2014 BEST PRACTICES STUDY UPDATE

Transcription

1 2014 BEST PRACTICES STUDY UPDATE New Day, New Possibilities Conducted by : & Independent Insurance Agents & Brokers of America, Inc.

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3 Special Acknowledgement We wish to thank the following companies for their sponsorship which has funded the development of the and the Best Practices Gateway website. Copyright 2014 by the Independent Insurance Agents & Brokers of America and Reagan Consulting, Inc. All rights reserved. i

4 TABLE OF CONTENTS Introduction Analysis of with Under $1,250, rmation rmation Analysis of with $1,250,000 and $2,500, rmation rmation Analysis of with $2,500,000 and $5,000, rmation rmation ii Analysis of with $5,000,000 and $10,000, rmation rmation

5 Analysis of with $10,000,000 and $25,000, rmation rmation Analysis of with Over $25,000, rmation rmation Population Density Analysis Regional Analysis Glossary / Definitions / Formulas iii

6 INTRODUCTION Since 1993 the annual Best has served as a tool to help agency owners and managers understand how their business operations perform and measure up to the top performing firms across the country. It is a must have for those agencies that want to become the best they can be. The provides critical performance benchmarks in six agency revenue categories ranging from Under $1,250,000 to Over $25,000,000. can measure, evaluate, and compare results for agency operations including: Income & Expense Distribution Revenue & Growth Sales & Service Staff Compensation/Productivity Property & Casualty and Life & Health Carrier Representation And much more The 2014 study can be purchased from the Independent Insurance Agents & Brokers of America (Big I ) Education Department. Orders can be placed at or at www. independentagent.com. For more information please call About The Study The History The annual Best originated in 1993 as an initiative by the Independent Insurance Agents & Brokers of America (Big I ) to help its members build and maintain the value of their most important assets, their agencies. By studying the leading agencies and brokers in the country, the association hoped to provide member agents with meaningful performance benchmarks and business strategies that could be adopted or adapted for use in improving agency performance, thus enhancing agency value. The Big I retained the principals of Reagan Consulting to create and perform the first Best. Annual updates conducted by Reagan Consulting continue to provide important financial and operational benchmarks, and the study is recognized as one of the most thoughtful, effective and valuable resources ever made available to the industry. The Process Once every three years the Big I asks insurance companies, state association affiliates, and other industry organizations to nominate for each of the study revenue categories those agencies they consider to be among the better, more professional agencies in the industry. The nominated agencies are then invited to participate. They must be willing to share key business practices/ philosophies and to complete an in-depth survey detailing their financial and operational year-end results. Those results are then scored and ranked objectively for inclusion on the basis of operational excellence. In 2013, the beginning of the current three-year study cycle, nearly 1,200 independent agencies throughout the U.S. were nominated to take part in the annual study. Although participation required extensive time and effort, 308 submitted their data; only 217 qualified for the honor and acquired the Best Practices status. To be chosen, the agency had to be among the top top performing agencies in one of six revenue categories. Their year-end results and business practices were then compiled to create the Best Practices benchmarks. The agencies retain their Best Practices status for the three-year study cycle as long as they submit their data each year so that the benchmarks can be updated annually. The 2014 study continues to examine the 2013 agencies. Taking part in the study has become a prestigious recognition of the superior accomplishments of the top insurance agencies in the country will mark iv

7 the beginning of a new study cycle in which the nomination and qualification process will be repeated. Those agencies that believe they have the qualities of a Best Practices Agency and wish to be nominated in 2016 for the next study cycle should contact their state association or insurance carrier and ask that their name be submitted. About the Best Practices Gateway Website The electronic version of this study can be accessed via the websites of the Big I (www. independentagent.com) and Reagan Consulting ( Planner. These Best Practices tools are part of a complete line of Best Practices products and services. Order forms can be downloaded from bp.reaganconsulting.com or can be purchased online at If You Have Questions If you have questions about the information published in the please contact the Big I Education Department at or Reagan Consulting at From the Best Practices Gateway home page, users can do the following: View an HTML version of the current and past Best Executive Updates Download a Best Practices comparison spreadsheet to compare their year-end results with the study s results Access other Best Practices studies, tools and products Order a copy of the study Other Best Practices Studies and Tools In addition to the annual Best, many other useful studies, resources, and tools are available to help agencies improve their performance and enhance the value of their businesses. Two of the most frequently used tools are The Agency Self- Diagnostic Tool and the Joint Agency Company v

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9 with Under $1,250,000 $1,250,000 $2,500,000 $5,000,000 $10,000,000 $25,000,000 2

10 Analysis of with Under $1,250,000 with Under $1,250,000 3 at a Glance Growth Organic Growth By Line of Business* Commercial P&C 1.8% -12.7% 9.2% Personal P&C 4.1% 2.7% 9.0% Group Medical -6.2% -28.4% -9.8% All Other Group -9.3% * * Total Organic Growth 4.6% 1.4% 14.1% Profit Pro Forma Pretax Profit 26.1% 48.3% 27.1% Pro Forma EBITDA 29.0% 48.6% 30.1% Rule of 20 Score Financial Average Top 25% Current Ratio 1.53:1 2.82:1 Receivable/Payable Ratio 62.4% 12.3% Accounts Receivables > 60 Days 48.5% * Accounts Receivables > 90 Days 4.2% 0.0% Productivity Revenue per Employee $135,346 $214,865 $135,198 Compensation per Employee $66,272 $78,802 $63,149 Spread per Employee $69,074 $136,063 $72,049 Annual New Commission Generated per Validated Producer Average Top 25% Commercial P&C $33,020 $64,733 Personal P&C $25,231 $43,224 Life & Health/Financial * * Service Staff Total Payroll as % of Line of Business Revenue Average # of Service Staff Commercial P&C 25.5% 1.8 Personal P&C 25.8% 2.0 Group Life & Health/Financial *Insufficient Data *Excludes any acquired revenue

11 Analysis of with Under $1,250,000 (of in this Study Group) Average Total : $810,333 Population Density of Metropolitan Areas Where Home Office is Located Less than 50, % 42.9% 57.1% 50, , % 14.3% 14.3% 250,000 1,000, % 28.6% 14.3% More than 1,000, % 14.3% 14.3% Corporate Structure C 17.2% 0.0% 14.3% S 69.0% 71.4% 71.4% Partnership 0.0% 0.0% 0.0% LLC 10.3% 28.6% 14.3% Sole Proprietorship 3.4% 0.0% 0.0% Average Number of Agency Locations (Main Offices and Branch Offices) Total Square Footage of Office Space 2,818 2,251 1,793 # of States in which Offices are Located Agency has an ESOP 0.0% 0.0% 0.0% % of Stock Owned by ESOP 0.0% 0.0% 0.0% Shareholders Number of Shareholders (excluding ESOP) High 13.0 Low 1.0 Ownership Percentage % Owned by Largest Shareholder 75.5% 70.0% 91.7% High 100.0% Low 33.3% Shareholder Age Current Age of Largest Shareholder Parent Corporation % of Owned by Another Corporation Average 3.7% Description of Parent Corporation Financial Institution 50.0% Other included Independent Agency. National Broker 0.0% Other 50.0% Member of Group % of Belonging to a Franchise, Cluster, Alliance/Network or Aggregator Group 41.2% Other included Continental Insurance Agency Alliance, SIAA, Consolidated, ISU, Empire Spectrum Group, Combined Agents of America, Marketsource, TIA, Bainswest, and DCS Risk Management Group. with Under $1,250,000 4

12 Analysis of with Under $1,250,000 (% by Source) Property & Casualty Commercial Commissions & Fees 41.2% 27.0% 29.6% Bonds 0.4% 0.1% 0.2% Personal Commissions 45.2% 60.9% 57.6% Value Added Services 0.4% 0.0% 1.0% Contingent/Bonus 6.2% 6.8% 8.1% Total P&C 93.5% 94.8% 96.5% Life & Health/Financial Group Medical Commissions & Fees 3.0% 1.0% 1.4% All Other Group Commissions & Fees 0.4% 0.1% 0.0% Individual L&H Commissions & Fees 2.6% 4.1% 1.6% Bonus/Overrides 0.0% 0.0% 0.2% Total L&H/Financial 6.1% 5.1% 3.3% Investments 0.1% 0.0% 0.0% Miscellaneous 0.3% 0.0% 0.2% Gross 100.0% 100.0% 100.0% Brokerage Commission Expense 0.3% 0.2% 0.0% Net 99.7% 99.8% 100.0% Revenue by Source (% of Gross ) 60.0% 50.0% 40.0% % Total Revenue 30.0% 20.0% with Under $1,250, % 0.0% P&C Commercial Comm & Fees P&C Bonds Comm & Fees P&C Personal Comm & Fees P&C VAS Fees P&C Contingent/ Bonus L&H Group Medical Comm & Fees L&H All Other Group Comm & Fees L&H Individual Comm & Fees L&H Bonus/ Overrides Investments Miscellaneous

13 Analysis of with Under $1,250,000 Revenue by Acquisition Acquired What the Typical Transactions Looked Like Acquired per Transaction % of Acquiring Average Commissions Acquired Multiples of Revenue Paid % of Net Acquisitions Made in Last 12 Months 6.9% $65, % *Insufficient Data Average * Average * High * High * Low * Low * Revenue by Specialty/Niche % of having an Industry and/or Product Specialty/Niche Total Commissions & Fees Generated from All Specialties/Niches Total Specialty/Niche Revenue as % of Net *Insufficient Data 37.9% * * $160,853 * * 21.4% * * Specialty/Niche Revenue as % of Net Revenue 25% 20% 21.4% 15% 10% 5% 0% with Under $1,250,000 6

14 Analysis of with Under $1,250,000 Revenue by Account Concentration % of Revenue Derived from Largest Account 4.9% 1.5% 2.6% High 18.2% Low 0.5% 10 Largest Accounts 13.2% 9.4% 7.9% High 32.3% Low 1.7% Other Group Life & Health* Revenue (% from source) Life 63.8% 56.3% * Disability 8.0% 15.7% * Dental & Vision 16.1% 23.3% * Retirement/Pension 0.6% 1.7% * Worksite/Voluntary/Supplement 0.0% 0.0% * Long-Term Care 0.0% 0.0% * Employee Benefits TPA 11.6% 3.0% * All Other 0.0% 0.0% * *Insufficient Data *Excludes Group Medical with Under $1,250,000 7

15 Analysis of with Under $1,250,000 Revenue by Account Size (as measured by Comm. & Fees not premium) Commercial P&C Greater than $25,000 % of Book 17.9% 0.0% 6.6% # of Accounts 2.5 * * Total Revenue $161,874 * * Revenue per Account $65,949 * * $10,000 and $25,000 % of Book 13.1% 17.7% 5.7% # of Accounts * Total Revenue $72,556 $84,027 * Revenue per Account $16,325 $18,006 * $5,000 and $10,000 % of Book 12.2% 21.9% 7.8% # of Accounts Total Revenue $54,897 $103,948 $27,759 Revenue per Account $6,069 $6,115 $5,552 Less than $5,000 % of Book 56.8% 60.4% 80.0% # of Accounts Total Revenue $225,683 $215,090 $190,070 Revenue per Account $435 $621 $503 (as measured by number of lives) Group L&H/Financial Over 100 Lives % of Book 20.4% 0.0% 0.0% # of Accounts 1.3 * * Total Revenue $34,186 * * Revenue per Account $27,349 * * Lives % of Book 1.6% 0.0% 0.0% # of Accounts * * * Total Revenue * * * Revenue per Account * * * Lives % of Book 23.9% 21.5% 19.4% # of Accounts * Total Revenue $22,878 $9,544 * Revenue per Account $8,007 $7,158 * Under 25 Lives % of Book 54.1% 78.5% 80.6% # of Accounts Total Revenue $24,151 $34,764 $15,807 Revenue per Account $738 $821 $558 with Under $1,250,000 8 *Insufficient Data

16 Analysis of with Under $1,250,000 Revenue Growth by Source Commercial P&C Renewals % 59.9% 94.7% New Business % 27.5% 14.6% Acquired 3 0.4% 0.0% 0.0% Organic Growth 4 1.8% -12.7% 9.2% Total Growth 5 2.2% -12.7% 9.2% Bonds P&C Renewals % * 49.9% New Business % * 56.7% Acquired 3 0.0% * 0.0% Organic Growth 4-1.7% * 6.7% Total Growth 5-1.7% * 6.7% Personal P&C Renewals % 75.3% 91.7% New Business % 27.4% 17.3% Acquired 3 0.2% 0.0% 0.0% Organic Growth 4 4.1% 2.7% 9.0% Total Growth 5 4.4% 2.7% 9.0% Value Added Services P&C Renewals % * * *Insufficient New Data Business % * * Acquired 3 0.0% * * Organic Growth 4-8.8% * * Total Growth 5-8.8% * * *Insufficient Data 1 Renewal as a % of prior year s total revenues for this line of business. This figure is impacted by attrition (loss or retention of accounts) and by changes in premium and commission levels. The higher the %, the more favorable the results. 2 New as a % of prior year s total revenues for this line of business. The higher the %, the more favorable the results. 3 Acquired as a % of prior year s total revenues for this line of business. The % indicates the significance of acquired business. 4 Growth in from prior year excluding acquired revenues. 5 Growth in from prior year including acquired revenues. with Under $1,250,000 9

17 Analysis of with Under $1,250,000 Revenue Growth by Source (continued) Group Medical L&H *Insufficient Data Renewals % 70.5% 76.3% New Business 2 7.1% 1.2% 13.9% Acquired 3 0.0% 0.0% 0.0% Organic Growth 4-6.2% -28.4% -9.8% Total Growth 5-6.2% -28.4% -9.8% All Other Group L&H Individual L&H Renewals % * * New Business 2 6.1% * * Acquired 3 0.0% * * Organic Growth 4-9.3% * * Total Growth 5-9.3% * * Renewals % 29.0% 55.2% New Business % 85.4% 24.5% Acquired 3 0.0% 0.0% 0.0% Organic Growth 4-6.3% 14.4% -20.3% Total Growth 5-6.3% 14.4% -20.3% Total Commissions & Fees (P&C, L&H) Renewals % 73.3% 92.1% New Business % 26.5% 16.4% Acquired 3 2.3% 0.0% 0.0% Organic Growth 4 3.7% -0.2% 8.5% Total Growth 5 6.0% -0.2% 8.5% Brokerage Commission Expense Growth * * * Net Commissions & Fees Growth (Organic) 6 3.7% -0.2% 8.5% Net Commissions & Fees Growth (Total) 7 6.0% -0.2% 8.5% Other Income P&C Contingent Income Growth 1.5% 1.8% * L&H Bonus Income Growth * * * Investment Income Growth -7.5% * * Gross Revenue Growth 6.9% 1.4% 14.1% Net Revenue Growth (Organic) 8 4.6% 1.4% 14.1% Net Revenue Growth (Total) 9 6.9% 1.4% 14.1% 1 Renewal as a % of prior year s total revenues for this line of business. This figure is impacted by attrition (loss or retention of accounts) and by changes in premium and commission levels. The higher the %, the more favorable the results. 2 New as a % of prior year s total revenues for this line of business. The higher the %, the more favorable the results. 4 Growth in from prior year excluding acquired revenues. 5 Growth in from prior year including acquired revenues. 6 Growth in Total Commissions & Fees (less Brokerage Commission Expense) from prior year excluding acquired revenues. 8 Growth in Net (Gross Revenue less Brokerage Commission Expense) from prior year excluding acquired revenues. 9 Growth in Net (Gross Revenue less Brokerage Commission Expense) from prior year including acquired revenues. with Under $1,250, Acquired as a % of prior year s total revenues for this line of business. The % indicates the significance of acquired business. 7 Growth in Total Commissions & Fees (less Brokerage Commission Expense) from prior year including acquired revenues.

18 Analysis of with Under $1,250,000 Revenue Growth by Source (continued) Historical Organic Growth (in Net Revenue) 40% 30% 20% 10% 0% 10% 9.2% 12.0% 24.6% 5.7% 7.9% 79% 21.2% 0.5% 2.2% 12.3% 2.0% 1.5% 16.8% % 0.4% 10.0% 5.4% 1.9% 11.6% 6.9% 7.4% 74% 19.2% 4.6% 1.4% 14.1% Future Growth Percentage of agencies considering line of business as very important to growing agency s revenue over the next 3 years Surety-Bonding 10.3% Personal P&C 79.3% Small Commercial P&C 89.7% Individual Life & Health 24.1% Group Medical/Health Insurance 24.1% All Other Group Benefits 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% with Under $1,250,000 11

19 Analysis of with Under $1,250,000 (as % of Net ) Compensation Payroll: Employee 39.7% 31.9% 40.5% Payroll: Non-Employee Producers/Temp Help 4.3% 0.8% 3.8% Total Payroll 44.0% 32.7% 44.3% Benefits: Payroll Taxes 3.9% 2.7% 3.0% Benefits: Retirement 1.4% 1.3% 1.5% Benefits: Insurance 3.0% 0.7% 3.2% Benefits: Other 0.3% 0.9% 0.2% Total Benefits 8.6% 5.6% 7.9% Total Compensation 52.5% 38.3% 52.2% Selling T&E/Conventions 1.2% 0.6% 1.0% Auto Expenditures 1.5% 0.9% 1.5% Auto Depreciation 0.4% 0.0% 0.5% Total Auto 2.0% 0.9% 2.0% Advertising/Promotions 2.0% 2.1% 2.5% Total Selling 5.1% 3.5% 5.5% Operating Occupancy Expenditures 4.7% 4.1% 4.1% Occupancy Depreciation/Amortization 0.4% 0.1% 0.1% Total Occupancy 5.0% 4.2% 4.3% Office Equipment Expenditures 0.3% 0.2% 0.0% Office Equipment Depreciation 0.1% 0.0% 0.1% Total Office Equipment 0.4% 0.2% 0.1% IT (Information ) 2.6% 1.8% 2.2% IT Depreciation/Amortization 0.1% 0.0% 0.1% Total IT 2.7% 1.8% 2.4% Telephone 1.3% 1.0% 1.2% Postage 0.5% 0.3% 0.5% Supplies/Printing 1.4% 1.2% 1.6% Dues/Subscriptions/Contributions 1.2% 0.9% 0.9% Taxes/Licenses 0.8% 0.5% 1.7% Insurance 2.1% 1.4% 1.7% Professional Fees 0.6% 0.5% 0.8% Bad Debts 0.0% 0.0% 0.1% Outside Services 0.6% 0.0% 0.9% Education/Training 0.3% 0.2% 0.2% Miscellaneous 0.5% 0.1% 0.2% Total Operating 17.3% 12.4% 16.5% continued on next page with Under $1,250,000 12

20 Analysis of with Under $1,250,000 (as % of Net ) continued Administrative Amortization of Intangibles 0.9% 0.2% 1.0% Officer Life 0.2% 0.1% 0.3% Interest 1.0% 0.0% 0.9% Other 0.2% 0.0% 0.0% Total Administrative 2.3% 0.3% 2.3% Total 77.3% 54.5% 76.5% Pre-Tax Profit (Loss) 22.7% 45.5% 23.5% EBITDA 25.6% 45.8% 26.4% Expense Growth Over Prior Year Compensation Expense 5.6% -6.1% 7.7% Selling Expense -4.8% -7.4% -14.2% Operating Expense 7.1% 5.9% 10.7% Administrative Expense 4.0% * * *Insufficient Data (as % of Net ) 60% 50% 52.2% 2% 52.2% 2% 40% 38.3% 30% with Under $1,250,000 20% 10% 0% 5.1% 5.5% 3.5% 17.3% 16.5% 12.4% 2.3% 2.3% 0.3% 03% Compensation Selling Operating Administrative 13

21 Analysis of with Under $1,250,000 Profit/Loss Summary (as % of Gross Revenue) Commercial Lines 41.2% 27.0% 29.6% Bonds 0.4% 0.1% 0.2% Personal Lines 45.2% 60.9% 57.6% VAS - P&C 0.4% 0.0% 1.0% Contingent/Bonus 6.2% 6.8% 8.1% Group Medical 3.0% 1.0% 1.4% All Other Group 0.4% 0.1% 0.0% Individual Life & Health 2.6% 4.1% 1.6% Bonus/Overrides 0.0% 0.0% 0.2% Investments 0.1% 0.0% 0.0% Miscellaneous 0.3% 0.0% 0.2% Total 100.0% 100.0% 100.0% Brokerage Commission Expense 0.3% 0.2% 0.0% Net 99.7% 99.8% 100.0% (as % of Net ) Compensation 52.5% 38.3% 52.2% Selling 5.1% 3.5% 5.5% Operating 17.3% 12.4% 16.5% Administrative 2.3% 0.3% 2.3% Total 77.3% 54.5% 76.5% Profit/Loss (as % of Net ) Pre-Tax Profit 22.7% 45.5% 23.5% Pro Forma Pre-Tax Profit % 48.3% 27.1% Operating Pre-Tax Profit % 41.6% 16.3% EBITDA % 45.8% 26.4% Pro Forma EBITDA % 48.6% 30.1% 1 Pre-tax Profits if discretionary expenses are eliminated and all owners compensated as employees 2 Pre-tax Profits excluding contingents, bonus and investment income 3 EBITDA Earnings Before Interest Taxes Depreciation and Amortization 4 EBITDA if discretionary expenses are eliminated and all owners compensated as employees with Under $1,250,000 14

22 Analysis of with Under $1,250,000 Historical EBITDA Margin & Operating Margin (for Average Group) 35% 30% 25% 20% 15% 10% 5% 0% 33.0% 26.2% 16.5% 26.0% 21.4% 6.6% 66% 24.8% 18.5% 5.0% 27.5% 28.5% 23.9% 9.9% 22.8% 26.2% 22.8% 10.8% 11.0% 30.3% 29.0% 25.8% 25.6% 17.4% 17.3% EBITDA Margin Operating Margin Pro Forma EBITDA About EBITDA Margin and Operating Margin EBITDA Margin is calculated by dividing a firm s EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) by the firm s net revenues. Pro Forma EBITDA Margin is calculated by dividing a firm s Pro Forma EBITDA by the firm s Pro Forma net revenue. Operating Margin is calculated as EBITDA less contingent income divided by Pro Forma net revenues less contingent income. with Under $1,250,000 15

23 Analysis of with Under $1,250,000 The Rule of 20 is a simple growth and profitability balancing equation that provides a quick way to determine whether or not an agency is creating value for its shareholders. It states that an agency will drive industry-standard shareholder returns if the sum of (a) its organic growth rate and (b) 1/2 of its EBITDA margin equals or exceeds 20. Generally speaking, an outcome of 20 or more, regardless of the different combinations of growth and profitability, indicates that the agency s shareholders can expect to earn 15% -17% per year through stock price appreciation and/or shareholder distributions. What is the Rule of 20? Rule of 20 Outcome Public Brokers Organic Growth EBITDA Margin Rule of 20 Outcome 1/2 of Rule of 20 Score = EBITDA + Margin Organic Revenue Growth Provides a tool to benchmark agency performance Helps frame the trade-off between growth and profitability Willis Group 4.9% 24.0% 16.9 Aon 3.0% 20.9% 13.5 Brown & Brown 6.8% 33.5% 23.6 Arthur J. Gallagher 6.5% 19.9% 16.5 Marsh & McLennan 3.0% 20.7% 13.4 Average +25% Profit Average +25% Growth Average Rule of Financial Stability Average Top 25% Balance Sheet Current Ratio 1.53:1 2.82:1 Tangible Net Worth (% of Net Revenue) 2.3% 14.7% Receivables/Payable Ratio 62.4% 12.3% Aged Receivables % Receivables Aged Past 60 Days 48.5% * % Receivables Aged Past 90 Days 4.2% 0.0% *Insufficient Data Accounts Receivable Agency Billed vs. Direct Billed by Carrier % of P&C that are Agency Billed 15.5% 3.6% 4.9% % of P&C that are Direct Billed 81.0% 82.1% 95.1% with Under $1,250,000 16

24 Analysis of with Under $1,250,000 Employee Productivity Total Number of Employees (FTE) Revenue Per Employee $135,346 $214,865 $135,198 Compensation Per Employee $66,272 $78,802 $63,149 Spread Per Employee $69,074 $136,063 $72,049 $250K $200K $150K $100K $50K $0 $135,346 $214,865 $135,198 $66,272 6 $78,802 Revenue Per Employee Compensation Per Employee Spread Per Employee $63,149 $69,074 $136,063 3 $72,049 Average number of Agency Employees that work remotely 1.3 * * % of with Remote Workers 20.7% 3.4% 28.6% *Insufficient Data Administrative Staff with Under $1,250, Accounting & HR Department Info Average Top 25% Accounting Department Total Number of Employees in Accounting Department 0.7 High 2.0 Low 0.2 Revenue per Accounting Employee $905,092 $1,167,708 Total Payroll for Accounting Employees $29,802 Accounting Payroll as % of Net Revenue 3.3% HR Department Total Number of Employees in HR Department * High * Low * Revenue per HR Employee * * Total Payroll for HR Employees * HR Payroll as % of Net Revenue * *Insufficient Data

25 Analysis of with Under $1,250,000 Most Successful Producer Productivity Most Successful Producer Productivity New Commissions Produced Annually Total Commissions in Producer s Book Average Commissions per Account *Insufficient Data Commercial P&C Group L&H Average $27,370 $12,647 Top 25% $51,714 * Average $247,097 $28,156 Top 25% $484,631 * Average $1,779 $475 Top 25% $4,495 * How Most Successful Producers Spent Time Most Successful Commercial P&C Producer Most Successful L&H Producer Mgmt/Personnel/ Mgmt/Personnel/ Agency Admin. 18.7% Soliciting New Business 31.4% Agency Admin. 21.8% Soliciting New Business 43.8% Personal Personal Training/ Training/ Education/ Prof. Dev. 6.1% Servicing Existing Accounts 43.8% Education/ Prof. Dev. 5.5% Servicing Existing Accounts 29.0% Personal Lines Producers, someone whose main responsibility is to solicit and write new personal lines accounts and is not responsible for the day-to-day servicing of the business, can be very productive. On average the most successful Personal Lines Producer in this revenue category generated $130,306 per year in new personal lines commissions with an average commission per account of $251. (Typically, the total commissions in the producer s book are not tracked since they are not paid renewal commission. Most often, the producers receive a base salary plus new business commissions.) with Under $1,250,000 18

