best practices study update

2020Independent Insurance Agents

& Brokers of America.

AIM HIGHER. ACHIEVE MORE.

BEST PRACTICES STUDY UPDATE.

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Copyright ©2020 by the Independent Insurance Agents & Brokers of America and Reagan Consulting, Inc. All rights reserved. No portion of this document may be reproduced in any manner without the prior written consent of IIABA or Reagan Consulting. In addition, this document may not be posted as a link on any public or private website without the prior written consent of IIABA or Reagan Consulting.

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We wish to thank the following companies for their sponsorship. The funding provided makes possible the development

of the 2020 Best Practices Study and the Best Practices Gateway website.

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Introduction & Overview .............................................................................................................................. 6

Re:Think – Embracing the Challenges of a Post-COVID World ................................................................... 10

Executive Summary ..................................................................................................................................... 24

Agencies under $1.25 Million in Revenue ..................................................................................... 24

Agencies between $1.25 Million and $2.5 Million in Revenue ...................................................... 28

Agencies between $2.5 Million and $5.0 Million in Revenue ........................................................ 32

Agencies between $5.0 Million and $10.0 Million in Revenue ...................................................... 36

Agencies between $10.0 Million and $25.0 Million in Revenue .................................................... 40

Agencies with over $25.0 Million in Revenue ................................................................................ 44

Cross Category Comparison ........................................................................................................................ 48

Glossary ....................................................................................................................................................... 78

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Created in 1993, through a joint initiative between Reagan Consulting and the Independent Insurance Agents & Brokers of America (the Big “I”), the Best Practices Study (BPS) is designed to deliver critical financial and operational industry benchmarks and strategies to member agencies. For nearly 30 years, this comprehensive annual publication has helped agencies optimize their performance and built its reputation as one of the industry’s most consistently effective, reliable, and valuable information resources.

Every three years, the Big “I” asks insurance companies, state association affiliates, and other industry organizations to nominate agencies they consider to be among the best in the industry for each of the BPS’s revenue categories. Nominated agencies are then invited to participate and must complete an in-depth survey detailing their financial and operational year-end results. Results are then scored and ranked objectively to determine which agencies earn the Best Practices agency designation.

In 2019, the beginning of the current three-year (2019-2021) BPS cycle, over 1,000 independent agencies throughout the U.S. were nominated and 267 of the participating agencies became Best Practices agencies. Their results served as the foundation for the 2019 Best Practices Study. This year, the 2020 Best Practices Study continues to examine these same top performers who maintained their Best Practices status by submitting annual data. Participation in the Best Practices Study is a prestigious recognition of superior accomplishments. Agencies who believe they have the qualities of a Best Practices agency and wish to be nominated for the next cycle (2022-2024) can have their state association or an insurance carrier nominate them or can self-nominate.

The 2020 Best Practices Study is composed of three primary sections:

1. ReThink: Embracing the Challenges of a Post-COVID World — Agencies must prepare now for the time when the yellow “Caution” flag comes down and they face the transformed economic landscape

2. Executive Summaries — Key benchmarks and perspectives summarized for each of the six revenue categories

3. Cross Category Comparison — The complete array of Best Practices benchmarks for all six revenue categories, arranged in a side-by-side format that allows for quick comparisons of metrics across categories

The 1993 Best Practices Study

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Visit the Best Practices Gateway at www.reaganconsulting.com/research/best-practices for access to the annual Best Practices Study. Other resources and tools to help agencies improve their performance and enhance the value of their business are also available via the Big “I” website, www.independentagent.com. Two of the most frequently used tools are the Agency Self-Diagnostic Tool and the Joint Agency Company Planner which are valuable components of a complete line of Best Practices products and services. If you have questions about the information published in the 2020 Best Practices Study or if you would like to nominate your agency to participate in the 2022-2024 Study cycle, please contact Reagan Consulting at 404-233-5545. If you would like access to additional Best Practices tools or wish to purchase the Study, contact the Big “I” Education Department at www.independentagent.com/best-practices or 800-221-7917.

The Best Practices Gateway: https://reaganconsulting.com/research/best-practices

http://www.reaganconsulting.com/research/best-practices

http://www.independentagent.com/

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2020 is shaping up to be the most tumultuous year in the history of the Best Practices Study. A year that started out with

great momentum and promise has turned into one of anxiety and uncertainty. On March 1st, agencies were growing at

the fastest rate in over a decade and agency valuations were setting all-time records. Life for agents and brokers was not

just good, it was really good.

Yet, less than a month later, the global economy began shutting down in the fastest reversal of our lifetimes with the

arrival of the COVID-19 pandemic. While most Americans were aware of the new novel Coronavirus, it had not yet

upended their day-to-day lives. On March 11, that all changed:

Seemingly overnight, American businesses closed operations or transitioned to remote work arrangements, as stay-at-

home mandates became the order of the day. Despite the identification of insurance workers as “essential workers,” and

thus exempt from certain stay-at-home restrictions, most agencies sent their employees home to work remotely. By early

April, a vast number of agents and brokers began applying for emergency Paycheck Protection Program loans to ensure

they could continue to employ their staffs through the summer. And as of August 2020 (the Best Practices Study

publication date), the majority of agencies are still working remotely.

Early returns on the industry’s navigation of the pandemic and transition to remote-work realities have been generally

positive. Agencies remained “open,” employees have been retained, and clients continue to be serviced.

Nonetheless, many in our industry seem to be operating under a yellow caution

flag, as when an accident interrupts a NASCAR race. As the yellow flag waves

and race wreckage is cleared, racers slow down, line up behind a pace car, and

seek to hold their positions until a green flag signals the restart of the race.

In 2020, many agencies find themselves under a yellow flag, ceasing to make

forward progress – just trying to hold their own and avoid giving up their pre-

COVID-19 positions.

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Best Practices Agencies, as we have seen time and time again in previous crises, take a different view in such situations.

They adapt, innovate, and find ways to thrive, despite the chaos and uncertainty that surrounds them.

Need convincing? Think back to the massive challenges

independent insurance agencies faced in just the past

three decades:

Despite all these (and many more) highly-disruptive

milestones, our industry has never been more valuable

or more relevant. How is this even possible? How did

Best Practices Agencies not go the way of high-

commission stockbrokers, travel agencies, and video

rental stores? How have Best Practices Agencies been

able to adapt, innovate and prosper, regardless of the

crisis du jour?

In short, Best Practices Agencies use periods of turmoil

and disruption as opportunities to rethink their

businesses. Proactive strategic thinking by Best

Practices Agencies is the catalyst for our industry’s

massive gains. The COVID-19 pandemic will be no

different.

While under the COVID-19 yellow flag, Best Practices

Agencies must go beyond the day-to-day challenges

and rethink their fundamental business operations in

critical ways.

This discipline of rethinking is the focus of the 2020 Best Practices Study and we have identified four primary areas where

this rethinking can be applied. If Best Practices Agencies engage in the practice of rethinking, we believe they will emerge

from the COVID-19 pandemic stronger, better, and more competitive than ever, ready to restart the race when the yellow

flag is lifted.

Managing your agency’s finances is always important, but the importance is magnified in times of stress and uncertainty

The threat of Hillarycare (nationalized healthcare) looms large

The Internet disrupts consumer habits

Banks enter the insurance landscape

Eliot Spitzer attacks contingent income

The Affordable Care Act passes

InsureTech and industry

consolidation threaten agencies

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like the COVID-19 pandemic. By rethinking your financial foundations, you can play both offense and defense while you

wait for the yellow flag to raise. You can defensively address issues brewing on your balance sheet, while at the same

time go on the offense to ensure a rapid response to changing economic circumstances. Admittedly, agency finances can

be complicated, but below are three important areas to rethink.

1) Protect your balance sheet. Your balance sheet is your agency’s war chest and safety net. Protect it at all costs. The

following are a few especially relevent balance sheet items to rethink:

• Keep an eye on accounts receivables. While there has been an industry push to move from agency bill to direct

bill, a significant amount of agency bill still exists. Poor management of accounts receivable can be deadly. If an

agency fails to collect a $10,000 premium account, it would have to write almost $70,000 in additional premium

to make up for that loss. Losing sight of accounts receivable can have dire consequences.

• Consider debt more carefully. Traditionally, banks

hesitated to loan money to insurance agencies

given the lack of hard assets and collateral. In

recent years, that has changed, as banks gained a

better understanding of the opportunities within

the insurance industry. In fact, most agencies can

now obtain up to three times their annual EBITDA

in debt funding. Ready access to debt can provide

necessary capital to fuel growth investment and

provide reserves in uncertain times.

• Rethink your cash position. Cash is king and insurance agencies generate a lot of cash. Unfortunately, many agency

owners view the healthy distributions they take as compensation, rather than as discretionary distributions of

profit that might better be retained in these uncertain times. Many agencies routinely distribute 80-90% of pretax

profits. Retained profits are an excellent source of capital to fund growth investments and perpetuation and to

provide rainy-day funds to weather the COVID-19 storm.

2) Develop multiple financial forecasts. Best Practices agencies typically rely heavily on budgets to help manage towards

desired growth and profitability outcomes. In normal times, this is enough. These are not normal times.

To protect your agency in a COVID-19 world, develop multiple forecasts and corresponding action plans – best case,

worst case, and expected. Each forecast should be built with as much available information to inform revenue,

including ground-level feedback and projections from producer-client interactions, knowledge of industry

concentrations and potential impacts, and updates from peers, government officials, medical personnel, clients, and

insurance company partners.

Once created, these dynamic forecasts and related action plans will allow you to adapt and pivot in real-time without

making decisions under fire when the pre-pandemic budget goes out the window. Decisions that might normally take

40.7%50.0%

41.5% 38.6%

72.2%60.5%

1.5x

1.4x

1.0x 1.0x

0.7x

1.0x

0.0x

0.5x

1.0x

1.5x

0%

25%

50%

75%

100%

< $1.25M $1.25M-$2.5M

$2.5M-$5.0M

$5.0M-$10.0M

$10.0M-$25.0M

> $25.0M

Debt and Leverage

% of Firms with Debt Average Leverage

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weeks or months will require only days to implement, as contingency action plans (expense reductions, specific

personnel adjustments, growth investments, etc.) will already be in place.

3) Rethink profitability. Experiences like COVID-19, while

painful, often reveal areas of excess in terms of agency

profitability. COVID-19 has exposed four potential

excess expense areas for insurance agencies. These

potential excess areas can be recaptured as profit and

used if needed to sustain the business during uncertain

times or to make the necessary growth investments

that will enable you to hit the ground running when the

yellow flag is raised.

Potential expense items to rethink include:

Occupancy

Do you need as much space as you have? Occupancy expenses typically consume 4% of net revenue and represent the second largest expense category (after compensation). The pandemic has demonstrated that agency employees can, and often prefer to, work remotely, so there may be an opportunity for agencies to rethink occupancy requirements accordingly. Does an all-hands-on-deck, brick and mortar approach still make sense for your agency? Does the pandemic create an opportunity to reinvest rent savings in hiring new talent?

Average Occupancy

as % of Net Revenues (across all revenue categories):

T&E

Travel and entertainment has ground to a halt during COVID-19. Interestingly, new business has not evaporated as many predicted. Much to the chagrin of many producers, historical levels of T&E expenses may not be necessary or appropriate in the future.

Average Travel & Entertainment

as % of Net Revenues (across all revenue categories):

Automobile

Like T&E, automobile usage has diminished and is certainly not mission-critical in many cases, revealing yet another area of potential savings.

Average Automobile as % of Net Revenues (across all revenue categories):

Advertising/ Promotion

Similarly, many agencies have made material reductions in advertising/promotions without significantly impacting new business results. Could this be an ongoing trend? If so, advertising budgets may be yet another source of profits to recapture.

Average Advertising/Promotion as % of Net Revenues (across all revenue categories):

Rethink your finances; not only to weather these uncertain times, but to prosper as things return to normal.

31.9%

26.4% 27.2% 25.8%22.7%

19.3%

0%

5%

10%

15%

20%

25%

30%

35%

< $1.25M $1.25M-$2.5M

$2.5M-$5.0M

$5.0M-$10.0M

$10.0M-$25.0M

> $25.0M

Pro Forma EBITDA**Earnings before interest, taxes, depreciation, and amortization

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Established patterns in the workplace don’t change quickly or easily. Remote work has been discussed, debated, and

experimented with for decades. Despite evidence that remote employees are often happier and more productive than

their peers in the office, 2020 began with only a small portion of the U.S. workforce working remotely – 3.2%, according

to flexjobs.com (Beth Braccio Hering, February 13, 2020).

COVID-19 created a “tipping point.” Virtually overnight, the question changed for most businesses from “should we

embrace remote work?” to “how do we do remote work successfully?” The remote work adoption timeline was radically

compressed. In June of 2020, the WSJ reported that nearly 50% of the U.S. workforce had transitioned to remote work

due to COVID-19 (Laura Forman, June 6, 2020).

Forced to figure out how to successfully work remotely, many

businesses found they could and are also discovering remote work

offers benefits for both employers and employees. Current

technologies, though not perfect, are generally sufficient to effectively

support remote work, suggesting the slow pre-COVID adoption of

remote work was due more to inertia and reluctance to change than to

structural or technical limitations. Is remote work here to stay? Almost

certainly, we have entered a new world of expanded remote work that

will remain even when the pandemic has subsided. If so, how can agents

and brokers embrace it?

1) Protect your culture. Acknowledge that cultural development

will be more difficult as employees become more dispersed and

personal interactions become less organic. Random encounters

between people that occur naturally in a physical workplace

help to develop relationships, spark new ideas, and promote

culture. Technology is a poor substitute. You will need to be

intentional about protecting your culture. How? Communicate,

communicate, communicate.

Proactively find ways to:

• Reinforce your shared values and goals.

• Keep employees informed on corporate level goals, initiatives, etc.

• Celebrate wins.

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• Use technology-based tools such as Slack and Teams, with their real-time chat functionalities, to replace

lost “water cooler” time.

2) Encourage interaction & feedback.

• Have 10-minute “check-in” calls for teams 2-3 times per week.

• Create quarterly surveys to solicit candid feedback from remote employees on what is working well and what

needs to be changed. Use these surveys to also gauge how employees are doing personally. Remote work is

not for everyone. Some employees will struggle to adjust. Feelings of isolation are common. Other employees

will struggle with burnout as the less structured nature of remote work can lead to overwork. Surveys can

help you monitor morale and be more responsive to potential problems.

• Make sure all employees know they have channels for one-on-one discussions and face-to-face meetings, if

needed.

3) Rethink your geographic footprint. In liberating agencies from

the central office model, COVID-19 also creates access to a

broader, deeper talent pool. If location is truly less relevant,

access to qualified candidates is greater than ever before. As you

prepare to compete for talent in this expanded pool, remember

that excellence in managing remote work can help you win.

