1. CONFIDENTIAL Recruiting and Developing Young Producers Tom Doran

2. CONFIDENTIALRecruiting and Developing Young Producers Pursuing Young Sales Talent People are an agency’s greatest asset Finding those people is often the agency’s greatest challenge There is an opportunity to include more young individuals in the search for talent What can we learn about hiring and developing young producers from those who do it well? 2

3. CONFIDENTIALRecruiting and Developing Young Producers Producer Recruiting and Development 1.The Case for Hiring Young Producers 2.The Economics of Producer Hiring 3.Best Practices for Producer Hiring & Development 3

4. CONFIDENTIALRecruiting and Developing Young Producers 2009 Young Producer Study 4

5. CONFIDENTIALRecruiting and Developing Young Producers Successful Young Producers Hired under the age of 30 Hired within last 10 years Selling Commercial P&C or Employee Benefits insurance Successful 5

6. CONFIDENTIALRecruiting and Developing Young Producers Young Producer Study Process BASELINE SURVEY IN-DEPTH FIRMS IN-DEPTH PRODUCERS 2065491 Assessed baseline level of young producer hiring in the industry Identified firms with success hiring young producers as well as strong sales cultures Completed detailed survey on hiring and development practices and production results Identified young producers who have been successful Detailed survey Personality and behavioral assessment Interview 6

7. CONFIDENTIALRecruiting and Developing Young Producers Baseline Survey Results Frequency of Young Producer HiresSuccess of Young Producer Hires 7

8. CONFIDENTIALRecruiting and Developing Young Producers Key Findings College recruiting is working 8

9. CONFIDENTIALRecruiting and Developing Young Producers College Recruiting Frequency 9

10. CONFIDENTIALRecruiting and Developing Young Producers College Recruiting Success Months Until ValidationYear Three New Business 10

11. CONFIDENTIALRecruiting and Developing Young Producers Successfully Recruiting Colleges Investing in on-campus recruiting Establishing an internship program Hiring in classes Why recruit at colleges? Because that’s where the talent is 11

12. CONFIDENTIALRecruiting and Developing Young Producers Key Findings College recruiting is working Well-rounded individuals trump academic superiority or sales experience 12

13. CONFIDENTIALRecruiting and Developing Young Producers Look For the Raw Athlete 58%41%48% Percentage of Successful Young Producers who were involved in at least two campus activities and who worked during school Percentage of Successful Young Producers who were involved in at least two campus activities, had a leadership role in at least one student organization and who worked during school Percentage of Successful Young Producers who were involved in at least two campus activities, worked during school and maintained a 3.0 GPA or higher 13

14. CONFIDENTIALRecruiting and Developing Young Producers Variables Influencing Success 14

15. CONFIDENTIALRecruiting and Developing Young Producers Key Findings College recruiting is working Well-rounded individuals trump academic superiority or sales experience Young producer economics can be attractive 15

16. CONFIDENTIALRecruiting and Developing Young Producers Comparing Returns Factor Metric Examined Young Producers Producers of All AgesAdvantage Hiring Success Rate % of Hires that are Successful ~ 50% - 55%53%Draw 16

17. CONFIDENTIALRecruiting and Developing Young Producers Capturing Returns The economics of Young Producer hiring don’t appear riskier or weaker than the economics of producer hiring in general Young Producers give agencies an opportunity to diversify risk in producer hiring Young producer hiring can be a low-cost organic growth strategy 17

18. CONFIDENTIALRecruiting and Developing Young Producers Key Findings College recruiting is working Well-rounded individuals trump academic superiority or sales experience Young producer economics can be attractive Young Producer hiring is a different game 18

19. CONFIDENTIALRecruiting and Developing Young Producers Attracting Young Producers Compensation opportunity is tremendous – For younger producers, cash is more important than equity Ability to build relationships with clients Freedom and flexibility Gratification: “Winning” Reaching the Target AudienceMessaging Percentage of Successful Young Producers entering the industry via family, friends or “accident” 46% 19

20. CONFIDENTIALRecruiting and Developing Young Producers Managing Younger Producers Young producers generally need more extensive training in the insurance industry and in sales Mentoring programs are critical – 97% of the firms in our study had mentorship programs – Most programs lasted up to three years or longer Hire in classes to foster competition and efficiently spend training dollars 20