26 Analysis of with Under $1,250,000 with Under $1,250, Validated Producer Productivity Average Top 25% Commercial P&C Producers Average Validated Producers # Validated 1.6 High 3.2 Low 1.0 Average New Commissions Produced Annually $33,020 $64,733 Average Book Serviced (Commissions) $174,263 $293,933 Average Pay ($) $61,306 Average Pay (% of Book Serviced) 32.5% Group Life & Health Producers Average Validated Producers # Validated 0.8 High 1.5 Low 0.3 Average New Commissions Produced Annually * * Average Book Serviced (Commissions) $68,587 * Average Pay ($) $44,297 Average Pay (% of Book Serviced) 64.6% Personal P&C Producers Average Validated Producers # Validated 1.1 High 2.0 Low 0.8 Average New Commissions Produced Annually $25,231 $43,224 Average Book Serviced (Commissions) $142,769 $224,600 Average Pay ($) $44,317 Average Pay (% of Book Serviced) 31.0% Multi-Line Producers Average Validated Producers # Validated 2.1 High 5.0 Low 1.0 Average New Commissions Produced Annually $35,252 $69,995 Average Book Serviced (Commissions) $262,499 $471,416 Average Pay ($) $94,917 Average Pay (% of Book Serviced) 36.2% % of That Reimburse All/Part T&E Expense 51.7% * 42.9% *Insufficient Data

27 Analysis of with Under $1,250,000 New Producers New Producer Hiring % of that Hired New Producers Last Year 20.7% * 42.9% # of New Producers Hired Last Year 1.2 * 1.0 Average Annualized Wages per Producer Hired $44,075 * $33,150 % of Producers Hired Over Last 5 Years That Met Their Production Goals 73.9% 61.0% 90.0% *Insufficient Data Where New Producers Were Found Average +25% Profit +25% Growth UNDER age 30 from WITHIN the insurance industry OVER age 30 from WITHIN the insurance industry *Insufficient Data UNDER age 30 from OUTSIDE the insurance industry OVER age 30 from OUTSIDE the insurance industry 14.3% 57.1% 28.6% 0.0% Net-investment in Unvalidated 1 Producer Pay The NUPP Expressed as a percentage of Net Revenue, the NUPP is the difference between what an agency pays its unvalidated producer(s) and what the producer(s) would earn under the agency s normal commission schedule. A NUPP of 1.5% is considered a healthy level of investment. High 5.3% Low 2.0% 1 An unvalidated producer is one whose production does not yet cover his/her wages *Insufficient Data Understanding the NUPP * * * * 33.3% 66.7% 0.0% 0.0% 3.9% * * By measuring pure payroll costs, the NUPP benchmark allows an apples-to-apples comparison with other agencies regarding the amount of direct investment an agency is making in new producers. While the NUPP provides a general investment guideline, an agency should also consider the success rate of its new producers, i.e. the percentage of new producers hired during the past 5 year period that have achieved the sales goals set before them. By multiplying the NUPP by the producer success rate, an agency can further determine the effectiveness of its NUPP. High performing agencies typically achieve an Effective NUPP between 1.0% - 1.5%. with Under $1,250,000 20

28 Analysis of with Under $1,250,000 Service Staff Productivity Service & Sales Support Staff Definition Typically non-commissioned employees Provide service to the agency s clients Support producers in the sale of new business and retention of existing business Some service positions may earn commission income but typically a majority of their pay is fixed and a majority of their time is devoted to service rather than the soliciting of new clients. Service & Sales Support Positions 1 Included in Full-time Equivalent Headcounts Account Executives (AE) - senior level service representatives Account Managers, Customer Service Representatives (CSRs) Assistant CSRs, Processors Claims Staff Placers/Marketers Department Managers - who also service clients 1 Position titles are general categories since specific job titles vary from agency to agency Administrative personnel such as accounting, mail room, and reception are not included in service benchmarks unless a portion of their time is dedicated to service. Service Staff Overview Total # of Service Staff (as defined above; excludes any TPA service staff) % of Peer Having Separate/Dedicated Marketing Department 3.4% 0.0% 0.0% # of Marketing Staff Separate/Dedicated Claims Department 6.9% 0.0% 0.0% # of Claims Staff with Under $1,250, TPA Service Staff % of Peer Having Workers Comp TPA 0.0% 0.0% 0.0% # of Service Staff * * * Total TPA Serviced * * * Group Benefits TPA 0.0% 0.0% 0.0% # of Service Staff * * * Total TPA Serviced * * * *Insufficient Data

29 Analysis of with Under $1,250,000 Service/Sales Support Staff Average Top 25% Commercial P&C Service/Sales Support Number 1.8 High 4.0 Low 0.5 Average Revenue per Staff $255,274 $404,940 Total Commercial Service Payroll ($) $87,098 Payroll (as % of Total Commercial Revenue) 25.5% Bonds P&C Service/Sales Support Staff Number * High * Low * Average Revenue per Staff * * Total Bond Service Payroll ($) * Payroll (as % of Total Bond Revenue) * Personal P&C Service/Sales Support Staff Number 2.0 High 3.8 Low 0.5 Average Revenue per Staff $183,715 $310,729 Total Personal Service Payroll ($) $77,807 Payroll (as % of Total Personal Revenue) 25.8% Group L&H Service/Sales Support Staff Number 0.5 High 1.0 Low 0.3 Average Revenue per Staff $89,547 * Total Group L&H Service Payroll ($) $15,557 Payroll (as % of Total Group L&H Revenue) 29.7% Individual L&H Service/Sales Support Staff Number 0.2 High 0.3 Low 0.1 Average Revenue per Staff $65,153 * Total Individual L&H Service Payroll ($) $9,799 Payroll (as % of Total Individual L&H Revenue) 22.3% Multi-Line Service/Sales Support Staff Number 3.6 High 6.5 Low 0.5 Average Revenue per Staff $397,783 * Total Multi-Line Service Payroll ($) $157,409 Payroll (as % of Total Multi-Line Revenue) 22.3% *Insufficient Data with Under $1,250,000 22

30 Analysis of with Under $1,250,000 with Under $1,250, Service Staff Payroll Information GROUP LIFE & HEALTH/FINANCIAL PERSONAL LINES COMMERCIAL LINES Pay Ranges by Service Position AE Average Low $43,060 * * Average High $48,985 * * CSR Average Low $40,510 $43,856 * Average High $44,293 $43,856 * Processor/Asst CSR Average Low $32,191 * * Average High $32,191 * * Marketing Average Low * * * Average High * * * Claims Average Low * * * Average High * * * AE Average Low $46,109 * * Average High $50,696 * * CSR Average Low $31,283 $33,510 $33,714 Average High $36,349 $36,692 $37,029 Processor/Asst CSR Average Low $23,154 * * Average High $23,725 * * Marketing Average Low * * * Average High * * * Claims Average Low * * * Average High * * * AE Average Low * * * Average High * * * CSR Average Low * * * Average High * * * Processor/Asst CSR Average Low * * * Average High * * * Marketing Average Low * * * Average High * * * Claims Average Low * * * Average High * * * *Insufficient Data

31 Analysis of with Under $1,250,000 Average Top 25% Information Employees (FTE) Number 0.6 High 3.0 Low 0.1 Number of IT Employees per 100 users N/A Revenue per IT Employee $657,966 $1,076,340 Total IT Payroll Expense ($) $14,419 $31,371 As % of Total Compensation Expense 3.3% As % of Net 1.7% Total IT 1 (as % of net revenues) 3.1% 2.9% 2.5% 1 Includes hardware/software leasing including offsite applications, supplies, maintenance & maintenance contracts, training, data lines, internet providers, website development/maintenance, outside consulting fees, computer depreciation, software amortization, and any non-depreciated hardware/software. Agency Management System Utilized Other included ITC/INSPRO, NASA Eclispe, Jenesis, and No Agency Management System AFW 6.9% EPIC 6.9% Instar 3.4% SIS 3.4% AMS % Hawksoft 10.3% Other 13.8% TAM 27.6% with Under $1,250,000 24

32 Analysis of with Under $1,250,000 Carriers Carrier Representation Personal Lines P&C National Regional Total Commercial Lines P&C National Regional Total Group L&H / Financial Total Life, Health, Disability, LTC, Retirement Products, and Other Carrier Appointments % of Total Commission & Fee Revenue Derived from Direct Versus Indirect Appointments INDIRECT Carrier Appointments 15.7% 0.7% 17.1% DIRECT Carrier Appointments 80.8% 85.0% 82.9% Use of Carrier Service Centers with Under $1,250,000 Service Center Use Total Personal Lines Commission placed in Carrier Service Center Total Commercial Lines Commission placed in Carrier Service Center *Insufficient Data 65.9% * * 55.6% * * 25

33 Analysis of with Under $1,250,000 Revenue from Top P&C Commission Income from Top Carriers Top P&C Carrier $223,286 $317,502 $181,245 as % of Agency Net Revenue 28.3% 38.9% 28.8% Top P&C Carrier Breakdown By Line of Business Mid/Large Commerical 17.3% Average Personal 46.6% Mid/Large Commerical 23.6% +25% Profit Personal 62.3% Mid/Large Commerical 0.0% +25% Growth Personal 64.7% Small Commercial 36.1% Small Commercial 14.1% Small Commercial 35.3% Top 3 P&C Carriers $414,132 $499,596 $323,687 as % of Agency Net Revenue 52.3% 61.7% 55.4% Top 3 P&C Carriers Breakdown By Line of Business Average +25% Profit +25% Growth Mid/Large Commerical 15.0% Personal 48.9% Mid/Large Commerical 16.7% Personal 65.0% Mid/Large Commerical 3.6% Personal 59.5% Small Commercial 36.1% Small Commercial 18.3% Small Commercial 36.9% L&H/F Commission Income from Top Carriers as % of Net Rev from Top L&H/F Carrier 3.5% 1.7% 3.2% as % of Net Rev from Top 3 L&H/F Carriers 5.5% 3.1% * *Insufficient Data with Under $1,250,000 26

34 27

35 with $1,250,000 and $2,500,000 $1,250,000 $2,500,000 $5,000,000 $10,000,000 $25,000,000 28

36 Analysis of with $1,250,000 and $2,500,000 with $1,250,000 and $2,500, at a Glance Growth Organic Growth By Line of Business* Commercial P&C 8.3% 9.6% 14.0% Personal P&C 7.5% 8.5% 16.4% Group Medical 1.2% 4.1% 17.8% All Other Group 2.8% * * Total Organic Growth 10.5% 11.8% 18.9% Profit Pro Forma Pretax Profit 23.0% 37.0% 27.5% Pro Forma EBITDA 30.6% 42.6% 37.7% Rule of 20 Score Financial Average Top 25% Current Ratio 1.74:1 3.24:1 Receivable/Payable Ratio 62.4% -14.8% Accounts Receivables > 60 Days 24.6% 1.4% Accounts Receivables > 90 Days 8.0% 0.0% Productivity Revenue per Employee $148,845 $200,208 $179,633 Compensation per Employee $80,893 $82,280 $84,092 Spread per Employee $67,951 $117,927 $95,541 Annual New Commission Generated per Validated Producer Average Top 25% Commercial P&C $57,126 $100,696 Personal P&C $22,124 $32,506 Life & Health/Financial $51,649 $80,523 Service Staff Total Payroll as % of Line of Business Revenue Average # of Service Staff Commercial P&C 20.5% 3.8 Personal P&C 23.2% 2.9 Group Life & Health/Financial 68.5% 0.9 *Insufficient Data *Excludes any acquired revenue

37 Analysis of with $1,250,000 and $2,500,000 (of in this Study Group) Average Total : $1,879,106 Population Density of Metropolitan Areas Where Home Office is Located Less than 50, % 16.7% 50.0% 50, , % 50.0% 16.7% 250,000 1,000, % 16.7% 0.0% More than 1,000, % 16.7% 33.3% Corporate Structure C 32.1% 33.3% 16.7% S 42.9% 33.3% 16.7% Partnership 0.0% 0.0% 0.0% LLC 25.0% 33.3% 66.7% Sole Proprietorship 0.0% 0.0% 0.0% Average Number of Agency Locations (Main Offices and Branch Offices) Total Square Footage of Office Space 5,154 4,433 6,040 # of States in which Offices are Located Agency has an ESOP 0.0% 0.0% 0.0% % of Stock Owned by ESOP 0.0% 0.0% 0.0% Shareholders Number of Shareholders (excluding ESOP) High 6.0 Low 1.0 Ownership Percentage % Owned by Largest Shareholder 77.4% 77.7% 83.7% High 100.0% Low 47.0% Shareholder Age Current Age of Largest Shareholder Parent Corporation Average % of Owned by Another Corporation 3.7% Description of Parent Corporation Financial Institution 100.0% National Broker 0.0% Other 0.0% Member of Group % of Belonging to a Franchise, Cluster, Alliance/Network or Aggregator Group 53.6% Other included The Iroquois Group, Georgia Agency Partners, Inc., North American Insurance Brokers, Select Prism, Combined Agents of America, Memphis Insurance Group, and Secure Risk/Shared Agency Services. with $1,250,000 and $2,500,000 30

38 Analysis of with $1,250,000 and $2,500,000 (% by Source) Property & Casualty Commercial Commissions & Fees 45.6% 47.8% 46.2% Bonds 3.3% 6.3% 1.5% Personal Commissions 30.5% 20.4% 27.5% Value Added Services 0.1% 0.2% 0.2% Contingent/Bonus 10.1% 10.8% 10.2% Total P&C 89.7% 85.5% 85.6% Life & Health/Financial Group Medical Commissions & Fees 5.8% 6.9% 11.3% All Other Group Commissions & Fees 0.7% 0.1% 0.4% Individual L&H Commissions & Fees 2.6% 6.4% 1.7% Bonus/Overrides 0.5% 0.4% 0.3% Total L&H/Financial 9.6% 13.9% 13.6% Investments 0.2% 0.5% 0.3% Miscellaneous 0.5% 0.1% 0.4% Gross 100.0% 100.0% 100.0% Brokerage Commission Expense 1.5% 0.0% 4.7% Net 98.5% 100.0% 95.3% Revenue by Source (% of Gross ) 60.0% 50.0% 40.0% % Total Revenue 30.0% 20.0% with $1,250,000 and $2,500, % 0.0% P&C Commercial Comm & Fees P&C Bonds Comm & Fees P&C Personal Comm & Fees P&C VAS Fees P&C Contingent/ Bonus L&H Group Medical Comm & Fees L&H All Other Group Comm & Fees L&H Individual Comm & Fees L&H Bonus/ Overrides Investments Miscellaneous

39 Analysis of with $1,250,000 and $2,500,000 Revenue by Acquisition Acquired What the Typical Transactions Looked Like Acquired per Transaction % of Acquiring Average Commissions Acquired Multiples of Revenue Paid % of Net Acquisitions Made in Last 12 Months 10.7% $164, % Average $141,322 Average 1.59x High $240,525 High 2.00x Low $80,000 Low 1.25x Revenue by Specialty/Niche % of having an Industry and/or Product Specialty/Niche Total Commissions & Fees Generated from All Specialties/Niches Total Specialty/Niche Revenue as % of Net *Insufficient Data 57.1% 66.7% 83.3% $382,669 $629,573 $115, % * 6.0% Specialty/Niche Revenue as % of Net Revenue 25% 20% 15% 10% 5% 0% 15.1% 6.0% with $1,250,000 and $2,500,000 32

40 Analysis of with $1,250,000 and $2,500,000 Revenue by Account Concentration % of Revenue Derived from Largest Account 4.1% 4.2% 6.4% High 11.8% Low 1.2% 10 Largest Accounts 14.8% 14.9% 21.2% High 33.1% Low 2.9% Other Group Life & Health* Revenue (% from source) Life 26.4% * 24.3% Disability 14.7% * 16.0% Dental & Vision 25.5% * 28.7% Retirement/Pension 7.8% * 0.0% Worksite/Voluntary/Supplement 14.7% * 0.0% Long-Term Care 2.0% * 1.3% Employee Benefits TPA 9.0% * 29.7% All Other 0.0% * 0.0% *Insufficient Data *Excludes Group Medical with $1,250,000 and $2,500,000 33

41 Analysis of with $1,250,000 and $2,500,000 Revenue by Account Size (as measured by Comm. & Fees not premium) Commercial P&C Greater than $25,000 % of Book 22.0% 44.0% 35.0% # of Accounts Total Revenue $282,238 $414,681 $473,533 Revenue per Account $42,000 $33,623 $48,320 $10,000 and $25,000 % of Book 15.0% 20.7% 15.8% # of Accounts Total Revenue $178,750 $233,872 $213,877 Revenue per Account $13,750 $11,932 $13,710 $5,000 and $10,000 % of Book 16.1% 16.9% 19.7% # of Accounts Total Revenue $191,520 $190,771 $266,655 Revenue per Account $6,283 $6,317 $5,772 Less than $5,000 % of Book 46.9% 18.5% 29.4% # of Accounts 1, Total Revenue $556,942 $208,988 $396,977 Revenue per Account $412 $778 $452 (as measured by number of lives) Group L&H/Financial Over 100 Lives % of Book 18.0% 49.3% 29.8% # of Accounts Total Revenue $82,011 $103,000 $115,000 Revenue per Account $36,449 $38,625 $49, Lives % of Book 15.8% 20.3% 13.5% # of Accounts Total Revenue $43,546 $42,333 $52,000 Revenue per Account $18,505 $14,111 $19, Lives % of Book 14.6% 16.8% 14.4% # of Accounts Total Revenue $48,268 $35,000 $41,500 Revenue per Account $8,704 $5,250 $8,300 Under 25 Lives % of Book 51.6% 13.6% 42.3% # of Accounts 72.4 * 25.8 Total Revenue $48,921 * $46,995 Revenue per Account $649 * $4,747 with $1,250,000 and $2,500, *Insufficient Data

42 Analysis of with $1,250,000 and $2,500,000 Revenue Growth by Source Commercial P&C Renewals % 95.7% 97.2% New Business % 13.9% 16.8% Acquired 3 0.6% 0.0% 0.4% Organic Growth 4 8.3% 9.6% 14.0% Total Growth 5 8.9% 9.6% 14.4% Bonds P&C Renewals % 62.5% 93.3% New Business % 47.2% 34.7% Acquired 3 0.5% 0.0% 0.0% Organic Growth 4 7.7% 9.7% 28.0% Total Growth 5 8.2% 9.7% 28.0% Personal P&C Renewals % 97.8% 105.3% New Business 2 9.9% 10.7% 11.1% Acquired 3 1.8% 0.0% 4.1% Organic Growth 4 7.5% 8.5% 16.4% Total Growth 5 9.3% 8.5% 20.5% Value Added Services P&C Renewals % * * *Insufficient New Data Business % * * Acquired 3 0.0% * * Organic Growth % * * Total Growth % * * *Insufficient Data 1 Renewal as a % of prior year s total revenues for this line of business. This figure is impacted by attrition (loss or retention of accounts) and by changes in premium and commission levels. The higher the %, the more favorable the results. 2 New as a % of prior year s total revenues for this line of business. The higher the %, the more favorable the results. 3 Acquired as a % of prior year s total revenues for this line of business. The % indicates the significance of acquired business. 4 Growth in from prior year excluding acquired revenues. 5 Growth in from prior year including acquired revenues. with $1,250,000 and $2,500,000 35

43 Analysis of with $1,250,000 and $2,500,000 Revenue Growth by Source (continued) Group Medical L&H *Insufficient Data Renewals % 95.6% 105.9% New Business 2 8.8% 8.5% 11.9% Acquired 3 0.0% 0.0% 0.2% Organic Growth 4 1.2% 4.1% 17.8% Total Growth 5 1.2% 4.1% 18.0% All Other Group L&H Individual L&H Renewals % * * New Business % * * Acquired 3 0.0% * * Organic Growth 4 2.8% * * Total Growth 5 2.8% * * Renewals % 48.8% 69.4% New Business % 28.6% 14.9% Acquired 3 0.0% 0.0% 0.0% Organic Growth 4 0.2% -22.7% -15.7% Total Growth 5 0.2% -22.7% -15.7% Total Commissions & Fees (P&C, L&H) Renewals % 84.3% 101.3% New Business % 24.7% 15.6% Acquired 3 1.2% 0.0% 1.6% Organic Growth 4 8.5% 9.0% 16.9% Total Growth 5 9.7% 9.0% 18.5% Brokerage Commission Expense Growth 10.0% * * Net Commissions & Fees Growth (Organic) 6 8.5% 9.0% 16.5% Net Commissions & Fees Growth (Total) 7 9.6% 9.0% 18.1% Other Income P&C Contingent Income Growth 25.5% 27.9% 34.6% L&H Bonus Income Growth 6.8% * * Investment Income Growth -8.8% * * Gross Revenue Growth 11.7% 11.8% 20.8% Net Revenue Growth (Organic) % 11.8% 18.9% Net Revenue Growth (Total) % 11.8% 20.4% 1 Renewal as a % of prior year s total revenues for this line of business. This figure is impacted by attrition (loss or retention of accounts) and by changes in premium and commission levels. The higher the %, the more favorable the results. 2 New as a % of prior year s total revenues for this line of business. The higher the %, the more favorable the results. 4 Growth in from prior year excluding acquired revenues. 5 Growth in from prior year including acquired revenues. 6 Growth in Total Commissions & Fees (less Brokerage Commission Expense) from prior year excluding acquired revenues. 8 Growth in Net (Gross Revenue less Brokerage Commission Expense) from prior year excluding acquired revenues. 9 Growth in Net (Gross Revenue less Brokerage Commission Expense) from prior year including acquired revenues. with $1,250,000 and $2,500, Acquired as a % of prior year s total revenues for this line of business. The % indicates the significance of acquired business. 7 Growth in Total Commissions & Fees (less Brokerage Commission Expense) from prior year including acquired revenues.

44 Analysis of with $1,250,000 and $2,500,000 Revenue Growth by Source (continued) Historical Organic Growth (in Net Revenue) 40% 30% 20% 10% 0% 10% 10.4% 6.4% 20.7% 6.2% 11.4% 20.2% 5.7% 18.9% 23.8% 0.2% 1.0% 8.4% 2.0% 1.2% % 1.3% 2.6% 12.1% 9.1% 10.4% 23.8% 10.5% 11.8% 18.9% Future Growth Percentage of agencies considering line of business as very important to growing agency s revenue over the next 3 years Surety-Bonding 17.9% Personal P&C 78.6% Small Commercial P&C 67.9% Individual Life & Health 21.4% Group Medical/Health Insurance 21.4% All Other Group Benefits 25.0% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% with $1,250,000 and $2,500,000 37

45 Analysis of with $1,250,000 and $2,500,000 (as % of Net ) Compensation Payroll: Employee 43.9% 32.5% 34.0% Payroll: Non-Employee Producers/Temp Help 2.9% 3.0% 5.4% Total Payroll 46.8% 35.5% 39.4% Benefits: Payroll Taxes 3.5% 3.2% 4.0% Benefits: Retirement 1.5% 0.5% 0.3% Benefits: Insurance 3.1% 2.5% 3.6% Benefits: Other 0.4% 0.2% 0.4% Total Benefits 8.5% 6.3% 8.4% Total Compensation 55.3% 41.7% 47.8% Selling T&E/Conventions 1.4% 2.1% 1.2% Auto Expenditures 1.0% 1.3% 0.6% Auto Depreciation 0.2% 0.2% 0.1% Total Auto 1.2% 1.5% 0.7% Advertising/Promotions 1.6% 1.2% 1.7% Total Selling 4.2% 4.7% 3.7% Operating Occupancy Expenditures 5.3% 6.0% 6.0% Occupancy Depreciation/Amortization 0.1% 0.0% 0.0% Total Occupancy 5.4% 6.0% 6.1% Office Equipment Expenditures 0.4% 0.9% 0.4% Office Equipment Depreciation 0.5% 0.2% 1.2% Total Office Equipment 0.9% 1.1% 1.6% IT (Information ) 2.3% 1.5% 1.7% IT Depreciation/Amortization 0.2% 0.0% 0.1% Total IT 2.4% 1.5% 1.8% Telephone 0.9% 0.6% 0.7% Postage 0.4% 0.4% 0.3% Supplies/Printing 1.1% 1.7% 1.6% Dues/Subscriptions/Contributions 0.8% 0.6% 0.6% Taxes/Licenses 0.4% 0.4% 0.4% Insurance 1.4% 1.1% 1.0% Professional Fees 0.9% 1.7% 1.8% Bad Debts 0.1% 0.4% 0.5% Outside Services 0.5% 0.1% 0.6% Education/Training 0.5% 0.4% 0.4% Miscellaneous 0.4% 0.1% 0.5% Total Operating 16.1% 16.1% 17.8% continued on next page with $1,250,000 and $2,500,000 38

46 Analysis of with $1,250,000 and $2,500,000 (as % of Net ) continued Administrative Amortization of Intangibles 0.8% 0.1% 2.7% Officer Life 0.2% 0.1% 0.0% Interest 0.4% 0.2% 0.5% Other 0.0% 0.1% 0.0% Total Administrative 1.4% 0.5% 3.2% Total 77.0% 63.0% 72.5% Pre-Tax Profit (Loss) 23.0% 37.0% 27.5% EBITDA 25.1% 37.7% 32.1% Expense Growth Over Prior Year Compensation Expense 8.4% 4.7% 10.0% Selling Expense 9.3% 13.9% 8.8% Operating Expense 10.3% 30.0% 30.0% Administrative Expense -12.2% * -7.8% *Insufficient Data (as % of Net ) 60% 50% 40% 55.3% 41.7% 47.8% 30% with $1,250,000 and $2,500,000 20% 10% 0% 4.2% 4.7% 3.7% 37% 16.1% 1% 16.1% 1% 17.8% 1.4% 14% 0.5% 3.2% Compensation Selling Operating Administrative 39

