YOUR GAME PLAN FOR GROWTH 360 SPEAKERS. THE IMPACT of Unvalidated Producers TRANSACTION MULTIPLES. ALERA GROUP Agency Spotlight

Transcription

1 Meet the 360 SPEAKERS Page 8 THE IMPACT of Unvalidated Producers Page Insurance Agency TRANSACTION MULTIPLES Page 6 ALERA GROUP Agency Spotlight Page 10 AGENCY DATA: Know Your Stats Page 12 QUARTER In Review Q&A Page 14 BROKER Tearsheet Page 15 YOUR GAME PLAN FOR GROWTH Keep it simple. Learn the tried-and-true strategies that we have seen top-performing agencies execute to win. Page 2 MARCH 2017

2 A&B Insurance and Financial, Inc., AB Capital Group, LLC, Insurance Exchange, LLC, & Smart Choice Health Plans, LLC dba Florida Health Team, LLC American Insurance Administrators, Inc. dba AIA Benefits Resource Group Benefit Advisors Network, LLC dba BAN Benico, Ltd. Brown & Noyes, LLC dba Ardent Solutions C.M. Smith Agency, Inc. Coury Health Services, Inc. Centennial Group Benefits and Insurance Services, Inc. Forum Benefits, Inc. Marsh, Berry & Company, Inc. is honored to be the investment banking firm that brokered the transactions that brought these 24 agencies and one networking organization together to form Alera Group 1, as funded by Genstar Capital. Corporate Plans, Inc. dba CPI-HR GCG Financial, Inc. Hampson Mowrer Agency, Inc. dba Hampson Mowrer Kreitz Agency HP Planning, LLC (dba CBP and/or Creative Benefit Planning) Beacon Retiree Benefits Group, LLC INGROUP Associates, Inc. J.A. Counter & Associates, Inc. K.B. Group Services, Inc. dba Group Services, Inc. Pentra, Inc. MFG Retirement Systems, Inc. dba PWA Insurance Services Robert G. Relph Agency, Inc. (dba Relph Benefit Advisors) & Flexible Benefits System, Inc. Silberstein Insurance Group, LLC Shirazi Benefits, LLC Shirazi-Miller Benefits, LLC TRUEBenefits, LLC Virtus Benefits, LLC 1 Marsh, Berry & Company, Inc. was financial advisor to the participating selling organizations. These organizations were acquired by Alera Group effective December 30, MARSHBERRY learn. improve. realize MarshBerry.com Securities offered through MarshBerry Capital, Inc., Member FINRA and SIPC, and an affiliate of Marsh, Berry & Company, Inc Chagrin Blvd., Suite 400, Woodmere, Ohio ( ).

3 CONTRIBUTING AUTHORS MOLLY CONNELL, Senior Consultant DUSTIN GIOVANNELLI, Consultant ERIC HALLINAN, Vice President JACK MCDERMOTT, Data Analyst TOMMY MCDONALD, Vice President DAN SKOWRONSKI, Senior Vice President PHIL TREM, Senior Vice President JOHN WEPLER, Chairman and CEO COUNTERPOINT EDITORIAL BOARD MEGAN BOSMA, Senior Vice President LAUREN BYERS, Vice President, Marketing ALISON WOLF, Director, Research SOURCES & DISCLAIMERS + PHP: Perspectives for High Performance ABOUT COUNTERPOINT CounterPoint is the proprietary publication of MarshBerry. The magazine offers eleven editions annually and is published for independent insurance agents and brokers, national brokers, private equity firms, banks & credit unions, insurance carriers and specialty distributors. MARCH SPOTLIGHT Now is the Time to Arm Yourself with Information Change is coming, but one thing is certain now is not the time to be uninformed. If you re like many of us in the insurance brokerage industry, you ve heard President Trump vow to deconstruct Obamacare, implement corporate income tax reform, and renegotiate foreign trade agreements. You ve watched the Merger & Acquisition (M&A) market explode in 2015 and again in Private equity-backed brokers are hammering you with voic s, letters, and the occasional popcorn tin. Meanwhile, the federal reserve is signaling significant interest rate increases in the near future. What does this mean for your business? Where are the opportunities and pitfalls? Join us at the MarshBerry 360 Seminars in May where we ll discuss trends in the industry. At its core, the MarshBerry 360 seminars provide attendees with an unbiased outlook on the State of the Industry and the economic factors helping to drive the acquisition market. At an organizational level, the 2017 seminars focus on harnessing and interpreting your company s data to help make smart decisions. Information is constantly streaming into your agency we ll highlight what metrics we believe you should concentrate on and how they relate to organic growth, sales performance, and shaping the future of your agency BEST PRACTICE TOPICS INCLUDE: n State of the Industry n M&A Hot Topics & Trends* n Top 100 Industry Panel Discussion n Talent Acquisition n Compensation Modeling n Sales Culture Development n Employee Engagement Nobody has a crystal ball in these uncertain times, but we believe that thought leadership from MarshBerry s executive team members will help arm you with the information you need to navigate today s market. Register today at *Securities offered through MarshBerry Capital, Inc., Member FINRA and SIPC, and an affiliate of Marsh, Berry & Company, Inc Chagrin Blvd, Suite 400, Woodmere, Ohio CounterPoint March

4 MARCH FEATURE YOUR GAME PLAN FOR GROWTH Combine a simple, time-tested strategy, talented team and the commitment to execute the plan, and you ve got a winning play. In the games of business and football, getting ahead is all about blocking and tackling. by Phil Trem, Senior Vice President Phil.Trem@MarshBerry.com Securities offered through MarshBerry Capital, Inc., Member FINRA and SIPC, and an affiliate of Marsh, Berry & Company, Inc Chagrin Blvd., Suite 400, Woodmere, OH March 2017 CounterPoint

