2004 Best Practices Study

REVENUE SIZE CATEGORY HERE AGENCIES WITH REV NUES OVER $25,000,000

EXECUTIVE PERSPECTIVES The Newest BP Size Category

EXECUTIVE PERSPECTIVES

In order to recognize and evaluate the operating practices of some of the largest and most success- ful agents and brokers in the country, the Best Practices Study has created a new size category for agencies with revenues in excess of $25 million. Because of the limited universe from which these agencies are selected, there are only 15 agencies included in this size category, as compared to the 30 included in the other six size categories. Of the 15 that were nominated and, in turn, selected, two are bank-owned with the remaining 13 being privately held. These 15 firms are gen- erating average revenues of just over $48 million, have an average of 270 employees and are gen- erating average revenues per employee of just under $160,000. On average, this group of firms saw their total commissions and fees grow by 11.8% in 2003, and saw their pre-tax profits grow by close to 30%. This is truly an outstanding group of agents and brokers. Keys to Their Success

PROFILE

REVENUES/ EXPENSES

FINANCIAL STABILITY

Factors Most Critical to Agency's Success (Top 5 Listed in Order of Frequency Mentioned) 1. Acquiring and keeping quality people 2. New business development/ organic growth 3. Acquiring and retaining successful producers 4. Diligently serving our clients 5. Balancing growth and profitability

The principals of these firms were asked to identify the most critical keys to their success. The most frequent response was clearly the quality of their people, with a close second being their ability to create a sales culture. The third most frequent response was their ability to effectively serve their clients. Evidence of the ability of these organizations to attract talented people, particularly producers, and to cre- ate a sales culture is evidenced by the fact that the average commercial lines producer, in these agencies, generated an average of $112,898 in new commissions and serviced a total book of business of just under $695,000. At the same time, the average employee benefits producer generated new commissions of $116,408, and handled an average book of business of just under $500,000. Challenges They Face

EMPLOYEE OVERVIEW

PRODUCER INFO

SERVICE STAFF INFO

When asked to identify the most significant challenges that they will face, the most prevalent response was the ability to grow their revenues in soft market conditions. Secondly, these executives saw producer recruitment as a huge chal- lenge, and also felt like it would be difficult to deal with car- rier relations in light of all of the consolidations going on. It is interesting to see that of the new producers recruited by these firms, 53% came from another broker, 19% from insurance carriers, 14% from outside the industry and 13.8% were hired directly out of college. On average, these firms hired 6.3 new producers during the year, at an average starting salary of just over $87,000.

Top Challenges (Top 5 Listed in Order of Frequency Mentioned) 1. Growing revenues and maintaining profitability in a soft market 2. Producer recruitment and development 3. Carrier consolidations and market changes. 4. Agency perpetuation 5. Identifying new business/ growth opportunities

TECHNOLOGY

INSURANCE CARRIERS

APPENDIX

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