47 Analysis of with $1,250,000 and $2,500,000 Profit/Loss Summary (as % of Gross Revenue) Commercial Lines 45.6% 47.8% 46.2% Bonds 3.3% 6.3% 1.5% Personal Lines 30.5% 20.4% 27.5% VAS - P&C 0.1% 0.2% 0.2% Contingent/Bonus 10.1% 10.8% 10.2% Group Medical 5.8% 6.9% 11.3% All Other Group 0.7% 0.1% 0.4% Individual Life & Health 2.6% 6.4% 1.7% Bonus/Overrides 0.5% 0.4% 0.3% Investments 0.2% 0.5% 0.3% Miscellaneous 0.5% 0.1% 0.4% Total 100.0% 100.0% 100.0% Brokerage Commission Expense 1.5% 0.0% 4.7% Net 98.5% 100.0% 95.3% (as % of Net ) Compensation 55.3% 41.7% 47.8% Selling 4.2% 4.7% 3.7% Operating 16.1% 16.1% 17.8% Administrative 1.4% 0.5% 3.2% Total 77.0% 63.0% 72.5% Profit/Loss (as % of Net ) Pre-Tax Profit 23.0% 37.0% 27.5% Pro Forma Pre-Tax Profit % 41.9% 33.1% Operating Pre-Tax Profit % 28.4% 18.0% EBITDA % 37.7% 32.1% Pro Forma EBITDA % 42.6% 37.7% 1 Pre-tax Profits if discretionary expenses are eliminated and all owners compensated as employees 2 Pre-tax Profits excluding contingents, bonus and investment income 3 EBITDA Earnings Before Interest Taxes Depreciation and Amortization 4 EBITDA if discretionary expenses are eliminated and all owners compensated as employees with $1,250,000 and $2,500,000 40

48 Analysis of with $1,250,000 and $2,500,000 Historical EBITDA Margin & Operating Margin (for Average Group) 35% 30% 30.1% 26.7% 34.0% 29.3% 27.0% 27.4% 31.1% 30.6% 25% 20% 23.2% 2% 23.5% 27.7% 23.4% 23.0% 23.3% 24.6% 25.1% 15% 10% 5% 7.8% 6.4% 64% 7.4% 8.0% 9.2% 12.2% 2% 12.8% 13.3% 0% EBITDA Margin Operating Margin Pro Forma EBITDA About EBITDA Margin and Operating Margin EBITDA Margin is calculated by dividing a firm s EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) by the firm s net revenues. Pro Forma EBITDA Margin is calculated by dividing a firm s Pro Forma EBITDA by the firm s Pro Forma net revenue. Operating Margin is calculated as EBITDA less contingent income divided by Pro Forma net revenues less contingent income. with $1,250,000 and $2,500,000 41

49 Analysis of with $1,250,000 and $2,500,000 The Rule of 20 is a simple growth and profitability balancing equation that provides a quick way to determine whether or not an agency is creating value for its shareholders. It states that an agency will drive industry-standard shareholder returns if the sum of (a) its organic growth rate and (b) 1/2 of its EBITDA margin equals or exceeds 20. Generally speaking, an outcome of 20 or more, regardless of the different combinations of growth and profitability, indicates that the agency s shareholders can expect to earn 15% -17% per year through stock price appreciation and/or shareholder distributions. What is the Rule of 20? Rule of 20 Outcome Public Brokers Organic Growth EBITDA Margin Rule of 20 Outcome 1/2 of Rule of 20 Score = EBITDA + Margin Organic Revenue Growth Provides a tool to benchmark agency performance Helps frame the trade-off between growth and profitability Willis Group 4.9% 24.0% 16.9 Aon 3.0% 20.9% 13.5 Brown & Brown 6.8% 33.5% 23.6 Arthur J. Gallagher 6.5% 19.9% 16.5 Marsh & McLennan 3.0% 20.7% 13.4 Average +25% Profit Average +25% Growth Average Rule of Financial Stability Average Top 25% Balance Sheet Current Ratio 1.74:1 3.24:1 Tangible Net Worth (% of Net Revenue) 9.9% 31.2% Receivables/Payable Ratio 62.4% -14.8% Aged Receivables % Receivables Aged Past 60 Days 24.6% 1.4% % Receivables Aged Past 90 Days 8.0% 0.0% Accounts Receivable Agency Billed vs. Direct Billed by Carrier % of P&C that are Agency Billed 26.2% 35.8% 19.9% % of P&C that are Direct Billed 73.8% 64.2% 80.1% with $1,250,000 and $2,500,000 42

50 Analysis of with $1,250,000 and $2,500,000 Employee Productivity Total Number of Employees (FTE) Revenue Per Employee $148,845 $200,208 $179,633 Compensation Per Employee $80,893 $82,280 $84,092 Spread Per Employee $67,951 $117,927 $95,541 $250K $200K $150K $100K $50K $0 $148,845 4 $200,208 2 $179,633 3 $80,893 $82,280 Revenue Per Employee Compensation Per Employee Spread Per Employee $84,092 $67,951 $117,927 $95,541 Average number of Agency Employees that work remotely % of with Remote Workers 46.4% 50.0% 33.3% Administrative Staff with $1,250,000 and $2,500, Accounting & HR Department Info Average Top 25% Accounting Department Total Number of Employees in Accounting Department 1.0 High 1.6 Low 0.5 Revenue per Accounting Employee $1,768,008 $2,295,490 Total Payroll for Accounting Employees $41,103 Accounting Payroll as % of Net Revenue 2.0% HR Department Total Number of Employees in HR Department 0.4 High 0.8 Low 0.2 Revenue per HR Employee $1,970,281 * Total Payroll for HR Employees $27,893 HR Payroll as % of Net Revenue 1.5% *Insufficient Data

51 Analysis of with $1,250,000 and $2,500,000 Most Successful Producer Productivity Most Successful Producer Productivity New Commissions Produced Annually Total Commissions in Producer s Book Average Commissions per Account Commercial P&C Group L&H Average $61,132 $49,864 Top 25% $109,428 $131,095 Average $502,450 $224,919 Top 25% $865,160 $458,333 Average $3,811 $2,955 Top 25% $7,990 $7,184 How Most Successful Producers Spent Time Most Successful Commercial P&C Producer Most Successful L&H Producer Mgmt/Personnel/ Mgmt/Personnel/ Agency Admin. 19.0% Soliciting New Business 30.6% Agency Admin. 12.5% Soliciting New Business 56.7% Personal Personal Training/ Training/ Education/ Prof. Dev. 11.9% Servicing Existing Accounts 38.5% Education/ Prof. Dev. 7.5% Servicing Existing Accounts 23.3% Personal Lines Producers, someone whose main responsibility is to solicit and write new personal lines accounts and is not responsible for the day-to-day servicing of the business, can be very productive. On average the most successful Personal Lines Producer in this revenue category generated $27,972 per year in new personal lines commissions with an average commission per account of $274. (Typically, the total commissions in the producer s book are not tracked since they are not paid renewal commission. Most often, the producers receive a base salary plus new business commissions.) with $1,250,000 and $2,500,000 44

52 Analysis of with $1,250,000 and $2,500,000 with $1,250,000 and $2,500, Validated Producer Productivity Average Top 25% Commercial P&C Producers Average Validated Producers # Validated 2.7 High 7.3 Low 1.0 Average New Commissions Produced Annually $57,126 $100,696 Average Book Serviced (Commissions) $351,294 $612,493 Average Pay ($) $125,407 Average Pay (% of Book Serviced) 35.7% Group Life & Health Producers Average Validated Producers # Validated 1.1 High 2.0 Low 0.5 Average New Commissions Produced Annually $51,649 $80,523 Average Book Serviced (Commissions) $181,751 * Average Pay ($) $77,713 Average Pay (% of Book Serviced) 42.8% Personal P&C Producers Average Validated Producers # Validated 1.8 High 5.0 Low 1.0 Average New Commissions Produced Annually $22,124 $32,506 Average Book Serviced (Commissions) $146,484 $201,818 Average Pay ($) $45,100 Average Pay (% of Book Serviced) 30.8% Multi-Line Producers Average Validated Producers # Validated 3.4 High 8.0 Low 1.0 Average New Commissions Produced Annually $81,170 * Average Book Serviced (Commissions) $391,032 * Average Pay ($) $140,485 Average Pay (% of Book Serviced) 35.9% % of That Reimburse All/Part T&E Expense 71.4% 83.3% 50.0% *Insufficient Data

53 Analysis of with $1,250,000 and $2,500,000 New Producers New Producer Hiring Where New Producers Were Found % of that Hired New Producers Last Year 32.1% * * # of New Producers Hired Last Year 1.2 * * Average Annualized Wages per Producer Hired $51,136 * * % of Producers Hired Over Last 5 Years That Met Their Production Goals 74.2% 70.0% 85.0% *Insufficient Data Average +25% Profit +25% Growth UNDER age 30 from WITHIN the insurance industry *Insufficient Data *Insufficient Data OVER age 30 from WITHIN the insurance industry UNDER age 30 from OUTSIDE the insurance industry OVER age 30 from OUTSIDE the insurance industry 18.2% 54.5% 0.0% 27.3% * * * * * * * * Net-investment in Unvalidated 1 Producer Pay The NUPP Expressed as a percentage of Net Revenue, the NUPP is the difference between what an agency pays its unvalidated producer(s) and what the producer(s) would earn under the agency s normal commission schedule. A NUPP of 1.5% is considered a healthy level of investment. High 5.0% Low 0.1% 1 An unvalidated producer is one whose production does not yet cover his/her wages *Insufficient Data Understanding the NUPP 2.7% * * By measuring pure payroll costs, the NUPP benchmark allows an apples-to-apples comparison with other agencies regarding the amount of direct investment an agency is making in new producers. While the NUPP provides a general investment guideline, an agency should also consider the success rate of its new producers, i.e. the percentage of new producers hired during the past 5 year period that have achieved the sales goals set before them. By multiplying the NUPP by the producer success rate, an agency can further determine the effectiveness of its NUPP. High performing agencies typically achieve an Effective NUPP between 1.0% - 1.5%. with $1,250,000 and $2,500,000 46

54 Analysis of with $1,250,000 and $2,500,000 Service Staff Productivity Service & Sales Support Staff Definition Typically non-commissioned employees Provide service to the agency s clients Support producers in the sale of new business and retention of existing business Some service positions may earn commission income but typically a majority of their pay is fixed and a majority of their time is devoted to service rather than the soliciting of new clients. Service & Sales Support Positions 1 Included in Full-time Equivalent Headcounts Account Executives (AE) - senior level service representatives Account Managers, Customer Service Representatives (CSRs) Assistant CSRs, Processors Claims Staff Placers/Marketers Department Managers - who also service clients 1 Position titles are general categories since specific job titles vary from agency to agency Administrative personnel such as accounting, mail room, and reception are not included in service benchmarks unless a portion of their time is dedicated to service. Service Staff Overview Total # of Service Staff (as defined above; excludes any TPA service staff) % of Peer Having Separate/Dedicated Marketing Department 28.6% 0.0% 33.3% # of Marketing Staff Separate/Dedicated Claims Department 10.7% 0.0% 0.0% # of Claims Staff with $1,250,000 and $2,500, TPA Service Staff % of Peer Having Workers Comp TPA 0.0% 0.0% 0.0% # of Service Staff * * * Total TPA Serviced * * * Group Benefits TPA 0.0% 0.0% 0.0% # of Service Staff * * * Total TPA Serviced * * * *Insufficient Data

55 Analysis of with $1,250,000 and $2,500,000 Service/Sales Support Staff Average Top 25% Commercial P&C Service/Sales Support Number 3.8 High 10.0 Low 2.0 Average Revenue per Staff $265,782 $415,423 Total Commercial Service Payroll ($) $183,313 Payroll (as % of Total Commercial Revenue) 20.5% Bonds P&C Service/Sales Support Staff Number 0.7 High 1.0 Low 0.1 Average Revenue per Staff $344,603 * Total Bond Service Payroll ($) $29,235 Payroll (as % of Total Bond Revenue) 16.6% Personal P&C Service/Sales Support Staff Number 2.9 High 7.0 Low 0.5 Average Revenue per Staff $205,946 $313,765 Total Personal Service Payroll ($) $114,405 Payroll (as % of Total Personal Revenue) 23.2% Group L&H Service/Sales Support Staff Number 0.9 High 1.5 Low 0.4 Average Revenue per Staff $223,119 $489,659 Total Group L&H Service Payroll ($) $38,976 Payroll (as % of Total Group L&H Revenue) 68.5% Individual L&H Service/Sales Support Staff Number 0.6 High 1.0 Low 0.5 Average Revenue per Staff $165,248 * Total Individual L&H Service Payroll ($) $29,607 Payroll (as % of Total Individual L&H Revenue) 42.6% Multi-Line Service/Sales Support Staff Number * High * Low * Average Revenue per Staff * * Total Multi-Line Service Payroll ($) * Payroll (as % of Total Multi-Line Revenue) * *Insufficient Data with $1,250,000 and $2,500,000 48

56 Analysis of with $1,250,000 and $2,500,000 with $1,250,000 and $2,500, Service Staff Payroll Information COMMERCIAL LINES PERSONAL LINES GROUP LIFE & HEALTH/FINANCIAL Pay Ranges by Service Position AE Average Low $40,864 $37,641 $45,000 Average High $66,488 $66,500 $71,000 CSR Average Low $40,721 $41,500 $38,255 Average High $54,239 $46,500 $53,691 Processor/Asst CSR Average Low $26,673 * * Average High $28,062 * * Marketing Average Low $39,390 * * Average High $39,390 * * Claims Average Low * * * Average High * * * AE Average Low $32,506 * * Average High $42,007 * * CSR Average Low $37,836 $35,875 $41,543 Average High $45,607 $37,750 $46,987 Processor/Asst CSR Average Low $24,411 * * Average High $27,660 * * Marketing Average Low * * * Average High * * * Claims Average Low * * * Average High * * * AE Average Low $59,285 * * Average High $59,285 * * CSR Average Low $32,896 * * Average High $33,030 * * Processor/Asst CSR Average Low * * * Average High * * * Marketing Average Low * * * Average High * * * Claims Average Low * * * Average High * * * *Insufficient Data

57 Analysis of with $1,250,000 and $2,500,000 Average Top 25% Information Employees (FTE) Number 0.7 High 1.5 Low 0.1 Number of IT Employees per 100 users N/A Revenue per IT Employee $1,775,631 $2,370,011 Total IT Payroll Expense ($) $31,541 $54,714 As % of Total Compensation Expense 3.3% As % of Net 1.8% Total IT 1 (as % of net revenues) 2.9% 2.5% 2.5% 1 Includes hardware/software leasing including offsite applications, supplies, maintenance & maintenance contracts, training, data lines, internet providers, website development/maintenance, outside consulting fees, computer depreciation, software amortization, and any non-depreciated hardware/software. Agency Management System Utilized EPIC 10.7% TAM 57.1% AMS % with $1,250,000 and $2,500,000 50

58 Analysis of with $1,250,000 and $2,500,000 Carriers Carrier Representation Personal Lines P&C National Regional Total Commercial Lines P&C National Regional Total Group L&H / Financial Total Life, Health, Disability, LTC, Retirement Products, and Other Carrier Appointments % of Total Commission & Fee Revenue Derived from Direct Versus Indirect Appointments INDIRECT Carrier Appointments 14.1% 8.8% 12.5% DIRECT Carrier Appointments 85.9% 91.2% 87.5% Use of Carrier Service Centers with $1,250,000 and $2,500,000 Service Center Use Total Personal Lines Commission placed in Carrier Service Center Total Commercial Lines Commission placed in Carrier Service Center *Insufficient Data 21.0% * * 22.2% * * 51

59 Analysis of with $1,250,000 and $2,500,000 Revenue from Top P&C Commission Income from Top Carriers Top P&C Carrier $462,570 $489,014 $449,639 as % of Agency Net Revenue 25.2% 27.6% 24.1% Top P&C Carrier Breakdown By Line of Business Mid/Large Commerical 24.0% Average Personal 39.0% Mid/Large Commerical 45.6% +25% Profit Personal 17.4% Mid/Large Commerical 22.4% +25% Growth Personal 45.0% Small Commercial 37.0% Small Commercial 37.0% Small Commercial 32.7% Top 3 P&C Carriers $783,827 $733,637 $760,310 as % of Agency Net Revenue 42.3% 41.2% 40.1% Top 3 P&C Carriers Breakdown By Line of Business Average +25% Profit +25% Growth Mid/Large Commerical 23.8% Personal 39.7% Mid/Large Commerical 41.7% Personal 23.0% Mid/Large Commerical 32.0% Personal 37.2% Small Commercial 36.6% Small Commercial 35.3% Small Commercial 30.8% L&H/F Commission Income from Top Carriers as % of Net Rev from Top L&H/F Carrier 5.7% 7.5% 7.4% as % of Net Rev from Top 3 L&H/F Carriers 8.3% 11.0% 12.7% with $1,250,000 and $2,500,000 52

60 53

61 with $2,500,000 and $5,000,000 $1,250,000 $2,500,000 $5,000,000 $10,000,000 $25,000,000 54

62 Analysis of with $2,500,000 and $5,000,000 with $2,500,000 and $5,000, at a Glance Growth Organic Growth By Line of Business* Commercial P&C 7.5% 6.5% 15.8% Personal P&C 5.5% 3.6% 9.0% Group Medical -3.5% -1.5% -3.3% All Other Group -7.9% * 12.3% Total Organic Growth 7.8% 6.0% 19.1% Profit Pro Forma Pretax Profit 24.8% 41.2% 19.8% Pro Forma EBITDA 27.9% 43.1% 22.4% Rule of 20 Score Financial Average Top 25% Current Ratio 1.37:1 1.99:1 Receivable/Payable Ratio 59.1% 0.1% Accounts Receivables > 60 Days 12.7% 1.1% Accounts Receivables > 90 Days 5.9% -0.9% Productivity Revenue per Employee $156,595 $170,253 $139,829 Compensation per Employee $92,306 $86,511 $85,039 Spread per Employee $64,289 $83,742 $54,790 Annual New Commission Generated per Validated Producer Average Top 25% Commercial P&C $66,268 $121,036 Personal P&C $47,682 $95,934 Life & Health/Financial $49,850 $107,080 Service Staff Total Payroll as % of Line of Business Revenue Average # of Service Staff Commercial P&C 19.2% 6.9 Personal P&C 24.5% 5.1 Group Life & Health/Financial 20.1% 1.3 *Insufficient Data *Excludes any acquired revenue

63 Analysis of with $2,500,000 and $5,000,000 (of in this Study Group) Average Total : $3,472,462 Population Density of Metropolitan Areas Where Home Office is Located Less than 50, % 54.5% 36.4% 50, , % 18.2% 27.3% 250,000 1,000, % 0.0% 18.2% More than 1,000, % 27.3% 18.2% Corporate Structure C 14.6% 27.3% 0.0% S 62.5% 27.3% 63.6% Partnership 4.2% 9.1% 18.2% LLC 18.8% 36.4% 18.2% Sole Proprietorship 0.0% 0.0% 0.0% Average Number of Agency Locations (Main Offices and Branch Offices) Total Square Footage of Office Space 7,364 6,765 6,963 # of States in which Offices are Located Agency has an ESOP 2.1% 0.0% 0.0% % of Stock Owned by ESOP 100.0% 0.0% 0.0% Shareholders Number of Shareholders (excluding ESOP) High 7.0 Low 1.0 Ownership Percentage % Owned by Largest Shareholder 64.7% 74.7% 65.5% High 100.0% Low 25.0% Shareholder Age Current Age of Largest Shareholder Parent Corporation % of Owned by Another Corporation Average 6.5% Description of Parent Corporation Financial Institution 25.0% Other included commercial P&C agency and holding company. National Broker 25.0% Other 50.0% Member of Group % of Belonging to a Franchise, Cluster, Alliance/Network or Aggregator Group 31.3% Other included Combined Agents of America, Trusted Insurance Alliance, CAA, Secure Risk/Shared Agency Services, Keystone Insurance Group, ARM of Illinois, Consolidated Insurance Agents, Assuralliance, and Northlake Insurance Group. with $2,500,000 and $5,000,000 56

65 Analysis of with $2,500,000 and $5,000,000 Revenue by Acquisition Acquired What the Typical Transactions Looked Like Acquired per Transaction % of Acquiring Average Commissions Acquired Multiples of Revenue Paid % of Net Acquisitions Made in Last 12 Months 14.6% $204, % Average $198,174 Average 1.49x High $750,000 High 1.85x Low $90,100 Low 1.0x Revenue by Specialty/Niche % of having an Industry and/or Product Specialty/Niche Total Commissions & Fees Generated from All Specialties/Niches Total Specialty/Niche Revenue as % of Net 58.3% 36.4% 63.6% $1,094,029 $1,647,837 $882, % 46.6% 15.6% Specialty/Niche Revenue as % of Net Revenue 50% 46.6% 40% 30% 20% 10% 0% 29.1% 15.6% with $2,500,000 and $5,000,000 58

66 Analysis of with $2,500,000 and $5,000,000 Revenue by Account Concentration % of Revenue Derived from Largest Account 3.8% 3.0% 3.4% High 24.5% Low 0.7% 10 Largest Accounts 15.1% 12.5% 13.4% High 43.1% Low 2.5% Other Group Life & Health* Revenue (% from source) Life 27.8% 58.0% 40.0% Disability 16.7% 0.3% 18.2% Dental & Vision 25.9% 8.3% 16.9% Retirement/Pension 6.4% 0.0% 17.6% Worksite/Voluntary/Supplement 6.8% 0.0% 3.3% Long-Term Care 2.5% 8.3% 3.7% Employee Benefits TPA 4.4% 0.0% 0.0% All Other 9.6% 25.0% 0.3% *Excludes Group Medical with $2,500,000 and $5,000,000 59

67 Analysis of with $2,500,000 and $5,000,000 Revenue by Account Size (as measured by Comm. & Fees not premium) Commercial P&C Greater than $25,000 % of Book 29.9% 21.5% 25.5% # of Accounts Total Revenue $698,258 $535,548 $601,222 Revenue per Account $56,718 $56,705 $52,488 $10,000 and $25,000 % of Book 17.0% 12.7% 16.7% # of Accounts Total Revenue $379,540 $284,293 $392,951 Revenue per Account $15,431 $15,203 $15,548 $5,000 and $10,000 % of Book 13.1% 12.0% 12.5% # of Accounts Total Revenue $291,869 $269,778 $294,178 Revenue per Account $7,082 $7,007 $7,422 Less than $5,000 % of Book 40.0% 53.8% 45.4% # of Accounts 1, , ,042.8 Total Revenue $893,749 $1,208,670 $1,069,882 Revenue per Account $538 $421 $524 (as measured by number of lives) Group L&H/Financial Over 100 Lives % of Book 32.0% 14.9% 38.2% # of Accounts Total Revenue $198,980 $48,792 $178,232 Revenue per Account $34,369 $36,594 $41, Lives % of Book 21.5% 19.0% 25.2% # of Accounts Total Revenue $106,004 $37,404 $94,050 Revenue per Account $11,358 $3,667 $7, Lives % of Book 14.2% 8.9% 20.5% # of Accounts Total Revenue $64,730 $17,586 $76,496 Revenue per Account $4,994 $3,664 $4,250 Under 25 Lives % of Book 32.3% 57.2% 16.0% # of Accounts Total Revenue $112,154 $62,503 $42,608 Revenue per Account $930 $868 $896 with $2,500,000 and $5,000,000 60

68 Analysis of with $2,500,000 and $5,000,000 Revenue Growth by Source Commercial P&C Renewals % 93.6% 97.5% New Business % 12.9% 18.3% Acquired 3 0.5% 0.1% 0.0% Organic Growth 4 7.5% 6.5% 15.8% Total Growth 5 7.9% 6.6% 15.8% Bonds P&C Renewals % 81.7% 46.9% New Business % 29.4% 45.2% Acquired 3 0.1% 0.0% 0.0% Organic Growth 4-1.2% 11.1% -7.9% Total Growth 5-1.2% 11.1% -7.9% Personal P&C Renewals % 91.3% 96.0% New Business % 12.3% 13.0% Acquired 3 0.7% 0.0% 0.0% Organic Growth 4 5.5% 3.6% 9.0% Total Growth 5 6.2% 3.6% 9.0% Value Added Services P&C Renewals % * * *Insufficient New Data Business % * * Acquired 3 0.0% * * Organic Growth % * * Total Growth % * * *Insufficient Data 1 Renewal as a % of prior year s total revenues for this line of business. This figure is impacted by attrition (loss or retention of accounts) and by changes in premium and commission levels. The higher the %, the more favorable the results. 2 New as a % of prior year s total revenues for this line of business. The higher the %, the more favorable the results. 3 Acquired as a % of prior year s total revenues for this line of business. The % indicates the significance of acquired business. 4 Growth in from prior year excluding acquired revenues. 5 Growth in from prior year including acquired revenues. with $2,500,000 and $5,000,000 61

69 Analysis of with $2,500,000 and $5,000,000 Revenue Growth by Source (continued) Group Medical L&H *Insufficient Data Renewals % 91.1% 87.7% New Business 2 9.3% 7.4% 9.0% Acquired 3 0.0% 0.0% 0.0% Organic Growth 4-3.5% -1.5% -3.3% Total Growth 5-3.5% -1.5% -3.3% All Other Group L&H Individual L&H Renewals % * 97.4% New Business % * 14.8% Acquired 3 0.0% * 0.0% Organic Growth 4-7.9% * 12.3% Total Growth 5-7.9% * 12.3% Renewals % 77.5% 74.5% New Business % 16.3% 45.4% Acquired 3 0.6% 0.0% 0.0% Organic Growth 4-2.9% -6.2% 19.8% Total Growth 5-2.3% -6.2% 19.8% Total Commissions & Fees (P&C, L&H) Renewals % 92.7% 95.6% New Business % 12.5% 16.9% Acquired 3 0.9% 0.1% 0.0% Organic Growth 4 6.6% 5.2% 13.9% Total Growth 5 7.5% 5.2% 13.9% Brokerage Commission Expense Growth -3.8% 13.7% * Net Commissions & Fees Growth (Organic) 6 6.8% 5.2% 14.5% Net Commissions & Fees Growth (Total) 7 7.7% 5.3% 14.5% Other Income P&C Contingent Income Growth 9.1% 3.3% 31.5% L&H Bonus Income Growth 13.4% -27.7% * Investment Income Growth -6.5% * -4.3% Gross Revenue Growth 8.4% 5.9% 18.6% Net Revenue Growth (Organic) 8 7.8% 6.0% 19.1% Net Revenue Growth (Total) 9 8.6% 6.1% 19.1% 1 Renewal as a % of prior year s total revenues for this line of business. This figure is impacted by attrition (loss or retention of accounts) and by changes in premium and commission levels. The higher the %, the more favorable the results. 2 New as a % of prior year s total revenues for this line of business. The higher the %, the more favorable the results. 4 Growth in from prior year excluding acquired revenues. 5 Growth in from prior year including acquired revenues. 6 Growth in Total Commissions & Fees (less Brokerage Commission Expense) from prior year excluding acquired revenues. 8 Growth in Net (Gross Revenue less Brokerage Commission Expense) from prior year excluding acquired revenues. 9 Growth in Net (Gross Revenue less Brokerage Commission Expense) from prior year including acquired revenues. with $2,500,000 and $5,000, Acquired as a % of prior year s total revenues for this line of business. The % indicates the significance of acquired business. 7 Growth in Total Commissions & Fees (less Brokerage Commission Expense) from prior year including acquired revenues.