5 YOU CAN DEVISE COMPLEX STRATEGIES TO OUTSMART COMPETITORS. BUT BASIC STRATEGIES THAT ARE WELL PLAYED DELIVER RESULTS. What happens when we get too fancy? We fumble. We become so focused on a certain move that we lose sight of the game going on around us. Our teams get frustrated, morale deflates. A culture that lacks drive will not set any records. Simple strategy. Talented team. Commitment to execute. As with any industry, there are insurance professionals who promote philosophies to boost growth, attract the best producers, make your firm more attractive to private equity whatever the goal. But at the end of the day, there s no secret to getting ahead, growing organically or perpetuating your business. It s all simple strategy, executed by a dedicated team. According to MarshBerry s experience, if you want to double your agency s growth in the next five years you have to grow an average of 15%. It s back to the basics. You can t cheat the numbers. If you want to score that growth target, you can t skip practice. There s no trick play that will get you to this number. It s hard work, time, talent and a will to stay on course with the plan. We know, talking about growth is easy. Executing is hard. So, let s take a closer look at the playbook for true growth the best practices that we have seen top-performing agencies follow. Successful agencies benchmark their businesses to measure performance, plan for perpetuation and vision their future organizational chart. Again, their strategies are simple. The challenge we all face is following through while blocking and tackling issues that arise so we can press forward. State of the Industry: Where Do You Stand? How does an average firm perform? How do standout agencies elevate growth? According to Business Insurance and MarshBerry opinion and experience, the insurance industry includes more than 25,000 businesses that all operate similarly. What separates the top performers from the rest is their ability to execute and their understanding of industry metrics. They reach for those lessons-learned from other agencies so they don t have to reinvent the wheel. They network with peers to share best practices. They find out what roadblocks keep other firms from growth and they learn the smart way: by not repeating those same mistakes. Understanding the state of the insurance industry and how it impacts your business is very important. With this knowledge, you can pivot quickly and make changes to your organization. Based on the market that is unfolding, you can determine whether to stay the course with your plan or if you need to call a timeout to regroup. Perpetuation: Independence in the 21st Century If you took a survey of agencies that sold their businesses in the last year and asked them if they always planned to sell, in our opinion, 95% of them would have said, No, of course not. We ll always remain independent. For many, the goal to perpetuate is a hollow promise they make to their people. That s because there s no actual plan to make perpetuation happen. Not only is execution an issue, there is no perpetuation strategy. A goal without a plan is just a wish, says Antoine de Saint-Exupery, the French writer. He s exactly right. Independence in the 21st Century is possible if you have a concrete plan. Also, the old way of perpetuation planning to pass a business on to the next generation of owners has evolved significantly within today s market. There are new solutions and approaches to help agencies reach their goals. Talent Management: Picture Your Future Agency If your goal is to double the size of your agency within five years, then the next question is: Who will help you achieve that growth? Talent management should be a continuous focus. That means constantly looking for that next resource, that next producer, that next support administrator not waiting to hire until there s a hole to fill. The key is to use your financial forecast to build the future infrastructure of your business. For example, if you re running Securities offered through MarshBerry Capital, Inc., Member FINRA and SIPC, and an affiliate of Marsh, Berry & Company, Inc Chagrin Blvd., Suite 400, Woodmere, OH CounterPoint March

6 TOP-PERFORMING FIRMS ARE FOCUSED ON SELLING NEW BUSINESS TO THE TUNE OF 20% PER YEAR IF THEY HOPE FOR 15% GROWTH. a $10 million agency today and want to be $20 million in five years, what does that larger firm look like? What team members will you need, and what will their roles be? What talent do you already have in-house, and what staff will you need to hire? Start asking those questions now and never stop recruiting. Organic Growth: Treat Your People like Shareholders According to MarshBerry s experience, top-performing firms are focused on selling new business to the tune of 15% per year if they hope for 20% growth. There s no way around organically growing your firm if you want to reach a goal like that. Back to the simple plan point, there are no shortcuts or secret plays to achieve success. It s about getting new business and plenty of it executing on sales goals. At your agency, do producers understand how the business is performing? Just like a publicly traded firm, you should report financial results to your producers and key employees. Treat them like investors. Let them know how you re doing as a business and what they should expect in the future. There are certain metrics to share that will shine a light on how their performance can impact your firm s overall success. There are core concepts that must be executed to be a true highgrowth organization. Compensation: Building a Motivated Culture There s no such thing as a plug-and-play compensation program that works for every agency. There isn t one single compensation structure that is guaranteed to produce more sales and create the best culture. It just doesn t exist. Compensation must be structured to align with your growth goals, and with your company culture. The program must speak to who you are as an organization. Compensation programs should help drive your people to execute on goals. They should feel rewarded for their hard Securities offered through MarshBerry Capital, Inc., Member FINRA and SIPC, and an affiliate of Marsh, Berry & Company, Inc Chagrin Blvd., Suite 400, Woodmere, OH METRIC OF THE MONTH THE IMPACT OF UNVALIDATED PRODUCERS ON YOUR AGENCY MarshBerry defines an Unvalidated Producer as a producer who does not write enough in new business to cover his/her payroll and benefits expense. Producer payroll represents the total amount of wages, commissions and bonus paid to employees designated as producers in our proprietary financial management system, PHP. Regardless of revenue size, all agencies strive to create and reach their organic growth goals each year. Those goals can put a tremendous amount of pressure on your producers if you don t have the necessary production personnel in place. Investing in unvalidated producers, in addition to training and retaining those individuals, will not only help your agency reach its goals, it will help create future leaders within your organization. Talent Acquisition is a key factor in helping your Agency reach the next level. Agencies go through various lifecycles over time, but whether an agency is new to the business or a more mature agency, all agencies have organic growth goals. As your agency grows, it can become more difficult to maintain organic growth targets when relying solely on your top producers. In addition to retaining top producers, it is crucial to continually add unvalidated producers to your sales team. The investment in unvalidated producers has risen during the past three years, but producer reinvestment is still lagging recommendations for agencies of all sizes. Investing in and mentoring unvalidated producers can help bridge the gap between your agency falling short of its goals and reaching its goals year after year. n 4 March 2017 CounterPoint