21. CONFIDENTIALRecruiting and Developing Young Producers The Economics - The Cost of a New Producer 21

22. CONFIDENTIALRecruiting and Developing Young Producers New Producer Five Year Cash Flow Return on Investment 22

23. CONFIDENTIALRecruiting and Developing Young Producers New Producer Five Year Total Return on Investment (with asset value included) 23

24. CONFIDENTIALRecruiting and Developing Young Producers 2 Reasons why Reinvesting in Agency is so Positive Financially State and Federal Government subsidize people investments Asset value is larger than most people realize 24

25. CONFIDENTIALRecruiting and Developing Young Producers Four Key Principals in Recruiting and Development 1.Recruit in the Right Places 2.Recruit at the Right Rate 3.Set New Hires Up for Success 4.Make Quick Mistakes 25

26. CONFIDENTIALRecruiting and Developing Young Producers Recruit in the Right Places - Producers Current Sources All categories, 2013 BPS Study Success Rate 62% Are You Recruiting in the Right Places? 26

27. CONFIDENTIALRecruiting and Developing Young Producers Recruit in the Right Places - Producers Easier to Teach Insurance or Sales? Source: Group of Large Agents 27

28. CONFIDENTIALRecruiting and Developing Young Producers Recruit in the Right Places - Producers Maturity Business Acumen Compensation Requirements Active Management Required Life Experiences Network What is Your Agency Best Equipped to Handle? Challenges of Under 30 vs. Over 30 28

29. CONFIDENTIALRecruiting and Developing Young Producers Step 1: Find the total comp of all unvalidated producers Number of unvalidated producers4 Actual payroll of unvalidated producers$300,000 Step 2: What would the unvalidated producers earn under the agency’s normal producer commission schedule? Unvalidated producers’ total book of business$600,000 Agency blended commission rate30% Implied (“earned”) compensation$180,000 Step 3: Calculate the NUPP as a percentage of revenues Actual payroll of unvalidated producers$300,000 Implied (“earned”) compensation$180,000 NUPP$120,000 Agency Net Revenues$10,000,000 NUPP as a percentage of revenues 1.2% Source: 2013 BPS, Agencies with Revenue between $10.0M and $25.0M Net Unvalidated Producer Payroll Recruit at the Right Rate – Effective Investments in Sales Talent 29

30. CONFIDENTIALRecruiting and Developing Young Producers On a scale of 1-10, what factors have had the most impact on your success? Mentoring is Perhaps Most Important Source: Young Producer Study Update Set New Hires Up for Success - Producers 30

31. CONFIDENTIALRecruiting and Developing Young Producers How Soon Do You Know If a Producer will be Successful? Source: Young Producer Study Make Mistakes Quick - Sales 31

32. CONFIDENTIALRecruiting and Developing Young Producers Misses Have Broad Impacts Make Mistakes Quick - All Culture Economic Clients Carriers Productivity Hire and Fire Day One Clear and Measurable Targets Frequent Performance Assessments Three Key Principles Impacts of Non-Performance 32

33. CONFIDENTIALRecruiting and Developing Young Producers 33 To access Reagan’s Young Producer Study Update – Three Years Later, go to http://tinyurl.com/kjjnf75 or visit our webpage at www.reaganconsulting.com

34. CONFIDENTIALRecruiting and Developing Young Producers Tom Doran Senior Vice President & Principal Tom joined Reagan Consulting as a consultant in 1993 and became a principal in the firm in 1995. He holds an undergraduate degree in Computer Information Systems and a Masters of Business Administration from Georgia State University. Before joining Reagan Consulting, he worked in the computer industry, both as a software developer and as a management consultant. Tom’s areas of expertise include merger and acquisition representation, agency valuation, ownership perpetuation planning, agency valuation enhancement and strategic planning facilitation. Tom is a regular contributor to Reagan Consulting’s industry studies and is frequently published in various insurance industry publications. He also speaks on a regular basis to industry trade groups and associations on a wide variety of topics concerning the insurance distribution system. 404.869.2534 tom@reaganconsulting.com 34