Year-End 2013 OGP ID: 9999

Current Value Driver Comparison

Organic Growth

Total Agency Organic Growth Organic Growth by Product Line Reagan Consulting Observations

• Median organic growth finished the yearat 6.2%, up only slightly over the median2012 growth rate of 6.1%

• Commercial lines was once again the fastestgrowing line of business, with an organicgrowth rate of 8.2%

• Over 25% of the firms responding to the OGPsurvey grew revenues organically at double--digit rates in 2013

• OGP Projected 2014 Growth: 6.1%Agents and brokers are projecting a third

Your organic consecutive year of organic growth around growth rank: 6% in 2014

Profitability

Total Agency EBITDA Margin EBITDA Margin by Product Line Reagan Consulting Observations

• Median EBITDA margin in 2013 was 19.3%,the highest annual EBITDA margin in theseven-year history of the OGP survey

• Contingent income performance was strongagain in 2013, with the median firm seeingcontingent income increase by 13%

• There was significant variability in profitmargins between product lines, with personal lines margins almost doubling commercial

• OGP Projected 2014 Margin: 20.0%While median margins are rising, less than

Your profitability half of brokers are projecting a margin rank: increase in 2014

The Rule of 20 (see note below)

Total Agency Rule of 20 Rule of 20 by Product Line Reagan Consulting Observations

• The median Rule of 20 score in 2013 was 16.5,very similar to the median score in 2013

• The top quartile of firms all scored above 20in 2013, a first in OGP history

• Just over 2 points separated the Rule of 20scores for personal, commercial and benefitsbusiness in 2013 - suggesting that returns toshareholders were similar across businesslines

• OGP Projected 2014 Score: 17.2 Agents and brokers are projecting a slight

Your Rule of increase in shareholder returns in 2014 20 rank:

About the Rule of 20

Note: If data for your firm reads "0.0%" or "0.0" it may mean that no data was submitted for that metric.

50th - 60th percentile

50th - 60th percentile

50th - 60th percentile

7.0% 6.2%

10.3%

6.1%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Your Firm OGP SurveyMedian

OGP 75thPercentile

2012 OGPMedian

8.5%

3.3%

4.6%

8.2%

2.9%

5.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

CommercialLines

Personal Lines Group Benefits

Your Firm OGP Median

20.0% 19.3%

23.8%

18.4%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Your Firm OGP SurveyMedian

OGP 75thPercentile

2012 OGPMedian

17.0%

29.0%

21.0%

16.6%

30.9%

20.2%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

CommercialLines

Personal Lines Group Benefits

Your Firm OGP Median

17.0 16.5

20.5

16.1

-

5.0

10.0

15.0

20.0

25.0

Your Firm OGP SurveyMedian

OGP 75thPercentile

2012 OGPMedian

17.0

17.8

15.1

16.9

18.1

15.9

13.5

14.0

14.5

15.0

15.5

16.0

16.5

17.0

17.5

18.0

18.5

CommercialLines

Personal Lines Group Benefits

Your Firm OGP Median

Organic Growth & Profitability

Survey

Reagan Consulting has developed a metric called the “Rule of 20” to provide a quick means of benchmarking an agency's shareholder returns. The Rule of 20 is calculated by adding half of an agency's EBITDA margin to its organic revenue 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%, which is a typical agency / brokerage return under normal market conditions.

1

Year-End 2013 OGP ID: 9999

Agency Organic Growth & Profitability Scatter Plot

Surveyed firms with annual revenues less than $10 million Your FirmSurveyed firms with annual revenues between $10 and $25 million Top and Bottom 25% of all firmsSurveyed firms with annual revenues greater than $25 million Rule of 20 line (All points on this line indicate a Rule of 20 score of 20)

About the Scatter Plot

Bottom 25% Growth

Top 25% Growth

Rule o

f 20

Rule o

f 20

In the chart above, we've plotted every firm in the survey that completed both the total agency organic growth section and th e total agency profitability section. Each firm's organic growth is plotted along the x-axis, and each firm's profitability is plotted along the y-axis. We've included a couple of guidelines on the graph to help in interpreting the data. The grey dotted lines show the top and bottom 25% of firms in organic growth and profitability. The solid blue line rep resents all combinations of organic growth and EBITDA margin that result in a Rule of 20 score of 20. Finally, we've broken the firms into groups based on revenue size, as distinguished by the different colored dots. The goal of this scatter plot is to show the wide range of organic growth and profitability results in the industry and to benchmark wher e your firm falls.