7 work, and challenged to improve their results. Your team should feel like a team. Compensation can be a true motivator or the ultimate de-motivator. Most people do not respond neutrally to their compensation; they ve got an opinion. Firms should understand what triggers their staff s performance, and what their people consider fair and reasonable. Organic growth depends on a team that wants to win. Get Your Game Plan for Growth You ve got a goal to double your agency s size, grow by 15% whatever your objectives, it s time to get real about what best practices will get you to that end goal. Too many agencies talk about organic growth or promise they ll perpetuate, but with no plan in place, they re not even in the game. It s time to get in the game. Network with industry peers who can share their lessons learned, and find out where you stand with benchmarking data. Get tools to help you vision your org chart of the future so you can hire the right people to propel your organization forward. This is not a sales pitch. It s a reality check. Ask top-performing agencies how they got to the top. There are no secrets. It s simple strategy and a commitment to execution. n LEARN HOW AT MARSHBERRY 360 Register online today! Use code MB4-MB for $425 a 50% discount! Securities offered through MarshBerry Capital, Inc., Member FINRA and SIPC, and an affiliate of Marsh, Berry & Company, Inc Chagrin Blvd., Suite 400, Woodmere, OH DIFFERENCE BETWEEN ACTUAL AND RECOMMENDED UNVALIDATED PRODUCER PAY + CounterPoint March

8 2016 Insurance Agency Transaction Multiples by Dan Skowronski, Senior Vice President & Molly Connell, Senior Consultant Buyer interest in size, growth and quality continues to drive deal multiples. Roll In pricing shows strong improvement as demand rises. After three years of robust increases in purchase price multiples, average 1 transaction multiples leveled off in Nonetheless, the average transaction price continued to have a strong Base Purchase Price and large Earn Out opportunity similar to last year. As a multiple of Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) the Base Purchase Price remained relatively unchanged for the average deal (7.74 times EBITDA in 2016 compared to 7.78 in 2015). Including the Realistic Earn Out, the average transaction price was 8.53 times EBITDA in 2016, down slightly from 8.72 in Significant Earn Out potential existed in 2016 if the Maximum Earn Out is achieved, resulting in an average maximum purchase price of times EBITDA, a slight drop from in For agencies within the best 25% of the average in 2016 however, they were able to obtain top-tier pricing well above these multiples (see chart). DEALMAKERS DIALOGUE Among the various classifications we track (Platform, Stand Alone and Roll In), Roll In agencies saw the largest increases. We define a Roll In as that involving the sale of a small privately-held agency or large book of business, which is physically rolled into the buyer s existing operations, either at closing or within a reasonably short period of time. This segment increased from 5.47 times EBITDA in 2015 to 6.60 in 2016 for the Base Purchase Price. The multiple including the Realistic Earn Out improved to 7.40 times EBITDA in 2016 (up from 6.49 in 2015), and the maximum purchase price improved as well (8.89 times EBITDA in 2016 compared to 7.12 in 2015). Based on feedback we have received from various buyers, we believe that the increased pricing is due to the focused attention many buyers have made to fill in their geographic footprint in search of growth and economies of scale through roll in opportunities. TRANSACTION MULTIPLES Source: MarshBerry proprietary database of transactions in which we were directly involved, those from which we have detailed information, transactions in the public record, our knowledge of the marketplace, and discussions with active buyers and sellers. Past performance is not indicative of future results. Multiples are averages and do not imply that all deals fall within these parameters. Securities offered through MarshBerry Capital, Inc., Member FINRA and SIPC, and an affiliate of Marsh, Berry & Company, Inc Chagrin Blvd., Suite 400, Woodmere, OH March 2017 CounterPoint

9 WE BELIEVE THE NUMBER AND VARIETY OF ACTIVE BUYERS THE PAST FEW YEARS AND SO FAR IN 2017 ILLUSTRATES A CONTINUED STRONG INTEREST IN THE INSURANCE DISTRIBUTION SPACE. We believe that large, sophisticated, organic growth-capable sellers with a solid bench of perpetuation candidates should have leverage to negotiate strong deal multiples in the near term. In addition, increased demand by buyers for Roll In opportunities should be a welcome sign for smaller agencies interested in partnering up with a larger buyer in their region, potentially bringing resources such as management strength, value-added services, and a robust sales approach. n Base Purchase Price The dollar amount Paid at Close, plus the Live Out the seller will receive. Paid at Close The amount of proceeds paid at the closing of a transaction, including any escrow for indemnification items. Live Out The amount a buyer may initially hold back, but which is paid as long as the seller s performance does not materially decline. This may also be paid at closing, but could be subject to a potential adjustment. If the Live Out is not paid at closing this payment is usually paid within one to three years, contingent upon delivering on the seller s pro forma revenue or EBITDA. Realistic Earn Out The dollar amount the seller is likely to receive in the future based on a number of factors including actual historical seller performance and buyer/seller review and discussion of earn out metrics. Maximum Earn Out The maximum possible earn out payment based on future performance. In certain circumstances where deals are not capped, this number represents the likely maximum through discussions with buyers and sellers. Earn Out The earn out represents the amount the seller can potentially achieve following a deal closing based upon the achievement of certain goals, typically related to growth of revenue and/or EBITDA. The average reflects deals completed by all buyer segments, including public brokers, private equity-backed brokers, banks, and independent agencies. 1 Securities offered through MarshBerry Capital, Inc., Member FINRA and SIPC, and an affiliate of Marsh, Berry & Company, Inc Chagrin Blvd., Suite 400, Woodmere, OH CounterPoint March