70 Analysis of with $2,500,000 and $5,000,000 Revenue Growth by Source (continued) Historical Organic Growth (in Net Revenue) 40% 30% 20% 10% 0% 10% 15.7% 14.1% 31.3% 4.1% 0.6% 12.1% 1.6% 0.7% 10.0% 0.2% 1.3% 6.7% 67% 3.6% 1.1% % 3.0% 12.2% 7.6% 76% 9.5% 11.7% 20.0% 7.8% 78% 6.0% 60% 19.1% Future Growth Percentage of agencies considering line of business as very important to growing agency s revenue over the next 3 years Surety-Bonding 27.1% Personal P&C 81.3% Small Commercial P&C 77.1% 7 Individual Life & Health 16.7% Group Medical/Health Insurance 50.0% All Other Group Benefits 35.4% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% with $2,500,000 and $5,000,000 63

72 Analysis of with $2,500,000 and $5,000,000 (as % of Net ) continued Administrative Amortization of Intangibles 1.5% 1.1% 1.3% Officer Life 0.2% 0.1% 0.3% Interest 0.7% 0.5% 0.6% Other 0.3% 0.0% 0.0% Total Administrative 2.7% 1.7% 2.2% Total 79.5% 64.8% 82.4% Pre-Tax Profit (Loss) 20.5% 35.2% 17.6% EBITDA 23.6% 37.1% 20.2% Expense Growth Over Prior Year Compensation Expense 7.4% 2.7% 14.3% Selling Expense 13.9% 8.8% 18.9% Operating Expense 5.9% 13.9% 7.0% Administrative Expense -3.8% -1.5% 8.3% (as % of Net ) 60% 58.8% 61.3% 50% 49.4% 40% 30% with $2,500,000 and $5,000,000 20% 10% 0% 3.9% 39% 2.1% 21% 4.0% 14.1% 14.8% 11.6% 2.7% 27% 1.7% 17% 2.2% 22% Compensation Selling Operating Administrative 65

74 Analysis of with $2,500,000 and $5,000,000 Historical EBITDA Margin & Operating Margin (for Average Group) 35% 33.5% 30% 25% 28.4% 25.3% 23.2% 23.0% 24.4% 27.1% 27.9% 20% 15% 23.2% 2% 21.1% 18.3% 18.9% 18.6% 20.3% 22.4% 23.6% 10% 5% 0% 8.9% 5.8% 2.2% 22% 6.2% % 9.0% 10.4% 12.8% EBITDA Margin Operating Margin Pro Forma EBITDA About EBITDA Margin and Operating Margin EBITDA Margin is calculated by dividing a firm s EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) by the firm s net revenues. Pro Forma EBITDA Margin is calculated by dividing a firm s Pro Forma EBITDA by the firm s Pro Forma net revenue. Operating Margin is calculated as EBITDA less contingent income divided by Pro Forma net revenues less contingent income. with $2,500,000 and $5,000,000 67

75 Analysis of with $2,500,000 and $5,000,000 The Rule of 20 is a simple growth and profitability balancing equation that provides a quick way to determine whether or not an agency is creating value for its shareholders. It states that an agency will drive industry-standard shareholder returns if the sum of (a) its organic growth rate and (b) 1/2 of its EBITDA margin equals or exceeds 20. Generally speaking, an outcome of 20 or more, regardless of the different combinations of growth and profitability, indicates that the agency s shareholders can expect to earn 15% -17% per year through stock price appreciation and/or shareholder distributions. What is the Rule of 20? Rule of 20 Outcome Public Brokers Organic Growth EBITDA Margin Rule of 20 Outcome 1/2 of Rule of 20 Score = EBITDA + Margin Organic Revenue Growth Provides a tool to benchmark agency performance Helps frame the trade-off between growth and profitability Willis Group 4.9% 24.0% 16.9 Aon 3.0% 20.9% 13.5 Brown & Brown 6.8% 33.5% 23.6 Arthur J. Gallagher 6.5% 19.9% 16.5 Marsh & McLennan 3.0% 20.7% 13.4 Average +25% Profit Average +25% Growth Average Rule of Financial Stability Average Top 25% Balance Sheet Current Ratio 1.37:1 1.99:1 Tangible Net Worth (% of Net Revenue) 6.7% 27.5% Receivables/Payable Ratio 59.1% 0.1% Aged Receivables % Receivables Aged Past 60 Days 12.7% 1.1% % Receivables Aged Past 90 Days 5.9% -0.9% Accounts Receivable Agency Billed vs. Direct Billed by Carrier % of P&C that are Agency Billed 28.4% 22.4% 22.6% % of P&C that are Direct Billed 71.6% 77.6% 77.4% with $2,500,000 and $5,000,000 68

76 Analysis of with $2,500,000 and $5,000,000 Employee Productivity Total Number of Employees (FTE) Revenue Per Employee $156,595 $170,253 $139,829 Compensation Per Employee $92,306 $86,511 $85,039 Spread Per Employee $64,289 $83,742 $54,790 $250K $200K $150K $100K $50K $0 $156,595 5 $170,253 $139,829 $92,306 $86,511 Revenue Per Employee Compensation Per Employee Spread Per Employee $85,039 $64,289 $83,742 $54,790 Average number of Agency Employees that work remotely % of with Remote Workers 41.7% 66.7% 44.4% Administrative Staff with $2,500,000 and $5,000, Accounting & HR Department Info Average Top 25% Accounting Department Total Number of Employees in Accounting Department 1.2 High 2.5 Low 0.2 Revenue per Accounting Employee $2,910,834 $3,946,716 Total Payroll for Accounting Employees $65,413 Accounting Payroll as % of Net Revenue 1.8% HR Department Total Number of Employees in HR Department 0.6 High 1.0 Low 0.2 Revenue per HR Employee $3,595,102 $4,539,036 Total Payroll for HR Employees $37,328 HR Payroll as % of Net Revenue 1.0%

77 Analysis of with $2,500,000 and $5,000,000 Most Successful Producer Productivity Most Successful Producer Productivity New Commissions Produced Annually Total Commissions in Producer s Book Average Commissions per Account Commercial P&C Group L&H Average $90,605 $35,266 Top 25% $160,303 $87,090 Average $655,680 $310,728 Top 25% $1,051,779 $700,460 Average $5,711 $5,405 Top 25% $14,282 $12,506 How Most Successful Producers Spent Time Most Successful Commercial P&C Producer Most Successful L&H Producer Mgmt/Personnel/ Mgmt/Personnel/ Agency Admin. 18.2% Soliciting New Business 28.6% Agency Admin. 11.4% Soliciting New Business 26.2% Personal Personal Training/ Training/ Education/ Prof. Dev. 8.3% Servicing Existing Accounts 44.9% Education/ Prof. Dev. 6.4% Servicing Existing Accounts 56.0% Personal Lines Producers, someone whose main responsibility is to solicit and write new personal lines accounts and is not responsible for the day-to-day servicing of the business, can be very productive. On average the most successful Personal Lines Producer in this revenue category generated $55,543 per year in new personal lines commissions with an average commission per account of $405. (Typically, the total commissions in the producer s book are not tracked since they are not paid renewal commission. Most often, the producers receive a base salary plus new business commissions.) with $2,500,000 and $5,000,000 70

78 Analysis of with $2,500,000 and $5,000,000 with $2,500,000 and $5,000, Validated Producer Productivity Average Top 25% Commercial P&C Producers Average Validated Producers # Validated 4.0 High 8.0 Low 1.0 Average New Commissions Produced Annually $66,268 $121,036 Average Book Serviced (Commissions) $415,602 $680,057 Average Pay ($) $138,503 Average Pay (% of Book Serviced) 33.3% Group Life & Health Producers Average Validated Producers # Validated 1.4 High 4.0 Low 0.3 Average New Commissions Produced Annually $49,850 $107,080 Average Book Serviced (Commissions) $293,601 $432,400 Average Pay ($) $94,470 Average Pay (% of Book Serviced) 32.2% Personal P&C Producers Average Validated Producers # Validated 3.1 High 11.0 Low 1.0 Average New Commissions Produced Annually $47,682 $95,934 Average Book Serviced (Commissions) $212,548 $486,820 Average Pay ($) $61,829 Average Pay (% of Book Serviced) 29.1% Multi-Line Producers Average Validated Producers # Validated 3.0 High 10.0 Low 1.0 Average New Commissions Produced Annually $49,403 $89,166 Average Book Serviced (Commissions) $433,272 $629,267 Average Pay ($) $125,708 Average Pay (% of Book Serviced) 29.0% % of That Reimburse All/Part T&E Expense 72.9% 63.6% 90.9%

79 Analysis of with $2,500,000 and $5,000,000 New Producers New Producer Hiring Where New Producers Were Found % of that Hired New Producers Last Year 45.8% 45.5% 63.6% # of New Producers Hired Last Year Average Annualized Wages per Producer Hired $49,901 $44,615 $51,369 % of Producers Hired Over Last 5 Years That Met Their Production Goals 67.1% 79.7% 81.6% Average +25% Profit +25% Growth UNDER age 30 from WITHIN the insurance industry OVER age 30 from WITHIN the insurance industry UNDER age 30 from OUTSIDE the insurance industry 28.1% 21.9% 25.0% 37.5% 50.0% 25.0% OVER age 30 from OUTSIDE the insurance industry 31.3% 18.8% 12.5% 25.0% 12.5% 12.5% Net-investment in Unvalidated 1 Producer Pay The NUPP Expressed as a percentage of Net Revenue, the NUPP is the difference between what an agency pays its unvalidated producer(s) and what the producer(s) would earn under the agency s normal commission schedule. A NUPP of 1.5% is considered a healthy level of investment. 1.2% 1.0% 1.3% High 2.7% Low 0.3% 1 An unvalidated producer is one whose production does not yet cover his/her wages Understanding the NUPP By measuring pure payroll costs, the NUPP benchmark allows an apples-to-apples comparison with other agencies regarding the amount of direct investment an agency is making in new producers. While the NUPP provides a general investment guideline, an agency should also consider the success rate of its new producers, i.e. the percentage of new producers hired during the past 5 year period that have achieved the sales goals set before them. By multiplying the NUPP by the producer success rate, an agency can further determine the effectiveness of its NUPP. High performing agencies typically achieve an Effective NUPP between 1.0% - 1.5%. with $2,500,000 and $5,000,000 72

81 Analysis of with $2,500,000 and $5,000,000 Service/Sales Support Staff Average Top 25% Commercial P&C Service/Sales Support Number 6.9 High 17.0 Low 2.3 Average Revenue per Staff $295,717 $437,893 Total Commercial Service Payroll ($) $378,495 Payroll (as % of Total Commercial Revenue) 19.2% Bonds P&C Service/Sales Support Staff Number 1.1 High 4.0 Low 0.2 Average Revenue per Staff $122,855 $172,408 Total Bond Service Payroll ($) $52,597 Payroll (as % of Total Bond Revenue) 30.7% Personal P&C Service/Sales Support Staff Number 5.1 High 14.0 Low 0.5 Average Revenue per Staff $197,956 $294,746 Total Personal Service Payroll ($) $212,140 Payroll (as % of Total Personal Revenue) 24.5% Group L&H Service/Sales Support Staff Number 1.3 High 4.0 Low 0.2 Average Revenue per Staff $310,919 $616,749 Total Group L&H Service Payroll ($) $68,657 Payroll (as % of Total Group L&H Revenue) 20.1% Individual L&H Service/Sales Support Staff Number 0.6 High 2.0 Low 0.1 Average Revenue per Staff $134,131 $235,754 Total Individual L&H Service Payroll ($) $24,042 Payroll (as % of Total Individual L&H Revenue) 28.6% Multi-Line Service/Sales Support Staff Number * High * Low * Average Revenue per Staff * * Total Multi-Line Service Payroll ($) * Payroll (as % of Total Multi-Line Revenue) * *Insufficient Data with $2,500,000 and $5,000,000 74

82 Analysis of with $2,500,000 and $5,000,000 with $2,500,000 and $5,000, Service Staff Payroll Information GROUP LIFE & HEALTH/FINANCIAL PERSONAL LINES COMMERCIAL LINES Pay Ranges by Service Position AE Average Low $65,802 $73,549 $54,094 Average High $83,171 $88,028 $83,261 CSR Average Low $37,911 $37,657 $38,066 Average High $53,622 $49,105 $53,710 Processor/Asst CSR Average Low $32,513 $26,363 $28,648 Average High $37,864 $41,459 $31,465 Marketing Average Low $59,117 * * Average High $60,085 * * Claims Average Low $42,204 $50,000 $41,862 Average High $45,676 $52,125 $41,862 AE Average Low $39,871 $37,100 $46,139 Average High $44,130 $35,050 $46,230 CSR Average Low $35,028 $34,779 $33,128 Average High $47,968 $53,912 $45,363 Processor/Asst CSR Average Low $34,660 $31,913 $38,283 Average High $38,751 $34,563 $38,283 Marketing Average Low $34,907 $34,907 * Average High $36,573 $36,573 * Claims Average Low $38,175 $51,549 $42,324 Average High $38,829 $53,674 $42,324 AE Average Low $61,665 * $63,353 Average High $63,772 * $63,353 CSR Average Low $39,026 $35,260 * Average High $41,988 $39,485 * Processor/Asst CSR Average Low $19,241 * * Average High $19,241 * * Marketing Average Low * * * Average High * * * Claims Average Low * * * Average High * * * *Insufficient Data

83 Analysis of with $2,500,000 and $5,000,000 Average Top 25% Information Employees (FTE) Number 0.8 High 2.6 Low 0.0 Number of IT Employees per 100 users N/A Revenue per IT Employee $3,149,271 $4,097,167 Total IT Payroll Expense ($) $46,628 $100,526 As % of Total Compensation Expense 2.3% As % of Net 1.3% Total IT 1 (as % of net revenues) 2.2% 2.0% 2.4% 1 Includes hardware/software leasing including offsite applications, supplies, maintenance & maintenance contracts, training, data lines, internet providers, website development/maintenance, outside consulting fees, computer depreciation, software amortization, and any non-depreciated hardware/software. Agency Management System Utilized Other included Xanatek-IMS, Navigator, and Custom EPIC 8.3% Instar AFW 2.1% 2.1% Other 4.2% Vision 2.1% DORIS 2.1% Sagitta 2.1% TAM 39.6% AMS % with $2,500,000 and $5,000,000 76

84 Analysis of with $2,500,000 and $5,000,000 Carriers Carrier Representation Personal Lines P&C National Regional Total Commercial Lines P&C National Regional Total Group L&H / Financial Total Life, Health, Disability, LTC, Retirement Products, and Other Carrier Appointments % of Total Commission & Fee Revenue Derived from Direct Versus Indirect Appointments INDIRECT Carrier Appointments 15.1% 12.6% 9.5% DIRECT Carrier Appointments 82.9% 87.5% 81.6% Use of Carrier Service Centers with $2,500,000 and $5,000,000 Service Center Use Total Personal Lines Commission placed in Carrier Service Center Total Commercial Lines Commission placed in Carrier Service Center *Insufficient Data 23.9% * * 6.6% * * 77

85 Analysis of with $2,500,000 and $5,000,000 Revenue from Top P&C Commission Income from Top Carriers Top P&C Carrier $657,900 $580,046 $601,016 as % of Agency Net Revenue 19.2% 18.0% 17.4% Top P&C Carrier Breakdown By Line of Business Mid/Large Commerical 37.0% Average Personal 38.3% Mid/Large Commerical 29.4% +25% Profit Personal 41.2% Mid/Large Commerical 35.7% +25% Growth Personal 37.9% Small Commercial 24.8% Small Commercial 29.4% Small Commercial 26.4% Top 3 P&C Carriers $1,261,779 $1,243,216 $1,091,726 as % of Agency Net Revenue 36.8% 38.5% 32.1% Top 3 P&C Carriers Breakdown By Line of Business Average +25% Profit +25% Growth Mid/Large Commerical 36.8% Personal 36.8% Mid/Large Commerical 29.6% Personal 42.5% Mid/Large Commerical 35.2% Personal 39.7% Small Commercial 26.4% Small Commercial 27.9% Small Commercial 25.1% L&H/F Commission Income from Top Carriers as % of Net Rev from Top L&H/F Carrier 4.5% 2.8% 3.6% as % of Net Rev from Top 3 L&H/F Carriers 7.1% 3.9% 5.5% with $2,500,000 and $5,000,000 78

86 79

87 with $5,000,000 and $10,000,000 $1,250,000 $2,500,000 $5,000,000 $10,000,000 $25,000,000 80

88 Analysis of with $5,000,000 and $10,000,000 with $5,000,000 and $10,000, at a Glance Growth Organic Growth By Line of Business* Commercial P&C 11.3% 14.0% 21.5% Personal P&C 5.3% 5.3% 7.3% Group Medical -2.0% -2.4% -0.7% All Other Group 3.9% 2.3% -17.3% Total Organic Growth 8.1% 9.5% 17.4% Profit Pro Forma Pretax Profit 21.8% 34.9% 23.8% Pro Forma EBITDA 25.1% 37.2% 27.9% Rule of 20 Score Financial Average Top 25% Current Ratio 1.28:1 1.82:1 Receivable/Payable Ratio 46.5% 7.7% Accounts Receivables > 60 Days 16.0% 1.1% Accounts Receivables > 90 Days 6.8% -4.8% Productivity Revenue per Employee $169,297 $215,833 $186,611 Compensation per Employee $104,563 $125,966 $110,740 Spread per Employee $64,733 $89,868 $75,871 Annual New Commission Generated per Validated Producer Average Top 25% Commercial P&C $73,374 $146,073 Personal P&C $37,952 $59,620 Life & Health/Financial $74,463 $149,171 Service Staff Total Payroll as % of Line of Business Revenue Average # of Service Staff Commercial P&C 19.5% 13.5 Personal P&C 23.3% 9.5 Group Life & Health/Financial 17.3% 2.8 *Excludes any acquired revenue

89 Analysis of with $5,000,000 and $10,000,000 (of in this Study Group) Average Total : $7,087,464 Population Density of Metropolitan Areas Where Home Office is Located Less than 50, % 22.2% 22.2% 50, , % 33.3% 22.2% 250,000 1,000, % 22.2% 11.1% More than 1,000, % 22.2% 44.4% Corporate Structure C 19.4% 22.2% 22.2% S 63.9% 55.6% 66.7% Partnership 5.6% 11.1% 11.1% LLC 11.1% 11.1% 0.0% Sole Proprietorship 0.0% 0.0% 0.0% Average Number of Agency Locations (Main Offices and Branch Offices) Total Square Footage of Office Space 13,729 10,479 14,122 # of States in which Offices are Located Agency has an ESOP 5.4% 22.2% 11.1% % of Stock Owned by ESOP 60.0% 60.0% 100.0% Shareholders Number of Shareholders (excluding ESOP) High 9.0 Low 1.0 Ownership Percentage % Owned by Largest Shareholder 57.8% 65.6% 71.4% High 100.0% Low 12.5% Shareholder Age Current Age of Largest Shareholder Parent Corporation Average % of Owned by Another Corporation 3.0% Description of Parent Corporation Financial Institution 100.0% National Broker 0.0% Other 0.0% Member of Group % of Belonging to a Franchise, Cluster, Alliance/Network or Aggregator Group 18.9% Other included Insurance & Risk Managers, Northern United Agents Alliance, ISU, Insurors Group, Combined Agents of America, Assurex Global, Keystone Insurers Group, Benefits Advisors Network, and Intersure. with $5,000,000 and $10,000,000 82

91 Analysis of with $5,000,000 and $10,000,000 Revenue by Acquisition Acquired What the Typical Transactions Looked Like Acquired per Transaction % of Acquiring Average Commissions Acquired Multiples of Revenue Paid % of Net Acquisitions Made in Last 12 Months 10.8% $199, % Average $151,139 Average 1.5x High $327,948 High 1.5x Low $16,450 Low 1.5x Revenue by Specialty/Niche % of having an Industry and/or Product Specialty/Niche Total Commissions & Fees Generated from All Specialties/Niches Total Specialty/Niche Revenue as % of Net 67.6% 77.8% 66.7% $1,749,439 $1,753,701 $2,404, % 29.4% 33.9% Specialty/Niche Revenue as % of Net Revenue 50% 40% 30% 20% 26.2% 29.4% 33.9% 10% 0% with $5,000,000 and $10,000,000 84

92 Analysis of with $5,000,000 and $10,000,000 Revenue by Account Concentration % of Revenue Derived from Largest Account 3.2% 4.2% 3.1% High 10.8% Low 0.8% 10 Largest Accounts 13.5% 14.5% 11.7% High 34.3% Low 2.5% Other Group Life & Health* Revenue (% from source) Life 31.2% 33.5% 42.7% Disability 15.8% 11.8% 12.8% Dental & Vision 27.6% 14.5% 22.5% Retirement/Pension 6.9% 15.6% 2.4% Worksite/Voluntary/Supplement 11.4% 23.5% 7.4% Long-Term Care 1.3% 1.1% 0.0% Employee Benefits TPA 2.2% 0.0% 10.2% All Other 3.5% 0.0% 2.0% *Excludes Group Medical with $5,000,000 and $10,000,000 85

93 Analysis of with $5,000,000 and $10,000,000 Revenue by Account Size (as measured by Comm. & Fees not premium) Commercial P&C Greater than $25,000 % of Book 33.8% 32.4% 38.4% # of Accounts Total Revenue $1,464,122 $1,178,350 $1,576,056 Revenue per Account $56,785 $60,257 $56,966 $10,000 and $25,000 % of Book 17.0% 14.9% 17.2% # of Accounts Total Revenue $738,105 $543,221 $705,875 Revenue per Account $15,438 $15,089 $15,162 $5,000 and $10,000 % of Book 12.0% 12.0% 12.7% # of Accounts Total Revenue $521,145 $437,363 $521,224 Revenue per Account $7,004 $6,787 $7,118 Less than $5,000 % of Book 37.2% 40.7% 31.8% # of Accounts 3, , ,103.0 Total Revenue $1,613,382 $1,482,380 $1,305,340 Revenue per Account $529 $458 $621 (as measured by number of lives) Group L&H/Financial Over 100 Lives % of Book 33.8% 37.7% 33.8% # of Accounts Total Revenue $465,918 $598,145 $472,804 Revenue per Account $43,341 $59,815 $42, Lives % of Book 17.4% 13.9% 21.9% # of Accounts Total Revenue $200,081 $176,817 $261,983 Revenue per Account $17,028 $17,682 $18, Lives % of Book 17.1% 12.1% 16.4% # of Accounts Total Revenue $188,941 $152,963 $196,568 Revenue per Account $8,796 $7,804 $8,709 Under 25 Lives % of Book 31.7% 36.3% 27.9% # of Accounts Total Revenue $324,330 $383,441 $334,944 Revenue per Account $1,421 $2,632 $1,832 with $5,000,000 and $10,000,000 86

94 Analysis of with $5,000,000 and $10,000,000 Revenue Growth by Source Commercial P&C Renewals % 103.7% 102.8% New Business % 10.3% 18.7% Acquired 3 0.4% 0.0% 0.2% Organic Growth % 14.0% 21.5% Total Growth % 14.0% 21.8% Bonds P&C Renewals % 82.5% 45.2% New Business % 13.9% 40.7% Acquired 3 0.6% 0.0% 0.0% Organic Growth % -3.6% -14.1% Total Growth 5-7.2% -3.6% -14.1% Personal P&C Renewals % 95.1% 94.5% New Business % 10.2% 12.8% Acquired 3 0.8% 0.1% 1.4% Organic Growth 4 5.3% 5.3% 7.3% Total Growth 5 6.1% 5.4% 8.7% Value Added Services P&C Renewals % 94.0% 95.2% *Insufficient New Data Business % 13.9% 16.6% Acquired 3 0.0% 0.0% 0.0% Organic Growth 4 0.9% 7.9% 11.8% Total Growth 5 0.9% 7.9% 11.8% 1 Renewal as a % of prior year s total revenues for this line of business. This figure is impacted by attrition (loss or retention of accounts) and by changes in premium and commission levels. The higher the %, the more favorable the results. 2 New as a % of prior year s total revenues for this line of business. The higher the %, the more favorable the results. 3 Acquired as a % of prior year s total revenues for this line of business. The % indicates the significance of acquired business. 4 Growth in from prior year excluding acquired revenues. 5 Growth in from prior year including acquired revenues. with $5,000,000 and $10,000,000 87

95 Analysis of with $5,000,000 and $10,000,000 Revenue Growth by Source (continued) Group Medical L&H *Insufficient Data Renewals % 89.9% 86.5% New Business % 7.7% 12.8% Acquired 3 0.4% 0.0% 1.7% Organic Growth 4-2.0% -2.4% -0.7% Total Growth 5-1.6% -2.4% 1.0% All Other Group L&H Individual L&H Renewals % 94.1% 70.9% New Business % 8.2% 11.9% Acquired 3-0.1% 0.0% 0.0% Organic Growth 4 3.9% 2.3% -17.3% Total Growth 5 3.8% 2.3% -17.3% Renewals % 32.0% 39.5% New Business % 54.2% 73.1% Acquired 3 0.0% 0.0% 0.0% Organic Growth 4-8.5% -13.8% 12.6% Total Growth 5-8.5% -13.8% 12.6% Total Commissions & Fees (P&C, L&H) Renewals % 98.3% 98.1% New Business % 10.9% 17.4% Acquired 3 0.6% 0.1% 0.9% Organic Growth 4 7.9% 9.1% 15.5% Total Growth 5 8.4% 9.3% 16.4% Brokerage Commission Expense Growth -1.3% * * Net Commissions & Fees Growth (Organic) 6 7.8% 9.1% 15.5% Net Commissions & Fees Growth (Total) 7 8.3% 9.2% 16.4% Other Income P&C Contingent Income Growth 15.5% 24.6% 21.0% L&H Bonus Income Growth -10.2% * -8.1% Investment Income Growth -1.8% -10.3% -15.6% Gross Revenue Growth 8.8% 9.6% 18.2% Net Revenue Growth (Organic) 8 8.1% 9.5% 17.4% Net Revenue Growth (Total) 9 8.6% 9.6% 18.3% 1 Renewal as a % of prior year s total revenues for this line of business. This figure is impacted by attrition (loss or retention of accounts) and by changes in premium and commission levels. The higher the %, the more favorable the results. 2 New as a % of prior year s total revenues for this line of business. The higher the %, the more favorable the results. 4 Growth in from prior year excluding acquired revenues. 5 Growth in from prior year including acquired revenues. 6 Growth in Total Commissions & Fees (less Brokerage Commission Expense) from prior year excluding acquired revenues. 8 Growth in Net (Gross Revenue less Brokerage Commission Expense) from prior year excluding acquired revenues. 9 Growth in Net (Gross Revenue less Brokerage Commission Expense) from prior year including acquired revenues. with $5,000,000 and $10,000, Acquired as a % of prior year s total revenues for this line of business. The % indicates the significance of acquired business. 7 Growth in Total Commissions & Fees (less Brokerage Commission Expense) from prior year including acquired revenues.