Firms that offer remote employees more of what they want,

including tools, technology, and support, as well as greater

flexibility in how, where, and when they work, will have an

increasing competitive advantage in the battle for talent.

4) Embrace diversity initiatives. In addition to being sound business strategy, embracing diversity will also drive

long-term growth and profitability. A diverse team that more accurately reflects the reality of our economy will

bring a variety of perspectives on how to respond to a rapidly changing business and social environment. Best

Practices Agencies have an opportunity to be a beacon of light in what feels like a deeply divided world. Diversity

is good business.

5) Maintain employee accountability. Agencies must develop a way to monitor employee results while also avoiding

micro-management. Accountability is especially important for young producers. Fostering good prospecting

habits and tracking production activity / pipelines is critical in a remote-work environment. In some ways, COVID-

19 has done agencies a favor by illuminating producer effectiveness. If effort and activity is not demonstrated,

don’t be afraid to quickly terminate and reinvest those dollars elsewhere. Equip your producers with a digital

playbook and resources to successfully compete in the marketplace. And then hold them accountable for doing

so.

Before COVID, the labor markets were tight and good talent was in short supply. Many agencies only looked to hire in

their own backyard and frowned upon remote work. Training and development largely occurred in in-person settings.

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COVID changed these realities and some agents and brokers are finding ways to prosper amongst the pandemic turmoil.

The bottom line is that insurance agencies are a people-driven business. Rethink your personnel and how you work.

Continue to make generous investments in your team - they are the lifeblood of your agency and the key to future success.

On a similar note to rethinking your agency’s foundations, it’s critical to pause and assess your client base and growth

drivers, understanding how you can best maximize your current strengths and avoid any potential pitfalls. Is your agency

too concentrated in certain industries? What parts of your book are thriving and struggling during the pandemic? Are

there any significant concentrations in your book of business that simply don’t make sense?

In other words, how well do you know your customers?

Below are a few practical ways to better understand and proactively manage your business and client base:

1) Conduct an industry analysis. Do you have exposures in industries that are significantly affected by COVID-19

(hospitality, retail, restaurants, etc.)? Perform a full audit of your customer base over a specified account threshold

that will cover at least 80% of your total book. Take proactive measures to reconsider growth investments in

industries in which you are overweighted or that may no longer make sense.

Within your agency management system, enter

clients’ Standard Industrial Classification (SIC) or

North American Industrial Classification System

(NAICS) code to identify client industries. Make this

a required field when submitting new business.

You are likely to find business concentrations and

exposures that you were never aware of.

2) Conduct a Line-of-Business analysis. Similarly, is

your book of business ideally balanced in terms of

lines of business? Will an extended COVID-19

recovery impact your agency’s largest lines of

business? Consider carefully how potential large-

scale market forces might affect your agency’s

performance and start thinking seriously about *includes persons with no previous work experience and persons whose last job was in the U.S.

Armed Forces

Source: Bureau of Labor Statistics; chart by Statista

4.86M

3.22M

2.55M

2.02M

1.99M

1.70M

1.53M

1.42M

3.21M

Leisure and hospitality

Wholesale and retail trade

Education and health services

Government workers

Manufacturing

Professional and business services

Construction

Other services

Other industries*

Industries Worst Affected by the COVID-19 Job Crisis

(Number of unemployed persons aged 16 and over in the U.S. in April 2020, by industry)

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how you can create plans today to mitigate the potential negative effects.

3) Consider account profitability. Do you know how much money you make on certain accounts, factoring in

producer splits, support payroll, and other selling and operating expenses? Review your accounts to determine

which are the most profitable based on size, business lines, etc. The results may surprise you. In a recent study

conducted by Reagan Consulting of 50 independent agents, we found that commercial lines margins were actually

higher for firms with smaller accounts, while there was an indistinguishable difference for employee benefits.

Information like this is invaluable in developing business strategies going forward.

4) Implement a CRM system. Are you tracking producer activity? Do you actively communicate with clients and

understand industry concentrations? Implement a new CRM system or effectively use your existing CRM system

to monitor your communication efforts and track progress. Over time, these efforts will pay huge dividends; you

will have real-time data on both producer and client needs and performance that you can use to manage future

growth more intelligently.

5) Create frequent client touchpoints. How often do you connect with your customers? How has client contact

suffered during COVID-19? Schedule periodic conversations/check-ins with your clients to touch base. Now, more

than ever, is the time to check in on your most valuable clients.

Focusing on your current account performance prepares you to weather the shifting economy. Armed with the in-depth

knowledge of where your agency is working, how it’s succeeding, and where potential risks or gaps exist, you will be able

to best navigate any continued changes with data-driven decisions that support your business. Knowing and actively

communicating with your clients builds and strengthens relationships, enabling future growth. As the pandemic continues,

this is a unique opportunity to reconnect with your business fundamentals – use the time wisely.

Without risk of hyperbole, the dynamic environment of mid-2020 is undoubtedly unprecedented. Between the COVID-19

pandemic and the associated derailing of the U.S. economy, the ongoing racial unrest triggered by the killing of George

Floyd by police in May 2020 and the upcoming Presidential election, it would be difficult to point to a more uncertain

moment in our lifetimes in which to conduct insurance agency business. To be up to the challenge, Best Practices Agencies

must rethink the future, in both the near-term and the long-term.

In the near-term, the pandemic and social unrest are shining a white-hot spotlight on the November 3rd national elections,

as both political parties and presidential candidates (Donald Trump and Joe Biden) stand at different ends of the policy

spectrum. The winner will affect outcomes for people across all income levels, net worth, and economic segments. What

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will change as a result of the upcoming elections, and what strategies should Best Practices Agencies pursue today to best

prepare?

In our view, if Donald Trump is reelected, the current political environment will largely stay the same. If Joe Biden wins

and delivers Democrat majorities in the House and Senate, massive change is likely.

Based on current polling in battleground states, a Democrat sweep is a very real possibility. Given this, it is prudent to

think through the changes that would likely accompany a Biden victory for the industry and plan accordingly.

The Biden / Democrat platform calls for material changes to the tax landscape, including:

Consider, too, other changes that would likely accompany a Democrat sweep in November and how this might affect your

customers, specialty areas of focus and lines-of-business:

• More regulation on business. A less business-friendly environment

• Oil and Gas. A de-emphasis on oil and gas and more focus on renewable energy sources

• Health Insurance. Biden has not stated support for Medicare for All or a single-payer solution, but rather supports

making changes to Obamacare

• Trade. With Biden, we will likely see more certainty and less volatility as respects trade wars, tariffs, etc. (a less

confrontational approach than Trump)

• Climate Change. Federal lands may be closed, carbon taxes are likely, no new pipelines

• Market Stability. Some pundits suggest that a Biden presidency will bring some level of calm and predictability to

the stock market, even in light of the above

So, how might all this affect insurance agents and brokers? The impact would likely be felt in several specific areas,

including:

Increase in Personal Income Tax Rates

•High wage-earners would be taxed at 39.6%, rather than the current 37%, with capped and potentially eliminated deductions.

Increase in Capital Gains & Dividends Tax Rates

•Rates will increase from the current 20% base to as much as 39.6% for high wage-earners.

Elimination of the “Step-Up” Basis in

Estate Taxes

•At the death and transfer of the estate, there will likely be a shift from zero taxes on the transfer to a charge of 39.6% capital gains rates on the assets in the estate regardless of whether assets are sold.

Rise in Corporate Taxes

•In 2017, C-corp taxes dropped from 35% to 21%. Biden is discussing raising them to 28%, but some suggest the tax rate will be raised 1% per year to moderate the impact on earnings. The 2017 tax benefits given to pass-through entities will likely be reduced or eliminated as well.

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1) A reduction in after-tax earnings and valuation multiples. The rise in corporate tax rates will reduce the net after-

tax earnings of all C-corporations. Similarly, the after-tax earnings of pass-through entities are also likely to

decline. Reduced after-tax earnings will translate into lower valuations, both internally (appraised valuations) and

externally (third-party valuations).

2) Changes in the M&A market. For sellers, valuations and after-tax proceeds are likely to suffer. The capital gains

rate changes alone would effectively double the tax burden for sellers. Given this massive change, mergers and

tax-free transfers of stock will likely become more popular and many potential sellers may race to close deals prior

to 2021 to avoid the materially punitive effects of a Biden presidency.

3) Transfer of net worth. Changes in estate taxation may likewise cause some agency owners to rush to transfer

generational wealth in advance of a potential Biden win.

4) Agency growth. Reduced earnings will place necessary agency growth investments under pressure. To the extent

that these changes negatively impact growth, we will likely see agents and brokers’ valuations moderate.

5) Increased value of insurance agencies navigating healthcare. A single payer health insurance system (i.e.,

Medicare for all) seems increasingly unlikely in the near-to-mid-term. A survival of Obamacare could offer short-

term or even long-term benefits to agents writing this business, as insureds will continue to need help navigating

the incredibly complicated health insurance landscape, making agents and brokers even more valuable.

Keep these changes in perspective. If, in fact, Biden wins and policy shifts occur, all businesses will be affected and

insurance agents and brokers are particularly well-positioned to deal with these changes. As was evidenced in the

economic crash of 2008-2010 and demonstrated by the current COVID-19 pandemic, insurance agencies are resilient

businesses and will continue to be incredibly important players in the U.S. economy for the foreseeable future.

In the long-term, Best Practices Agencies must be able to adapt to the post-2020 world in which they will find themselves.

What will change? What will stay the same?

While nobody knows whether the dangers of the virus will be short-lived (if a vaccine is developed) or whether they will

linger for years, below are some observations about what the future holds for the insurance industry.

Changes triggered or accelerated by COVID-19 include:

• Scale matters more than ever. Economists observed that COVID-19’s impact has been much tougher on small

businesses than large ones. This is in part because many small businesses lack the resources and access to capital

enjoyed by their larger competitors. In the insurance brokerage business, scale brings several advantages including

more lucrative carrier contracts and the ability to effectively specialize in particular industries or insurance

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coverages, such as D&O or cyber. As the brokerage landscape evolves and the number of brokers with a billion or

more in annual revenue increases, local agencies will continue to feel the squeeze.

• Use of data, technology, and artificial intelligence will accelerate. As COVID-19 intensifies economic pressures in

our economy, agents and brokers will more aggressively seek to deploy technology as a way to improve client

offerings, while also enhancing efficiency and driving down costs.

• The need for visionary leadership will intensify. The insurance brokerage industry has historically been a steady,

slow-growth business without significant change year-to-year. Thus, the leadership demands for many agencies

have been modest and not demanding a great deal of time or vision. This is clearly changing. In the COVID-19 era,

agency leaders are facing a plethora of urgent decisions across all fronts. Issues such as remote-work, technology

disruption, clients’ evolving needs, and diversity in the workplace are all clamoring for a greater share of agency

leaders’ attention. While some love the challenge, others are wondering if this is what they signed up for!

Trying to predict a five or ten-year future is harder than ever given the extraordinarily rapid pace of change. We are

confident, however, that certain elements of the insurance brokerage business won’t change over the coming decade.

When planning for the future, it is important to consider these unchanging factors as well.

• Relationships will drive business. Insurance brokerage will still require finding the right balance between

relationships and resources. When the Best Practices Study was launched in 1993, the top agencies were those

that developed strong personal relationships with clients, while delivering the resources necessary to help clients

succeed. Twenty-seven years later, these same elements are true, but have evolved. Agencies had to work

extremely hard to maintain their competitiveness during an arms-race of client resources. The balance between

relationships and resources has clearly shifted in favor of resources. One needs to look no further than employee

benefits business to see how fundamentally the broker’s role has transformed.

Yet relationships still matter, and they will continue to do so. Although the back-slapping producer has been

replaced by a knowledgeable, resourced “consultant,” clients still want a real human they trust and relate to. That

is unlikely to change. In the post mortems of their failed business plans, several insurtech leaders have lamented

that they didn’t properly grasp how important a human relationship is to the insurance client.

• Clients, employees, carriers, and communities will remain the four

key pillars of any great insurance broker. Effectively balancing the

interests and needs of these four constituencies is the best way for

agents and brokers to plan for a prosperous future.

When facing a major decision, the best agencies ask, “How will this

decision affect our ability to serve our clients, employees, carriers

and communities?” In a complex and rapidly changing landscape,

this question can serve as a beacon in guiding a firm toward

effective outcomes.

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• Growth will determine value. The old saying, “If you’re not growing, you’re dying,” has never been truer – and

will only become even more so. As the competitive dynamics of our industry intensify, growth will be more

challenging, requiring thoughtful vision and strategy, consistent investment, and business discipline. While this

may be bad news to some, the good news is that the rewards for growth will increase as well with a greater value

differentiation between slow-growth and high-growth firms.

While these are harrowing times with unprecedented challenges, there are also unprecedented opportunities for agency

leaders to make a strong and lasting contribution to clients, employees, carriers, and communities. The insurance industry

has shown remarkable resiliency in the past and we are confident that our industry – led by the Best Practices Agencies –

will thrive in the years to come.

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Regional Distribution

◼ Northeast 11.1%

◼ Midwest 29.6%

◼ West 7.4%

◼ Southeast 40.7%

◼ Southwest 11.1%

Corporate Structure

Average Revenues

Weighted Average Shareholder Age (WASA)

Revenue Distribution (as a % of Gross Revenue)

Organic Growth in Net Commissions & Fees (excluding contingents, bonuses & overrides)

Account Stratification

◼ < $5K 57.0% ◼ Under 50 lives 88.0%

◼ $5K to $10K 14.7% ◼ From 50 to 100 lives 6.0%

◼ $10K to $25K 14.2% ◼ Over 100 lives 6.0%

◼ $25K to $50K 6.8%

◼ > $50K 7.2%

Notes

C Corp4.2%

S Corp

70.8%

LLC20.8%

Other4.2%

Commercial P&C

38.5%

Personal P&C

50.0%

Group L/H/F4.5%

Contingent/ Bonus/ Overrides

6.2%

Other0.8%

7.1%4.7%

7.4%10.3%

23.6%

10.3%

20.2%

34.9%

TotalAgency

CommercialP&C

PersonalP&C

Group L/H/F

Median Top Quartile

Commercial P&C Group L/H/F • The smallest agency revenue category continues to struggle to make significant headway with large Group L/H/F accounts. 88% of the Group L/H/F book for agencies under $1.25 million was represented by accounts under 50 lives.

• On a positive note, agencies under $1.25 million achieved the fastest growth rate (10.3%) in its Group L/H/F book across all Best Practices revenue categories.

Note: Commercial P&C includes Bonds / Surety. Group L/H/F includes Group Medical, All Other Group, and Individual L/H/F.