10 MEET THE SPEAKERS John Wepler, Chairman & CEO Phil Trem, Senior Vice President Nick Kormos, Vice President Eric Hallinan, Vice President John joined Marsh, Berry & Company, Inc. (MarshBerry) in 1991 and is Chairman and Chief Executive Officer. John is a frequent keynote speaker on organic growth management, valuation enhancement solutions, mergers and acquisitions (M&A)*, business planning, ownership perpetuation and financial management at national conferences, agent association meetings, insurance carrier elite meetings and executive leadership forums. John has extensive knowledge in the area of merger & acquisition advisory, having personally advised on over 170 M&A transactions since joining the firm. He currently maintains the Series 62, 79, 99, 24 and 63 FINRA Registrations through MarshBerry Capital, Inc., the affiliated FINRA-registered Broker/ Dealer of Marsh, Berry & Co., Inc. Phil joined Marsh, Berry & Co., Inc. (MarshBerry) in 2010 and was promoted in 2015 to Senior Vice President. Phil is a key contributor to MarshBerry s M&A services division* and is responsible for deal execution on both buy-side and sell-side transactions. He has extensive knowledge in the areas of acquisition analysis, due diligence, deal negotiation and integration planning. Aside from his responsibilities within the firm s M&A division, Phil is a regular contributor to MarshBerry s consulting practice. His consulting activities involve internal perpetuation planning, agency valuations, business planning, financial and organizational development, and compensation strategies. Phil currently maintains the Series 62, 79 and 63 FINRA Registrations through MarshBerry Capital, Inc., the affiliated FINRAregistered Broker/Dealer of Marsh, Berry & Co., Inc. Nick is Vice President and Unit Leader of MarshBerry s Sales Performance Division. His team focuses on producer training/ coaching and agency sales culture development. Nick has over 15 years of sales and sales management experience and spent more than six years of his career in production and management roles at an independent insurance agency. He has presented on a multitude of topics surrounding agency growth, producer sales tactics, and organizational infrastructure. He also leads and facilitates SalesPro training sessions and organic growth best practices seminars hosted by MarshBerry. Eric joined Marsh, Berry & Co., Inc. (MarshBerry) as a Consultant in 2011 and was promoted to Vice President in As a member of MarshBerry s California-based team, his current consulting activities involve M&A advisor*, business planning, financial management consulting, due diligence, valuation services, compensation consulting, and ownership perpetuation. In addition, Eric is a public speaker, focusing on topics within the insurance industry, and he has contributed to various insurance related articles and industry publications. Eric currently maintains the Series 62, 79 and 63 FINRA Registrations through MarshBerry Capital, Inc., the affiliated FINRA-registered Broker/ Dealer of Marsh, Berry & Co., Inc. See details on the back of this issue to register today! * Securities offered through MarshBerry Capital, Inc., Member FINRA and SIPC, and an affiliate of Marsh, Berry & Company, Inc Chagrin Blvd., Suite 400, Woodmere, OH March 2017 CounterPoint

11 ALL THE DATA YOU NEED TO HELP GROW YOUR BUSINESS 2017 BEST PRACTICE TOPICS INCLUDE: NOLA MAY 9 NYC MAY 11 CHI MAY 23 LV MAY 25 State of the Industry Merger & Acquisition Hot Topics & Trends* Top 100 Industry Panel Discussion Talent Acquisition Compensation Modeling Sales Culture Development Employee Engagement Register online at MarshBerry.com/360 or call SPONSORED BY: PLATINUM GOLD SILVER STRATEGIC PARTNER MARSHBERRY learn. improve. realize. *Securities offered through MarshBerry Capital, Inc., Member FINRA and SIPC, and an affiliate of Marsh, Berry & Company, Inc Chagrin Blvd., Suite 400, Woodmere, Ohio ( ). Marsh, Berry & Co., Inc. and its affiliates are non-affiliated entities with First Insurance Funding, Zywave, ReSourcePro, Westfield Insurance and Insurance Journal.

12 UNIQUE DEAL MAKES WAVES TO END THE The Most Unique Deal of the Year Tommy McDonald chatted with Alan Levitz, CEO Alera Group, Inc. (Alera Group) about this momentous transaction. by Tommy McDonald, Vice President Call it a merger, call it a platform, or call it another private equity transaction. Some may even call it a miracle. We would simply call it unique. Ending the year in historic fashion, newly formed Alera Group brought together 24 independent firms into one company. What makes this deal(s) unique? Two things come to the top of the list the concentration of employee benefits revenues and the number of firms coming together to form one organization, entering the marketplace as the 14th largest insurance firm in the country representing the 7th largest employee benefits operation (in terms of revenue). Alan Levitz, the CEO of Alera Group commented on the uniqueness of the transaction, There was a great deal of familiarity within the majority of the 24 firms as we interacted and collaborated through the Benefits Advisors Network (BAN). These firms, and a few of their friends, chose to create an even deeper collaboration model that included accountability to each other. Anyone that has ever bought or sold a company can respect the effort associated with getting a deal closed. Imagine those efforts multiplied by 24. Leadership sees the discovery and collaboration over the past 18 months as a spring board for opportunity as they move forward. Levitz continued, During the 18 months that we worked to make Alera Group a reality, we really began to get a sense for the strengths and challenges of both the individual firm owners and the group as a whole. Work groups were formed six months prior to our launch. During those six months we learned to leverage the strength of the firm owners. Some of our owners are ripe with phenomenal ideas, some are terrific at making sure that we execute the ideas. Still other owners possess great technical expertise while others are brilliant marketers. These work groups will continue to add value as we work through opportunities, issues and solutions. SHARED VISION. Levitz attributes commitment to a shared vision as the number one driver of getting this transaction completed. The firms are unified in their view that there is more to be gained as part of a larger, more experienced team than there is staying independent just for the sake of being independent. A deal 18 months in the making, the ability to bring together 24 individual firms and ownership groups across 40 states, speaks to the commitment from the firms leadership to making this a reality, the quality of the deal team leading the transaction, and the importance of long term relationships. PARTNERSHIP IS KEY. In order to make Alera Group work, we needed great partners. Levitz added A great private equity partner like Genstar Capital, LLC (Genstar) was able to provide expertise, capital and an appropriate amount of debt today and a commitment of additional capital in the future. Second, each of the firm owners was able to take some chips off the table. Alera Group became the umbrella company that owns our firms; in return we kept an interest in a significantly large percentage of the newly created organization. Genstar is one of the more seasoned insurance distribution-focused private equity groups with current and former investments in the insurance industry, including Insurity, Financial Horizons Group, Innovative Aftermarket Systems, Palomar Specialty, and Confie 10 March 2017 CounterPoint