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

-10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0%

Pro

fita

bili

ty (

EBIT

DA

Mar

gin

)

Organic Growth

Organic Growth & Profitability

Survey

Bottom 25% Profitability

Top 25% Profitability

2

Year-End 2013 OGP ID: 9999

Historical Trending

Quarterly Organic Growth - Total Agency Median (Q3 2008 - Present)

Comparative Median Organic Growth by Product Line (Annual Results 2008 - Present)

Comparative Median Profitability and Rule of 20 Analysis (Annual Results 2008 - Present)

About EBITDA Margin and Operating Margin

Organic Growth & Profitability

Survey

0.9%

1.7%

-0.6% -0.7%

-1.4% -1.8%

-1.4%

0.2%

1.0%

1.9%

3.3% 3.3% 3.8% 3.7%

5.0% 5.5% 5.4%

6.1% 6.1%

6.9% 6.8%

6.2%

Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13

-1.3%

-3.5%

0.0%

3.3%

7.6% 8.2%

2008 2009 2010 2011 2012 2013

Commercial Lines

0.6%

-0.9%

1.6% 1.3%

2.1%

2.9%

2008 2009 2010 2011 2012 2013

Personal Lines

10.6%

4.5% 4.4%

7.1%

4.8% 5.0%

2008 2009 2010 2011 2012 2013

Group Benefits

18.7% 16.6% 17.5% 18.2% 18.4% 19.3%

10.3% 9.0% 9.9%

12.3% 12.6% 13.7%

2008 2009 2010 2011 2012 2013

EBITDA Margin and Operating Margin

EBITDA Margin Operating Margin

10.8

6.9

10.6

12.9

16.1 16.5

2008 2009 2010 2011 2012 2013

Rule of 20

EBITDA Margin is calculated by dividing a firm's pro-forma EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) by the firm's pro-forma net revenues. Operating Margin is calculated as EBITDA less contingent income, divided by pro-forma net revenues less contingent income.

3

Organic Growth & Profitability Survey

Market Commentary (Q4 2013)

- 1 -

2013 Broker Results Were the Best in the Seven-Year History of the OGP, But …

by Brian Deitz

Agents and brokers continued to raise the bar in 2013, posting new OGP highs in all three major value creation categories:

Median organic growth for the year was 6.2%, beating last year’s 6.1%

EBITDA margins jumped almost a point from 18.4% in 2012 to 19.3% in 2013

Rule of 20 scores were 16.5 and the top 25% of brokers all exceeded 20 for the first time

Before we continue, we should recognize the progress that has been made in broker performance in the last five years. It wasn’t too long ago (2009) when brokers were shrinking organically (-1.9% median organic growth) and posting mid-single-digit Rule of 20 scores (6.9). Agents and brokers have capitalized on a firming market, a recovering economy and specialization to make large strides forward in performance and shareholder returns. But … as we analyze the full-year 2013 results, we are cautious about continued improvement in broker performance. We do not necessarily think that brokers will go backwards, but we are wondering if brokers can maintain their impressive run of consistently improving results. The Fourth Quarter “Miss” The truth is, when the dust settled on 2013, broker results were just slightly better than 2012. While profitability jumped almost a point (fueled in part by a median increase of 13% in contingent income), organic growth was up just 0.1% and Rule of 20 scores just 0.4 points. As recently as the third quarter, however, it looked like brokers were poised to continue making good-sized steps forward in 2013. Year-to-date growth was 6.8%, brokers

were projecting full-year growth of 7.0% and Rule of 20 scores were forecasted to come in at 18.0. The table below compares broker forecasts made in October 2013 to actual results.

Brokers Q3 Guidance Versus Actual 2013 Results

7.0%

20.0%

18.0

6.2%

19.3%

16.5

Organic Growth EBITDA Margin Rule of 20 Score

2013 Projection Made in October 2013 Actual

A question naturally arises: What happened in Q4 that caused brokers to miss their projections? Not only did organic growth not meet broker projections, but it fell 0.6% from year-to-date third-quarter numbers. The combination of organic growth and EBITDA performance dropped Rule of 20 scores a full 1.5 points below projections made just three months ago. The full-year 2013 organic growth result was particularly surprising, but it was not only privately-held firms that performed below expectations in Q4. Powell Brown, CEO of Brown & Brown, noted that “at the end of the day, we were surprised” by the Company’s difficulty in retail organic growth in Q4 2013 – Brown & Brown reported organic growth of just 0.2% in the company’s retail operations.