26

Definitions

Sales Velocity

Age Banding of Sales Velocity

Book of Business per Producer

(commissions and fees)

New Business

Average Book

Commercial P&C

$39,568

$232,708

Personal P&C

$29,930

$143,019

Life/Health/ Financial

$35,641

$162,618

Multi- Line

$49,619

$469,579

Book of Business by Age

Notes & Definitions

Effective NUPP

Group Average:

13.2%

22.0%

Average

TopQuartile

4.1%

2.4%

3.9%

2.8%

Comparison Group Average

Over age 55

Age 46-55

Age 36-45

Up to age 35

Up to age 3514.8%

Age 36-45

22.1%

Age 46-55

39.7%

Over age 5523.4%

• Effective NUPP, which is the product of an agency’s investment in unvalidated producers (NUPP) and success rate in hiring producers (Producer Success Rate), is expressed as a percentage of net revenue. It is the best overall measure of an agency’s effectiveness in recruiting and developing sales talent.

• Investment in young talent pays dividends. Over 30% of Sales Velocity for Best Practices Agencies under $1.25 million was generated by producers under age 35, the largest freshman class contribution to Sales Velocity across all revenue categories.

• New business contributions for validated producers were consistent across all lines of business – no one line of business significantly outpaced the others.

• Sales Velocity is a critical metric in determining organic growth. It is defined as this year’s written new business divided by last year’s commissions and fees.

• Age Banding of Sales Velocity can help a firm assess where new business and growth are coming from and prepare for perpetuation.

27

Profitability

Employee Productivity

Pro Forma Metrics:

Average

Top Quartile

# of Employees

7.7

Revenue per Employee

$128,003 $183,707

Compensation per Employee

$58,307 $29,579

Spread per Employee

$69,696 $119,789

Rule of 20 Score

Notes

Organic Growth & Profitability Scatter Plot

Note: Firms identified as outliers have been set to have a maximum growth of 30% or a maximum profitability of 50%. They appear on the graph line bordering the chart instead of plotting their actual results.

19.7%

31.9%33.8%

51.3%

Pro Forma OperatingProfit

Pro FormaEBITDA

Comparison Group Average Top Quartile

23.9

38.9

Average Top Quartile

• The Rule of 20 measures an agency's shareholder returns. It is calculated by adding 50% of an agency's Pro Forma EBITDA margin to its organic commission & fee growth rate. An outcome of 20 or higher means an agency is likely generating, through profit distributions and / or share price appreciation, a shareholder return of approximately 15% - 17%, a typical agency / brokerage return under normal market conditions.

• The graph to the right provides a look at the Rule of 20 results for agencies in this revenue category. The solid black line represents all combinations of organic growth and EBITDA margin that result in a Rule of 20 score of 20.

29


◼ Northeast 10.0%

◼ Midwest 30.0%

◼ West 10.0%

◼ Southeast 43.3%

◼ Southwest 6.7%

Corporate Structure

Average Revenues





◼ < $5K 45.0% ◼ Under 50 lives 83.1%


◼ $10K to $25K 19.2% ◼ Over 100 lives 4.4%

◼ $25K to $50K 10.1%

◼ > $50K 7.6%

Notes

C Corp

27.6%

S Corp

48.3%

LLC24.1%

Commercial P&C

48.9%

Personal P&C

35.0%

Group L/H/F7.6%


7.9%

Other0.6%

8.1%5.8% 5.4%

7.0%

24.9%

29.4%

21.0% 21.0%

TotalAgency

CommercialP&C

PersonalP&C

Group L/H/F

Median Top Quartile

Commercial P&C Group L/H/F • The $1.25 - $2.5 million Best Practices group had the second lowest WASA of any size category (52.5 years).

• At 8.1%, total agency organic growth for the $1.25 - $2.5 million group is the highest growth achieved by any revenue category in this year’s Study.

• The Top Quartile growth of 24.9% was the highest of any revenue category.


30

Definitions

Sales Velocity




New Business

Average Book

Commercial P&C

$75,805

$363,563

Personal P&C

$28,647

$118,854


$28,072

$152,101

Multi- Line

$53,881

$551,106


Notes & Definitions

• Weighted average producer age

(WAPA) is 46.

Effective NUPP

Group Average:

17.9%

32.0%

Average

TopQuartile

4.4%

5.1%

2.5%

6.0%


Over age 55

Age 46-55

Age 36-45

Up to age 35

Up to age 3519.5%

Age 36-45

27.5%Age 46-

5514.6%

Over age 5538.5%

• Effective NUPP, which is the product of an agency’s investment in unvalidated producers (NUPP) and success rate in hiring producers (Producer Success Rate), is expressed as a percentage of net revenue. It is the best overall measure of an agency’s effectiveness in recruiting and developing sales talent. This group’s Effective NUPP totaled 0.7, the lowest NUPP of all the Study groups.

• BPS agencies in the $1.25 - $2.5 million revenue category posted the highest Sales Velocity (17.9%) of all the 2020 Best Practices Study revenue categories.

• This revenue category’s senior class (the “Over age 55” producer group) had the largest contribution to Sales Velocity in this year’s Study, an indication that additional investments in new producers may be needed.



31

Profitability


Pro Forma Metrics:

Average

Top Quartile

# of Employees

14.9


$161,634 $273,627


$80,353 $53,638

Spread per Employee

$81,281 $169,311

Rule of 20 Score

Notes



25.9% 26.4%

44.0% 45.1%


Pro FormaEBITDA


22.6

38.6




33


◼ Northeast 19.5%

◼ Midwest 14.6%

◼ West 14.6%

◼ Southeast 31.8%

◼ Southwest 19.5%

Corporate Structure

Average Revenues





◼ < $5K 35.6% ◼ Under 50 lives 62.3%


◼ $10K to $25K 19.3% ◼ Over 100 lives 20.5%

◼ $25K to $50K 13.2%

◼ > $50K 16.8%

Notes

C Corp

18.4%

S Corp

60.5%

LLC21.1%

Commercial P&C

60.8%

Personal P&C

23.6%

Group L/H/F5.2%


9.4%

Other1.0%

7.4% 7.5%5.3%

-1.2%

17.0% 17.9% 18.3%

25.3%

TotalAgency

CommercialP&C

PersonalP&C

Group L/H/F

Median Top Quartile

Commercial P&C Group L/H/F• Agencies in the $2.5 – 5.0 million revenue

category had the second highest WASA in the Study (55).

• This was only revenue category in this year’s Study that exhibited negative growth (-1.2%) in Group L/H/F.

• Agencies in this revenue category generated the second-highest commercial lines organic growth rate (7.5%) across all revenue categories in the 2020 Best Practices Study.


34

Definitions

Sales Velocity




New Business

Average Book

Commercial P&C

$84,811

$646,620

Personal P&C

$60,024

$270,105


$116,330

$297,837

Multi- Line

$57,113

$575,894


Notes & Definitions


(WAPA) is 46.

Effective NUPP

Group Average:

13.8%

20.2%

Average

Top Quartile

3.8%

3.1%

4.1%

2.7%


Over age 55

Age 46-55

Age 36-45

Up to age 35

Up to age 3514.0%

Age 36-45

17.0%

Age 46-55

34.5%

Over age 5534.5%


• Agencies in the $2.5 – 5.0 million revenue category had the highest producer success rate among all revenue categories in the Study at 73%.

• Life/Health/Financial producers generated the most significant new business (an average of $116,330) among all lines of business.



35

Profitability


Pro Forma Metrics:

Average

Top Quartile

# of Employees

21.1


$193,578 $280,343


$107,318 $72,359

Spread per Employee

$86,260 $144,867

Rule of 20 Score

Notes



17.1%

27.2%31.6%

40.8%


Pro FormaEBITDA


22.2

34.3




37


◼ Northeast 18.6%

◼ Midwest 16.3%

◼ West 14.0%

◼ Southeast 34.9%

◼ Southwest 16.3%

Corporate Structure

Average Revenues





◼ < $5K 29.5% ◼ Under 50 lives 49.2%


◼ $10K to $25K 19.3% ◼ Over 100 lives 30.7%

◼ $25K to $50K 14.4%

◼ > $50K 23.2%

Notes

C Corp

11.9%

S Corp

52.4%

Partner-ship9.5%

LLC26.2%

Commercial P&C

56.8%Personal P&C

19.6%

Group L/H/F13.6%


9.1%

Other0.9%

6.2%

9.3%

2.0%4.4%

18.1%

22.7%

17.7%

27.6%

TotalAgency

CommercialP&C

PersonalP&C

Group L/H/F

Median Top Quartile

Commercial P&C Group L/H/F • Agencies in the $5.0 – 10.0 million revenue category had the highest commercial lines organic growth rate of all revenue categories in the Study at 9.3%.

• Agencies in this revenue category also had the lowest personal lines organic growth rate (2.0%) across all revenue categories in this year’s Best Practices Study.


38

Definitions

Sales Velocity




New Business

Average Book

Commercial P&C

$72,402

$631,075

Personal P&C

$49,550

$302,344


$78,328

$504,025

Multi- Line

$66,742

$558,224


Notes & Definitions


(WAPA) is 46.

Effective NUPP

Group Average:

13.2%

19.6%

Average

TopQuartile

3.3%

4.4%

2.2%

3.3%


Over age 55

Age 46-55

Age 36-45

Up to age 35

Up to age 3515.5%

Age 36-45

30.8%

Age 46-55

19.7%

Over age 5534.0%


• Agencies in this revenue category are tied for last place with 3 other agency revenue categories in Sales Velocity (13.2%).

• Agencies in this revenue category continue to make investment in young producer talent - they had the second highest NUPP investment (1.6%) in the Study and were tied for 1st place in Effective NUPP (0.9%).



39

Profitability


Pro Forma Metrics:

Average

Top Quartile

# of Employees

40.3


$192,750 $249,533


$111,195 $81,677

Spread per Employee

$81,555 $119,240

Rule of 20 Score

Notes



15.7%

25.8%27.9%

38.8%


Pro FormaEBITDA


20.4

32.2




41


◼ Northeast 16.7%

◼ Midwest 8.3%

◼ West 11.1%

◼ Southeast 36.1%

◼ Southwest 27.8%

Corporate Structure

Average Revenues





◼ < $5K 23.8% ◼ Under 50 lives 33.9%


◼ $10K to $25K 18.2% ◼ Over 100 lives 44.7%

◼ $25K to $50K 14.7%

◼ > $50K 31.3%

Notes

C Corp

27.8%

S Corp

52.8%

Partner-ship5.6%

LLC13.9%

Commercial P&C

50.5%

Personal P&C

17.4%

Group L/H/F22.8%


8.0%

Other1.3%

5.8% 6.6%4.6%

7.5%

16.8%15.6%

13.2%

22.6%

TotalAgency

CommercialP&C

PersonalP&C

Group L/H/F

Median Top Quartile

Commercial P&C Group L/H/F • Total organic growth for agencies in the $10.0 – 25.0 million revenue category was the lowest among all size categories in the Study at 5.8%.

• Agencies in this group had the second-highest growth rate in Group L/H/F at 7.5%.

• This revenue category is the first in this year’s Study in which the largest concentration of Group L/H/F business is in the “over 100 lives” account size bucket (44.7%).


42

Definitions

Sales Velocity




New Business

Average Book

Commercial P&C

$93,252

$848,384

Personal P&C

$55,545

$355,682


$93,314

$852,896

Multi- Line

$124,448

$998,513


Notes & Definitions


(WAPA) is 46.

Effective NUPP

Group Average:

13.2%

20.6%

Average

TopQuartile

2.0%

4.4%

3.4%

3.3%


Over age 55

Age 46-55

Age 36-45

Up to age 35

Up to age 358.3%

Age 36-45

27.1%

Age 46-55

28.3%

Over age 5536.3%


• This revenue group’s freshman class (producers under age 35) contributed the least to Sales Velocity (15%) of all the revenue categories.

• Commercial P&C and L/H/F producers in this revenue category generated effectively the same new business results ($93,252 and $93,314, respectively).

• Agencies in this revenue category are investing heavily in young producers, as they have the highest NUPP (1.7%) in the Study.



43

Profitability


Pro Forma Metrics:

Average

Top Quartile

# of Employees

78.5


$205,222 $283,259


$126,478 $91,411

Spread per Employee

$78,744 $116,932

Rule of 20 Score

Notes



14.8%

22.7%25.3%

32.6%


Pro FormaEBITDA


18.4

29.6




45


◼ Northeast 22.7%

◼ Midwest 31.8%

◼ West 18.2%

◼ Southeast 22.7%

◼ Southwest 4.5%

Corporate Structure

Average Revenues





◼ < $5K 14.4% ◼ Under 50 lives 22.5%


◼ $10K to $25K 15.6% ◼ Over 100 lives 58.5%

◼ $25K to $50K 14.9%

◼ > $50K 46.8%

Notes

C Corp

31.8%

S Corp

50.0%

Partner-ship0.0%

LLC13.6%

Other4.5%

Commercial P&C

54.6%Personal P&C8.3%

Group L/H/F27.5%


8.3%

Other1.3%

7.0% 6.6% 6.0% 6.0%

17.3%19.2%

21.1%

16.3%

TotalAgency

CommercialP&C

PersonalP&C

Group L/H/F

Median Top Quartile

Commercial P&C Group L/H/F• As expected, this revenue category’s

concentration in large accounts in both P&C (46.8% of accounts > $50K) and Group L/H/F (58.5% of accounts over 100 lives) is the highest in the BPS.

• Agencies in this revenue category have the highest WASA (55.3) in the BPS, an indication that additional investments in perpetuation readiness may be warranted.

• Organic growth in all three business segments (CL, PL, and Group L/H/F) were virtually identical


46

Definitions

Sales Velocity




New Business

Average Book

Commercial P&C

$160,746

$1,175,070

Personal P&C

$95,593

$493,740


$186,542

$1,124,066

Multi- Line

$54,590

$995,815


Notes & Definitions


(WAPA) is 46.

Effective NUPP

Group Average:

15.5%

23.4%

Average

TopQuartile

2.4%

4.6%

5.2%

3.3%


Over age 55

Age 46-55

Age 36-45

Up to age 35

Up to age 359.9%

Age 36-45

24.3%

Age 46-55

35.5%

Over age 5530.4%


• This revenue category’s new business production was the second highest in the BPS, with a average Sales Velocity of 15.5%

• Among all revenue groups, producers in this revenue category delivered the highest new business contributions in CL, PL and L/H/F.

• Books of business controlled by the senior class (producers over 55) are the second lowest in the BPS (30.4%).