13 2016 TRANSACTION YEAR. Seguros, a Hispanic-focused auto insurance broker founded by Genstar in 2008 (exiting in 2012). Up until this past year, Genstar was the capital partner behind Acrisure, LLC the 14th largest firm in the country on the 2016 Business Insurance Top 100 list and one of the most active buyers in the space over the past five years. JUST THE BEGINNING. Our organic growth goal is to achieve double the industry average. We think that with promoting client based outcomes and enhancing the experience of our clients, we will achieve these targets. Cross-selling between our different services is also a big component of our strategy. We will use our platforms and success to attract likeminded firms to join us. We are already playing nationally and will be looking to add firms that both match up with our existing footprint and enhance that footprint adding new locations building all three lines of our business. Given the concentration and size of their employee benefits and wealth management revenue, Alera Group becomes a different type of buyer in the marketplace. There is an interesting opportunity for entrepreneurial owners and firms to join Alera Group and get in on the ground floor. There will be both financial and leadership opportunities that are available early in Alera Group s business life. In addition, Alera Group offers an opportunity for a substantial additional economic return by offering the ability to reinvest in the company. Marsh, Berry & Company, Inc. (MarshBerry) is honored to be the investment banking firm* that brokered the transactions that brought these 24 agencies and one networking organization together to form Alera Group 1, as funded by Genstar Capital. We believe this deal demonstrates MarshBerry s aptitude in coordinating the complexities that arose out of consolidating these entities into what is now a top 20 independent broker in the United States. Alan Levitz, CEO of Alera Group Growing their Property & Casualty (P&C) revenue over the next five years is a core focus as Alera Group looks to balance its benefits and P&C revenue. With a growth goal of $500,000,000 in revenues, we believe Alera Group will be an interesting company to watch. n *Securities offered through MarshBerry Capital, Inc., Member FINRA and SIPC, and an affiliate of Marsh, Berry & Company, Inc Chagrin Blvd., Suite 400, Woodmere, Ohio Marsh, Berry & Company, Inc. was financial advisor to the participating selling organizations. These organizations were acquired by Alera Group effective December 30, ALERA GROUP THE NUMBERS 24 INDEPENDENT FIRMS 20,000 CLIENTS NATIONALLY $158M IN ANNUAL REVENUES 40 OFFICES 15 STATES 14TH LARGEST FIRM IN THE COUNTRY Source: Insurance Journal AGENCY SPOTLIGHT CounterPoint March

14 Agency Data: Know Your Stats by Eric Hallinan, Vice President If you end up in the hospital after having a heart attack, every day your doctor monitors your vital signs: your temperature, pulse, blood pressure, etc. By carefully measuring and monitoring data, your medical team can evaluate your progress, address root causes, and develop a concrete plan to improve your health and vitality. This analogy is the same for your agency. To succeed, you must study the mechanics of your agency, pinpoint the vital signs, and then devise ways to focus constantly on them. Find out what important data needs to be measured, analyzed, managed, improved, and optimized. Consider the following suggestions of essential items. This list is by no means exhaustive. WE RECOMMEND THAT YOU BENCHMARK EACH AGAINST YOUR AGENCY S HISTORICAL PERFORMANCE AS WELL AS THE AVERAGES FOR COMPARABLE AGENCIES. FOR THE RECORD Total Commissions & Fees Growth How much growth in Total Commissions & Fees has your agency experienced in the last year? How does it compare to the prior year, or to your competition? You should also consider specifically measuring growth in different revenue lines (commercial lines, personal lines, benefits, etc.). See Figure 1. New Business Growth It is important to know the total amount of new business produced during the past twelve months as a percentage of the agency s total commission income over the prior year. Are you producing enough new business to overcome leakage and have net agency growth that is above average? This ratio helps an agency understand the amount of new business produced for benchmarking purposes and for setting budgeted new business growth over the following year. See Figure 1. Average Account Size Do you know your agency s average total commission per client? How does your Average Account Size this year compare to last year? This statistic is also informative when split by revenue line (commercial lines, personal lines, benefits, etc.). See Figure 2. Employee Efficiency Every agency owner should know the agency s revenue per employee, revenue per service person, and revenue per producer. It s common for some staff members to complain about having too much work. How do you know if that s true or not? Measuring and managing this statistic can help. See Figure 3. There are many other data that can be measured and may prove essential to your organization s success. The suggestions above are merely a few options to consider as you focus on improving and optimizing your agency. n Securities offered through MarshBerry Capital, Inc., Member FINRA and SIPC, and an affiliate of Marsh, Berry & Company, Inc Chagrin Blvd., Suite 400, Woodmere, OH March 2017 CounterPoint