Organic Growth & Profitability Survey

Market Commentary (Q4 2013)

- 2 -

Brokers Forecast 2014 Growth Below 2013 After Q4’s performance, brokers are forecasting a median organic growth rate of 6.1% in 2014, roughly equivalent to 2012 (6.1%) and very slightly below 2013 (6.2%). In fact, brokers are almost evenly split on whether they believe organic growth will increase or decrease for their firm in 2014.

Broker Organic Growth Forecasts in 2014

The percentage of brokers projecting an increase in organic growth is at an OGP low. At the end of 2010, 75% of brokers projected increasing organic growth results. This percentage dropped to 67% at the end of 2011, 55% at the end of 2012 and just over 50% in 2013. Full-year 2013 organic growth rose just 0.1% when 55% of firms forecasted an increase … how will median organic growth fare in 2014 with only half of firms forecasting an increase? Understanding the Slowing Momentum Why are brokers suddenly less aggressive concerning organic growth estimates? We believe that three variables are in play:

A primary factor influencing growth projections is broker perception of commercial P&C pricing. Commercial P&C rates were increasing by approximately 4% to 5% from 2012 through the first half of 2013 (as reported by the Council of Insurance Agents & Brokers). However, the rate of increase slowed to 3.4% in the third quarter (fourth quarter

rates were unavailable at press time). Further, some industry leaders are projecting the market firming to continue to slow into 2014. “So for 2014, as we look at the rates,” noted Arthur J. Gallagher CEO Pat Gallagher in a recent earnings call, “we expect the property/casualty market to remain stable with increases on most lines being somewhere in the order of 2% to 3%.”

The performance of the economy, on the other hand, should be a source of optimism for brokers. The Wall Street Journal’s survey of economists projects 2014 GDP growth for the United States of 2.8%, up from a 1.9% increase in 2013. Further, GDP growth in the second half of 2013 was strong – third quarter growth was 4.1% and fourth quarter estimates are 3.2%. Given the traditional 6-9 month lag between economic growth and broker performance, the strong second half of 2013 could help brokers in 2014.

The final variable, we believe, is employee benefits performance. Benefits divisions, which make up 20% - 25% of revenues for the typical firm, grew at a modest 5% in 2013 and have averaged 5.2% growth over the last five years. It appears unlikely that the healthcare environment will change dramatically in 2014. Mike Turpin, Executive VP at USI Insurance Services, explains in Leader’s Edge Magazine that 2014 will produce “low rates of participation in public exchanges” and that “the consumption of healthcare will continue to move sideways.” It is possible that improvement in the economy could create a slight upside in 2014, however. “In terms of the overall employee benefits outlook for organic growth in 2014,” noted Hub International Limited CEO Marty Hughes, “Hub expects its performance to be equal to or stronger than 2013.”

As brokers look at 2014, they appear to believe that these three forces will largely balance out, creating results that look fairly similar to 2013. Brokers may continue to improve performance, but the days of making large gains appear – at least temporarily – to have come to an end. Earnings Call excerpts courtesy of SeekingAlpha.com

Increase50.4%

Stay the Same2.2%

Decrease47.4%

Reagan Consulting is the industry’s leading ownership perpetuation advisor, having

helped hundreds of high-performing firms achieve their perpetuation goals. Whether

the goal is to build a successful strategy for long-term independence, to raise capital for

expansion or to align with a strategic partner, Reagan Consulting provides unparalleled

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Securities transactions provided through Reagan Securities, Inc., member of FINRA and SIPC.

USI Insurance Services acquired

Van Gilder Insurance Corp.

Denver, CO

Reagan represented Van Gilder

2013

Marsh & McLennan Agency acquired

Barney & Barney, LLC

San Diego, CA

Reagan represented Barney & Barney

2014

Alliant Insurance Services acquired

Sagewell Partners, Inc.

Pittsburgh, PA

Reagan represented Sagewell

2013

Hub International Ltd. acquired

The Manual Lujan Agencies

Albuquerque, NM

Reagan represented Manuel Lujan

2013

AmWINS Group, Inc. acquired

Gresham & Associates, Inc.

Stockbridge, GA

Reagan represented Gresham

2012

BancorpSouth Insurance Services, Inc. acquired

GEM Insurance Agencies, LP

Houston, TX

Reagan represented GEM

2013

Stone Point Capital and Dowling Capital Partners

invested in

Hodges-Mace Benefits

Group, Inc.

Atlanta, GA

Reagan represented HMBG

2013

Marsh & McLennan Agency acquired

Brower Insurance Agency, LLC

Dayton, OH

Reagan represented Brower

2012