96 Analysis of with $5,000,000 and $10,000,000 Revenue Growth by Source (continued) Historical Organic Growth (in Net Revenue) 40% 30% 20% 10% 0% 12.0% 14.4% 21.0% 4.3% 5.9% 12.4% 0.2% 1.0% 7.7% 77% 0.3% 0.9% 11.0% 0.7% 7.5% 75% 3.2% 4.3% 9.6% 8.9% 89% 9.2% 18.8% 8% 8.1% 81% 9.5% 17.4% 10% % Future Growth Percentage of agencies considering line of business as very important to growing agency s revenue over the next 3 years Surety-Bonding 27.0% Personal P&C 78.4% Small Commercial P&C 64.9% Individual Life & Health 18.9% Group Medical/Health Insurance 64.9% All Other Group Benefits 45.9% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% with $5,000,000 and $10,000,000 89

98 Analysis of with $5,000,000 and $10,000,000 (as % of Net ) continued Administrative Amortization of Intangibles 1.3% 0.7% 1.7% Officer Life 0.3% 0.3% 0.3% Interest 1.0% 0.9% 1.7% Other 0.0% 0.1% -0.2% Total Administrative 2.6% 1.9% 3.5% Total 82.0% 74.0% 77.2% Pre-Tax Profit (Loss) 18.0% 26.0% 22.8% EBITDA 21.2% 28.2% 26.9% Expense Growth Over Prior Year Compensation Expense 7.9% 8.7% 13.0% Selling Expense 7.5% 5.6% 14.7% Operating Expense 7.5% 5.4% 16.3% Administrative Expense 0.3% 0.6% 6.2% (as % of Net ) 60% 50% 61.7% 58.4% 56.9% 40% 30% with $5,000,000 and $10,000,000 20% 10% 0% 3.2% 32% 2.7% 27% 3.0% 30% 14.5% 12.5% 12.3% 2.6% 26% 3.5% 1.9% 19% Compensation Selling Operating Administrative 91

100 Analysis of with $5,000,000 and $10,000,000 Historical EBITDA Margin & Operating Margin (for Average Group) 35% 30% 25% 20% 15% 29.5% 18.4% 24.7% 20.7% 22.9% 22.9% 17.6% 16.8% 68% 21.0% 21.9% 16.3% 63% 16.6% 66% 25.2% 21.0% 25.1% 21.2% 2% 10% 5% 0% 10.1% 9.6% 6.5% 5.5% 4.5% 3.4% 3.7% EBITDA Margin Operating Margin Pro Forma EBITDA About EBITDA Margin and Operating Margin EBITDA Margin is calculated by dividing a firm s EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) by the firm s net revenues. Pro Forma EBITDA Margin is calculated by dividing a firm s Pro Forma EBITDA by the firm s Pro Forma net revenue. Operating Margin is calculated as EBITDA less contingent income divided by Pro Forma net revenues less contingent income. with $5,000,000 and $10,000,000 93

101 Analysis of with $5,000,000 and $10,000,000 The Rule of 20 is a simple growth and profitability balancing equation that provides a quick way to determine whether or not an agency is creating value for its shareholders. It states that an agency will drive industry-standard shareholder returns if the sum of (a) its organic growth rate and (b) 1/2 of its EBITDA margin equals or exceeds 20. Generally speaking, an outcome of 20 or more, regardless of the different combinations of growth and profitability, indicates that the agency s shareholders can expect to earn 15% -17% per year through stock price appreciation and/or shareholder distributions. What is the Rule of 20? Rule of 20 Outcome Public Brokers Organic Growth EBITDA Margin Rule of 20 Outcome 1/2 of Rule of 20 Score = EBITDA + Margin Organic Revenue Growth Provides a tool to benchmark agency performance Helps frame the trade-off between growth and profitability Willis Group 4.9% 24.0% 16.9 Aon 3.0% 20.9% 13.5 Brown & Brown 6.8% 33.5% 23.6 Arthur J. Gallagher 6.5% 19.9% 16.5 Marsh & McLennan 3.0% 20.7% 13.4 Average +25% Profit Average +25% Growth Average Rule of Financial Stability Average Top 25% Balance Sheet Current Ratio 1.28:1 1.82:1 Tangible Net Worth (% of Net Revenue) 10.2% 27.3% Receivables/Payable Ratio 46.5% 7.7% Aged Receivables % Receivables Aged Past 60 Days 16.0% 1.1% % Receivables Aged Past 90 Days 6.8% -4.8% Accounts Receivable Agency Billed vs. Direct Billed by Carrier % of P&C that are Agency Billed 28.3% 20.5% 20.4% % of P&C that are Direct Billed 71.7% 79.5% 79.6% with $5,000,000 and $10,000,000 94

102 Analysis of with $5,000,000 and $10,000,000 Employee Productivity Total Number of Employees (FTE) Revenue Per Employee $169,297 $215,833 $186,611 Compensation Per Employee $104,563 $125,966 $110,740 Spread Per Employee $64,733 $89,868 $75,871 $250K $200K $150K $100K $50K $0 $169,297 9 $215,833 $186,611 $104,563 $125,966 Revenue Per Employee Compensation Per Employee Spread Per Employee $110,740 $64,733 $89,868 $75,871 Average number of Agency Employees that work remotely % of with Remote Workers 48.6% 66.7% 33.3% Administrative Staff with $5,000,000 and $10,000, Accounting & HR Department Info Average Top 25% Accounting Department Total Number of Employees in Accounting Department 2.3 High 5.0 Low 0.2 Revenue per Accounting Employee $3,736,055 $6,441,545 Total Payroll for Accounting Employees $131,544 Accounting Payroll as % of Net Revenue 1.9% HR Department Total Number of Employees in HR Department 0.8 High 2.0 Low 0.1 Revenue per HR Employee $6,848,874 $8,860,484 Total Payroll for HR Employees $58,058 HR Payroll as % of Net Revenue 0.8%

103 Analysis of with $5,000,000 and $10,000,000 Most Successful Producer Productivity Most Successful Producer Productivity New Commissions Produced Annually Total Commissions in Producer s Book Average Commissions per Account Commercial P&C Group L&H Average $107,156 $77,165 Top 25% $217,036 $177,653 Average $923,336 $612,723 Top 25% $1,677,304 $1,204,505 Average $10,604 $8,511 Top 25% $30,116 $18,891 How Most Successful Producers Spent Time Most Successful Commercial P&C Producer Most Successful L&H Producer Mgmt/Personnel/ Mgmt/Personnel/ Agency Admin. 13.3% Soliciting New Business 30.4% Agency Admin. 14.5% Soliciting New Business 26.7% Personal Personal Training/ Training/ Education/ Prof. Dev. 7.3% Servicing Existing Accounts 49.0% Education/ Prof. Dev. 10.5% Servicing Existing Accounts 48.4% Personal Lines Producers, someone whose main responsibility is to solicit and write new personal lines accounts and is not responsible for the day-to-day servicing of the business, can be very productive. On average the most successful Personal Lines Producer in this revenue category generated $57,081 per year in new personal lines commissions with an average commission per account of $415. (Typically, the total commissions in the producer s book are not tracked since they are not paid renewal commission. Most often, the producers receive a base salary plus new business commissions.) with $5,000,000 and $10,000,000 96

104 Analysis of with $5,000,000 and $10,000,000 with $5,000,000 and $10,000, Validated Producer Productivity Average Top 25% Commercial P&C Producers Average Validated Producers # Validated 6.5 High 17.0 Low 2.0 Average New Commissions Produced Annually $73,374 $146,073 Average Book Serviced (Commissions) $472,036 $782,595 Average Pay ($) $147,805 Average Pay (% of Book Serviced) 31.3% Group Life & Health Producers Average Validated Producers # Validated 1.6 High 4.0 Low 1.0 Average New Commissions Produced Annually $74,463 $149,171 Average Book Serviced (Commissions) $486,614 $918,667 Average Pay ($) $157,240 Average Pay (% of Book Serviced) 32.3% Personal P&C Producers Average Validated Producers # Validated 2.2 High 8.0 Low 0.5 Average New Commissions Produced Annually $37,952 $59,620 Average Book Serviced (Commissions) $191,720 $339,974 Average Pay ($) $60,369 Average Pay (% of Book Serviced) 31.5% Multi-Line Producers Average Validated Producers # Validated 4.1 High 12.0 Low 1.0 Average New Commissions Produced Annually $62,099 $109,843 Average Book Serviced (Commissions) $545,714 $906,112 Average Pay ($) $166,859 Average Pay (% of Book Serviced) 30.6% % of That Reimburse All/Part T&E Expense 73.0% 44.4% 66.7%

105 Analysis of with $5,000,000 and $10,000,000 New Producers New Producer Hiring Where New Producers Were Found % of that Hired New Producers Last Year 59.5% 44.4% 77.8% # of New Producers Hired Last Year Average Annualized Wages per Producer Hired $51,132 $52,833 $48,033 % of Producers Hired Over Last 5 Years That Met Their Production Goals 54.7% 38.0% 51.3% Average +25% Profit +25% Growth UNDER age 30 from WITHIN the insurance industry OVER age 30 from WITHIN the insurance industry UNDER age 30 from OUTSIDE the insurance industry 12.5% 25.0% 20.0% 0.0% 25.0% 25.0% OVER age 30 from OUTSIDE the insurance industry 18.8% 43.8% 20.0% 60.0% 12.5% 37.5% Net-investment in Unvalidated 1 Producer Pay The NUPP Expressed as a percentage of Net Revenue, the NUPP is the difference between what an agency pays its unvalidated producer(s) and what the producer(s) would earn under the agency s normal commission schedule. A NUPP of 1.5% is considered a healthy level of investment. 1.1% * 0.7% High 3.5% Low 0.1% 1 An unvalidated producer is one whose production does not yet cover his/her wages *Insufficient Data Understanding the NUPP By measuring pure payroll costs, the NUPP benchmark allows an apples-to-apples comparison with other agencies regarding the amount of direct investment an agency is making in new producers. While the NUPP provides a general investment guideline, an agency should also consider the success rate of its new producers, i.e. the percentage of new producers hired during the past 5 year period that have achieved the sales goals set before them. By multiplying the NUPP by the producer success rate, an agency can further determine the effectiveness of its NUPP. High performing agencies typically achieve an Effective NUPP between 1.0% - 1.5%. with $5,000,000 and $10,000,000 98

106 Analysis of with $5,000,000 and $10,000,000 Service Staff Productivity Service & Sales Support Staff Definition Typically non-commissioned employees Provide service to the agency s clients Support producers in the sale of new business and retention of existing business Some service positions may earn commission income but typically a majority of their pay is fixed and a majority of their time is devoted to service rather than the soliciting of new clients. Service & Sales Support Positions 1 Included in Full-time Equivalent Headcounts Account Executives (AE) - senior level service representatives Account Managers, Customer Service Representatives (CSRs) Assistant CSRs, Processors Claims Staff Placers/Marketers Department Managers - who also service clients 1 Position titles are general categories since specific job titles vary from agency to agency Administrative personnel such as accounting, mail room, and reception are not included in service benchmarks unless a portion of their time is dedicated to service. Service Staff Overview Total # of Service Staff (as defined above; excludes any TPA service staff) % of Peer Having Separate/Dedicated Marketing Department 56.8% 44.4% 44.4% # of Marketing Staff Separate/Dedicated Claims Department 62.2% 55.6% 44.4% # of Claims Staff with $5,000,000 and $10,000, TPA Service Staff % of Peer Having Workers Comp TPA 2.7% 0.0% 0.0% # of Service Staff * * * Total TPA Serviced * * * Group Benefits TPA 8.1% 0.0% 0.0% # of Service Staff 2.2 * * Total TPA Serviced $109,718 * * *Insufficient Data

107 Analysis of with $5,000,000 and $10,000,000 Service/Sales Support Staff Average Top 25% Commercial P&C Service/Sales Support Number 13.5 High 27.0 Low 3.5 Average Revenue per Staff $307,824 $489,678 Total Commercial Service Payroll ($) $696,605 Payroll (as % of Total Commercial Revenue) 19.5% Bonds P&C Service/Sales Support Staff Number 1.4 High 4.0 Low 0.1 Average Revenue per Staff $186,446 $314,128 Total Bond Service Payroll ($) $79,338 Payroll (as % of Total Bond Revenue) 31.7% Personal P&C Service/Sales Support Staff Number 9.5 High 31.6 Low 1.0 Average Revenue per Staff $200,849 $283,475 Total Personal Service Payroll ($) $389,453 Payroll (as % of Total Personal Revenue) 23.3% Group L&H Service/Sales Support Staff Number 2.8 High 6.5 Low 0.4 Average Revenue per Staff $372,264 $587,381 Total Group L&H Service Payroll ($) $144,549 Payroll (as % of Total Group L&H Revenue) 17.3% Individual L&H Service/Sales Support Staff Number 0.9 High 2.0 Low 0.1 Average Revenue per Staff $95,113 $265,281 Total Individual L&H Service Payroll ($) $32,626 Payroll (as % of Total Individual L&H Revenue) 35.5% Multi-Line Service/Sales Support Staff Number * High * Low * Average Revenue per Staff * * Total Multi-Line Service Payroll ($) * Payroll (as % of Total Multi-Line Revenue) * *Insufficient Data with $5,000,000 and $10,000,

108 Analysis of with $5,000,000 and $10,000,000 with $5,000,000 and $10,000, Service Staff Payroll Information GROUP LIFE & HEALTH/FINANCIAL PERSONAL LINES COMMERCIAL LINES Pay Ranges by Service Position AE Average Low $60,182 $55,475 $57,288 Average High $85,803 $91,964 $76,703 CSR Average Low $40,218 $40,468 $39,224 Average High $70,798 $71,253 $74,865 Processor/Asst CSR Average Low $35,085 $35,954 $32,904 Average High $44,332 $46,313 $50,828 Marketing Average Low $53,806 * $49,315 Average High $71,774 $66,873 $68,946 Claims Average Low $39,765 $40,313 $39,299 Average High $50,130 $49,713 $52,462 AE Average Low $44,367 $47,901 $49,564 Average High $59,475 $79,704 $52,462 CSR Average Low $35,951 $38,289 $38,177 Average High $51,658 $53,903 $51,437 Processor/Asst CSR Average Low $29,385 $28,126 $28,426 Average High $36,038 $36,967 $38,753 Marketing Average Low $35,402 * * Average High $55,258 * * Claims Average Low $30,878 $31,500 * Average High $35,478 $34,000 * AE Average Low $63,510 * $51,714 Average High $70,709 * $69,694 CSR Average Low $39,520 $34,004 $34,646 Average High $56,533 $57,168 $54,642 Processor/Asst CSR Average Low $32,390 * $25,123 Average High $33,958 * $25,740 Marketing Average Low * * * Average High * * * Claims Average Low * * * Average High * * * *Insufficient Data

109 Analysis of with $5,000,000 and $10,000,000 Average Top 25% Information Employees (FTE) Number 1.2 High 2.3 Low 0.2 Number of IT Employees per 100 users N/A Revenue per IT Employee $6,039,250 $8,700,109 Total IT Payroll Expense ($) $72,214 $116,886 As % of Total Compensation Expense 1.7% As % of Net 1.0% Total IT 1 (as % of net revenues) 2.0% 1.6% 1.9% 1 Includes hardware/software leasing including offsite applications, supplies, maintenance & maintenance contracts, training, data lines, internet providers, website development/maintenance, outside consulting fees, computer depreciation, software amortization, and any non-depreciated hardware/software. Agency Management System Utilized Sagitta 8.1% AFW 2.7% Vision 2.7% EPIC 13.5% TAM 56.8% AMS % with $5,000,000 and $10,000,

110 Analysis of with $5,000,000 and $10,000,000 Carriers Carrier Representation Personal Lines P&C National Regional Total Commercial Lines P&C National Regional Total Group L&H / Financial Total Life, Health, Disability, LTC, Retirement Products, and Other Carrier Appointments % of Total Commission & Fee Revenue Derived from Direct Versus Indirect Appointments INDIRECT Carrier Appointments 17.2% 9.1% 12.7% DIRECT Carrier Appointments 80.1% 79.8% 76.2% Use of Carrier Service Centers with $5,000,000 and $10,000,000 Service Center Use Total Personal Lines Commission placed in Carrier Service Center Total Commercial Lines Commission placed in Carrier Service Center 28.0% 29.5% 32.8% 5.6% 6.0% 3.7% 103

111 Analysis of with $5,000,000 and $10,000,000 Revenue from Top P&C Commission Income from Top Carriers Top P&C Carrier $1,076,195 $1,174,964 $1,101,475 as % of Agency Net Revenue 15.1% 17.5% 14.6% Top P&C Carrier Breakdown By Line of Business Average +25% Profit +25% Growth Mid/Large Commerical 37.0% Personal 32.5% Mid/Large Commerical 36.8% Personal 30.2% Mid/Large Commerical 48.5% Personal 25.4% Small Commercial 30.5% Small Commercial 33.0% Small Commercial 26.1% Top 3 P&C Carriers $2,025,213 $2,078,334 $1,992,976 as % of Agency Net Revenue 28.5% 31.1% 26.5% Top 3 P&C Carriers Breakdown By Line of Business Average +25% Profit +25% Growth Mid/Large Commerical 36.4% Personal 35.1% Mid/Large Commerical 35.5% Personal 38.3% Mid/Large Commerical 45.3% Personal 26.4% Small Commercial 28.6% Small Commercial 26.2% Small Commercial 28.3% L&H/F Commission Income from Top Carriers as % of Net Rev from Top L&H/F Carrier 5.1% 4.1% 4.0% as % of Net Rev from Top 3 L&H/F Carriers 8.0% 5.9% 7.7% with $5,000,000 and $10,000,

112 105

113 with $10,000,000 and $25,000,000 $1,250,000 $2,500,000 $5,000,000 $10,000,000 $25,000,

114 Analysis of with $10,000,000 and $25,000,000 with $10,000,000 and $25,000, at a Glance Growth Organic Growth By Line of Business* Commercial P&C 10.7% 8.9% 17.4% Personal P&C 7.4% 10.6% 6.9% Group Medical 7.5% 7.8% 29.3% All Other Group 1.0% 11.0% -1.1% Total Organic Growth 9.6% 9.3% 19.0% Profit Pro Forma Pretax Profit 19.2% 27.1% 17.5% Pro Forma EBITDA 21.7% 28.5% 20.7% Rule of 20 Score Financial Average Top 25% Current Ratio 1.26:1 2.02:1 Receivable/Payable Ratio 51.3% 10.5% Accounts Receivables > 60 Days 10.2% 1.1% Accounts Receivables > 90 Days 7.3% -5.2% Productivity Revenue per Employee $179,711 $205,213 $178,529 Compensation per Employee $116,404 $120,665 $114,420 Spread per Employee $63,308 $84,548 $64,109 Annual New Commission Generated per Validated Producer Average Top 25% Commercial P&C $91,816 $183,692 Personal P&C $54,898 $94,922 Life & Health/Financial $96,802 $167,392 Service Staff Total Payroll as % of Line of Business Revenue Average # of Service Staff Commercial P&C 20.3% 28.2 Personal P&C 26.0% 12.4 Group Life & Health/Financial 16.0% 10.5 *Excludes any acquired revenue

115 Analysis of with $10,000,000 and $25,000,000 (of in this Study Group) Average Total : $15,442,007 Population Density of Metropolitan Areas Where Home Office is Located Less than 50, % 14.3% 12.5% 50, , % 0.0% 12.5% 250,000 1,000, % 57.1% 12.5% More than 1,000, % 28.6% 62.5% Corporate Structure C 22.9% 25.0% 0.0% S 51.4% 25.0% 62.5% Partnership 2.9% 0.0% 12.5% LLC 22.9% 50.0% 25.0% Sole Proprietorship 0.0% 0.0% 0.0% Average Number of Agency Locations (Main Offices and Branch Offices) Total Square Footage of Office Space 28,414 19,497 31,020 # of States in which Offices are Located Agency has an ESOP 20.0% 12.5% 12.5% % of Stock Owned by ESOP 50.9% 80.1% 27.8% Shareholders Number of Shareholders (excluding ESOP) High 24.0 Low 1.0 Ownership Percentage % Owned by Largest Shareholder 48.0% 49.9% 45.8% High 100.0% Low 10.0% Shareholder Age Current Age of Largest Shareholder Parent Corporation % of Owned by Another Corporation Average 14.7% Description of Parent Corporation Financial Institution 33.3% Other included AAA and holding company. National Broker 33.3% Other 33.3% Member of Group % of Belonging to a Franchise, Cluster, Alliance/Network or Aggregator Group 27.8% Other included ARM, ResourcePro, Intersure, Assurex Global, Globex, United Benefit Advisors, C2 Centric, Lionstreet and SIAA. with $10,000,000 and $25,000,

117 Analysis of with $10,000,000 and $25,000,000 Revenue by Acquisition Acquired What the Typical Transactions Looked Like Acquired per Transaction % of Acquiring Average Commissions Acquired Multiples of Revenue Paid % of Net Acquisitions Made in Last 12 Months 17.1% $678, % Average $1,535,443 Average 1.46x High $2,933,293 High 2.00x Low $600,000 Low 1.00x Revenue by Specialty/Niche % of having an Industry and/or Product Specialty/Niche Total Commissions & Fees Generated from All Specialties/Niches Total Specialty/Niche Revenue as % of Net 82.9% 62.5% 87.5% $4,706,916 $7,280,317 $6,275, % 52.1% 23.7% Specialty/Niche Revenue as % of Net Revenue 50% 52.1% 40% 30% 20% 28.1% 23.7% 10% 0% with $10,000,000 and $25,000,

118 Analysis of with $10,000,000 and $25,000,000 Revenue by Account Concentration % of Revenue Derived from Largest Account 3.3% 4.1% 3.6% High 10.5% Low 0.5% 10 Largest Accounts 13.5% 15.6% 14.0% High 27.5% Low 2.9% Other Group Life & Health* Revenue (% from source) Life 24.3% 18.7% 28.3% Disability 15.9% 22.0% 9.9% Dental & Vision 21.7% 23.1% 12.1% Retirement/Pension 4.5% 3.2% 3.4% Worksite/Voluntary/Supplement 11.3% 5.9% 20.8% Long-Term Care 1.1% 0.7% 0.6% Employee Benefits TPA 4.5% 5.1% 0.0% All Other 16.6% 21.1% 25.0% *Excludes Group Medical with $10,000,000 and $25,000,

119 Analysis of with $10,000,000 and $25,000,000 Revenue by Account Size (as measured by Comm. & Fees not premium) Commercial P&C Greater than $25,000 % of Book 45.6% 51.1% 53.2% # of Accounts Total Revenue $4,039,967 $4,195,592 $4,261,388 Revenue per Account $62,351 $68,499 $66,196 $10,000 and $25,000 % of Book 18.2% 16.6% 16.8% # of Accounts Total Revenue $1,611,042 $1,363,341 $1,348,298 Revenue per Account $15,313 $15,830 $15,724 $5,000 and $10,000 % of Book 12.1% 9.1% 8.5% # of Accounts Total Revenue $1,067,218 $750,354 $681,501 Revenue per Account $6,983 $7,087 $6,981 Less than $5,000 % of Book 24.1% 23.2% 21.4% # of Accounts 2, , ,434.4 Total Revenue $2,075,680 $1,902,053 $1,713,273 Revenue per Account $611 $470 $445 (as measured by number of lives) Group L&H/Financial Over 100 Lives % of Book 54.3% 55.1% 66.6% # of Accounts Total Revenue $1,657,013 $1,884,765 $2,609,431 Revenue per Account $58,141 $66,633 $55, Lives % of Book 17.5% 22.2% 13.5% # of Accounts Total Revenue $532,665 $758,870 $528,936 Revenue per Account $17,905 $21,771 $15, Lives % of Book 10.9% 11.0% 7.2% # of Accounts Total Revenue $346,339 $375,008 $281,951 Revenue per Account $7,015 $5,107 $4,475 Under 25 Lives % of Book 17.3% 11.7% 12.7% # of Accounts Total Revenue $509,192 $399,997 $496,194 Revenue per Account $1,104 $1,424 $2,056 with $10,000,000 and $25,000,