15 FIG. 1: AVERAGE NET & NEW BUSINESS GROWTH ++ PEER EXCHANGE NETWORK NEWS Join us for the 2017 MarshBerry University Webinar Series! Exclusively for executive Peer Exchange Network partners, and their staff. FIG. 2: AVERAGE ACCOUNT SIZE ++ Each webinar presents 20 minutes of content from one of MarshBerry s thought leaders with 10 minutes for questions. Take advantage of opportunities to get consulting advice and updates on MarshBerry s industry-leading data by registering for any or all of these webinars: 3.24 Updates & Trends In Organic Growth Deal Multiple Review 5.19 An Expert s Guide To Evaluating Résumés 6.23 Utilizing Lean Methodology To Improve Process FIG. 3: AVERAGE EMPLOYEE EFFICIENCY The Importance Of Strategic Planning 8.18 Updates In Employee Benefits 9.22 Trends In Indemnity Building A Culture Of Inclusion Updates & Trends In Organic Growth December 15: 2018 Projections Register now! ++ Source: MarshBerry proprietary financial management system, Perspectives for High Performance (PHP). Average is defined as the average for all agencies in the PHP database. Data as of 9/30 for each given year. Securities offered through MarshBerry Capital, Inc., Member FINRA and SIPC, and an affiliate of Marsh, Berry & Company, Inc Chagrin Blvd., Suite 400, Woodmere, OH INTERESTED IN LEARNING MORE ABOUT OUR PEER EXCHANGE NETWORKS? Please contact Tommy McDonald today at Tommy.McDonald@MarshBerry.com CounterPoint March

16 Q&A with John Wepler 1 There has been some noise around a possible elimination of the interest deduction by the Trump Administration. What do you see as the potential impact on the US mergers and acquisitions (M&A) market in the insurance distribution space? First, it is highly uncertain if the interest income deduction will be eliminated and there have not been extensive details of any possible policy shift made public on this topic at present. That said, at MarshBerry, we anticipate that any interest income deduction elimination would be paired with a corporate tax rate reduction. Due to this potential tradeoff, we believe values and Private Equity (PE) interest will remain at current high levels in the insurance distribution space. And, considering the volume of intangibles being amortized from prior acquisitions, taxable income would remain negative for many of the buyers, even if the interest deduction was eliminated. While not being proposed, if the amortization deduction was eliminated, we believe strongly that multiples would drop even if the elimination was accompanied by a reduction in the corporate tax rate. We note that some public brokers recently indicated that they would not favor debt reduction over M&A. Arthur J. Gallagher management stated, We would still continue to be an active acquirer of nice tuck-in acquisitions, which would pay better than repaying the debt. The public buyers know that leverage can help drive shareholder return. We see a strong focus throughout the buyer market on deal pipeline development. Marsh & McLennan Companies (MMC) has recently favored a string-of-pearls approach integrating over 120 smaller transactions (smaller relative to the size of MMC) over the past seven years which has afforded them the ability to utilize more cash and less financing. While public and private brokers buyers would love to see less competition from Private Equity backed firms on deals, we have yet to see enough public policy clarity to suggest any change in the status quo. QUARTER IN REVIEW 2 President Trump campaigned on revising the US tax infrastructure what is the expected impact on M&A multiples for the insurance distribution industry? There have not been many specific details of the nature and timing of a tax policy overall. A corporate tax reduction from 35% to 20% has been publicized and if such a policy change is enacted, we see the impact on M&A multiples to yield a favorable increase given the viability for increased cash flow and ultimately the prospect for greater return on investment. Based upon the inherent math, firms will be paying a higher multiple for the exact same cash. MMC has committed over $2.5 billion of capital since 2009 and their return on investment calculations factor in a high US tax rate. If a tax reduction is implemented MMC has a favorable outlook citing it means that $2.5 billion return profile, is far better that the good returns that we are already receiving and so it is a huge potential positive for us. This could allow for increased capital to help offset increased multiples. Brown & Brown, Inc. (BRO) and Arthur J. Gallagher & Co. (AJG) are focused on solid agencies with good margins and management that is looking to stay in the business. Given the current multiple environment BRO is looking at acquisitions opportunistically and building cash on their balance sheet to deploy for potential share repurchases and reinvestment. A reduced tax infrastructure would boost their ability to retain cash. AJG indicated that they are not in favor of where the multiples currently reside and they are satisfied with the quality tuck-in opportunities currently in their pipeline. AJG has even gone as far as to calculate their 2016 pro forma earnings, inclusive of the federal corporate tax rate dropping to 20%. They believe their core adjusted brokerage and risk management earnings per share (EPS) could increase as much at 18% and their company adjusted EPS as much as 10%, under the proposed revision. Sources: Data for Arthur J. Gallagher & Co., Brown & Brown, Inc. and Marsh & McLennan Companies was obtained through the 4Q16 public investor calls for each organization as well as other publicly available sources. Securities offered through MarshBerry Capital, Inc., Member FINRA Member SIPC and an affiliate of Marsh, Berry & Company, Inc., Chagrin Blvd., Suite 400, Woodmere, Ohio Marsh, Berry & Co., Inc. and MarshBerry Capital, Inc. do not provide tax or legal advice. These professionals should be consulted before implementing changes to your tax or legal matters. 14 March 2017 CounterPoint