47

Profitability


Pro Forma Metrics:

Average

Top Quartile

# of Employees

262.0


$222,266 $272,352


$143,307 $112,970

Spread per Employee

$78,959 $104,245

Rule of 20 Score

Notes



10.8%

19.3%21.1%

28.9%


Pro FormaEBITDA


18.2

26.7




49

<$1.25M $1.25-$2.5M $2.5-$5M $5-$10M $10-$25M >$25M

Average Revenues $873,685 $2,016,287 $3,791,207 $7,456,227 $15,507,840 $56,669,157

2019 BPS Average Revenues $906,261 $1,956,918 $3,603,247 $7,379,660 $16,403,196 $59,415,518


Northeast 11.1% 10.0% 19.5% 18.6% 16.7% 22.7%

Midwest 29.6% 30.0% 14.6% 16.3% 8.3% 31.8%

West 7.4% 10.0% 14.6% 14.0% 11.1% 18.2%

Southeast 40.7% 43.3% 31.8% 34.9% 36.1% 22.7%

Southwest 11.1% 6.7% 19.5% 16.3% 27.8% 4.5%

Corporate Structure

C Corp 4.2% 27.6% 18.4% 11.9% 27.8% 31.8%

S Corp 70.8% 48.3% 60.5% 52.4% 52.8% 50.0%

Partnership 0.0% 0.0% 0.0% 9.5% 5.6% 0.0%

LLC 20.8% 24.1% 21.1% 26.2% 13.9% 13.6%

Sole Proprietorship 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Other 4.2% 0.0% 0.0% 0.0% 0.0% 4.5%

Population Density:

Less than 50,000 52.0% 39.3% 42.1% 36.6% 22.2% 11.9%

50,000 - 250,000 20.0% 35.7% 21.1% 24.4% 11.1% 23.8%

250,000 - 1,000,000 12.0% 7.1% 13.2% 17.1% 27.8% 33.3%

More than 1,000,000 16.0% 17.9% 23.7% 22.0% 38.9% 31.0%

Average Number of Agency Locations 1.3 1.8 1.7 2.5 3.7 9.1

Number of Shareholders:

Low 1.0 1.0 1.0 1.0 1.0 1.0

Average 1.9 1.9 2.9 4.6 8.5 43.3

High 9.0 5.0 7.0 33.0 27.0 427.0

Profile of Largest Shareholder:

Average Age of Largest Shareholder:

Low 31.0 35.0 31.0 33.0 39.0 45.0

Average 52.7 52.9 57.8 56.7 60.4 59.8

High 79.0 68.0 71.0 76.0 79.0 81.0

Average Ownership of Largest SH:

Low 14.0% 31.3% 25.7% 14.0% 13.1% 2.4%

Average 80.2% 75.9% 66.0% 62.8% 48.3% 33.1%

High 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

What percentage of firms have an

ESOP? 0.0% 0.0% 0.0% 0.0% 13.9% 27.3%

AGENCIES WITH REVENUES OF:

50

<$1.25M $1.25-$2.5M $2.5-$5M $5-$10M $10-$25M >$25MRevenue by Source (as % of Gross Revenues):

Property & Casualty:

Commercial Commissions & Fees 38.2% 48.3% 56.4% 53.6% 49.0% 51.7%

Bonds / Surety 0.3% 0.6% 4.4% 3.2% 1.5% 2.9%

Personal Commissions & Fees 50.0% 35.0% 23.6% 19.6% 17.4% 8.3%

Contingent / Bonus 6.2% 7.4% 9.3% 9.1% 6.7% 6.6%

Total P&C 94.7% 91.2% 93.8% 85.5% 74.6% 69.5%

Life & Health / Financial:

Group Medical Comm & Fees 2.0% 4.6% 3.6% 9.3% 14.9% 18.7%

All Other Group Comm & Fees 0.2% 0.5% 0.4% 2.6% 7.1% 7.6%

Individual L/H/F Comm & Fees 2.3% 2.5% 1.1% 1.2% 0.8% 1.3%

Bonus / Overrides 0.0% 0.5% 0.1% 0.5% 1.3% 1.7%

Total L&H / Financial 4.5% 8.1% 5.2% 13.6% 24.1% 29.2%

Investment 0.2% 0.5% 0.5% 0.6% 0.6% 0.9%

Miscellaneous 0.5% 0.2% 0.5% 0.3% 0.7% 0.4%

Gross Revenues 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Brokerage Comm Expense 0.0% 1.4% 0.1% 1.0% 1.2% 1.4%

Net Revenues 100.0% 98.6% 99.9% 99.0% 98.8% 98.6%

All Other Group L/H/F Revenue:

Life 45.4% 35.3% 40.3% 25.6% 21.3% 16.5%

Disability 5.7% 23.6% 17.7% 14.5% 15.3% 20.4%

Dental & Vision 29.8% 23.6% 27.9% 31.9% 35.4% 24.2%

Retirement/Pension 0.0% 0.2% 0.4% 1.0% 2.4% 6.0%

Worksite/Voluntary/Supplement 4.6% 6.0% 3.9% 12.7% 10.0% 11.9%

Long Term Care 0.1% 2.3% 0.5% 2.9% 1.4% 1.1%

Employee Benefits TPA 0.0% 5.8% 0.0% 1.4% 2.8% 2.6%

All Other 14.3% 3.2% 9.4% 9.9% 11.4% 17.2%

Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

This is a breakdown of commissions and fees listed under "All Other Group Life, Health, and Financial" revenues.


52.754.0 54.3 54.1

53.154.0

50.0

52.0

53.8 54.3 54.1 54.2

52.1 52.5

55.0

53.254.1

55.3

< $1.25M $1.25M-$2.5M $2.5M-$5.0M $5.0M-$10.0M $10.0M-$25.0M > $25.0M

2018 BPS 2019 BPS 2020 BPS

51

<$1.25M $1.25-$2.5M $2.5-$5M $5-$10M $10-$25M >$25M

% of agencies making acquisitions in

the last fiscal year:3.7% 10.0% 17.1% 7.0% 22.2% 38.6%

Average annualized commissions

acquired:$110,000 $278,459 $293,091 $1,120,060 $1,339,600 $1,545,713


3.4%

12.9%

4.8%

15.6%

27.0% 25.6%

8.1% 10.3% 12.5% 12.8%

31.8%37.2%

3.7%10.0%

17.1%

7.0%

22.2%

38.6%

< $1.25M $1.25M-$2.5M $2.5M-$5.0M $5.0M-$10.0M $10.0M-$25.0M > $25.0M

2018 BPS 2019 BPS 2020 BPS

0.3% 0.2% 0.6% 0.4% 0.2% 0.5%4.1% 3.2% 3.8% 3.4% 3.5% 2.2%

20.0%

11.5% 12.0% 13.6% 15.5%11.0%

< $1.25M $1.25M-$2.5M $2.5M-$5.0M $5.0M-$10.0M $10.0M-$25.0M > $25.0M

Low Average High

1.4% 1.7% 1.5% 2.4% 1.0% 3.0%12.8% 13.8% 15.7% 15.1% 14.3% 12.3%

55.2%

40.8% 36.0% 38.9% 37.0%

66.0%

< $1.25M $1.25M-$2.5M $2.5M-$5.0M $5.0M-$10.0M $10.0M-$25.0M > $25.0M

Low Average High

52

Account Size: <$1.25M $1.25-$2.5M $2.5-$5M $5-$10M $10-$25M >$25M

Commercial P&C*as measured by commissions and fees

Greater than $50,000

% of Book 7.2% 7.6% 16.8% 23.2% 31.3% 46.8%

# of Accounts * 1.4 5.6 10.9 26.8 117.1

Total Revenue * $87,410 $431,906 $1,082,742 $2,894,494 $16,466,113

Revenue per Account * $80,028 $84,619 $93,622 $104,362 $131,902

Between $25,000 and $50,000

% of Book 6.8% 10.1% 13.2% 14.4% 14.7% 14.9%

# of Accounts 2.5 3.4 9.6 19.5 37.6 123.0

Total Revenue $30,966 $96,434 $315,320 $670,475 $1,316,319 $4,277,541

Revenue per Account $27,125 $31,858 $33,815 $34,249 $34,778 $35,014

Between $10,000 & $25,000

% of Book 14.2% 19.2% 19.3% 19.3% 18.2% 15.6%

# of Accounts 9.5 17.3 36.4 58.0 99.5 270.7

Total Revenue $47,575 $195,015 $447,733 $886,703 $1,545,288 $4,259,900


Between $5,000 & $10,000

% of Book 14.7% 18.0% 15.2% 13.5% 11.9% 8.3%

# of Accounts 16.4 42.5 59.4 87.2 133.9 305.7

Total Revenue $50,721 $167,805 $339,172 $604,876 $946,906 $2,179,831


Less than $5,000

% of Book 57.0% 45.0% 35.6% 29.5% 23.8% 14.4%

# of Accounts 292.5 851.3 1,375.0 1,622.2 2,129.1 5,003.1

Total Revenue $162,101 $462,969 $690,741 $1,281,829 $1,743,684 $3,672,353

Revenue per Account $652 $665 $927 $998 $913 $961

Group L/H/F*as measured by number of lives

Over 100 Lives

% of Book 6.0% 4.4% 20.5% 30.7% 44.7% 58.5%

# of Accounts * 0.5 1.8 11.1 26.7 137.4

Total Revenue * $13,149 $73,695 $514,283 $1,913,223 $9,805,596

Revenue per Account * $5,236 $25,714 $38,390 $70,759 $67,175

50-100 Lives

% of Book 6.0% 12.5% 17.2% 20.1% 20.1% 18.5%

# of Accounts 0.2 1.6 4.3 13.1 27.3 98.2

Total Revenue $2,598 $25,568 $55,561 $240,740 $597,079 $2,169,234


Under 50 Lives

% of Book 88.0% 83.1% 62.3% 49.2% 33.9% 22.5%

# of Accounts 9.0 64.3 173.9 132.6 289.6 957.4

Total Revenue $17,795 $118,004 $130,236 $446,612 $875,421 $2,454,727



*Insufficient Data Note: Comparison Group Averages are based on the average for each individual line item and therefore may not validate when attempting to replicate calculations.

53

<$1.25M $1.25-$2.5M $2.5-$5M $5-$10M $10-$25M >$25M

% of Agencies with Specialty Rev 40.7% 53.3% 65.9% 67.4% 63.9% 81.8%

Average Total Specialty Revenue1 $313,153 $622,751 $1,837,004 $2,993,061 $4,937,561 $29,500,089

Average % Net Revenue1 34.9% 32.0% 47.0% 39.3% 29.4% 42.2%1 Only for those firms who reported speciality revenues

Specialty Revenues:

% of Comparison Group with this Specialty:

Agriculture 7.4% 13.3% 7.3% 18.6% 5.6% 29.5%

Construction 18.5% 26.7% 34.1% 39.5% 27.8% 63.6%

Energy 3.7% 3.3% 14.6% 16.3% 5.6% 29.5%

Government/ Municipality 11.1% 10.0% 9.8% 23.3% 13.9% 40.9%

Healthcare 11.1% 6.7% 22.0% 23.3% 11.1% 52.3%

Hospitality 7.4% 10.0% 7.3% 16.3% 8.3% 34.1%

Manufacturing 3.7% 10.0% 12.2% 25.6% 5.6% 47.7%

Non-profits * 10.0% 12.2% 27.9% 8.3% 25.0%

Real Estate 7.4% 13.3% 19.5% 25.6% 22.2% 47.7%

Schools/ Education 7.4% 3.3% 12.2% 25.6% 13.9% 43.2%

Transportation 7.4% 3.3% 9.8% 16.3% 8.3% 45.5%

Other 7.4% 20.0% 34.1% 34.9% 41.7% 63.6%

For firms that specialize in this, what

% of NR is from this specialty?

Agriculture 26.9% 25.0% 4.6% 4.8% 0.8% 2.5%

Construction 16.4% 17.0% 32.0% 21.4% 18.7% 10.4%

Energy 2.5% 23.1% 15.6% 3.7% 7.4% 3.5%

Government/ Municipality 7.8% 4.3% 27.1% 5.8% 2.0% 3.2%

Healthcare 3.6% 3.8% 13.7% 4.1% 7.5% 5.8%

Hospitality 8.6% 6.8% 2.7% 5.0% 10.2% 2.9%

Manufacturing 4.1% 9.1% 3.0% 5.6% 5.0% 9.6%

Non-profits * 10.8% 3.1% 11.3% 7.6% 2.6%

Real Estate 9.3% 7.0% 13.3% 15.2% 11.4% 5.7%

Schools/ Education 28.0% 2.3% 4.3% 2.7% 19.7% 4.1%

Transportation 6.1% 1.2% 2.5% 2.9% 7.3% 5.3%

Other 51.7% 20.2% 21.8% 10.9% 10.6% 13.5%


*Insufficient Data

31.0% 32.3%

47.6%53.3% 56.8%

73.7%

45.9% 46.2%

62.5% 59.6%

68.2%

86.0%

40.7%

53.3%

65.9% 67.4% 63.9%

81.8%

< $1.25M $1.25M-$2.5M $2.5M-$5.0M $5.0M-$10.0M $10.0M-$25.0M > $25.0M

2018 BPS 2019 BPS 2020 BPS

54

<$1.25M $1.25-$2.5M $2.5-$5M $5-$10M $10-$25M >$25MRevenue Growth by Source:

TOTAL COMMISSIONS & FEES

Renewal Business 93.5% 91.6% 93.5% 93.5% 93.0% 91.7%

New Business 11.1% 15.1% 13.1% 12.6% 12.2% 13.7%

Acquired Business 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Total Growth 7.5% 6.7% 6.7% 6.2% 7.4% 8.7%

Organic Growth 7.1% 8.1% 7.4% 6.2% 7.2% 7.0%

Brokerage Commission Expense * -17.3% -0.5% 4.6% -2.6% 1.6%

Net Commissions and Fees

Total Growth 7.5% 6.7% 7.4% 6.2% 7.2% 8.6%

Organic Growth 7.1% 8.1% 7.4% 6.2% 5.8% 7.0%

2019 BPS Organic Growth 9.6% 7.9% 7.9% 7.5% 7.1% 6.4%

P&C Contingent Income -0.8% 2.1% 5.9% 4.6% 8.0% 0.3%

L/H/F Bonus Income -35.6% -17.2% -12.3% -16.1% -3.2% 8.4%

Investment Income 13.4% -10.9% -0.3% 17.7% 9.1% 16.3%

Miscellaneous Income 0.0% 0.0% 0.0% 0.0% -32.3% -13.8%

NET REVENUE TOTAL GROWTH 8.5% 6.7% 7.9% 6.7% 6.8% 7.7%

NET REVENUE ORGANIC GROWTH 8.1% 9.6% 8.0% 6.7% 5.5% 6.8%

<$1.25M $1.25-$2.5M $2.5-$5M $5-$10M $10-$25M >$25MRenewal Business 103.6% 101.6% 100.4% 111.0% 100.5% 98.5%

New Business 22.0% 31.7% 20.2% 19.2% 20.5% 23.2%


Total Growth 23.6% 25.9% 20.3% 33.4% 24.5% 18.0%

Organic Growth 23.6% 26.1% 17.3% 18.6% 19.0% 17.8%

Brokerage Commission Expense * 6.5% 3.9% 57.9% 19.5% 34.0%

Net Commissions and Fees

Total Growth 23.6% 24.8% 20.0% 19.5% 17.2% 17.9%

Organic Growth 23.6% 24.9% 17.0% 18.1% 16.8% 17.3%

2019 BPS Organic Growth 26.2% 30.1% 19.2% 16.2% 15.1% 11.9%

P&C Contingent Income 43.5% 23.3% 33.1% 27.4% 38.9% 25.7%

L/H/F Bonus Income -35.6% 35.7% 28.1% 14.7% 24.7% 40.4%

Investment Income 19.3% 10.5% 33.3% 34.6% 34.1% 31.7%

Miscellaneous Income 4.8% 77.3% 109.1% 42.7% 81.6% 203.1%

NET REVENUE TOTAL GROWTH 23.4% 27.2% 21.2% 20.9% 21.4% 16.1%

NET REVENUE ORGANIC GROWTH 23.4% 26.5% 18.5% 19.7% 16.9% 15.6%

TOP QUARTILE AGENCIES WITH REVENUES OF:

AGENCIES WITH REVENUES OF:MEDIAN

*Insufficient Data

Note: The Median is the mid-point in a list of data – it is different than the Mean or Average. Median data cannot be added / subtracted to arrive at related Medians. Each data point presented above (Renewal Business %, New Business %, Total Growth %, Organic Growth %, etc.) must be viewed as a discrete Median data point.