120 Analysis of with $10,000,000 and $25,000,000 Revenue Growth by Source Commercial P&C Renewals % 93.9% 100.0% New Business % 15.1% 17.4% Acquired 3 1.0% 0.0% 2.4% Organic Growth % 8.9% 17.4% Total Growth % 8.9% 19.7% Bonds P&C Renewals % 108.7% 97.5% New Business % 5.8% 28.2% Acquired 3 0.0% 0.0% 0.0% Organic Growth 4 7.8% 14.5% 25.7% Total Growth 5 7.8% 14.5% 25.7% Personal P&C Renewals % 96.8% 96.4% New Business % 13.8% 10.6% Acquired 3 1.1% 0.0% 4.6% Organic Growth 4 7.4% 10.6% 6.9% Total Growth 5 8.5% 10.6% 11.5% Value Added Services P&C Renewals % * 72.5% *Insufficient New Data Business % * 6.9% Acquired 3 1.4% * 5.6% Organic Growth % * -20.7% Total Growth % * -15.1% *Insufficient Data 1 Renewal as a % of prior year s total revenues for this line of business. This figure is impacted by attrition (loss or retention of accounts) and by changes in premium and commission levels. The higher the %, the more favorable the results. 2 New as a % of prior year s total revenues for this line of business. The higher the %, the more favorable the results. 3 Acquired as a % of prior year s total revenues for this line of business. The % indicates the significance of acquired business. 4 Growth in from prior year excluding acquired revenues. 5 Growth in from prior year including acquired revenues. with $10,000,000 and $25,000,

121 Analysis of with $10,000,000 and $25,000,000 Revenue Growth by Source (continued) Group Medical L&H *Insufficient Data Renewals % 93.5% 108.4% New Business % 14.2% 20.8% Acquired 3 3.0% 0.0% 1.7% Organic Growth 4 7.5% 7.8% 29.3% Total Growth % 7.8% 31.0% All Other Group L&H Individual L&H Renewals % 97.7% 85.6% New Business % 13.3% 13.3% Acquired 3 0.5% 0.0% 2.9% Organic Growth 4 1.0% 11.0% -1.1% Total Growth 5 1.5% 11.0% 1.7% Renewals % 75.4% 58.6% New Business % 27.3% 36.2% Acquired 3 0.0% 0.0% 0.0% Organic Growth 4-2.4% 2.7% -5.2% Total Growth 5-2.4% 2.7% -5.2% Total Commissions & Fees (P&C, L&H) Renewals % 102.2% 108.3% New Business % 16.2% 18.5% Acquired 3 1.0% 0.0% 2.1% Organic Growth 4 9.6% 9.4% 18.9% Total Growth % 9.4% 21.3% Brokerage Commission Expense Growth -5.0% * * Net Commissions & Fees Growth (Organic) 6 9.6% 9.3% 19.0% Net Commissions & Fees Growth (Total) % 18.4% 29.0% Other Income P&C Contingent Income Growth 33.1% 42.4% 20.8% L&H Bonus Income Growth -1.3% -0.6% 16.9% Investment Income Growth -8.5% -21.8% -15.5% Gross Revenue Growth 11.8% 10.6% 21.9% Net Revenue Growth (Organic) % 10.5% 19.7% Net Revenue Growth (Total) % 10.5% 22.0% 1 Renewal as a % of prior year s total revenues for this line of business. This figure is impacted by attrition (loss or retention of accounts) and by changes in premium and commission levels. The higher the %, the more favorable the results. 2 New as a % of prior year s total revenues for this line of business. The higher the %, the more favorable the results. 4 Growth in from prior year excluding acquired revenues. 5 Growth in from prior year including acquired revenues. 6 Growth in Total Commissions & Fees (less Brokerage Commission Expense) from prior year excluding acquired revenues. 8 Growth in Net (Gross Revenue less Brokerage Commission Expense) from prior year excluding acquired revenues. 9 Growth in Net (Gross Revenue less Brokerage Commission Expense) from prior year including acquired revenues. with $10,000,000 and $25,000, Acquired as a % of prior year s total revenues for this line of business. The % indicates the significance of acquired business. 7 Growth in Total Commissions & Fees (less Brokerage Commission Expense) from prior year including acquired revenues.

122 Analysis of with $10,000,000 and $25,000,000 Revenue Growth by Source (continued) Historical Organic Growth (in Net Revenue) 40% 30% 20% 10% 0% 17.0% 20.4% 33.4% 5.1% 1.6% 15.0% 5.0% 1.0% 11.3% 0.7% 1.1% 8.7% 87% 2.4% 3.5% % 4.7% 4.1% 12.4% 10.4% 7.3% 73% 20.0% 10.8%10.5% 19.7% Future Growth Percentage of agencies considering line of business as very important to growing agency s revenue over the next 3 years Surety-Bonding 34.3% 3 Personal P&C 57.1% Small Commercial P&C 31.4% Individual Life & Health 28.6% Group Medical/Health Insurance 82.9% All Other Group Benefits 65.7% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% with $10,000,000 and $25,000,

123 Analysis of with $10,000,000 and $25,000,000 (as % of Net ) Compensation Payroll: Employee 54.9% 50.6% 51.5% Payroll: Non-Employee Producers/Temp Help 1.3% 0.5% 3.8% Total Payroll 56.2% 51.1% 55.3% Benefits: Payroll Taxes 3.3% 2.6% 3.1% Benefits: Retirement 1.6% 1.3% 2.0% Benefits: Insurance 3.4% 3.2% 3.3% Benefits: Other 0.2% 0.2% 0.1% Total Benefits 8.5% 7.4% 8.5% Total Compensation 64.7% 58.5% 63.8% Selling T&E/Conventions 1.4% 1.3% 1.6% Auto Expenditures 0.6% 0.4% 0.6% Auto Depreciation 0.1% 0.0% 0.1% Total Auto 0.6% 0.4% 0.7% Advertising/Promotions 1.2% 1.0% 1.2% Total Selling 3.2% 2.7% 3.5% Operating Occupancy Expenditures 3.7% 3.4% 4.0% Occupancy Depreciation/Amortization 0.2% 0.1% 0.1% Total Occupancy 3.9% 3.5% 4.1% Office Equipment Expenditures 0.4% 0.2% 0.5% Office Equipment Depreciation 0.4% 0.6% 0.6% Total Office Equipment 0.8% 0.7% 1.1% IT (Information ) 2.1% 2.1% 2.1% IT Depreciation/Amortization 0.3% 0.3% 0.2% Total IT 2.3% 2.4% 2.3% Telephone 0.6% 0.4% 0.6% Postage 0.3% 0.3% 0.4% Supplies/Printing 0.7% 0.6% 0.8% Dues/Subscriptions/Contributions 0.7% 0.7% 0.7% Taxes/Licenses 0.4% 0.4% 0.4% Insurance 1.2% 1.0% 1.2% Professional Fees 1.3% 1.9% 2.6% Bad Debts 0.2% 0.1% 0.0% Outside Services 0.9% 1.0% 0.9% Education/Training 0.3% 0.2% 0.4% Miscellaneous 0.6% 1.4% 0.5% Total Operating 14.2% 14.5% 16.0% continued on next page with $10,000,000 and $25,000,

124 Analysis of with $10,000,000 and $25,000,000 (as % of Net ) continued Administrative Amortization of Intangibles 1.1% 0.3% 1.4% Officer Life 0.2% 0.0% 0.3% Interest 0.4% 0.2% 0.7% Other 0.8% 0.2% 0.3% Total Administrative 2.6% 0.8% 2.7% Total 84.6% 76.4% 86.0% Pre-Tax Profit (Loss) 15.4% 23.6% 14.0% EBITDA 17.9% 25.1% 17.2% Expense Growth Over Prior Year Compensation Expense 11.1% 8.0% 28.4% Selling Expense 7.1% 4.3% 21.5% Operating Expense 10.6% 9.2% 22.2% Administrative Expense -4.9% -3.7% -8.5% (as % of Net ) 70% 60% 50% 64.7% 63.8% 58.5% 40% 30% with $10,000,000 and $25,000,000 20% 10% 0% 3.2% 32% 2.7% 27% 3.5% 14.2% 14.5% 16.0% 2.6% 26% 2.7% 0.8% 08% Compensation Selling Operating Administrative 117

125 Analysis of with $10,000,000 and $25,000,000 Profit/Loss Summary (as % of Gross Revenue) Commercial Lines 50.3% 47.6% 38.4% Bonds 1.8% 0.3% 3.7% Personal Lines 15.2% 14.2% 15.6% VAS - P&C 0.8% 0.1% 1.2% Contingent/Bonus 6.8% 5.9% 6.2% Group Medical 15.1% 19.1% 20.2% All Other Group 5.0% 5.8% 5.9% Individual Life & Health 2.9% 4.6% 6.3% Bonus/Overrides 1.3% 1.9% 1.5% Investments 0.4% 0.4% 0.4% Miscellaneous 0.4% 0.2% 0.5% Total 100.0% 100.0% 100.0% Brokerage Commission Expense 1.7% 0.6% 0.5% Net 98.3% 99.4% 99.5% (as % of Net ) Compensation 64.7% 58.5% 63.8% Selling 3.2% 2.7% 3.5% Operating 14.2% 14.5% 16.0% Administrative 2.6% 0.8% 2.7% Total 84.6% 76.4% 86.0% Profit/Loss (as % of Net ) Pre-Tax Profit 15.4% 23.6% 14.0% Pro Forma Pre-Tax Profit % 27.1% 17.5% Operating Pre-Tax Profit 2 7.6% 17.0% 6.6% EBITDA % 25.1% 17.2% Pro Forma EBITDA % 28.5% 20.7% 1 Pre-tax Profits if discretionary expenses are eliminated and all owners compensated as employees 2 Pre-tax Profits excluding contingents, bonus and investment income 3 EBITDA Earnings Before Interest Taxes Depreciation and Amortization 4 EBITDA if discretionary expenses are eliminated and all owners compensated as employees with $10,000,000 and $25,000,

126 Analysis of with $10,000,000 and $25,000,000 Historical EBITDA Margin & Operating Margin (for Average Group) 35% 30% 25% 20% 15% 10% 27.1% 21.6% 25.0% 19.2% 20.4% 18.2% 19.6% 16.3% 19.7% 16.7% 17.7% 7% 15.1% 20.1% 15.8% 21.7% 17.9% 5% 0% 6.6% 3.2% 2.3% 23% 0.2% % 3.4% 5.9% 7.6% EBITDA Margin Operating Margin Pro Forma EBITDA About EBITDA Margin and Operating Margin EBITDA Margin is calculated by dividing a firm s EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) by the firm s net revenues. Pro Forma EBITDA Margin is calculated by dividing a firm s Pro Forma EBITDA by the firm s Pro Forma net revenue. Operating Margin is calculated as EBITDA less contingent income divided by Pro Forma net revenues less contingent income. with $10,000,000 and $25,000,

127 Analysis of with $10,000,000 and $25,000,000 The Rule of 20 is a simple growth and profitability balancing equation that provides a quick way to determine whether or not an agency is creating value for its shareholders. It states that an agency will drive industry-standard shareholder returns if the sum of (a) its organic growth rate and (b) 1/2 of its EBITDA margin equals or exceeds 20. Generally speaking, an outcome of 20 or more, regardless of the different combinations of growth and profitability, indicates that the agency s shareholders can expect to earn 15% -17% per year through stock price appreciation and/or shareholder distributions. What is the Rule of 20? Rule of 20 Outcome Public Brokers Organic Growth EBITDA Margin Rule of 20 Outcome 1/2 of Rule of 20 Score = EBITDA + Margin Organic Revenue Growth Provides a tool to benchmark agency performance Helps frame the trade-off between growth and profitability Willis Group 4.9% 24.0% 16.9 Aon 3.0% 20.9% 13.5 Brown & Brown 6.8% 33.5% 23.6 Arthur J. Gallagher 6.5% 19.9% 16.5 Marsh & McLennan 3.0% 20.7% 13.4 Average +25% Profit Average +25% Growth Average Rule of Financial Stability Average Top 25% Balance Sheet Current Ratio 1.26:1 2.02:1 Tangible Net Worth (% of Net Revenue) 4.5% 22.6% Receivables/Payable Ratio 51.3% 10.5% Aged Receivables % Receivables Aged Past 60 Days 10.2% 1.1% % Receivables Aged Past 90 Days 7.3% -5.2% Accounts Receivable Agency Billed vs. Direct Billed by Carrier % of P&C that are Agency Billed 40.1% 44.7% 48.6% % of P&C that are Direct Billed 59.9% 55.3% 51.4% with $10,000,000 and $25,000,

128 Analysis of with $10,000,000 and $25,000,000 Employee Productivity Total Number of Employees (FTE) Revenue Per Employee $179,711 $205,213 $178,529 Compensation Per Employee $116,404 $120,665 $114,420 Spread Per Employee $63,308 $84,548 $64,109 $250K $200K $150K $100K $50K $0 $179,711 1 $205,213 $178,529 $116,404 $120,665 Revenue Per Employee Compensation Per Employee Spread Per Employee $114,420 $63,308 $84,548 4 $64,109 Average number of Agency Employees that work remotely % of with Remote Workers 57.1% 62.5% 75.0% Administrative Staff with $10,000,000 and $25,000, Accounting & HR Department Info Average Top 25% Accounting Department Total Number of Employees in Accounting Department 4.3 High 14.0 Low 1.0 Revenue per Accounting Employee $4,516,672 $7,670,475 Total Payroll for Accounting Employees $257,483 Accounting Payroll as % of Net Revenue 1.7% HR Department Total Number of Employees in HR Department 1.3 High 5.0 Low 0.2 Revenue per HR Employee $12,719,375 $19,044,440 Total Payroll for HR Employees $86,262 HR Payroll as % of Net Revenue 0.5%

129 Analysis of with $10,000,000 and $25,000,000 Most Successful Producer Productivity Most Successful Producer Productivity New Commissions Produced Annually Total Commissions in Producer s Book Average Commissions per Account Commercial P&C Group L&H Average $161,413 $159,788 Top 25% $271,376 $316,076 Average $1,571,993 $924,043 Top 25% $2,492,641 $1,825,342 Average $15,333 $17,419 Top 25% $35,791 $40,116 How Most Successful Producers Spent Time Most Successful Commercial P&C Producer Most Successful L&H Producer Mgmt/Personnel/ Mgmt/Personnel/ Agency Admin. 14.1% Soliciting New Business 32.5% Agency Admin. 13.8% Soliciting New Business 36.6% Personal Personal Training/ Training/ Education/ Prof. Dev. 7.8% Servicing Existing Accounts 45.7% Education/ Prof. Dev. 9.5% Servicing Existing Accounts 40.2% Personal Lines Producers, someone whose main responsibility is to solicit and write new personal lines accounts and is not responsible for the day-to-day servicing of the business, can be very productive. On average the most successful Personal Lines Producer in this revenue category generated $62,505 per year in new personal lines commissions with an average commission per account of $1,084. (Typically, the total commissions in the producer s book are not tracked since they are not paid renewal commission. Most often, the producers receive a base salary plus new business commissions.) with $10,000,000 and $25,000,

130 Analysis of with $10,000,000 and $25,000,000 with $10,000,000 and $25,000, Validated Producer Productivity Average Top 25% Commercial P&C Producers Average Validated Producers # Validated 11.1 High 36.0 Low 1.0 Average New Commissions Produced Annually $91,816 $183,692 Average Book Serviced (Commissions) $714,091 $1,147,191 Average Pay ($) $208,471 Average Pay (% of Book Serviced) 29.2% Group Life & Health Producers Average Validated Producers # Validated 3.1 High 7.0 Low 1.0 Average New Commissions Produced Annually $96,802 $167,392 Average Book Serviced (Commissions) $569, 795 $961,989 Average Pay ($) $185,708 Average Pay (% of Book Serviced) 32.6% Personal P&C Producers Average Validated Producers # Validated 2.4 High 8.0 Low 1.0 Average New Commissions Produced Annually $54,898 $94,922 Average Book Serviced (Commissions) $290,530 $529,550 Average Pay ($) $91,964 Average Pay (% of Book Serviced) 31.7% Multi-Line Producers Average Validated Producers # Validated 7.6 High 23.0 Low 1.0 Average New Commissions Produced Annually $111,153 $202,151 Average Book Serviced (Commissions) $728,311 $1,694,770 Average Pay ($) $224,904 Average Pay (% of Book Serviced) 30.9% % of That Reimburse All/Part T&E Expense 74.3% 75.0% 62.5%

131 Analysis of with $10,000,000 and $25,000,000 New Producers New Producer Hiring Where New Producers Were Found % of that Hired New Producers Last Year 85.7% 100.0% 100.0% # of New Producers Hired Last Year Average Annualized Wages per Producer Hired $72,730 $88,386 $86,077 % of Producers Hired Over Last 5 Years That Met Their Production Goals 52.2% 56.2% 53.3% Average +25% Profit +25% Growth UNDER age 30 from WITHIN the insurance industry OVER age 30 from WITHIN the insurance industry UNDER age 30 from OUTSIDE the insurance industry 13.3% 51.1% 4.0% 52.0% 12.0% 48.0% OVER age 30 from OUTSIDE the insurance industry 12.2% 18.9% 12.0% 24.0% 12.0% 28.0% Net-investment in Unvalidated 1 Producer Pay The NUPP Expressed as a percentage of Net Revenue, the NUPP is the difference between what an agency pays its unvalidated producer(s) and what the producer(s) would earn under the agency s normal commission schedule. A NUPP of 1.5% is considered a healthy level of investment. 1.4% 1.1% 1.7% High 4.1% Low 0.1% 1 An unvalidated producer is one whose production does not yet cover his/her wages Understanding the NUPP By measuring pure payroll costs, the NUPP benchmark allows an apples-to-apples comparison with other agencies regarding the amount of direct investment an agency is making in new producers. While the NUPP provides a general investment guideline, an agency should also consider the success rate of its new producers, i.e. the percentage of new producers hired during the past 5 year period that have achieved the sales goals set before them. By multiplying the NUPP by the producer success rate, an agency can further determine the effectiveness of its NUPP. High performing agencies typically achieve an Effective NUPP between 1.0% - 1.5%. with $10,000,000 and $25,000,

133 Analysis of with $10,000,000 and $25,000,000 Service/Sales Support Staff Average Top 25% Commercial P&C Service/Sales Support Number 28.2 High 53.4 Low 10.5 Average Revenue per Staff $296,697 $392,998 Total Commercial Service Payroll ($) $1,603,497 Payroll (as % of Total Commercial Revenue) 20.3% Bonds P&C Service/Sales Support Staff Number 1.5 High 2.0 Low 1.0 Average Revenue per Staff $298,617 $532,900 Total Bond Service Payroll ($) $89,781 Payroll (as % of Total Bond Revenue) 30.5% Personal P&C Service/Sales Support Staff Number 12.4 High 44.0 Low 1.0 Average Revenue per Staff $202,048 $322,245 Total Personal Service Payroll ($) $525,751 Payroll (as % of Total Personal Revenue) 26.0% Group L&H Service/Sales Support Staff Number 10.5 High 34.6 Low 1.0 Average Revenue per Staff $389,453 $552,339 Total Group L&H Service Payroll ($) $594,031 Payroll (as % of Total Group L&H Revenue) 16.0% Individual L&H Service/Sales Support Staff Number 1.4 High 6.0 Low 0.1 Average Revenue per Staff $367,171 $833,916 Total Individual L&H Service Payroll ($) $61,647 Payroll (as % of Total Individual L&H Revenue) 17.7% Multi-Line Service/Sales Support Staff Number * High * Low * Average Revenue per Staff * * Total Multi-Line Service Payroll ($) * Payroll (as % of Total Multi-Line Revenue) * *Insufficient Data with $10,000,000 and $25,000,

134 Analysis of with $10,000,000 and $25,000,000 with $10,000,000 and $25,000, Service Staff Payroll Information GROUP LIFE & HEALTH/FINANCIAL PERSONAL LINES COMMERCIAL LINES Pay Ranges by Service Position AE Average Low $80,200 $81,125 $69,113 Average High $107,903 $114,331 $101,582 CSR Average Low $42,325 $43,814 $41,581 Average High $75,312 $73,380 $73,898 Processor/Asst CSR Average Low $33,073 $30,259 $32,231 Average High $44,253 $39,714 $44,253 Marketing Average Low $51,773 $54,537 $43,707 Average High $71,367 $70,390 $60,568 Claims Average Low $49,511 $61,421 $45,266 Average High $66,959 $65,254 $63,280 AE Average Low $59,401 $60,480 $60,147 Average High $71,680 $67,813 $70,955 CSR Average Low $39,162 $40,239 $36,987 Average High $61,620 $69,331 $57,843 Processor/Asst CSR Average Low $30,933 $32,978 $25,482 Average High $34,909 $36,935 $31,638 Marketing Average Low $43,808 $45,000 $39,772 Average High $44,828 $45,000 $39,772 Claims Average Low $41,164 * * Average High $44,883 * * AE Average Low $83,370 $72,318 $83,882 Average High $114,498 $119,625 $98,806 CSR Average Low $42,401 $43,275 $38,654 Average High $69,086 $69,175 $64,912 Processor/Asst CSR Average Low $29,978 $28,479 $28,220 Average High $37,497 $36,886 $40,316 Marketing Average Low $38,449 $27,554 $39,815 Average High $54,076 $46,114 $56,189 Claims Average Low * * * Average High * * * *Insufficient Data

135 Analysis of with $10,000,000 and $25,000,000 Average Top 25% Information Employees (FTE) Number 2.0 High 4.0 Low 1.0 Number of IT Employees per 100 users 2.3 Revenue per IT Employee $8,285,567 $12,307,230 Total IT Payroll Expense ($) $142,096 $227,520 As % of Total Compensation Expense 1.4% As % of Net 0.9% Total IT 1 (as % of net revenues) 2.5% 2.6% 2.8% 1 Includes hardware/software leasing including offsite applications, supplies, maintenance & maintenance contracts, training, data lines, internet providers, website development/maintenance, outside consulting fees, computer depreciation, software amortization, and any non-depreciated hardware/software. Agency Management System Utilized Other included XDTI/Nexsure. Vision 5.7% Other 2.9% EPIC 14.3% TAM 25.7% Sagitta 20.0% AMS % with $10,000,000 and $25,000,

136 Analysis of with $10,000,000 and $25,000,000 Carriers Carrier Representation Personal Lines P&C National Regional Total Commercial Lines P&C National Regional Total Group L&H / Financial Total Life, Health, Disability, LTC, Retirement Products, and Other Carrier Appointments % of Total Commission & Fee Revenue Derived from Direct Versus Indirect Appointments INDIRECT Carrier Appointments 17.1% 13.7% 15.5% DIRECT Carrier Appointments 82.9% 86.3% 84.5% Use of Carrier Service Centers with $10,000,000 and $25,000,000 Service Center Use Total Personal Lines Commission placed in Carrier Service Center Total Commercial Lines Commission placed in Carrier Service Center *Insufficient Data 12.4% 13.6% * 3.2% 10.6% 2.3% 129

137 Analysis of with $10,000,000 and $25,000,000 Revenue from Top P&C Commission Income from Top Carriers Top P&C Carrier $1,751,905 $1,311,780 $2,016,752 as % of Agency Net Revenue 11.5% 9.1% 10.9% Top P&C Carrier Breakdown By Line of Business Mid/Large Commerical 50.8% Average Personal 34.0% Mid/Large Commerical 56.4% +25% Profit Personal 29.8% Mid/Large Commerical 58.0% +25% Growth Personal 35.2% Small Commercial 15.2% Small Commercial 13.8% Small Commercial 6.8% Top 3 P&C Carriers $3,575,172 $3,247,017 $3,881,360 as % of Agency Net Revenue 23.6% 22.0% 21.5% Top 3 P&C Carriers Breakdown By Line of Business Average +25% Profit +25% Growth Mid/Large Commerical 48.4% Personal 28.7% Mid/Large Commerical 48.1% Personal 30.9% Mid/Large Commerical 51.7% Personal 32.7% Small Commercial 22.9% Small Commercial 21.1% Small Commercial 15.6% L&H/F Commission Income from Top Carriers as % of Net Rev from Top L&H/F Carrier 6.4% 8.2% 6.2% as % of Net Rev from Top 3 L&H/F Carriers 10.7% 13.4% 11.5% with $10,000,000 and $25,000,

138 131

139 with Over $25,000,000 $1,250,000 $2,500,000 $5,000,000 $10,000,000 $25,000,

140 Analysis of with Over $25,000,000 with Over $25,000, at a Glance Growth Organic Growth By Line of Business* Commercial P&C 7.1% 7.3% 12..0% Personal P&C 2.6% 3.8% 4.0% Group Medical 13.4% 15.8% 17.2% All Other Group 4.9% -9.6% -2.6% Total Organic Growth 8.8% 7.5% 18.9% Profit Pro Forma Pretax Profit 16.8% 25.6% 14.8% Pro Forma EBITDA 19.9% 27.1% 18.4% Rule of 20 Score Financial Average Top 25% Current Ratio 1.36:1 1.88:1 Receivable/Payable Ratio 52.6% 18.8% Accounts Receivables > 60 Days 4.4% 0.6% Accounts Receivables > 90 Days 3.2% -5.2% Productivity Revenue per Employee $203,873 $218,807 $210,296 Compensation per Employee $131,686 $127,274 $135,612 Spread per Employee $67,899 $76,111 $74,684 Annual New Commission Generated per Validated Producer Average Top 25% Commercial P&C $127,777 $227,160 Personal P&C $51,360 $82,434 Life & Health/Financial $162,104 $283,438 Service Staff Total Payroll as % of Line of Business Revenue Average # of Service Staff Commercial P&C 21.0% Personal P&C 26.7% 13.1 Group Life & Health/Financial 15.3% 35.1 *Excludes any acquired revenue