17 MARCH 2017 BROKER TEARSHEET The Broker Tear Sheet is a proprietary quarterly report from MarshBerry that highlights critical ratios and statistics on the performance and market value of the five publicly traded insurance brokers. The information is compiled from a number of credible sources including: S&P Global Market Intelligence, Yahoo! Finance, Morningstar and Reuters reports along with company websites. The one and five year Financial Performance Indicators are updated after each broker s year end filing (Q4), while the remaining metrics are updated on a quarterly basis. Q Snapshot (as of ) BROKER Aon Corporation Arthur J. Gallagher & Co. Brown & Brown, Inc. Marsh & McLennan Companies, Inc. Willis Towers Watson Ticker AON AJG BRO MMC WLTW Total Revenue LTM (in $ mil) 11,636 4,186 1,767 13,216 7,860 Number of Employees (FTEs) 1 68,790 24,790 8,297 60,000 40,000 Number of Offices Revenue per Employee ($) 169, , , , ,500 Revenue per Office ($) $23,272,000 $6,440,308 $7,330,290 $22,026,667 $19,650,000 ENTERPRISE VALUE 2 Common Stock Price ($) Number of Shares Outstanding (in 000s) 262, , , , ,279 Market Capitalization (in $ mil) 29,221 9,266 6,285 34,741 16,664 Plus: Total Debt (in $ mil) 6,205 2,848 1,074 4,807 3,865 Plus: Preferred Stock & Minority Interest in Subsidiaries (in $ mil) Less: Cash & Short Term Investments (in $ mil) , Equals: Enterprise Value (in $ mil) $35,052 $11,628 $6,843 $38,602 $19,828 BOOK OF BUSINESS VALUE Market Capitalization (in $ mil) 29,221 9,266 6,285 34,741 16,664 Less: Tangible Net Worth (in $ mil) -5,438-1,739-1,023-3,223-4,724 Equals: Book of Business Value (in $ mil) $34,659 $11,005 $7,308 $37,964 $21,388 ORGANIC GROWTH Organic Growth 3 3.0% 2.8% 3.5% 3.0% -0.5% Total Growth 4 0.9% 3.6% 7.2% 0.8% 92.0% 1 Number of employees and number of offices are estimates based on data provided in annual reports, S&P Global Market Intelligence and on corporate websites by each company. 2 Numbers may not add up due to rounding. 3 Both Organic Growth and Total Growth represent the most recent quarter (MRQ) in comparison to the same period for the prior year for all reported segments. As such, the difference is comprised of growth by acquisition and disposition of applicable business units for the MRQ. It could include items such as contingent revenue, acquisition revenue and disposed revenue from those that would exclude it from their organic growth calculation. Organic Growth calculations vary by broker (see reverse side). 4 Total growth for Willis Towers Watson includes merger effective January 4, 2016 The Broker Tear Sheet has been prepared by Marsh, Berry & Co., Inc. This is an overview and analysis of the five publicly traded insurance brokers, and is not intended to provide investment recommendations on any company. It is not a research report; as such term is defined by applicable laws and regulations. It is not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any securities, financial instruments or to participate in any particular trading strategy. This tear sheet is distributed with the understanding that the publisher and distributor are not rendering legal, accounting, financial or other advice and assume no liability in connection with its use. This tear sheet does not rate or recommend securities of individual companies, nor does it contain sufficient information upon which to make an investment decision. These materials are based solely on information contained in publicly available documents and certain other information provided to Marsh, Berry & Co., Inc., and Marsh, Berry & Co., Inc. has not independently attempted to investigate or to verify such information. Marsh, Berry & Co., Inc. has relied, without independent investigation, upon the accuracy, completeness and reasonableness of such information and therefore has assumed no obligation to update this data for financial restatements. These materials are intended for your benefit and use and may not be reproduced, disseminated, quoted or referred to, in whole or in part, or used for any other purpose, without the prior written consent of Marsh, Berry & Co., Inc. Nothing herein shall constitute a recommendation or opinion to buy or sell any security of any publicly traded entity mentioned in this document. Numbers may not add up due to rounding, however, this does not materially affect the data integrity. Securities offered through MarshBerry Capital, Inc., Member FINRA, Member SIPC, and an affiliate of Marsh, Berry & Co., Inc Chagrin Blvd., Suite 400, Woodmere, Ohio