55

4.6% 3.6% 5.5% 3.3% 5.6% 5.0%

9.6%7.9% 7.9% 7.5% 7.1%

6.4%7.1% 8.1%

7.4% 6.2% 5.8%7.0%

23.6% 24.9%

17.0% 18.1% 16.8% 17.3%

< $1.25M $1.25M-$2.5M $2.5M-$5.0M $5.0M-$10.0M $10.0M-$25.0M > $25.0M

2018 BPS Median 2019 BPS Median 2020 BPS Median 2020 BPS Top Quartile

3.7%5.8% 4.9% 3.5%

5.5% 6.8%11.5%

7.4% 7.7% 6.6% 6.8% 7.2%8.1% 9.6% 8.0% 6.7%5.5% 6.8%

23.4%26.5%

18.5% 19.7%16.9% 15.6%

< $1.25M $1.25M-$2.5M $2.5M-$5.0M $5.0M-$10.0M $10.0M-$25.0M > $25.0M

2018 BPS Median 2019 BPS Median 2020 BPS Median 2020 BPS Top Quartile

56

9.6%

7.9%7.9%

7.5%7.1%

6.4%

7.1%

8.1%

7.4%

6.2%5.8%

7.0%

< $1.25M $1.25M-$2.5M

$2.5M-$5.0M

$5.0M-$10.0M

$10.0M-$25.0M

> $25.0M

2019 2020

12.1%

9.6%

6.5% 6.6% 7.0%7.5%

4.7%

5.8%

7.5%

9.3%

6.6% 6.6%

< $1.25M $1.25M-$2.5M

$2.5M-$5.0M

$5.0M-$10.0M

$10.0M-$25.0M

> $25.0M

2019 2020

7.0%

6.4% 6.5%

5.2% 5.4%4.9%

7.4%

5.4% 5.3%

2.0%

4.6%

6.0%

< $1.25M $1.25M-$2.5M

$2.5M-$5.0M

$5.0M-$10.0M

$10.0M-$25.0M

> $25.0M

2019 2020

-2.4%

0.2%

9.2% 9.3%

7.6%7.1%

10.3%

7.0%

-1.2%

4.4%

7.5%6.0%

< $1.25M $1.25M-$2.5M

$2.5M-$5.0M

$5.0M-$10.0M

$10.0M-$25.0M

> $25.0M

2019 2020


57

<$1.25M $1.25-$2.5M $2.5-$5M $5-$10M $10-$25M >$25MREVENUE GROWTH BY LINE OF BUSINESS:

Commercial P&C


New Business 10.4% 15.7% 12.6% 11.1% 11.4% 13.6%


TOTAL GROWTH 4.4% 5.6% 7.1% 9.0% 6.0% 6.9%

ORGANIC GROWTH 4.3% 5.8% 8.4% 9.0% 5.8% 6.2%

Bonds/Surety

Renewal Business * * * 47.7% 32.7% 73.8%

New Business * * * 31.3% 13.9% 28.2%

Acquired Business * * * 0.0% 0.0% 0.0%

TOTAL GROWTH 0.0% -6.7% -0.5% 14.5% 3.3% 13.7%

ORGANIC GROWTH 0.0% -6.7% -0.5% 14.5% 3.3% 12.1%

Personal P&C


New Business 11.2.% 10.8% 9.6% 8.2% 8.1% 11.6%


TOTAL GROWTH 8.3% 5.6% 4.6% 2.0% 4.3% 6.1%

ORGANIC GROWTH 7.4% 5.4% 5.3% 2.0% 4.6% 6.0%

Group Medical


New Business * * * 9.8% 10.1% 11.2%


TOTAL GROWTH 2.0% 2.5% 2.2% 5.3% 6.8% 5.4%

ORGANIC GROWTH 2.0% 2.5% 4.0% 5.8% 6.8% 4.1%

All Other Group


New Business * * * 5.4% 11.9% 11.1%


TOTAL GROWTH 2.2% -7.7% -12.5% -3.4% 10.2% 8.1%

ORGANIC GROWTH 2.2% -7.7% -12.5% -1.9% 10.2% 7.4%

Individual L/H/F


New Business * * * 25.9% 33.8% 26.3%


TOTAL GROWTH 8.6% 4.5% 4.3% -2.8% 0.4% -7.8%

ORGANIC GROWTH 17.3% 4.5% 4.3% -2.8% -2.4% -7.8%

MEDIANAGENCIES WITH REVENUES OF:

*Insufficient Data

58

<$1.25M $1.25-$2.5M $2.5-$5M $5-$10M $10-$25M >$25MREVENUE GROWTH BY LINE OF BUSINESS:

Commercial P&C

Renewal Business * * 103.5% 117.7% 101.2% 100.7%

New Business * * 19.6% 19.5% 19.1% 26.0%

Acquired Business * * 3.3% 4.9% 21.9% 3.8%

TOTAL GROWTH 9.8% 28.8% 21.1% 22.4% 21.0% 23.6%

ORGANIC GROWTH 9.8% 28.9% 18.5% 22.4% 15.2% 19.4%

Bonds/Surety


New Business * * * 104.4% 137.0% 98.1%


TOTAL GROWTH 36.8% 34.3% 30.5% 49.7% 47.9% 50.7%

ORGANIC GROWTH 36.8% 34.3% 28.9% 49.7% 48.0% 47.6%

Personal P&C


New Business 33.6% 28.0% 21.0% 22.1% 16.8% 31.5%


TOTAL GROWTH 20.2% 19.2% 19.6% 17.7% 14.7% 23.4%

ORGANIC GROWTH 20.2% 21.0% 18.3% 17.7% 13.2% 21.1%

Group Medical


New Business * * * 88.9% 27.0% 31.2%


TOTAL GROWTH 12.7% 25.9% 24.0% 24.2% 19.3% 17.8%

ORGANIC GROWTH 12.7% 25.9% 26.2% 27.8% 18.7% 17.2%

All Other Group


New Business * * * 43.6% 43.3% 31.4%


TOTAL GROWTH 34.9% 1.5% 7.4% 26.2% 30.0% 23.1%

ORGANIC GROWTH 34.9% 1.5% 7.4% 28.0% 30.0% 23.8%

Individual L/H/F


New Business * * * 121.8% 295.4% 252.0%


TOTAL GROWTH 37.1% 34.2% 30.9% 32.7% 29.7% 32.7%

ORGANIC GROWTH 37.1% 34.2% 30.9% 32.7% 28.1% 30.9%

TOP QUARTILEAGENCIES WITH REVENUES OF:

*Insufficient Data

59

20.3% 18.8%

13.6%13.2% 14.8% 15.9%

13.2%17.9% 13.8% 13.2% 13.2%

15.5%

22.0%

32.0%

20.2% 19.6% 20.6%23.4%

< $1.25M $1.25M-$2.5M $2.5M-$5.0M $5.0M-$10.0M $10.0M-$25.0M > $25.0M

2019 BPS Average 2020 BPS Average 2020 BPS Top Quartile

4.1% 4.4% 3.8% 3.3%2.0% 2.4%

2.4%

5.1%

3.1% 4.4%

4.4%4.6%

3.9%

2.5%

4.1% 2.2%3.4%

5.2%

2.8%

6.0%

2.7%3.3% 3.3%

3.3%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

<$1.25M $1.25-$2.5M $2.5-$5M $5-$10M $10-$25M >$25M

Up to age 35 Age 36-45 Age 46-55 Over age 55

Sales Velocity is an excellent measure of an agency’s success in writing new business. It is calculated by dividing new

commission and fee income written by prior year commission and fee income.

The Age Banding of Sales Velocity takes it a step further by showing Sales Velocity contributions by different producer age

groupings (35 and under, 36-45, 46-55, over 55).

60

(expressed as a percentage of pro forma net revenues)

Compensation <$1.25M $1.25-$2.5M $2.5-$5M $5-$10M $10-$25M >$25MPayroll

Employees 38.4% 43.8% 45.5% 47.0% 51.9% 54.0%

"Non-employees" (1099

Prods/outsourced) 2.7% 3.4% 2.7% 3.1% 1.7% 1.7%

Total Payroll 41.0% 47.2% 48.2% 50.1% 53.7% 55.7%

Benefits

Payroll Taxes 3.0% 3.3% 3.0% 3.1% 3.0% 3.1%

Retirement 0.8% 1.2% 1.9% 1.5% 1.8% 2.0%

Insurance 2.4% 3.2% 3.7% 3.4% 3.2% 3.7%

Other 0.3% 0.1% 0.1% 0.2% 0.1% 0.2%

Total Benefits 6.5% 7.8% 8.8% 8.1% 8.2% 9.1%

Total Compensation 47.5% 55.0% 57.0% 58.2% 61.8% 64.8%

Selling

Travel and Ent./Conventions 1.0% 1.1% 1.2% 1.2% 1.4% 2.1%

Automobile Expense 0.8% 0.9% 0.6% 0.5% 0.4% 0.6%

Advertising/Promotions 2.5% 1.5% 1.1% 1.3% 0.8% 0.9%

Total Selling 4.2% 3.5% 2.9% 3.1% 2.6% 3.6%

Operating

Occupancy Expenses 1 5.0% 4.7% 4.0% 4.0% 3.8% 3.5%

Office Equipment Expenses 0.3% 0.6% 0.3% 0.4% 0.3% 0.4%

IT Expenses 3.5% 2.9% 2.7% 2.4% 2.6% 2.2%

Telephone 0.9% 0.6% 0.6% 0.5% 0.5% 0.5%

Postage 0.2% 0.2% 0.2% 0.2% 0.2% 0.2%

Supplies/Printing 1.2% 0.8% 0.8% 0.6% 0.5% 0.4%

Dues/Subscriptions/Contributions 1.3% 0.9% 0.8% 0.9% 0.9% 0.7%

Taxes/Licenses 0.5% 0.3% 0.4% 0.3% 0.3% 0.4%

Insurance 1.6% 1.3% 1.2% 1.2% 1.1% 1.1%

Professional Fees 1.0% 0.7% 0.8% 0.8% 0.8% 1.1%

Bad Debts 0.0% 0.0% 0.1% 0.1% 0.1% 0.1%

Outside Services 0.3% 1.0% 0.4% 0.7% 1.4% 1.3%

Education/Training 0.4% 0.4% 0.4% 0.3% 0.3% 0.4%

Miscellaneous 0.2% 0.6% 0.2% 0.3% 0.2% 0.3%

Total Operating 16.4% 15.1% 12.9% 12.6% 12.8% 12.3%

Administrative

Depreciation 1.1% 0.6% 1.0% 0.7% 1.0% 1.0%

Amortization of Intangibles 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Officer Life 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Interest 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Other 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Total Administrative 1.1% 0.6% 1.0% 0.6% 1.0% 1.0%

TOTAL EXPENSES (PRO FORMA) 69.2% 74.1% 73.8% 74.9% 78.3% 81.7%

PRO FORMA PRE-TAX PROFIT/LOSS 30.8% 25.9% 26.2% 25.1% 21.7% 18.3%

PRO FORMA EBITDA2 31.9% 26.4% 27.2% 25.8% 22.7% 19.3%


1 For firms that own their building and reported a much lower than peer expense load, we have normalized their occupancy expense.

61

Note: Operating Profit is pre-tax profit less contingent income and less bonus/override income.

25.7%20.5% 22.3% 20.9%

17.0%11.5%

46.2%38.5% 37.2% 33.9%

28.0%22.1%

< $1.25M $1.25M-$2.5M

$2.5M-$5.0M

$5.0M-$10.0M

$10.0M-$25.0M

> $25.0M


30.8%25.9% 26.2% 25.1% 21.7% 18.3%

49.5%44.0%

40.0% 38.4%31.7% 28.2%

< $1.25M $1.25M-$2.5M

$2.5M-$5.0M

$5.0M-$10.0M

$10.0M-$25.0M

> $25.0M


20.3%13.3% 13.9% 12.5% 9.6%

3.3%

43.5%

32.6% 30.0%25.8%

21.8%14.8%

< $1.25M $1.25M-$2.5M

$2.5M-$5.0M

$5.0M-$10.0M

$10.0M-$25.0M

> $25.0M


19.7%16.4% 17.1% 15.7% 14.8%

10.8%

33.8%30.3% 31.6%

27.9%25.3%

21.1%

< $1.25M $1.25M-$2.5M

$2.5M-$5.0M

$5.0M-$10.0M

$10.0M-$25.0M

> $25.0M


62

Note: Pro Forma EBITDA excludes all administrative expenses (depreciation, amortization of intangibles, officer life, interest and other.)

The Rule of 20: <$1.25M $1.25-$2.5M $2.5-$5M $5-$10M $10-$25M >$25MLow 4.4 -20.6 -1.0 -2.4 4.8 5.9

Average 23.9 22.6 22.2 20.4 18.4 18.2

High 57.4 52.0 46.0 49.7 41.0 40.7

Top Quartile 38.9 38.6 34.3 32.2 29.6 26.7


28.9%24.9% 25.1% 23.5% 20.9%

15.6%

49.7%45.2%

39.8% 36.6%32.1%

26.2%

< $1.25M $1.25M-$2.5M

$2.5M-$5.0M

$5.0M-$10.0M

$10.0M-$25.0M

> $25.0M


31.9%26.4%

27.2%25.8% 22.7% 19.3%

51.3%45.1%

40.8% 38.8%32.6%

28.9%

< $1.25M $1.25M-$2.5M

$2.5M-$5.0M

$5.0M-$10.0M

$10.0M-$25.0M

> $25.0M


27.6 26.322.4 20.5 19.4 17.0

23.9 22.6 22.2 20.4 18.4 18.2

38.9 38.634.3 32.2 29.6

26.7

< $1.25M $1.25M-$2.5M $2.5M-$5.0M $5.0M-$10.0M $10.0M-$25.0M > $25.0M


The Rule of 20 measures an agency's shareholder returns. It is calculated by adding 50% of an agency's Pro Forma EBITDA margin to

its organic commission and fee growth rate. An outcome of 20 or higher means an agency is likely generating, through profit

distributions and / or share price appreciation, a shareholder return of approximately 15% - 17%, a typical agency / brokerage return

under normal market conditions.