141 Analysis of with Over $25,000,000 (of in this Study Group) Average Total : $62,381,287 Population Density of Metropolitan Areas Where Home Office is Located Less than 50, % 0.0% 0.0% 50, , % 28.6% 42.9% 250,000 1,000, % 42.9% 28.6% More than 1,000, % 28.6% 28.6% Corporate Structure C 37.9% 42.9% 42.9% S 51.7% 42.9% 42.9% Partnership 3.4% 14.3% 0.0% LLC 6.9% 0.0% 14.3% Sole Proprietorship 0.0% 0.0% 0.0% Average Number of Agency Locations (Main Offices and Branch Offices) Total Square Footage of Office Space 88,622 73,918 55,806 # of States in which Offices are Located Agency has an ESOP 31.0% 14.3% 42.9% % of Stock Owned by ESOP 46.7% 26.3% 46.2% Shareholders Number of Shareholders (excluding ESOP) High Low 2.0 Ownership Percentage % Owned by Largest Shareholder 27.3% 22.9% 24.9% High 99.0% Low 1.5% Shareholder Age Current Age of Largest Shareholder Parent Corporation Average % of Owned by Another Corporation 17.9% Description of Parent Corporation Financial Institution 83.3% National Broker 16.7% Other 0.0% Member of Group % of Belonging to a Franchise, Cluster, Alliance/Network or Aggregator Group 44.8% Other included Assurex Global, and Worldwide Broker Network. with Over $25,000,

142 Analysis of with Over $25,000,000 (% by Source) Property & Casualty Commercial Commissions & Fees 52.8% 59.1% 40.5% Bonds 3.5% 4.2% 2.7% Personal Commissions 6.7% 4.0% 11.1% Value Added Services 1.9% 1.2% 2.3% Contingent/Bonus 5.6% 6.0% 6.4% Total P&C 70.4% 74.6% 63.0% Life & Health/Financial Group Medical Commissions & Fees 19.4% 17.7% 21.7% All Other Group Commissions & Fees 5.9% 4.0% 8.6% Individual L&H Commissions & Fees 1.2% 1.4% 1.9% Bonus/Overrides 1.7% 1.6% 2.7% Total L&H/Financial 28.2% 24.7% 35.0% Investments 0.5% 0.1% 0.8% Miscellaneous 0.8% 0.6% 1.3% Gross 100.0% 100.0% 100.0% Brokerage Commission Expense 2.4% 2.0% 3.1% Net 97.6% 98.0% 96.9% Revenue by Source (% of Gross ) 60.0% 50.0% 40.0% % Total Revenue 30.0% 20.0% with Over $25,000, % 0.0% P&C Commercial Comm & Fees P&C Bonds Comm & Fees P&C Personal Comm & Fees P&C VAS Fees P&C Contingent/ Bonus L&H Group Medical Comm & Fees L&H All Other Group Comm & Fees L&H Individual Comm & Fees L&H Bonus/ Overrides Investments Miscellaneous

143 Analysis of with Over $25,000,000 Revenue by Acquisition Acquired What the Typical Transactions Looked Like Acquired per Transaction % of Acquiring Average Commissions Acquired Multiples of Revenue Paid % of Net Acquisitions Made in Last 12 Months 34.5% $5,608, % Average $967,284 Average 1.25x High $2,998,725 High 1.90x Low $160,000 Low 1.00x Revenue by Specialty/Niche % of having an Industry and/or Product Specialty/Niche Total Commissions & Fees Generated from All Specialties/Niches Total Specialty/Niche Revenue as % of Net 69.0% 57.1% 42.9% $17,663,360 $10,141,281 $8,778, % 29.2% 17.1% Specialty/Niche Revenue as % of Net Revenue 50% 40% 30% 20% 10% 0% 34.1% 29.2% 17% with Over $25,000,

144 Analysis of with Over $25,000,000 Revenue by Account Concentration % of Revenue Derived from Largest Account 2.3% 2.3% 2.0% High 7.7% Low 0.5% 10 Largest Accounts 9.7% 10.4% 8.0% High 20.1% Low 2.2% Other Group Life & Health* Revenue (% from source) Life 26.1% 17.4% 28.5% Disability 18.7% 15.3% 16.4% Dental & Vision 26.2% 28.2% 21.8% Retirement/Pension 2.3% 3.4% 5.0% Worksite/Voluntary/Supplement 10.4% 14.6% 17.4% Long-Term Care 1.4% 1.0% 1.8% Employee Benefits TPA 8.0% 18.5% 2.2% All Other 7.0% 1.6% 6.8% *Excludes Group Medical with Over $25,000,

145 Analysis of with Over $25,000,000 Revenue by Account Size (as measured by Comm. & Fees not premium) Commercial P&C Greater than $25,000 % of Book 64.8% 66.9% 60.7% # of Accounts Total Revenue $22,413,256 $26,149,422 $16,606,740 Revenue per Account $81,896 $98,926 $70,496 $10,000 and $25,000 % of Book 14.6% 13.6% 15.4% # of Accounts Total Revenue $5,054,927 $5,325,050 $4,214,105 Revenue per Account $15,939 $16,301 $15,851 $5,000 and $10,000 % of Book 7.4% 7.2% 8.1% # of Accounts Total Revenue $2,562,312 $2,821,565 $2,224,503 Revenue per Account $7,150 $7,399 $6,955 Less than $5,000 % of Book 13.2% 12.2% 15.7% # of Accounts 6, , ,678.0 Total Revenue $4,737,726 $4,780,622 $5,018,283 Revenue per Account $757 $748 $884 (as measured by number of lives) Group L&H/Financial Over 100 Lives % of Book 63.0% 52.6% 55.9% # of Accounts Total Revenue $8,221,478 $6,096,228 $8,673,964 Revenue per Account $61,309 $41,006 $64, Lives % of Book 16.6% 14.8% 17.4% # of Accounts Total Revenue $2,165,857 $1,715,379 $2,695,351 Revenue per Account $15,476 $16,984 $12, Lives % of Book 7.8% 6.1% 8.9% # of Accounts Total Revenue $1,071,034 $704,729 $1,386,255 Revenue per Account $5,762 $6,387 $4,307 Under 25 Lives % of Book 12.6% 26.5% 17.8% # of Accounts 2, , ,658.8 Total Revenue $1,726,029 $3,062,786 $2,768,361 Revenue per Account $811 $982 $757 with Over $25,000,

146 Analysis of with Over $25,000,000 Revenue Growth by Source Commercial P&C Renewals % 95.0% 99.3% New Business % 12.3% 12.6% Acquired 3 1.1% 0.5% 3.0% Organic Growth 4 7.1% 7.3% 12.0% Total Growth 5 8.1% 7.8% 15.0% Bonds P&C Renewals % 90.8% 86.3% New Business % 13.7% 23.9% Acquired 3 0.8% 0.0% 3.5% Organic Growth 4 5.6% 4.5% 10.1% Total Growth 5 6.4% 4.5% 13.6% Personal P&C Renewals % 95.3% 87.0% New Business % 8.6% 17.0% Acquired 3 1.2% 0.9% 3.5% Organic Growth 4 2.6% 3.8% 4.0% Total Growth 5 3.7% 4.7% 7.5% Value Added Services P&C Renewals % 65.0% 90.9% *Insufficient New Data Business % 42.9% 19.6% Acquired 3 0.0% 0.0% 0.0% Organic Growth 4 9.8% 7.9% 10.4% Total Growth 5 9.8% 7.9% 10.4% 1 Renewal as a % of prior year s total revenues for this line of business. This figure is impacted by attrition (loss or retention of accounts) and by changes in premium and commission levels. The higher the %, the more favorable the results. 2 New as a % of prior year s total revenues for this line of business. The higher the %, the more favorable the results. 3 Acquired as a % of prior year s total revenues for this line of business. The % indicates the significance of acquired business. 4 Growth in from prior year excluding acquired revenues. 5 Growth in from prior year including acquired revenues. with Over $25,000,

147 Analysis of with Over $25,000,000 Revenue Growth by Source (continued) Group Medical L&H Renewals % 103.9% 96.4% New Business % 12.0% 20.8% Acquired 3 4.0% 1.5% 10.6% Organic Growth % 15.8% 17.2% Total Growth % 17.3% 27.8% All Other Group L&H Individual L&H Renewals % 84.1% 82.5% New Business % 6.3% 14.9% Acquired 3 3.5% 0.8% 7.4% Organic Growth 4 4.9% -9.6% -2.6% Total Growth 5 8.5% -8.8% 4.8% Renewals % 58.8% 63.7% New Business % 24.9% 54.5% Acquired 3 0.4% 0.0% 0.0% Organic Growth 4 0.8% -16.3% 18.3% Total Growth 5 1.1% -16.3% 18.3% Total Commissions & Fees (P&C, L&H) Renewals % 94.1% 97.4% New Business % 13.1% 19.5% Acquired 3 4.6% 0.6% 16.3% Organic Growth 4 9.0% 7.2% 16.9% Total Growth 5 9.4% 7.8% 16.9% Brokerage Commission Expense Growth 5.0% 3.8% 2.9% Net Commissions & Fees Growth (Organic) 6 9.1% 7.7% 17.4% Net Commissions & Fees Growth (Total) % 8.4% 33.8% Other Income P&C Contingent Income Growth 7.4% 12.5% 24.0% L&H Bonus Income Growth 6.8% 2.8% 12.6% Investment Income Growth -12.1% -10.5% -8.3% Gross Revenue Growth 8.9% 7.6% 18.3% Net Revenue Growth (Organic) 8 8.8% 7.5% 18.9% Net Revenue Growth (Total) 9 9.0% 8.1% 18.9% 1 Renewal as a % of prior year s total revenues for this line of business. This figure is impacted by attrition (loss or retention of accounts) and by changes in premium and commission levels. The higher the %, the more favorable the results. 2 New as a % of prior year s total revenues for this line of business. The higher the %, the more favorable the results. 4 Growth in from prior year excluding acquired revenues. 5 Growth in from prior year including acquired revenues. 6 Growth in Total Commissions & Fees (less Brokerage Commission Expense) from prior year excluding acquired revenues. 8 Growth in Net (Gross Revenue less Brokerage Commission Expense) from prior year excluding acquired revenues. 9 Growth in Net (Gross Revenue less Brokerage Commission Expense) from prior year including acquired revenues. with Over $25,000, Acquired as a % of prior year s total revenues for this line of business. The % indicates the significance of acquired business. 7 Growth in Total Commissions & Fees (less Brokerage Commission Expense) from prior year including acquired revenues.

148 Analysis of with Over $25,000,000 Revenue Growth by Source (continued) Historical Organic Growth (in Net Revenue) 40% 30% 20% 10% 0% 10.6% 8.2% 21.4% 5.2% 6.2% 12.8% 6.6% 1.7% 13.0% 1.2% 3.0% 8.2% 82% 3.3% 4.0% 9.0% 5.6% 7.7% 77% % 9.2% 10.7% 16.5% 8.8% 10.7% 16.5% Future Growth Percentage of agencies considering line of business as very important to growing agency s revenue over the next 3 years Surety-Bonding 72.4% Personal P&C 48.3% Small Commercial P&C 34.5% Individual Life & Health 24.1% Group Medical/Health Insurance 86.2% All Other Group Benefits 75.9% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% with Over $25,000,

149 Analysis of with Over $25,000,000 (as % of Net ) Compensation Payroll: Employee 53.7% 48.8% 53.1% Payroll: Non-Employee Producers/Temp Help 2.3% 1.2% 2.2% Total Payroll 56.0% 50.1% 55.3% Benefits: Payroll Taxes 3.0% 2.4% 3.1% Benefits: Retirement 2.0% 1.7% 2.4% Benefits: Insurance 3.1% 2.5% 3.2% Benefits: Other 0.8% 1.9% 0.3% Total Benefits 8.8% 8.5% 9.0% Total Compensation 64.8% 58.6% 64.4% Selling T&E/Conventions 2.5% 2.3% 3.1% Auto Expenditures 0.7% 0.7% 0.5% Auto Depreciation 0.1% 0.0% 0.0% Total Auto 0.7% 0.8% 0.5% Advertising/Promotions 1.0% 0.7% 1.2% Total Selling 4.2% 3.8% 4.8% Operating Occupancy Expenditures 3.4% 3.2% 3.7% Occupancy Depreciation/Amortization 0.2% 0.2% 0.2% Total Occupancy 3.6% 3.3% 3.8% Office Equipment Expenditures 0.4% 0.4% 0.5% Office Equipment Depreciation 0.4% 0.4% 0.5% Total Office Equipment 0.8% 0.8% 0.9% IT (Information ) 1.5% 1.4% 1.4% IT Depreciation/Amortization 0.4% 0.4% 0.5% Total IT 1.9% 1.7% 1.8% Telephone 0.6% 0.5% 0.6% Postage 0.3% 0.2% 0.3% Supplies/Printing 0.6% 0.6% 0.4% Dues/Subscriptions/Contributions 0.7% 0.6% 0.8% Taxes/Licenses 0.3% 0.3% 0.3% Insurance 1.3% 1.2% 1.0% Professional Fees 1.3% 1.2% 1.5% Bad Debts 0.1% 0.1% 0.1% Outside Services 1.0% 0.9% 1.3% Education/Training 0.3% 0.3% 0.4% Miscellaneous 0.5% 0.3% 0.4% Total Operating 13.3% 12.0% 13.7% continued on next page with Over $25,000,

150 Analysis of with Over $25,000,000 (as % of Net ) continued Administrative Amortization of Intangibles 1.6% 0.4% 2.0% Officer Life 0.1% 0.0% 0.2% Interest 0.4% 0.1% 0.5% Other 0.8% 0.0% 0.4% Total Administrative 2.9% 0.6% 3.0% Total 85.2% 75.0% 85.9% Pre-Tax Profit (Loss) 14.8% 25.0% 14.1% EBITDA 17.8% 26.5% 17.7% Expense Growth Over Prior Year Compensation Expense 9.0% 7.3% 13.8% Selling Expense 11.9% 8.9% 16.7% Operating Expense 8.8% 8.2% 13.9% Administrative Expense 7.3% 0.2% 24.6% (as % of Net ) 70% 60% 50% 64.8% 64.4% 58.6% 40% 30% with Over $25,000,000 20% 10% 0% 4.2% 3.8% 4.8% 13.3% 12.0% 13.7% 2.9% 3.0% 0.6% 06% Compensation Selling Operating Administrative 143

151 Analysis of with Over $25,000,000 Profit/Loss Summary (as % of Gross Revenue) Commercial Lines 52.8% 59.1% 40.5% Bonds 3.5% 4.2% 2.7% Personal Lines 6.7% 4.0% 11.1% VAS - P&C 1.9% 1.2% 2.3% Contingent/Bonus 5.6% 6.0% 6.4% Group Medical 19.4% 17.7% 21.7% All Other Group 5.9% 4.0% 8.6% Individual Life & Health 1.2% 1.4% 1.9% Bonus/Overrides 1.7% 1.6% 2.7% Investments 0.5% 0.1% 0.8% Miscellaneous 0.8% 0.6% 1.3% Total 100.0% 100.0% 100.0% Brokerage Commission Expense 2.4% 2.0% 3.1% Net 97.6% 98.0% 96.9% (as % of Net ) Compensation 64.8% 58.6% 64.4% Selling 4.2% 3.8% 4.8% Operating 13.3% 12.0% 13.7% Administrative 2.9% 0.6% 3.0% Total 85.2% 75.0% 85.9% Profit/Loss (as % of Net ) Pre-Tax Profit 14.8% 25.0% 14.1% Pro Forma Pre-Tax Profit % 25.6% 14.8% Operating Pre-Tax Profit 2 7.9% 18.5% 5.2% EBITDA % 26.5% 17.7% Pro Forma EBITDA % 27.1% 18.4% 1 Pre-tax Profits if discretionary expenses are eliminated and all owners compensated as employees 2 Pre-tax Profits excluding contingents, bonus and investment income 3 EBITDA Earnings Before Interest Taxes Depreciation and Amortization 4 EBITDA if discretionary expenses are eliminated and all owners compensated as employees with Over $25,000,

152 Analysis of with Over $25,000,000 Historical EBITDA Margin & Operating Margin (for Average Group) 35% 30% 25% 20% 15% 10% 5% 0% 22.0% 21.5% 18.6% 4.5% 19.3% 4.9% 20.7% 17.9% 3.5% 19.8% 16.9% 4.5% 19.4% 17.6% % 18.4% 16.5% 5.9% 21.7% 19.2% 17.8% 7.5% 19.9% 7.9% EBITDA Margin Operating Margin Pro Forma EBITDA About EBITDA Margin and Operating Margin EBITDA Margin is calculated by dividing a firm s EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) by the firm s net revenues. Pro Forma EBITDA Margin is calculated by dividing a firm s Pro Forma EBITDA by the firm s Pro Forma net revenue. Operating Margin is calculated as EBITDA less contingent income divided by Pro Forma net revenues less contingent income. with Over $25,000,

153 Analysis of with Over $25,000,000 The Rule of 20 is a simple growth and profitability balancing equation that provides a quick way to determine whether or not an agency is creating value for its shareholders. It states that an agency will drive industry-standard shareholder returns if the sum of (a) its organic growth rate and (b) 1/2 of its EBITDA margin equals or exceeds 20. Generally speaking, an outcome of 20 or more, regardless of the different combinations of growth and profitability, indicates that the agency s shareholders can expect to earn 15% -17% per year through stock price appreciation and/or shareholder distributions. What is the Rule of 20? Rule of 20 Outcome Public Brokers Organic Growth EBITDA Margin Rule of 20 Outcome 1/2 of Rule of 20 Score = EBITDA + Margin Organic Revenue Growth Provides a tool to benchmark agency performance Helps frame the trade-off between growth and profitability Willis Group 4.9% 24.0% 16.9 Aon 3.0% 20.9% 13.5 Brown & Brown 6.8% 33.5% 23.6 Arthur J. Gallagher 6.5% 19.9% 16.5 Marsh & McLennan 3.0% 20.7% 13.4 Average +25% Profit Average +25% Growth Average Rule of Financial Stability Average Top 25% Balance Sheet Current Ratio 1.36:1 1.88:1 Tangible Net Worth (% of Net Revenue) 9.3% 27.2% Receivables/Payable Ratio 52.6% 18.8% Aged Receivables % Receivables Aged Past 60 Days 4.4% 0.6% % Receivables Aged Past 90 Days 3.2% -5.2% Accounts Receivable Agency Billed vs. Direct Billed by Carrier % of P&C that are Agency Billed 57.8% 49.6% 59.7% % of P&C that are Direct Billed 38.7% 36.1% 40.3% with Over $25,000,

154 7.9% 5% 7.5% 5.9% 4.5% 4.9% 4.5% 4.7% 0% 3.5% Analysis of with Over $25,000,000 EBITDA Margin Operating Margin Pro Forma EBITDA Employee Productivity Total Number of Employees (FTE) Revenue Per Employee $203,873 $218,807 $210,296 7-Productivity Compensation Per Employee $131,686 $127,274 $135,612 Spread Per Employee $72,187 $91,533 $74,684 $250K $200K $150K $100K $50K $0 $203,873 $218,807 $210,296 $131,686 $127,274 $135,612 $72,187 $91,533 $74,684 Revenue Per Employee Compensation Per Employee Spread Per Employee Average number of Agency Employees that work remotely * % of with Remote Workers 41.4% 42.9% 14.3% with Over $25,000, *Insufficient Data Administrative Staff Accounting & HR Department Info Average Top 25% Accounting Department Total Number of Employees in Accounting Department 10.5 High Most Successful 28.0 Most Successful Low Commercial P&C Producer L&H Producer 4.0 Revenue per Accounting Employee $5,851,191 $8,490,813 Total Payroll Mgmt/Personnel/ for Accounting Employees Mgmt/Personnel/ $687,670 Agency Admin. 11.4% Accounting Payroll as % of Net Revenue 1.2% HR Department 8-How-Successful-Prod-Spent-Time Total Number of Employees in HR Department 3.2 Personal Training/ Education/ Prof. Dev. Soliciting New Business 30.4% High 9.0 Low Servicing 1.0 Existing Accounts 52.4% Agency Admin. 11.1% Personal Training/ Education/ Prof. Dev. Revenue per 5.9% HR Employee 8.2% $20,788,247 $34,281,300 Total Payroll for HR Employees $240,620 HR Payroll as % of Net Revenue 0.4% Soliciting New Business 34.7% Servicing Existing Accounts 46.1%

155 Analysis of with Over $25,000,000 Most Successful Producer Productivity Most Successful Producer Productivity New Commissions Produced Annually Total Commissions in Producer s Book Average Commissions per Account *Insufficient Data Commercial P&C Group L&H Average $234,567 $254,877 Top 25% $403,117 $479,736 Average $2,121,258 $1,367,815 Top 25% $3,192,698 $1,906,993 Average $37,058 $31,321 Top 25% $84,173 $60,274 How Most Successful Producers Spent Time Most Successful Commercial P&C Producer Most Successful L&H Producer Mgmt/Personnel/ Mgmt/Personnel/ Agency Admin. 11.4% Soliciting New Business 30.4% Agency Admin. 11.1% Soliciting New Business 34.7% Personal Personal Training/ Training/ Education/ Prof. Dev. 5.9% Servicing Existing Accounts 52.4% Education/ Prof. Dev. 8.2% Servicing Existing Accounts 46.1% Personal Lines Producers, someone whose main responsibility is to solicit and write new personal lines accounts and is not responsible for the day-to-day servicing of the business, can be very productive. On average the most successful Personal Lines Producer in this revenue category generated $53,458 per year in new personal lines commissions with an average commission per account of $965. (Typically, the total commissions in the producer s book are not tracked since they are not paid renewal commission. Most often, the producers receive a base salary plus new business commissions.) with Over $25,000,

156 Analysis of with Over $25,000,000 with Over $25,000, Validated Producer Productivity Average Top 25% Commercial P&C Producers Average Validated Producers # Validated 35.4 High 92.0 Low 9.0 Average New Commissions Produced Annually $127,777 $227,160 Average Book Serviced (Commissions) $833,839 $1,135,284 Average Pay ($) $238,748 Average Pay (% of Book Serviced) 28.6% Group Life & Health Producers Average Validated Producers # Validated 12.9 High 32.0 Low 2.0 Average New Commissions Produced Annually $162,104 $283,438 Average Book Serviced (Commissions) $909,077 $1,253,629 Average Pay ($) $263,868 Average Pay (% of Book Serviced) 29.0% Personal P&C Producers Average Validated Producers # Validated 2.2 High 5.0 Low 1.0 Average New Commissions Produced Annually $51,360 $82,434 Average Book Serviced (Commissions) $334,477 $615,817 Average Pay ($) $97,313 Average Pay (% of Book Serviced) 29.1% Multi-Line Producers Average Validated Producers # Validated 6.2 High 19.0 Low 1.0 Average New Commissions Produced Annually $194,175 * Average Book Serviced (Commissions) $1,153,534 * Average Pay ($) $371,510 Average Pay (% of Book Serviced) 32.2% % of That Reimburse All/Part T&E Expense 72.4% 85.7% 71.4% *Insufficient Data

157 Analysis of with Over $25,000,000 New Producers New Producer Hiring Where New Producers Were Found % of that Hired New Producers Last Year 89.7% 57.1.% 100.0% # of New Producers Hired Last Year Average Annualized Wages per Producer Hired $88,100 $78,169 $76,726 % of Producers Hired Over Last 5 Years That Met Their Production Goals 62.6% 76.7% 60.1% Average +25% Profit +25% Growth UNDER age 30 from WITHIN the insurance industry OVER age 30 from WITHIN the insurance industry UNDER age 30 from OUTSIDE the insurance industry 16.2% 64.0% 35.0% 50.0% 16.7% 61.1% OVER age 30 from OUTSIDE the insurance industry 9.0% 10.8% 5.0% 10.0% 11.1% 11.1% Net-investment in Unvalidated 1 Producer Pay The NUPP Expressed as a percentage of Net Revenue, the NUPP is the difference between what an agency pays its unvalidated producer(s) and what the producer(s) would earn under the agency s normal commission schedule. A NUPP of 1.5% is considered a healthy level of investment. 1.3% 1.3% 1.1% High 3.1% Low 0.2% 1 An unvalidated producer is one whose production does not yet cover his/her wages Understanding the NUPP By measuring pure payroll costs, the NUPP benchmark allows an apples-to-apples comparison with other agencies regarding the amount of direct investment an agency is making in new producers. While the NUPP provides a general investment guideline, an agency should also consider the success rate of its new producers, i.e. the percentage of new producers hired during the past 5 year period that have achieved the sales goals set before them. By multiplying the NUPP by the producer success rate, an agency can further determine the effectiveness of its NUPP. High performing agencies typically achieve an Effective NUPP between 1.0% - 1.5%. with Over $25,000,

158 Analysis of with Over $25,000,000 Service Staff Productivity Service & Sales Support Staff Definition Typically non-commissioned employees Provide service to the agency s clients Support producers in the sale of new business and retention of existing business Some service positions may earn commission income but typically a majority of their pay is fixed and a majority of their time is devoted to service rather than the soliciting of new clients. Service & Sales Support Positions 1 Included in Full-time Equivalent Headcounts Account Executives (AE) - senior level service representatives Account Managers, Customer Service Representatives (CSRs) Assistant CSRs, Processors Claims Staff Placers/Marketers Department Managers - who also service clients 1 Position titles are general categories since specific job titles vary from agency to agency Administrative personnel such as accounting, mail room, and reception are not included in service benchmarks unless a portion of their time is dedicated to service. Service Staff Overview Total # of Service Staff (as defined above; excludes any TPA service staff) % of Peer Having Separate/Dedicated Marketing Department 58.6% 42.9% 42.9% # of Marketing Staff Separate/Dedicated Claims Department 86.2% 71.4% 85.7% # of Claims Staff with Over $25,000, TPA Service Staff % of Peer Having Workers Comp TPA 20.7% 0.0% 14.3% # of Service Staff 11.7 * * Total TPA Serviced $1,562,860 * * Group Benefits TPA 6.9% 14.3% 0.0% # of Service Staff * * * Total TPA Serviced * * * *Insufficient Data