18 Q Financial Performance Indicators (as of ) GROWTH Total Revenue LTM (in $ mil) Organic Growth Quarter End 4Q16 5 Organic Growth Year to Date as of Revenue YOY Growth as of Revenue Growth 5 Year CAGR Marsh & McLennan 13,216 Brown & Brown 3.5% Marsh & McLennan 3.0% *Willis Towers Watson 102.4% *Willis Towers Watson 17.9% Aon 11,636 Aon 3.0% Aon 3.0% Brown & Brown 6.4% AJ Gallagher 14.8% *Willis Towers Watson 7,860 Marsh & McLennan 3.0% Brown & Brown 3.0% AJ Gallagher 3.6% Brown & Brown 11.8% AJ Gallagher 4,186 AJ Gallagher 2.8% AJ Gallagher 2.7% Marsh & McLennan 2.1% Marsh & McLennan 2.7% Brown & Brown 1,767 *Willis Towers Watson -0.5% *Willis Towers Watson 2.0% Aon -0.6% Aon 0.6% Median 7,860 Median 3.0% Median 3.0% Median 3.6% Median 11.8% PROFIT EBITDA 6 LTM (in $ mil) EBITDA Margin LTM EBITDA Margin 5 Year Average EBITDA YOY Growth as of EBITDA Growth 5 Year CAGR Marsh & McLennan 3,107 Brown & Brown 32.3% Brown & Brown 32.4% *Willis Towers Watson 98.0% *Willis Towers Watson 19.2% Aon 2,460 Marsh & McLennan 23.5% Aon 21.1% AJ Gallagher 11.9% AJ Gallagher 17.6% *Willis Towers Watson 1,293 Aon 21.1% Marsh & McLennan 21.0% Marsh & McLennan 7.4% Brown & Brown 10.2% AJ Gallagher 818 AJ Gallagher 19.5% AJ Gallagher 18.4% Brown & Brown 3.7% Marsh & McLennan 9.9% Brown & Brown 571 *Willis Towers Watson 16.5% *Willis Towers Watson 15.2% Aon -8.2% Aon 2.2% Median 1,293 Median 21.1% Median 21.0% Median 7.4% Median 10.2% BALANCE SHEET Tangible Net Worth (in $ mil) Tangible Net Worth as % of Revenue Debt to LTM EBITDA (Lower performance is usually best) Working Capital/ LTM Revenue Days of Working Capital Brown & Brown (1,023) Marsh & McLennan -24.4% Marsh & McLennan 1.5 Brown & Brown 17.9% Brown & Brown 85.7 AJ Gallagher (1,739) AJ Gallagher -41.5% Brown & Brown 1.9 Marsh & McLennan 6.1% Marsh & McLennan 27.3 Marsh & McLennan (3,223) Aon -46.7% Aon 2.5 Aon 5.6% Aon 23.8 *Willis Towers Watson (4,724) Brown & Brown -57.9% *Willis Towers Watson 3.0 *Willis Towers Watson 5.4% *Willis Towers Watson 20.7 Aon (5,438) *Willis Towers Watson -60.1% AJ Gallagher 3.5 AJ Gallagher -4.7% AJ Gallagher (18.6) Median (3,223) Median -46.7% Median 2.5 Median 5.6% Median 23.8 VALUE Market Cap (in $ mil) Price-Earnings Multiple Book of Biz Value as Multiple of LTM Revenue Book of Biz Value as Multiple of LTM EBITDA Enterprise Value as Multiple of LTM EBITDA Marsh & McLennan 34,741 *Willis Towers Watson 54.1 Brown & Brown 4.1 *Willis Towers Watson 16.5 *Willis Towers Watson 15.3 Aon 29,221 Brown & Brown 24.6 Aon 3.0 Aon 14.1 Aon 14.2 *Willis Towers Watson 16,664 AJ Gallagher 22.4 Marsh & McLennan 2.9 AJ Gallagher 13.5 AJ Gallagher 14.2 AJ Gallagher 9,266 Aon 21.6 *Willis Towers Watson 2.7 Brown & Brown 12.8 Marsh & McLennan 12.4 Brown & Brown 6,285 Marsh & McLennan 20.0 AJ Gallagher 2.6 Marsh & McLennan 12.2 Brown & Brown 12.0 Median 16,664 Median 22.4 Median 2.9 Median 13.5 Median 14.2 RETURN Dividend Yield Quarter End 4Q16 Earnings Yield Quarter End 4Q16 Price Per Share Growth LTM Price Per Share Growth 5 Year CAGR Total Return LTM AJ Gallagher 2.9% Aon 1.7% Brown & Brown 39.8% Aon 19.0% Brown & Brown 41.9% Marsh & McLennan 2.0% Marsh & McLennan 1.3% AJ Gallagher 26.9% Marsh & McLennan 16.4% AJ Gallagher 30.9% *Willis Towers Watson 1.6% AJ Gallagher 1.0% Marsh & McLennan 21.9% Brown & Brown 14.7% Marsh & McLennan 25.2% Brown & Brown 1.2% Brown & Brown 0.9% Aon 21.0% AJ Gallagher 9.2% Aon 23.8% Aon 1.2% *Willis Towers Watson 0.2% *Willis Towers Watson -5.0% *Willis Towers Watson 3.5% *Willis Towers Watson -3.2% Median 1.6% Median 1.0% Median 21.9% Median 14.7% Median 27.5% * WLTW includes financial information from the merger that was effective January 4, As reported in the MD&A published by each company; and calculated and reported slightly differently by each. AON: Includes all revenue except business unit transfers, unusual items and reimbursable expenses. AJG: Includes base organic commission & fee revenue and excludes supplemental and contingent commission revenue, impact of prior year large account wins, run-off related to the New South Wales Workers Compensation Scheme, South Australia ramp up fees and New Zealand claims administration. BRO: Includes total commissions excludes profit sharing and guaranteed supplemental commissions. MMC: Includes all segments of revenue, using consistent currency translation (excluding divestitures, transfers among business units, acquisitions, and deconsolidation of Marsh India). WLTW: Includes total commissions & fees (excludes goodwill impairment charges, debt extinguishment, investment income, and other income). All broker organic growth calculations exclude the impact of foreign currency translation, divestitures, transfers, disposed operations, and the first twelve months of acquisition commission & fee revenue. 6 EBITDA is not adjusted to include the add-back of non-recurring expenses written off throughout the year. TERMINOLOGY KEY: LTM: LAST 12 MONTHS ( ); CAGR: COMPOUND ANNUAL GROWTH RATE ( ); EBITDA: EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION & AMORTIZATION; NM: NON-MEASURABLE; YOY: YEAR OVER YEAR Securities offered through MarshBerry Capital, Inc., Member FINRA, Member SIPC, and an affiliate of Marsh, Berry & Co., Inc Chagrin Blvd., Suite 400, Woodmere, Ohio No portion of this publication may be reproduced without express written consent from Marsh, Berry & Company, Inc. All rights reserved 2017.

19 CHALK IT UP TO MARSHBERRY. #1 M&A RANKING BY S&P GLOBAL MARKET INTELLIGENCE MARSHBERRY MOST ACTIVE: ADVISOR RANKINGS Merger & Acquisition Transactions in Insurance Brokerage Ranked by Total Number of Deals Deals A EVERYONE ELSE 602 B Completed Transactions Completed transactions in the United States as reported by S&P Global Market Intelligence, February 1, 2017 This data displays a snapshot at a particular point in time of the number of deals as reported by S&P Global Market Intelligence. It has not been updated to reflect subsequent changes, if any. 602 B total Merger & Acquisition (M&A) transactions advised on since 1999, representing 28% of total advised deal flow as tracked by S&P Global Market Intelligence. $4.1B in advised transaction value since 2012 C 325 M&A transactions since 1995 with the 100 largest brokers of U.S. business as identified by Business Insurance, and over 205 Bank-Related Insurance M&A transactions since 1997 Completed more than 275 diagnostic and confirmatory due diligence projects over the last thirteen years MARSHBERRY learn. improve. realize A Completed transactions in the United States for 2016 as reported by S&P Global Market Intelligence, February 1, B These totals include certain transactions completed by Marsh, Berry & Company, Inc. professionals while employed at another firm, whereby substantially all of the assets were acquired by Marsh, Berry & Company, Inc. C Based upon maximum possible purchase price; MarshBerry advised deals through 12/31/16. Securities offered through MarshBerry Capital, Inc., Member FINRA and SIPC, and an affiliate of Marsh, Berry & Company, Inc Chagrin Blvd., Suite 400, Woodmere, Ohio ( ).