63

<$1.25M $1.25-$2.5M $2.5-$5M $5-$10M $10-$25M >$25M

Current Ratio 1.45:1 2.15:1 2.12:1 1.71:1 1.67:1 1.55:1

Trust Ratio 1.66:1 1.59:1 1.95:1 1.99:1 2.41:1 1.81:1

Tangible Net Worth (% of Net Rev) 5.0% 12.7% 15.5% 12.7% 11.4% 11.2%

Receivables-to-Payables Ratio 44.1% 36.9% 39.2% 35.0% 51.8% 49.1%

Accounts Receivables:

% Receivables Aged 61-90 Days 52.9% -6.2% 20.5% 17.3% 11.5% 6.3%

% Receivables Aged Past 90 Days 7.3% 5.8% 14.3% 14.5% 10.4% 10.3%

% of P&C Revenues - Agency Billed 16.3% 18.5% 30.3% 30.7% 30.4% 50.2%

% of P&C Revenues - Direct Billed 76.3% 81.5% 69.7% 69.3% 64.1% 47.5%

<$1.25M $1.25-$2.5M $2.5-$5M $5-$10M $10-$25M >$25M

Current Ratio 3.00:1 4.09:1 3.45:1 2.80:1 2.41:1 2.46:1

Trust Ratio 2.91:1 2.35:1 3.24:1 3.25:1 3.88:1 3.05:1

Tangible Net Worth (% of Net Rev) 20.8% 28.3% 30.3% 31.1% 28.1% 28.4%

Receivables-to-Payables Ratio 8.9% 6.1% 5.0% -4.2% 10.7% 18.0%

Accounts Receivables:

% Receivables Aged 61-90 Days 5.8% -36.2% -19.9% -4.8% -5.7% 0.1%

% Receivables Aged Past 90 Days 6.4% -34.8% -2.0% -5.5% -9.9% -1.2%

<$1.25M $1.25-$2.5M $2.5-$5M $5-$10M $10-$25M >$25M

Debt Metrics:

% of All Loans by Source Type:

Community Bank 55.2% 58.3% 39.5% 45.3% 35.6% 35.4%

Industry Lender 6.9% 5.6% 13.2% 3.8% 5.9% 3.0%

Private Equity Lender 10.3% 2.8% 5.3% 9.4% 0.0% 2.0%

Shareholder 6.9% 11.1% 21.1% 5.7% 39.6% 30.3%

Other 20.7% 22.2% 21.1% 35.8% 18.8% 29.3%

% of Firms that have Identified Debt 40.7% 50.0% 41.5% 38.6% 72.2% 60.5%

Of those firms that have debt:

Average Total Debt $546,184 $720,930 $1,005,462 $1,760,997 $2,942,809 $12,841,811

Total Leverage1 1.5x 1.4x 1.0x 1.0x 0.7x 1.0x

Average Effective Interest Rate 5.4% 4.9% 4.3% 4.3% 4.4% 4.2%

Average Term (Years to Maturity) 5.0 4.9 5.9 6.2 4.7 5.4 1 Total Debt / Pro Forma EBITDA

AVERAGE

TOP QUARTILE



AVERAGEAGENCIES WITH REVENUES OF:

64

<$1.25M $1.25-$2.5M $2.5-$5M $5-$10M $10-$25M >$25MNumber of IT Employees 0.1 0.2 0.2 0.6 1.1 6.0

(includes regularly outsourced IT support staff)

IT Payroll as % of Pro Forma Net Rev 0.0% 0.0% 0.0% 0.5% 0.6% 0.9%

IT Expense as % of Pro Forma Net Rev 3.5% 2.9% 2.7% 2.4% 2.6% 2.2%

AMS360 19.2% 26.7% 42.5% 33.3% 25.7% 27.9%

EPIC 38.5% 33.3% 37.5% 47.6% 57.1% 48.8%

EZLynx 13.3%

Hawksoft 7.7% 3.3%

Sagitta 4.8% 8.6% 20.9%

SIS - Partner XE 11.5%

TAM 7.7% 20.0% 15.0% 14.3%

Jenesis 2.9%

Xdimensional Tech. - Nexsure 2.9%

DORIS 2.5%

Other 15.4% 3.4% 2.5% 0.0% 2.8% 2.4%

Technology Utilization:

Electronic Communications Used:

Texting with clients 81.5% 83.3% 70.7% 76.7% 83.3% 65.9%

Use of tablets/smartphones 85.2% 86.7% 85.4% 95.3% 91.7% 79.5%

Agency eSignature solutions 40.7% 46.7% 43.9% 62.8% 63.9% 77.3%

Carrier eSignature solutions 74.1% 80.0% 87.8% 88.4% 97.2% 97.7%

Activity notifications from carrier 40.7% 36.7% 41.5% 60.5% 55.6% 40.9%

Paperless or e-documents ("eDocs") 40.7% 43.3% 53.7% 69.8% 77.8% 77.3%

Marketing:

Website 59.3% 56.7% 48.8% 69.8% 80.6% 93.2%

Mobile adaptable website 88.9% 96.7% 95.1% 100.0% 94.4% 100.0%

Social Media

Facebook 51.9% 70.0% 63.4% 86.0% 100.0% 97.7%

Twitter 70.4% 86.7% 95.1% 93.0% 94.4% 97.7%

LinkedIn 48.1% 56.7% 61.0% 79.1% 66.7% 63.6%

Instagram 74.1% 93.3% 95.1% 97.7% 94.4% 95.5%

Customer portal 25.9% 33.3% 12.2% 37.2% 25.0% 31.8%

Digital content - blogs, webinars 40.7% 50.0% 39.0% 53.5% 41.7% 45.5%

Processing technologies:

Paperless or e-documents ("eDocs") 74.1% 86.7% 68.3% 69.8% 77.8% 72.7%

Secure / Encrypted email 7.4% 16.7% 14.6% 20.9% 33.3% 22.7%

Electronic Funds Transfer (EFT) 48.1% 63.3% 61.0% 55.8% 36.1% 45.5%

Online application 14.8% 46.7% 51.2% 44.2% 44.4% 38.6%

Online chat assistance 88.9% 83.3% 82.9% 81.4% 77.8% 81.8%

Virtual Chat Agent (via machine learning) 85.2% 90.0% 80.5% 83.7% 80.6% 77.3%

Mobile app (manage accounts) 77.8% 96.7% 90.2% 93.0% 91.7% 88.6%

Rating technologies:

Use Comp Rater for PL 77.8% 80.0% 70.7% 88.4% 83.3% 75.0%

Use Comp Rater for CL 70.4% 83.3% 75.6% 90.7% 86.1% 75.0%

Use 'Bridging' from within AMS (PL) 92.6% 100.0% 90.2% 97.7% 97.2% 95.5%

Use 'Bridging' from within AMS (CL) 96.3% 96.7% 97.6% 100.0% 100.0% 100.0%

Use Carrier Agent Portal for PL 77.8% 86.7% 90.2% 65.1% 86.1% 81.8%

Use Carrier Agent Portal for CL 0.0% 0.0% 0.0% 2.3% 25.0% 40.9%

Top 5 Agency Mgmt Systems Used in Home Office:

(excl. comp, hardware depreciation & software amortization)


65

<$1.25M $1.25-$2.5M $2.5-$5M $5-$10M $10-$25M >$25M

Total Number of FTE Employees: 7.7 14.9 21.1 40.3 78.5 262.0

2020 BPS Pro Forma Rev per Employee $128,072 $161,634 $193,578 $192,750 $205,222 $222,266

2019 BPS Pro Forma Rev per Employee $131,081 $165,371 $179,303 $198,702 $199,569 $217,945

Pro Forma Compensation per EE $58,352 $80,353 $107,318 $111,195 $126,478 $143,307

Pro Forma Spread per Employee $69,720 $81,281 $86,260 $81,555 $78,744 $78,959

<$1.25M $1.25-$2.5M $2.5-$5M $5-$10M $10-$25M >$25M

Pro Forma Revenue per Employee $183,707 $273,627 $280,343 $249,533 $283,259 $272,352

Pro Forma Compensation per EE $29,745 $53,638 $72,359 $81,677 $91,411 $112,970

Pro Forma Spread per Employee $119,789 $169,311 $144,867 $119,240 $116,932 $104,245

AGENCIES WITH REVENUES OF:TOP QUARTILE

AVERAGE


Note: Pro Forma Revenue per Employee includes 1099 and outsourced employees.

$128.0$161.6

$193.6 $192.8 $205.2$222.3

$183.7

$273.6 $280.3 $249.5

$283.3 $272.4

< $1.25M $1.25M-$2.5M $2.5M-$5.0M $5.0M-$10.0M $10.0M-$25.0M > $25.0M


$58.3$80.4

$107.3 $111.2$126.5

$143.3

$29.7 $53.6

$72.4 $81.7 $91.4 $113.0

< $1.25M $1.25M-$2.5M $2.5M-$5.0M $5.0M-$10.0M $10.0M-$25.0M > $25.0M


66

<$1.25M $1.25-$2.5M $2.5-$5M $5-$10M $10-$25M >$25M

HUMAN RESOURCES

% Agencies w/ HR Employees 25.9% 36.7% 46.3% 83.7% 80.6% 90.9%

For those with HR Employees:

Number of HR Employees 0.3 0.4 0.5 0.6 1.1 3.5

HR Payroll as % of Net Rev 1.9% 1.2% 1.0% 0.7% 0.6% 0.6%

ACCOUNTING

% Agencies w/ Accounting Employees 55.6% 76.7% 92.7% 100.0% 91.7% 97.7%

For those with Accounting Employees:

Number of Accounting Employees 0.5 0.7 1.0 1.7 3.3 8.2

Accounting Payroll as % of Net Rev 3.0% 1.8% 1.7% 1.5% 1.5% 1.1%

MARKETING

% Agencies w/ Marketing Employees 37.0% 33.3% 43.9% 65.1% 75.0% 79.5%

For those with Marketing Employees:

Number of Marketing Employees 0.5 1.2 2.1 1.4 2.9 6.5

Marketing Payroll as % of Net Rev 2.4% 2.7% 2.7% 1.3% 1.3% 0.9%


$69.7 $81.3 $86.3 $81.6 $78.7 $79.0

$119.8

$169.3 $144.9

$119.2 $116.9 $104.2

< $1.25M $1.25M-$2.5M $2.5M-$5.0M $5.0M-$10.0M $10.0M-$25.0M > $25.0M


67

<$1.25M $1.25-$2.5M $2.5-$5M $5-$10M $10-$25M >$25MSERVICE & SALES SUPPORT STAFF

PROPERTY & CASUALTY

% Agencies with Commercial P&C Staff 81.5% 96.7% 95.1% 100.0% 94.4% 97.7%

In agencies that have CPC Staff:

Number of CPC Employees 1.6 3.4 6.2 11.9 23.6 80.1

Avg CPC Revenue per Staff $351,633 $337,926 $465,384 $399,114 $382,776 $438,431

Payroll as a % of CPC Revenue 29.8% 20.0% 16.4% 16.5% 17.2% 18.7%

% Agencies with Personal P&C Staff 85.2% 86.7% 85.4% 90.7% 88.9% 97.7%

In agencies that have PPC Staff:

Number of PPC Employees 1.9 3.3 4.3 7.3 11.5 18.8

Avg PPC Revenue per Staff $276,243 $275,542 $231,039 $225,615 $248,692 $259,303

Payroll as a % of PPC Revenue 20.3% 19.5% 25.7% 23.0% 24.1% 29.6%

% Agencies with CL Claims Staff 18.2% 6.9% 25.6% 57.5% 80.0% 97.6%

In agencies that have CL Claims Staff:

Number of CL Claims Employees 0.2 1.1 1.1 1.0 2.0 7.1

Avg CL Claims Revenue per Staff $2,395,876 $3,735,438 $4,049,926 $5,895,032 $5,696,447 $8,771,041

Payroll as a % of CL Claims Revenue 1.0% 2.7% 1.4% 1.3% 1.6% 1.8%

% Agencies with PL Claims Staff 13.6% 13.8% 15.4% 32.5% 28.6% 33.3%

In agencies that have PL Claims Staff:

Number of PL Claims Employees 0.3 1.2 0.6 0.7 0.8 1.5

Avg PL Claims Revenue per Staff $1,311,838 $1,172,282 $1,446,871 $2,663,349 $5,097,026 $5,835,711

Payroll as a % of PL Claims Revenue 1.7% 6.0% 3.8% 2.5% 1.5% 1.7%

% Agencies with P&C Value Added Staff 7.4% 16.7% 12.2% 23.3% 36.1% 79.5%

In agencies that have P&C VAS Staff:

Number of P&C VAS Employees 0.4 0.7 1.3 1.5 2.1 8.2

Avg P&C Revenue per Staff $1,951,878 $3,714,474 $9,285,966 $4,074,516 $10,231,427 $14,687,793

Payroll as a % of P&C Revenue 0.6% 1.4% 2.2% 2.1% 1.6% 2.0%

LIFE & HEALTH / FINANCIAL

% Agencies with L&H/Financial Staff: 18.5% 33.3% 22.0% 69.8% 91.7% 97.7%

In agencies that have L&H/F Staff:

Number of L&H/F Employees 0.3 1.1 1.7 3.8 9.0 35.7

Avg L&H/F Revenue per Staff $561,325 $385,192 $345,508 $479,249 $416,297 $486,536

Payroll as a % of L&H/F Revenue 4.5% 18.4% 20.6% 17.2% 16.4% 17.6%

% Agencies with L&H/F Value Added: * 3.3% 4.9% 7.0% 27.8% 59.1%

In agencies that have L&H/F Staff:

Number of L&H/F Employees * 0.1 1.0 1.2 4.5 6.8

Avg L&H/F Revenue per Staff * $12,684,080 $237,852 $2,328,623 $2,396,759 $5,536,840

Payroll as a % of L&H/F Revenue * 0.7% 12.5% 18.0% 4.6% 2.7%


*Insufficient Data

68

<$1.25M $1.25-$2.5M $2.5-$5M $5-$10M $10-$25M >$25MCOMMERCIAL LINES

LOWEST PAY:

Account Executive (AE) $50,000 $48,936 $77,500 $61,653 $92,429 $70,597

Customer Service Rep (CSR) $39,957 $45,000 $50,000 $45,000 $45,000 $40,890

Processor/Asst CSR $24,776 $35,581 $36,750 $37,838 $36,881 $34,609

Marketing * * $54,667 $56,500 $52,020 $51,000

Claims * * $49,102 $57,593 $54,336 $48,296

AVERAGE PAY:




Marketing $20,000 $45,000 $66,000 $63,582 $72,725 $81,313

Claims * $23,248 $50,102 $62,207 $65,833 $76,862

HIGHEST PAY:




Marketing * * $72,000 $80,000 $92,000 $107,740

Claims * * $50,602 $67,939 $80,000 $100,500

PERSONAL LINES

LOWEST PAY:




Marketing * * $44,888 $31,178 $49,712 $43,354

Claims * * * * * $48,023

AVERAGE PAY:




Marketing $20,000 $56,501 $47,888 $31,930 $52,239 $49,466

Claims * $41,347 $24,813 $43,868 $44,000 $53,076

HIGHEST PAY:




Marketing * * $57,362 $32,681 $62,581 $52,802

Claims * * * * * $58,640

GROUP LIFE & HEALTH/FINANCIAL

LOWEST PAY:

Account Executive (AE) * $49,565 $70,500 $68,834 $68,732 $80,000


Processor/Asst CSR * * $50,000 $33,280 $38,000 $37,268

Marketing * * * * $52,800 $47,789

AVERAGE PAY:




Marketing * * * $59,000 $65,400 $69,696

HIGHEST PAY:

Account Executive (AE) * $50,000 $82,500 $77,590 $109,000 $171,571



Marketing * * * * $98,000 $106,126

AGENCIES WITH REVENUES OF:MEDIAN

*Insufficient Data

69

Agency Commission Structure: <$1.25M $1.25-$2.5M $2.5-$5M $5-$10M $10-$25M >$25MNew Rate:

Commercial P&C 42.6% 44.5% 43.6% 39.9% 39.4% 36.8%

Bonds/Surety 42.2% 44.4% 44.0% 40.9% 37.7% 34.0%

Small Commercial P&C 42.8% 44.9% 44.0% 38.8% 36.7% 35.8%

Personal P&C 44.0% 46.2% 41.6% 40.7% 42.3% 39.2%

Group Medical 39.5% 43.2% 44.2% 40.7% 39.5% 36.8%

Other Group L/H/F 39.5% 46.3% 44.6% 40.7% 39.5% 37.7%

Individual L/H/F 46.9% 49.8% 48.1% 45.9% 43.3% 41.0%

Renewal Rate:

Commercial P&C 35.0% 31.2% 30.6% 27.6% 28.8% 26.2%

Bonds/Surety 32.3% 34.3% 31.0% 26.1% 28.3% 27.0%

Small Commercial P&C 35.2% 28.7% 27.8% 25.2% 19.8% 13.6%

Personal P&C 25.9% 25.0% 21.4% 19.7% 18.2% 15.9%

Group Medical 34.6% 25.6% 30.2% 30.3% 29.2% 25.9%

Other Group L/H/F 34.6% 22.1% 29.7% 29.4% 29.2% 25.7%

Individual L/H/F 22.2% 24.0% 23.8% 28.0% 25.9% 21.8%

Commercial P&C $491 $400 $686 $1,167 $1,882 $3,262

Bonds/Surety $208 $205 $243 $323 $1,202 $1,390

Small Commercial P&C $136 $43 $121 $353 $741 $1,507

Personal P&C $87 $156 $65 $36 $344 $561

Group Medical $313 $172 $432 $321 $2,662 $2,524

Other Group L/H/F $313 $172 $333 $75 $1,779 $2,513

Individual L/H/F $0 $30 $37 $79 $968 $1,079

Additional Benefits Paid (% of agencies

providing this benefit to producers):

Travel and Entertainment 25.9% 50.0% 80.5% 81.4% 77.8% 90.9%

Health Benefits 40.7% 70.0% 92.7% 95.3% 94.4% 90.9%

Automobile 14.8% 20.0% 53.7% 48.8% 50.0% 68.2%


Minimum Threshold (minimum account size on which

commissions are paid) :

46.2

52.550.7

49.0 49.6 50.148.1

50.1 50.548.9

50.2 49.8

47.248.1

50.6

48.2

50.6 50.0

< $1.25M $1.25M-$2.5M $2.5M-$5.0M $5.0M-$10.0M $10.0M-$25.0M > $25.0M

2018 BPS 2019 BPS 2020 BPS

70

<$1.25M $1.25-$2.5M $2.5-$5M $5-$10M $10-$25M >$25MCommercial P&C

Number of Validated Producers 0.5 1.4 2.7 4.5 7.8 21.1

% Male * * 89% 93% 88% 88%

% Female * * 11% 7% 12% 12%

Average New Commissions $39,568 $75,805 $84,811 $72,402 $93,252 $160,746

Average Book Serviced $232,708 $363,563 $646,620 $631,075 $848,384 $1,175,070

Average Compensation $67,499 $129,443 $185,811 $204,588 $243,636 $323,370

Avg. Comp. as % of Book 36.1% 37.3% 29.6% 30.4% 30.5% 29.1%

Top 25% Avg New Commissions $63,793 $181,691 $148,345 $128,330 $150,027 $321,365

Top 25% Average Book Serviced $422,178 $786,285 $1,057,757 $1,019,392 $1,530,133 $2,153,904

Personal P&C


% Male * * * * * *

% Female * * * * * *


Average Book Serviced $143,019 $118,854 $270,105 $302,344 $355,682 $493,740




Top 25% Average Book Serviced $269,831 $188,510 $424,604 $569,944 $588,294 $859,059

Life/Health/Financial


% Male * * * * 73% 76%

% Female * * * * 27% 24%


Average Book Serviced $162,618 $152,101 $297,837 $504,025 $852,896 $1,124,066




Top 25% Average Book Serviced $244,308 $280,640 $522,350 $908,537 $1,786,313 $1,991,760

Multi-l ine


% Male * * * * * *

% Female * * * * * *






Top 25% Average Book Serviced $807,269 $1,388,541 $1,205,609 $984,803 $2,330,822 $2,388,075

Weighted Average Producer Age 47.2 48.1 50.6 48.2 50.6 50.0

% Total Book by Producer Age:

Up to age 35 14.8% 19.5% 14.0% 15.5% 8.3% 9.9%

Age 36-45 22.1% 27.5% 17.0% 30.8% 27.1% 24.3%

Age 46-55 39.7% 14.6% 34.5% 19.7% 28.3% 35.5%

Over age 55 23.4% 38.5% 34.5% 34.0% 36.3% 30.4%


*Insufficient Data

71

$39.6$75.8

$84.8 $72.4$93.3

$160.7

$63.8

$181.7$148.3

$128.3$150.0

$321.4

< $1.25M $1.25-$2.5M $2.5-$5.0M $5.0-$10.0M $10.0-$25.0M > $25.0M

Average Top 25%

$29.9 $28.6

$60.0 $49.6 $55.5$95.6

$46.1 $54.3

$110.1$88.4 $92.2

$188.6

< $1.25M $1.25-$2.5M $2.5-$5.0M $5.0-$10.0M $10.0-$25.0M > $25.0M

Average Top 25%

$35.6 $28.1

$116.3$78.3 $93.3

$186.5

$75.0 $73.7

$227.2

$149.2 $171.7

$418.8

< $1.25M $1.25-$2.5M $2.5-$5.0M $5.0-$10.0M $10.0-$25.0M > $25.0M

Average Top 25%

$49.6 $53.9 $57.1 $66.7

$124.4

$54.6$96.6 $103.3 $115.1

$152.1

$306.1

$101.5

< $1.25M $1.25-$2.5M $2.5-$5.0M $5.0-$10.0M $10.0-$25.0M > $25.0M

Average Top 25%

72

$232.7 $363.6

$646.6 $631.1$848.4

$1,175.1

$422.2

$786.3$1,057.8 $1,019.4

$1,530.1

$2,153.9

< $1.25M $1.25-$2.5M $2.5-$5.0M $5.0-$10.0M $10.0-$25.0M > $25.0M

Average Top 25%

$143.0 $118.9$270.1 $302.3 $355.7

$493.7$269.8 $188.5

$424.6$569.9 $588.3

$859.1

< $1.25M $1.25-$2.5M $2.5-$5.0M $5.0-$10.0M $10.0-$25.0M > $25.0M

Average Top 25%

$162.6 $152.1$297.8

$504.0

$852.9$1,124.1

$244.3 $280.6$522.3

$908.5

$1,786.3$1,991.8

< $1.25M $1.25-$2.5M $2.5-$5.0M $5.0-$10.0M $10.0-$25.0M > $25.0M

Average Top 25%

$469.6 $551.1 $575.9 $558.2

$998.5 $995.8$807.3

$1,388.5$1,205.6

$984.8

$2,330.8 $2,388.1

< $1.25M $1.25-$2.5M $2.5-$5.0M $5.0-$10.0M $10.0-$25.0M > $25.0M

Average Top 25%

73

<$1.25M $1.25-$2.5M $2.5-$5M $5-$10M $10-$25M >$25M

Number of Unvalidated Producers 0.6 1.4 1.0 2.7 4.9 17.3



Avg Estimated Annual Compensation $42,164 $52,301 $55,534 $70,049 $83,898 $104,236

TOP QUARTILE

<$1.25M $1.25-$2.5M $2.5-$5M $5-$10M $10-$25M >$25M

Number of Unvalidated Producers 1.9 4.1 2.5 6.1 9.6 40.6



<$1.25M $1.25-$2.5M $2.5-$5M $5-$10M $10-$25M >$25MNUPP:

Net Investment in Unvalidated Producer Pay

Low 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Average 0.9% 1.2% 1.1% 1.6% 1.7% 1.6%

High 8.1% 6.3% 6.4% 5.6% 4.9% 4.1%

Top Quartile 3.4% 4.4% 3.0% 4.0% 3.4% 3.2%

2019 BPS Average NUPP 2.0% 1.3% 1.3% 1.3% 1.7% 2.2%

Producer Success Rate 65.9% 53.3% 73.0% 53.8% 50.2% 50.5%

Effective NUPP:

Average 0.6% 0.6% 0.8% 0.9% 0.9% 0.8%

Top Quartile 2.8% 2.3% 1.9% 1.8% 1.9% 3.4%


AGENCIES WITH REVENUES OF:AVERAGE


1.6%

0.7% 0.8% 0.8% 0.9% 1.2%0.6% 0.6% 0.8% 0.9% 0.9% 0.8%

2.8%2.3%

1.9% 1.8% 1.9%

3.4%

< $1.25M $1.25M-$2.5M $2.5M-$5.0M $5.0M-$10.0M $10.0M-$25.0M > $25.0M


NUPP (Net Investment in Unvalidated Producer Pay), expressed as a percentage of net revenue, is the difference between what an agency pays its unvalidated producers and what the producers would earn under the agency’s normal commission schedule. It is an excellent metric to assess the financial investment an agency is making in its next generation of producer talent.

Effective NUPP, which is the product of an agency’s investment in unvalidated producers (NUPP) and success rate in hiring producers (Producer Success Rate), is expressed as a percentage of net revenue. It is the best overall measure of an agency’s effectiveness in recruiting and developing sales talent.

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<$1.25M $1.25-$2.5M $2.5-$5M $5-$10M $10-$25M >$25M% of Agencies that Hired New

Producers Last Year 22.2% 40.0% 39.0% 69.8% 77.8% 95.5%

# of New Producers Hired Last Year 1.3 2.5 1.5 1.7 3.0 6.9

Avg annualized wages per prod hired $55,608 $56,312 $63,642 $71,080 $84,206 $107,546

# New Producers Hired past 5 Yrs 2.8 5.6 3.3 5.4 10.3 29.2

Producer Success Rate past 5 years 65.9% 53.3% 73.0% 53.8% 50.2% 50.5%

<$1.25M $1.25-$2.5M $2.5-$5M $5-$10M $10-$25M >$25M # of New Producers Hired Last Year 2.0 5.7 2.5 3.0 5.9 15.4

Avg annualized wages per prod hired $99,006 $100,125 $89,422 $123,675 $149,495 $175,302

# New Produceres Hired past 5 Yrs 5.8 13.7 6.2 10.3 17.6 59.7

Producer Success Rate past 5 years 100.0% 89.4% 100.0% 89.0% 74.3% 74.3%

Recruiting & Development Techniques: <$1.25M $1.25-$2.5M $2.5-$5M $5-$10M $10-$25M >$25M

Recruiting:

Targeted college recruiting

efforts/programs 14.3% 19.0% 24.2% 27.5% 55.9% 54.5%

Use of outside recruiters 7.1% 38.1% 39.4% 52.5% 58.8% 81.8%

Use of social media as a recruiting

tool 42.9% 61.9% 63.6% 70.0% 82.4% 95.5%

Assessment:

Testing (sales, personality,

intelligence capabilities, call

reluctance, etc.) 57.1% 61.9% 87.9% 92.5% 94.1% 95.5%

Development:

Internship 21.4% 38.1% 30.3% 45.0% 52.9% 68.2%

Mentorship 78.6% 76.2% 84.8% 85.0% 85.3% 90.9%

Technical training:

Internal 71.4% 81.0% 93.9% 95.0% 88.2% 90.9%

External 64.3% 71.4% 84.8% 80.0% 94.1% 95.5%

Sales training:

Internal 78.6% 76.2% 90.9% 95.0% 88.2% 97.7%

External 57.1% 66.7% 78.8% 87.5% 91.2% 95.5%

Selling structure:

Required specialization 35.7% 23.8% 30.3% 35.0% 32.4% 31.8%

Team selling 42.9% 76.2% 69.7% 70.0% 94.1% 81.8%

Assigned accounts 64.3% 66.7% 57.6% 67.5% 76.5% 77.3%




AVERAGE

TOP QUARTILE

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<$1.25M $1.25-$2.5M $2.5-$5M $5-$10M $10-$25M >$25MCarrier Representation:

Commercial P&C

# of National Carriers 5.0 10.0 13.5 18.2 40.5 75.0

# of Regional Carriers 4.3 9.0 12.2 12.9 19.1 37.3

Total

Personal P&C

# of National Carriers 5.6 6.5 5.9 12.2 19.4 25.8

# of Regional Carriers 5.2 8.7 7.1 8.5 9.1 15.2

Total

Life & Health/Financial 4.0 12.5 7.3 23.2 35.2 76.8

Commission Income from Top Carriers:

Top P&C Carrier 33.1% 24.4% 18.8% 16.1% 11.4% 7.8%

Top 3 P&C Carriers 50.8% 42.5% 33.6% 28.4% 20.8% 14.7%

Top L/H/F Carrier 2.2% 4.1% 1.9% 9.1% 6.8% 5.8%

Top 3 L/H/F Carriers 3.0% 5.4% 2.8% 7.9% 12.2% 11.1%


15.2%24.2% 30.4%

16.1%27.0% 22.1%

34.8%26.6%

33.6%

26.0%

33.7% 40.2%

28.3% 31.2%22.4%

41.3%

23.7% 24.7%

21.7% 18.0% 13.6% 16.6% 15.6% 13.0%

< $1.25M $1.25M-$2.5M $2.5M-$5.0M $5.0M-$10.0M $10.0M-$25.0M > $25.0M

Under 35 from WITHIN the Industry

Over 35 from WITHIN the Industry

Under 35 from OUTSIDE the Industry

Over 35 from OUTSIDE the Industry

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<$1.25M $1.25-$2.5M $2.5-$5M $5-$10M $10-$25M >$25MBreakdown by line for top P&C carriers:

Personal 59.8% 49.7% 30.8% 31.7% 33.0% 15.6%

Small Commercial 29.9% 29.4% 23.6% 21.7% 13.1% 10.0%

Mid/Large Commercial 10.3% 20.8% 45.5% 46.6% 54.0% 74.3%

Breakdown by line for top 3 P&C carriers:

Personal 60.8% 45.7% 31.8% 30.8% 32.4% 16.3%

Small Commercial 28.7% 32.2% 26.8% 21.0% 14.8% 9.9%

Mid/Large Commercial 10.5% 22.1% 41.5% 48.2% 52.8% 73.8%

Service Center Usage:

% by Line of Business

Commercial Lines Commission 20.9% 13.4% 4.3% 1.0% 0.4% 1.3%

Personal Lines Commission 14.9% 61.8% 39.1% 26.7% 19.8% 17.6%


50.8%42.5%

33.6% 28.4%20.8% 14.7%

3.0% 5.4% 2.8% 7.9% 12.2% 11.1%

< $1.25M $1.25M-$2.5M $2.5M-$5.0M $5.0M-$10.0M $10.0M-$25.0M > $25.0M

P&C L/H/F

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In addition to the average results for each Study group, the BPS 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 result achieved by all the firms in the Study group for a particular factor.

Low The lowest result achieved in the peer group for a particular factor.

High The highest result achieved in the peer group for a particular factor.

Top Quartile The average results achieved by the Top 25% of the firms in the group for that particular factor or line item.

Median The mid-point in a list of results achieved by all the firms in the Study group for a particular factor.

(As reported for most recently completed fiscal year-end and stated as a percentage of gross revenues)

Property & Casualty:

1) Commercial Commissions & Fees — Commissions and fees for the sale of commercial P&C insurance. Includes items often considered "value-added services," (e.g., revenues from workers' 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.).

2) Bonds / Surety — Commissions from the sale of bonds (surety, fidelity, etc.).

3) Personal Commissions & Fees - Commissions (both direct and agency-billed), and fees earned in lieu of commissions for the sale of personal P&C insurance.

4) Contingent / Bonus — Profit sharing, bonus, and supplemental income received from insurance carriers.

5) Total P&C — The sum of items 1 – 4.

Life & Health / Financial

6) Group Medical Commissions & Fees — Commissions & fees from the sale of group health/medical insurance.

7) All Other Group Commissions & Fees — Commissions and fees from the sale of all other employee benefits products and services. Includes group life, dental, disability, pension, retirement plan, PEOs, investment products, and any revenue from delivery of value added services (VAS) - i.e., benefits, TPA HR/wellness/other consulting services, actuarial services, risk management, cost containment, and any other related to employee benefits, life and health, or financial services.

8) Individual Commissions & Fees — Commissions & fees from the sale of individual life, health, dental, disability & investment products.

9) Bonus / Overrides — Bonus or incentive payments paid to agency for L/H/F promotion (usually for volume, persistency, growth, etc.).

10) Total Life & Health / Financial — The sum of items 6 – 9.

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11) Investments — Income from interest, dividends, premium finance, late charges, gains/losses on sales of marketable securities.

12) Miscellaneous — Income from countersignature fees, gains/losses on fixed or intangible assets, life insurance proceeds, and other income not included in one of the other revenue categories.

13) Gross Revenues — The sum of items 5, 10, 11 & 12.

14) Brokerage Commission Expense — Commissions paid to other agencies or outside brokers. Does NOT include in-house 1099 producers, who are included with “Payroll - Non-Employees - 1099 Producers / Outsourced Labor.”

15) Net Revenues — Gross Revenues less Brokerage Commission Expense.

(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:

16) Employees — All expensed payroll, including salaries, commissions, bonuses, management fees, and discretionary owner compensation. Does NOT include "S" corporation distributions.

17) Non-Employees - 1099 Producers / Outsourced Labor — Commissions, bonuses for agency's producers compensated on a 1099. Also includes expense for outside temporary staffing and temp-to-perm staffing, as well as expenses for outsourced services such as Patra or ResourcePro.

18) Total Payroll — The sum of items 16 – 17.

Benefits

19) Payroll Taxes — All payroll taxes (SS, FICA, FUTA, SUTA, etc.).

20) Retirement — Expenses related to a 401(k), ESOP/ESOT, pension, and other miscellaneous retirement benefits.

21) Insurance — Health insurance, medical reimbursements, life insurance, disability insurance, etc. Does NOT include Officer or Key Person life, which is included with “Administrative - Officer Life.”

22) Other – Wellness programs, employee assistance plans, health club memberships, and employee gifts, etc.

23) Total Benefits — The sum of items 19 - 22.

24) Total Compensation — The sum of items 18 & 23.

Selling

25) Travel & Entertainment/Conventions — Airfare, meals, hotels, social/country club dues, convention related expenses. Does NOT include professional dues/memberships, which are included in “Operating - Dues/Subscriptions/Contributions.”

26) Automobile Expense — Lease, gas, maintenance/repair, employee parking, mileage allowances, etc. Does NOT include employee auto insurance, which are included under "Insurance" in Operating section; also exclude auto depreciation, which is included under "Depreciation" in Administrative section.

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.

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28) Total Selling — The sum of items 25, 26 & 27.

Operating

29) Occupancy Expenditures — Total rent, utilities, building/grounds maintenance, property taxes, janitorial services, storage & other building related expenses. Should be net of rental/sublet income. Does NOT include building depreciation or leasehold amortization, which are included in “Administration – Depreciation.”

30) Office Equipment Expenses — Leased and expensed equipment purchases and equipment maintenance for copiers, telephone & fax, postage meters, office furniture & fixtures. Does NOT include leased IT equipment, which is included in “Operating - IT Expenses.” Does NOT include depreciation, which is included in “Administration – Depreciation.”

31) IT Expenses — Expensed/leased computer hardware, software, license fees, maintenance and maintenance contracts, website development/maintenance, website hosting, internet connections, automation related training, regularly outsourced IT support, etc. Does NOT include equipment depreciation, section 179 items, or software amortization, which are included in “Administration – Depreciation.”

32) Telephone — Local & long distance, cellular telephone, and fax expenses. Does NOT include leased telephone equipment, which is included in “Operating - Office Equipment Expense.”

33) Postage — Postage, Express mail, FedEx, UPS, or courier services. Does NOT include postage machines, which are included in “Operating - Office Equipment Expense.”

34) Supplies / Printing — Office supplies, paper, copying/printing, coffee/soft drinks/break room expenses.

35) Dues / Subscriptions/ Contributions — Professional dues/membership fees, periodical & information services subscriptions, contributions.

36) Taxes / Licenses — Insurance licenses, miscellaneous local & franchise taxes, sales tax, other property taxes, and license fees. Does NOT include occupancy-related property taxes, which are included with “Operating – Occupancy Expense.” Does NOT include payroll-related taxes, which are included with “Payroll – Payroll Tax.”

37) Insurance —Property & casualty insurance, including employee auto insurance and workers’ compensation, and payments for E&O claims /settlements.

38) Professional Fees — Expenses for CPAs, lawyers, consultants and other outside advisors. Does NOT include directors’ fees, which are included in “Administrative – Other.”

39) Bad Debts — Bad debts written off and agency-paid claims. Does NOT include E&O claims/settlements, which are included with “Operating – Insurance.”

40) Outside Services — MVRs, CLUE reports, etc.; 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.).

41) Education / Training — Tuition reimbursement, registration fees, materials, books/materials, in-house training programs, and related travel expenses, etc. Does NOT include training on how to use your agency management system or other agency technology, which is included with “Operating – IT Expenses.”

42) Miscellaneous — Other non-specific miscellaneous operating expenses not included elsewhere.

43) Total Operating — The sum of items 29 – 42.

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Administrative

44) Depreciation — All depreciation of fixed tangible assets to include current year depreciation related to autos, building depreciation, depreciation of equipment, furniture and fixtures (including section 179 purchases), depreciation of computers, servers, software, leasehold improvements, etc. The write-down of certain tangible assets may be called amortization, but it is included here if it involved a tangible asset.

45) Amortization of Intangibles — All amortization of intangible assets to include current year amortization of acquired expirations, covenants, non-competes, customer lists, etc.

46) Officer Life — Premium paid by agency, where agency is beneficiary.

47) Interest —Interest expense incurred.

48) Other — Directors’ fees, non-specific overhead allocations to parent companies, deferred compensation, and any other miscellaneous administrative expenses.

49) Total Administrative — The sum of items 44-48.

50) Total Expenses — The sum of 24, 28, 43, & 49.

51) Pro Forma Revenue – Net Revenue after the agency’s revenue categories are normalized by eliminating non-recurring or non-

operating activity.

52) Pre-tax Profit / Loss — Net Revenues less Total Expenses.

53) Pro Forma Pre-tax Profit – Pro Forma Net Revenues less Pro Forma Total Expenses.

54) Pro Forma Operating Profit – Pro Forma Pre-tax Profit less contingent and bonus / override income.

55) Operating Profit — Pre-tax Profit less contingent and bonus / override income.

56) EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) — An agency’s profit before interest, taxes, depreciation and amortization expenses are included.

57) Pro Forma EBITDA — Adjusted EBITDA after a) Pro Forma Revenue adjustments are accounted for, b) discretionary expenditures made for the benefit of the owners are added back, and c) expense categories are normalized to eliminate non-recurring and/or non-operating activity. Pro Forma EBITDA excludes all Administrative expenses (Depreciation, Amortization, Officer Life, Interest, and Other).

58) Sales Velocity – A Reagan Consulting metric used to gauge a firm’s new business results. Expressed as a percentage, Sales Velocity is current year New Commission and Fee income written divided by prior year Commissions and Fee income.

59) Banded Sales Velocity – Sales Velocity contributions by producer age segments (35 and under, 36-45, 46-55, over age 55).

60) Rule of 20 Score — A Reagan Consulting valuation metric that is the sum of the agency’s Pro Forma EBITDA margin times 50% plus the organic commission and fee growth rate. It provides a quick means of calculating whether an agency is creating significant returns for its shareholders.

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61) 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.

62) Trust Ratio – Cash plus accounts receivable divided by premiums payable.

63) Tangible Net Worth (TNW) — Total tangible assets minus total liabilities. The tangible net worth represents the net value of the agency’s balance sheet if it were liquidated. A low or negative tangible net worth impacts an agency’s ability to invest in new opportunities, develop new products, hire new employees, make other capital expenditures and facilitate shareholder redemption obligations.

64) 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.

65) 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.

66) Total # of Employees (FTE) — Total number of full-time equivalent employees, including agency principals.

67) Pro Forma Revenue per Employee — Pro Forma Net Revenue divided by the total number of full-time equivalent employees. Includes 1099 and outsourced employees.

68) Pro Forma Compensation per Employee — Pro Forma Compensation divided by total number of full-time equivalent employees.

69) Pro Forma Spread per Employee — Pro Forma Revenue Per Employee less Pro Forma Compensation Per Employee. While Revenue Per Employee is a standard for measuring productivity, the Spread Per Employee measures the dollars per employee available to pay all other agency expenses and generate a profit for the agency.

70) WAPA (Weighted Average Producer Age) – A Reagan Consulting metric designed to assess the relative age of an agency’s

production force. WAPA is calculated using the sum of the product of the agency’s producers’ ages and multiplying it by the percentage of the agency’s “produced” business handled by each. House business is excluded for the WAPA calculation.

71) Validated Producer — A producer whose book of business is sufficient to cover his/her wages under agency’s commission formula.

72) Unvalidated Producer — A producer whose production does not yet cover his/her wages under agency’s commission formula.

73) 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.

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74) Effective NUPP — Effective NUPP, which is the product of an agency’s investment in unvalidated producers (NUPP) and success rate in hiring producers (Producer Success Rate), is expressed as a percentage of net revenue. It is the best overall measure of an agency’s effectiveness in recruiting and developing sales talent.

75) Hiring Velocity — A gauge of an agency’s hiring rate in replenishing its existing producer population. Calculated by taking the number of unvalidated producers hired in the most recent year and divide it into the agency’s total number of producers. A healthy Hiring Velocity is typically in the 18-22% range.

76) Producer Average Compensation — The portion of a producer’s total W-2 compensation that resulted from the producer’s production responsibilities. Management and other non-sales compensation is excluded.

77) WASA (Weighted Average Shareholder Age) – A Reagan Consulting metric designed to assess the relative age of an agency’s

ownership team. WASA is calculated using the sum of the product of the agency’s owners’ ages and multiplying it by their ownership percentages.

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) Account Executive (AE) – Senior level service position, usually assigned to a producer in order to support & enable the producer to focus on new business production. This is a highly technical position, requiring a comparable technical skill set to that of producers. An AE's 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.

80) Customer Service Representative (CSR) – 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, cross-selling, etc., but may include some processing responsibilities (e.g., coordinate new client set-up, prepare proposals, order & check policies, issue certificates, binders, billings, etc.).

81) Processor/Asst CSR – Lower level service position whose main function is to support 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.).

82) Marketing – Staff dedicated to marketing functions (negotiating with carriers to obtain coverage for clients - soliciting quotes/rates, negotiating coverage/pricing, placing new and renewal business with carriers, preparing proposals/binders, tracking market trends, pricing and underwriting policies).

83) Claims – This is a claims advocacy role. Coordinates P&C claims reporting, tracking, processing, and analysis for agency and its clients; delivers Value-Added-Service claims services.

Reagan Consulting, Inc. 3495 Piedmont Road, NE Building 10, Suite 920 Atlanta, GA 30305 (404) 233-5545 (404) 237-5996 fax www.reaganconsulting.com

Independent Insurance Agents and Brokers of America 127 S. Peyton Street Alexandria, VA 22314 (800) 221-7917 (703) 683-7556 fax www.independentagent.com

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