159 Analysis of with Over $25,000,000 Service/Sales Support Staff Average Top 25% Commercial P&C Service/Sales Support Number High Low 33.0 Average Revenue per Staff $304,936 $411,695 Total Commercial Service Payroll ($) $6,429,040 Payroll (as % of Total Commercial Revenue) 21.0% Bonds P&C Service/Sales Support Staff Number 5.7 High 19.0 Low 1.0 Average Revenue per Staff $404,477 $577,147 Total Bond Service Payroll ($) $392,618 Payroll (as % of Total Bond Revenue) 19.2% Personal P&C Service/Sales Support Staff Number 13.1 High 42.0 Low 1.0 Average Revenue per Staff $196,598 $284,702 Total Personal Service Payroll ($) $611,268 Payroll (as % of Total Personal Revenue) 26.7% Group L&H Service/Sales Support Staff Number 35.1 High 95.0 Low 6.0 Average Revenue per Staff $439,847 $639,685 Total Group L&H Service Payroll ($) $2,178,777 Payroll (as % of Total Group L&H Revenue) 15.3% Individual L&H Service/Sales Support Staff Number 3.8 High 19.6 Low 0.5 Average Revenue per Staff $286,259 $1,344,066 Total Individual L&H Service Payroll ($) $465,365 Payroll (as % of Total Individual L&H Revenue) 26.6% Multi-Line Service/Sales Support Staff Number 10.3 High 21.0 Low 3.0 Average Revenue per Staff $420,451 * Total Multi-Line Service Payroll ($) $693,669 Payroll (as % of Total Multi-Line Revenue) 27.4% *Insufficient Data with Over $25,000,

160 Analysis of with Over $25,000,000 with Over $25,000, Service Staff Payroll Information GROUP LIFE & HEALTH/FINANCIAL PERSONAL LINES COMMERCIAL LINES Pay Ranges by Service Position AE Average Low $75,185 $81,231 $76,707 Average High $147,229 $120,809 $132,419 CSR Average Low $40,473 $36,488 $33,462 Average High $84,585 $83,963 $72,825 Processor/Asst CSR Average Low $31,645 $30,958 $36,491 Average High $49,811 $40,150 $48,481 Marketing Average Low $58,077 * * Average High $115,722 * * Claims Average Low $45,266 $45,375 $46,604 Average High $107,379 $96,275 $88,786 AE Average Low $62,337 * $51,455 Average High $92,170 * $98,799 CSR Average Low $39,206 $39,150 $34,701 Average High $60,264 $57,169 $60,366 Processor/Asst CSR Average Low $32,971 * $29,185 Average High $46,317 * $52,095 Marketing Average Low * * * Average High * * * Claims Average Low $38,300 * * Average High $61,678 * * AE Average Low $84,811 $88,000 $88,910 Average High $142,653 $137,988 $111,884 CSR Average Low $43,565 $40,570 $40,296 Average High $76,792 $64,088 $63,949 Processor/Asst CSR Average Low $31,490 * $31,901 Average High $48,704 $48,775 $48,268 Marketing Average Low $44,888 * * Average High $116,733 * * Claims Average Low $72,148 * $52,863 Average High $93,050 * $80,733 *Insufficient Data

161 Analysis of with Over $25,000,000 Average Top 25% Information Employees (FTE) Number 7.3 High 26.4 Low 1.4 Number of IT Employees per 100 users 2.5 Revenue per IT Employee $9,343,352 $15,156,330 Total IT Payroll Expense ($) $572,776 $1,170,644 As % of Total Compensation Expense 1.5% As % of Net 1.0% Total IT 1 (as % of net revenues) 2.4% 2.1% 2.2% 1 Includes hardware/software leasing including offsite applications, supplies, maintenance & maintenance contracts, training, data lines, internet providers, website development/maintenance, outside consulting fees, computer depreciation, software amortization, and any non-depreciated hardware/software. Agency Management System Utilized Other included multiple systems used. Vision 6.9% Other 3.4% AMS % EPIC 31.0% TAM 24.1% Sagitta 27.6% with Over $25,000,

162 Analysis of with Over $25,000,000 Carriers Carrier Representation Personal Lines P&C National Regional Total Commercial Lines P&C National Regional Total Group L&H / Financial Total Life, Health, Disability, LTC, Retirement Products, and Other Carrier Appointments % of Total Commission & Fee Revenue Derived from Direct Versus Indirect Appointments INDIRECT Carrier Appointments 19.3% 13.6% 22.1% DIRECT Carrier Appointments 70.4% 72.1% 77.9% Use of Carrier Service Centers with Over $25,000,000 Service Center Use Total Personal Lines Commission placed in Carrier Service Center Total Commercial Lines Commission placed in Carrier Service Center *Insufficient Data 30.9% * * 2.0% 3.2% 2.7% 155

163 Analysis of with Over $25,000,000 Revenue from Top P&C Commission Income from Top Carriers Top P&C Carrier $3,892,484 $3,482,258 $4,739,303 as % of Agency Net Revenue 7.4% 7.1% 9.1% Top P&C Carrier Breakdown By Line of Business Mid/Large Commerical 72.4% Average Personal 12.7% Mid/Large Commerical 78.0% +25% Profit Personal 3.1% Mid/Large Commerical 54.4% +25% Growth Personal 22.8% Small Commercial 14.8% Small Commercial 18.9% Small Commercial 22.9% Top 3 P&C Carriers $8,577,221 $7,231,614 $10,212,947 as % of Agency Net Revenue 16.7% 15.8% 20.4% Top 3 P&C Carriers Breakdown By Line of Business Average +25% Profit +25% Growth Mid/Large Commerical 73.2% Personal 12.5% Mid/Large Commerical 74.9% Personal 9.7% Mid/Large Commerical 57.3% Personal 22.6% Small Commercial 14.2% Small Commercial 15.4% Small Commercial 20.0% L&H/F Commission Income from Top Carriers as % of Net Rev from Top L&H/F Carrier 6.4% 6.6% 8.2% as % of Net Rev from Top 3 L&H/F Carriers 11.4% 11.2% 13.6% with Over $25,000,

164 157

165 $1,250,000 $2,500,000 $5,000,000 $10,000,000 $25,000,

166 Population Density with UNDER $5,000,000 Population Where Home Office is Located: Less than 50,000 50,000 to 250, ,000 to 1,000,000 Over 1,000,000 % of Located in Each Population 20.4% 13.6% 6.4% 10.7% Net Revenue Growth (Organic) 7.3% 7.1% 7.4% 9.3% as % of Net Pre-tax Profit 22.0% 23.2% 21.9% 19.4% Pro Forma Pre-tax Profit 27.2% 27.4% 23.8% 24.1% Operating Pre-tax Profit 14.3% 15.3% 14.7% 12.1% EBITDA 25.2% 25.9% 24.6% 21.4% Pro Forma EBITDA 30.3% 30.1% 26.5% 26.1% Value Creation Rule of 20 Score Revenue per Employee $139,349 $157,872 $161,489 $148,180 Productivity Compensation per Employee $74,872 $83,587 $88,089 $90,925 Spread per Employee $64,476 $74,285 $73,400 $57,255 Commercial P&C $101,761 $137,256 $106,136 $160,844 Pay Levels for Producers Personal P&C $43,516 $74,348 $63,333 $60,023 Life & Health / Financial $64,598 $74,645 * $107,141 Multi-Line $99,545 $138,829 $140,436 $148,890 Total Number of Service / Sales Support Staff per Line of Business Total Service / Sales Support Staff Payroll as % of LOB Revenue Number of Carriers Commercial P&C Personal P&C Group Life & Health * 0.9 Multi-Line 2.3 * * * Commercial P&C 18.5% 20.6% 21.7% 24.7% Personal Lines 22.6% 23.1% 21.7% 30.9% Group Life & Health 59.1% 26.3% * 27.6% Multi-Line 20.2% * * * Personal Lines Commercial Lines Life & Health Service Center Use Total PL Comms Placed (as % of PL ) Total CL Comms Placed (as % of CL ) % of Making an Acquisition in the last 12 Months * 44.8% 25.6% * 12.9% 8.6% 26.0% 13.6% 16.7% 3.6% 0.0% 18.2% *Insufficient Data

167 Population Density with OVER $5,000,000 Population Where Home Office is Located: Less than 50,000 50,000 to 250, ,000 to 1,000,000 Over 1,000,000 % of Located in Each Population 7.3% 9.6% 15.1% 17.0% Net Revenue Growth (Organic) 6.5% 10.3% 8.8% 10.1% as % of Net Pre-tax Profit 14.5% 17.9% 16.6% 15.5% Pro Forma Pre-tax Profit 16.7% 20.4% 20.5% 19.3% Operating Pre-tax Profit 5.8% 11.3% 8.8% 8.0% EBITDA 18.9% 21.2% 18.7% 18.3% Pro Forma EBITDA 21.1% 23.7% 22.6% 22.1% Value Creation Rule of 20 Score Revenue per Employee $154,264 $181,040 $184,384 $194,521 Productivity Compensation per Employee $95,138 $111,475 $118,418 $126,501 Spread per Employee $58,946 $69,566 $65,966 $68,020 Commercial P&C $131,722 $168,755 $209,249 $220,329 Pay Levels for Producers Personal P&C $51,650 $66,885 $101,846 $81,690 Life & Health / Financial $140,940 $200,951 $214,375 $226,808 Multi-Line $180,497 $233,506 $210,006 $178,581 Total Number of Service / Sales Support Staff per Line of Business Total Service / Sales Support Staff Payroll as % of LOB Revenue Number of Carriers Commercial P&C Personal P&C Group Life & Health Multi-Line * * * * Commercial P&C 20.5% 19.9% 19.3% 20.6% Personal Lines 26.4% 23.4% 25.1% 24.9% Group Life & Health 16.3% 16.5% 14.4% 17.8% Multi-Line * * * * Personal Lines Commercial Lines Life & Health Service Center Use Total PL Comms Placed (as % of PL ) Total CL Comms Placed (as % of CL ) % of Making an Acquisition in the last 12 Months 29.3% 27.6% 18.3% 23.6% * 3.1% 5.1% 2.7% 6.7% 20.0% 22.6% 22.9% 160 *Insufficient Data

168 Regional Analysis with UNDER $5,000,000 Geographic Region: Northeast Southeast Midwest Southwest West % of Located in Each Region 8.3% 13.6% 14.6% 9.3% 5.4% Net Revenue Growth (Organic) 9.1% 10.0% 4.7% 6.4% 9.8% as % of Net Pre-tax Profit 19.7% 16.2% 25.2% 25.1% 24.0% Pro Forma Pre-tax Profit 26.0% 21.2% 27.9% 30.0% 27.7% Operating Pre-tax Profit 10.5% 9.4% 18.1% 15.3% 19.2% EBITDA 23.3% 18.9% 28.0% 27.6% 25.8% Pro Forma EBITDA 29.6% 23.9% 30.7% 32.5% 29.4% Value Creation Rule of 20 Score Revenue per Employee $136,203 $140,259 $150,707 $177,117 $136,658 Productivity Compensation per Employee $75,647 $86,354 $77,884 $92,731 $75,294 Spread per Employee $60,556 $53,905 $72,823 $84,386 $61,364 Commercial P&C $109,593 $160,399 $104,398 $125,083 $113,055 Pay Levels for Producers Personal P&C $54,824 $48,183 $54,190 $57,500 $48,750 Life & Health / Financial * $108,878 $65,316 * $106,000 Multi-Line $100,390 $137,802 $105,279 $146,264 * Total Number of Service / Sales Support Staff per Line of Business Total Service / Sales Support Staff Payroll as % of LOB Revenue Number of Carriers Commercial P&C Personal P&C Group Life & Health Multi-Line * * 3.0 * * Commercial P&C 28.5% 22.8% 16.7% 18.3% 19.2% Personal Lines 23.4% 24.6% 21.9% 27.1% 27.9% Group Life & Health 47.1% 26.0% 12.6% 27.4% 12.1% Multi-Line * * 20.6% * * Personal Lines Commercial Lines Life & Health Service Center Use Total PL Comms Placed (as % of PL ) Total CL Comms Placed (as % of CL ) % of Making an Acquisition in the last 12 Months * 29.1% * * * 12.9% 3.6% * * 37.4% 17.6% 7.1% 6.7% 15.8% 18.2% *Insufficient Data

169 Regional Analysis with OVER $5,000,000 Geographic Region: Northeast Southeast Midwest Southwest West % of Located in Each Region 10.7% 12.7% 9.3% 8.8% 7.8% Net Revenue Growth (Organic) 8.3% 8.5% 11.1% 8.5% 10.2% as % of Net Pre-tax Profit 16.0% 16.6% 15.9% 18.5% 13.3% Pro Forma Pre-tax Profit 18.8% 20.0% 18.5% 20.8% 19.3% Operating Pre-tax Profit 8.7% 9.5% 6.0% 11.2% 7.2% EBITDA 20.4% 18.7% 18.7% 20.6% 16.5% Pro Forma EBITDA 23.3% 22.1% 21.3% 23.0% 22.4% Value Creation Rule of 20 Score Revenue per Employee $175,779 $174,870 $185,636 $183,611 $200,817 Productivity Compensation per Employee $107,305 $112,812 $119,522 $116,259 $131,272 Spread per Employee $68,474 $62,058 $66,114 $67,352 $69,545 Commercial P&C $146,672 $205,766 $213,707 $170,852 $226,633 Pay Levels for Producers Personal P&C $55,833 $88,579 $76,014 $89,734 $84,181 Life & Health / Financial $146,320 $232,882 $219,707 $193,891 $217,331 Multi-Line $101,307 $196,712 $282,598 $185,452 $273,921 Total Number of Service / Sales Support Staff per Line of Business Total Service / Sales Support Staff Payroll as % of LOB Revenue Number of Carriers Commercial P&C Personal P&C Group Life & Health Multi-Line 11.0 * * * * Commercial P&C 22.4% 20.5% 19.9% 16.8% 19.5% Personal Lines 24.8% 22.4% 28.1% 26.1% 23.6% Group Life & Health 21.1% 15.4% 15.9% 14.4% 14.1% Multi-Line 9.3% * * * * Personal Lines Commercial Lines Life & Health Service Center Use Total PL Comms Placed (as % of PL ) Total CL Comms Placed (as % of CL ) % of Making an Acquisition in the last 12 Months 18.5% 28.0% 33.9% 21.4% 25.4% 11.1% 2.1% 0.8% 1.9% 3.0% 18.2% 19.2% 31.6% 16.7% 12.5% 162 *Insufficient Data

170 In addition to the average results for each study group, the study provides insights on how the best of the best are operating. This table will help you understand the terms used to report this information. HEADING REFERS TO Average the average results achieved by all the firms in the study group for a particular factor. (Extreme high and low results distorting the average have been excluded.) High Low Top 25% +25% Profit +25% Growth the highest results achieved in the peer group for a particular factor the lowest results achieved in the peer group for a particular factor the average results achieved by the Top 25% of the firms in the group for that particular factor or line item. (The firms comprising this group will be different for each factor or line item.) the average results achieved by the 25% of firms having the greatest pro forma profitability as a percent of net revenues. (The firms comprising this group are the same for each factor or line item.) the average results achieved by the 25% of firms experiencing the greatest growth in net revenues. (The firms comprising this group are the same for each factor or line item.) Glossary REVENUES (as reported for most recently completed fiscal year-end and stated as a percentage of gross revenues) 163 Property & Casualty: 1. Commercial Commissions & Fees Commissions (both direct & agency billed) and fees earned in lieu of commissions for the sale of commercial P&C insurance. 2. Bonds Commissions from the sale of all bonds (surety, fidelity, etc.) 3. Personal Commissions Commissions (both direct & agency billed) from the sale of personal P&C insurance. 4. Value Added Services from a Worker s Comp TPA, loss control, engineering, risk management, consulting services, self-insurance programs, underwriting and claims services, additional carrier compensation or reimbursements for services provided on their behalf, etc. 5. Contingent / Bonus Profit sharing, bonus, and supplemental income received from insurance carriers 6. Total P&C The sum of items 1-5 Life & Health / Financial 7. Group Medical Commissions & Fees Commissions & fees from the sale of group health/medical insurance ONLY. 8. All Other Group Commissions & Fees Commissions & fees from the sale of all other employee benefits products and services, including group life, dental, disability, pension, 401(k)s, PEOs, and investment products. Also includes any revenue from the delivery of value added services (VAS), i.e., revenues from a Benefits TPA, HR/Wellness/other consulting services, actuarial services, risk management, cost containment, and other VAS related to employee benefits, L&H/Financial Services. 9. Individual Commissions & Fees Commissions from the sale of individual life, health, dental, disability & investment products. 10. Bonus / Overrides Bonus or incentive payments paid to agency for L&H production, usually for volume, persistency, growth, etc. 11. Total L&H / Financial The sum of items Investments Income from interest, dividends, premium finance, late charges, gains/losses on sales of marketable securities (investment type securities)

171 13. Miscellaneous Income from countersignatures fees, gains/losses on fixed or intangible assets, life insurance proceeds 14. Gross The sum of items 6, 11, 12 & Brokerage Commission Expense Commissions paid to other agencies or outside brokers. Does NOT include in-house producers that are paid on a Net Gross less Brokerage Commission Expense EXPENSES (as reported for most recently completed fiscal year-end and stated as a percentage of net revenues) Compensation Payroll: The following payroll breakdown is for the entire agency including agency owners: 17. Employees Salaries, commissions, bonuses, management fees, and discretionary owner compensation 18. Non-Employees 1099 Producers /Temporary Help Commissions, bonuses for agency s producers compensated on (Does not include producers/agencies to which you pay outside broker commissions.) Also includes expenses for outside temporary staffing, temp-to-perm staffing expenses, etc. 19. Total Payroll The sum of items Benefits: 20. Payroll Taxes All payroll taxes (SS, FICA, FUTA, etc.) 21. Retirement related to a 401(k), ESOP/ESOT, miscellaneous retirement benefits 22. Insurance Health ins, medical reimbursements, life ins (except key man life), disability insurance 23. Other Wellness programs, health club memberships, gifts, etc. 24. Total Benefits The sum of items Total Compensation The sum of items 19 & 24 Selling 26. Travel & Entertainment/Conventions Airfare, meals, hotels, social/country club dues, convention related expenses (Excludes professional dues/memberships) 27. Auto Expenditures Lease, gas, maintenance/repair, employee parking, mileage allowances, etc. 28. Auto Depreciation Depreciated expense for current year that is associated with auto only. 29. Total Auto The sum of items 27 & Advertising / Promotion Promotional / advertising materials, target marketing services, fees paid to advertising or public relations agencies, media buys, contest rewards, customer relations functions, gifts, telemarketing, etc. 31. Total Selling The sum of items 26, 29 & 30 Operating 32. Occupancy Expenditures Total rent, utilities, building/grounds maintenance, property taxes, janitorial services, storage & other building related expense. (net rental/sublet income against Occupancy Expense) 33. Occupancy Depreciation/Amortization Building depreciation, leasehold amortization 34. Total Occupancy The sum of items 32 & Office Equipment Expenditures Leases and expensed equipment purchases including copier leasing/ maintenance, telephone & fax leasing/maintenance, postage meters lease/maintenance, office furniture & fixtures leasing/maintenance (Excludes IT equipment) 164

172 36. Office Equipment Depreciation/Amortization Current year depreciation expense for equipment, furniture, fixtures. Include Section 179 purchases. 37. Total Office Equipment The sum of items 35 & IT Expenditures Expensed/leased computers, servers, software, wiring, maintenance and maintenance contracts, website development/maintenance, website hosting, internet connections, & training. 39. IT Depreciation / Amortization Current year depreciation expense for computers, servers, etc, software amortization. Include Section 179 items. 40. Total IT The sum of items 38 & Telephone Local & long distance, cellular telephone, and fax expenses. (Excludes leased telephone equipment; included under Office Equipment) 42. Postage Postage, Express mail, FedEx, UPS, courier services (Excludes postage meter lease/maintenance; included under Office Equipment) 43. Supplies / Printing Office supplies, paper, copying/printing, coffee/soft drinks/break room expenses 44. Dues / Subscriptions/ Contributions Professional dues/membership fees, periodical & information services subscriptions, contributions 45. Taxes / Licenses Miscellaneous local & franchise taxes, sales tax, other property taxes, license fees. (Excludes property taxes entered under Occupancy, payroll taxes, & state/federal income taxes) 46. Insurance All property & casualty insurance including employee auto insurance, and any payments for E&O claims /settlements 47. Professional Fees for CPAs, lawyers, consultants and other outside advisors (Excludes directors fee included in Administrative-Other) 48. Bad Debts Any bad debts written off, claims paid (Excludes E&O claims/settlements) 49. Outside Services MVRs, bank fees, employment fees, moving expenses and all other outside service expense including those used to deliver value added services to the agency s clients (e.g. Zywave, actuarial services, COBRA administration, etc.) 50. Education / Training Registration fees, materials, in-house training programs, etc. (Excludes training on how to use your agency management system or other agency technology) 51. Miscellaneous Other non-specific miscellaneous operating expenses not included elsewhere 52. Total Operating The sum of items 34, 37, Administrative 53. Amortization of Intangibles Acquired expirations, covenants, non-competes, etc. 54. Officer Life Premium paid by agency, agency is beneficiary 55. Interest All interest expense incurred 56. Other Director s fees, non-specific overhead allocations to parent companies, deferred compensation, and any other miscellaneous administrative expenses 57. Total Administrative The sum of items Total The sum of 25, 31, 52, & 57 PROFITABILITY Pretax Profit / Loss Net revenues minus total expenses. 60. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) The agency s profit before interest, taxes, depreciation and amortization expenses are included. 61. Pro Forma Pretax Profit The agency s profit if all discretionary expenditures made for the benefit of the owners, based solely on ownership, were removed and all extraordinary / non-reoccurring expenses or revenues were normalized.

173 62. Operating Pre-Tax Profit Pretax profit minus contingents, bonus and investment income. 63. Pro Forma EBITDA See items 60 (EBITDA) and 61 (Pro Forma Pretax Profit). 64. Rule of 20 Score a valuation metric developed by Reagan Consulting that is the sum of the agency s pro forma EBITDA margin times 50% plus the organic revenue growth rate. It provides a quick means of calculating whether or not an agency is creating significant returns for its shareholders. FINANCIAL STABILITY 65. Current Ratio Current assets divided by current liabilities. A current ratio greater than 1:1 indicates that cash and assets with short term maturities are sufficient to meet a firm s short-term obligations. 66. Tangible Net Worth Total assets minus intangible assets equals total tangible assets. Total tangible assets minus total liabilities equals tangible net worth. Represents the net value of the corporation if it were liquidated. A low or negative tangible net worth impacts a firm s ability to invest in new opportunities, develop new products, hire new employees, make other capital expenditures and handle stockholder redemption obligations. 67. Receivables/Payables Ratio Accounts receivable divided by accounts payable. This ratio measures the collection practices of an agency, with a lower ratio representing more timely collections of those amounts due from insureds. 68. Aged Receivables Measures the length of time that receivables are past due (over 60 days, over 90 days). Receivables aged greater than 60 days tend to have a magnified impact on the agency s liquidity as payments are most always due to insurance companies on or before 60 days, thus forcing the agency to use its own funds to pay carriers. EMPLOYEE OVERVIEW 69. Total # of Employees (FTE) Total number of full-time equivalent employees including agency principals. 70. Revenue per Employee Net revenues divided by the total number of full-time equivalent employees. 71. Compensation per Employee Total compensation divided by total number of full-time equivalent employees. 72. Remote Workers An employee whose main location is in their home or other site not physically located within an agency s physical space. 73. Spread per Employee Total revenue per employee minus compensation per employee. While revenue per employee is a standard for measuring productivity, the spread measures the dollars per employee available to pay all other agency expenses and generate a profit for the agency. PRODUCER INFORMATION 74. Validated Producer Producers whose book of business is sufficient to cover his/her wages under agency s commission formula. 75. Unvalidated Producer Producers whose production does not yet cover his/her wages under agency s commission formula. 76. NUPP Net Investment in Unvalidated Producer Pay. Expressed as a percentage of net revenue, the NUPP is the difference between what an agency pays its unvalidated producers and what the producers would earn under the agency s normal commission schedule. 77. Annual Pay per Producer Includes only compensation that shows up on the producer s W-2 that resulted from the producer s production responsibilities. 166

174 SERVICE STAFF INFORMATION 78. Service Staff Typically non-commissioned personnel who are responsible for providing service to the agency s clients and/or supporting producers in the sale of new business and the retention of existing business. 79. Service /Sales Support Staff Definitions: Account Executives (AE) Senior level service position, often assigned to a Commercial P&C or Group L&H producer in order to support & enable the producer to focus on new business production. Primary responsibility is to manage the overall service plan/activities for an existing book of business and to maintain ongoing client relationships including renewals & account development. In some agencies the AE position may have specific responsibility to solicit new clients or write new business that is referred/ comes to agency, but a majority of time is spent on service and client retention. Customer Service Reps (CSR)s / Account Managers Senior level service position in agencies where the AE position does not exist to support the producer. Position will serve as the main service contact for the client. Customer service duties are similar to AE duties including renewals, account upgrading, crossselling, etc., but may include some processing responsibilities (e.g. coordinate new client set-up, prepare proposals, order & check policies, issue certificates, binders, billings, etc.). Assistant CSRs/Processors Lower level service position whose main function is to support AEs or other senior level service staff. Position may or may not have direct client contact. Duties vary but are usually processing oriented (e.g. coordinate new client set-ups, prepare proposals, order & check policies, issue certificates, binders, billings, etc.). Marketing Has responsibility to negotiate with carriers to obtain coverage for clients (solicit quotes/ rates, negotiate coverage/pricing; place new & renewal business with carriers; may prepare proposals/ binders). Keeps track of market trends, pricing and underwriting policies. If you do not have a person dedicated to these activities, leave blank. Claims Coordinates P&C claims reporting, tracking, processing, and analysis for agency and its clients; delivers VAS claims services. If you do not have a person dedicated to these activities, leave blank. 80. Service Staff Pay Ranges Pay includes Salary, Commissions, and Bonuses but does NOT include benefits or payroll taxes. INSURANCE CARRIERS 81. Top Carrier Commissions: Small Commercial Accounts Accounts generating less than $7,500 in commission income. 82. Carrier Service Center Use Carriers with whom agency has the option of placing policies in their service centers (i.e., the carrier will assume the role of providing customer service to the policyholder). 167

175 Independent Insurance Agent Reagan Consulting, Inc. 1 Piedmont Center, Suite 500 Atlanta, GA (404) (404) fax Independent Insurance Agents and Brokers of America 127 S. Peyton Street Alexandria, VA (800) (703) fax