10 LARGEST U.S.-BASED INSURANCE WHOLESALERS: STEWART SMITH GROUP INC.

Stewart Smith Group Inc.

26 Century Blvd., Nashville,

Tenn. 37214; 615-872-3030;

fax: 615-872-4408

1996 1995

Premium volume $366,169,000 $355,870,000

Gross revenues $28,728,000 $27,878,000

Employees 216 214

Commercial lines 100% 100%

Admitted business 40% 40%

Non-admitted 60% 60%

Stewart Smith Group Inc.'s premium growth was only 2.9% last year, which is not surprising considering the continuing soft market, according to Chairman and Chief Executive Officer Gary H. Cooper.

Mr. Cooper said growth was limited for three reasons: "The market is still softening overall, the standard carriers are now taking quite a bit of business, and premiums are having to go down."

Stewart Smith Group's premium volume was $366.2 million last year, up from $355.9 million in 1995.

Furthermore, this year premium volume is not expected to grow much, if at all, for the same reasons, he predicted. "Our business plan is for nearly flat revenues," he said.

However, Stewart Smith climbed one spot to become the fourth-largest wholesale broker in 1996, according to the Business Insurance rankings.

Stewart Smith's gross revenues rose 3% last year to $28.7 million.

First-half 1997 premium volume was about $175 million, "just a little below plan," Mr. Cooper said. Last year's first-half premium volume was $175.5 million. Mr. Cooper noted that much of the wholesaler's volume comes in the second half of the year because of renewal schedules.

Mr. Cooper said his goal for the next five years is "to have dramatic profit growth," which "may or may not mean dramatic premium growth."

Not only is Mr. Cooper new to Stewart Smith, he's also relatively new to the wholesale side of brokering. He joined Willis Corroon Group P.L.C., Stewart Smith Group's parent, about 21/2 years ago, as regional director for Texas for Willis Corroon America. He had been in the retail brokerage business since 1967, he said.

Earlier this year Mr. Cooper was given responsibility for all Willis Corroon's wholesale operations around the country.

In addition to being chairman and CEO of Stewart Smith Group, he is president and CEO of Willis Corroon's U.S. wholesale division.

"My role is to put a little different perspective on the wholesale side," he said. "Willis is trying

to put its best managerial talent where it will do the most good."

About 45% of Stewart Smith's premium volume is from casualty coverage, including primary general liability, automobile liability, excess liability and umbrella liability. Another 28% comes from directors and officers and errors and omissions liability coverages. The wholesaler had strong growth in D&O and E&O placements last year, Mr. Cooper said. In 1995, those coverages made up 22% of Stewart Smith's premium volume.

Property coverage placements accounted for 25% of premium volume last year. Other coverages, including aviation liability and medical stop-loss coverage, accounted for the remaining 2% of placements.

Stewart Smith retained about 70% of its business last year, down from its historical retention of 77% to 78%, according to Mr. Cooper. However, the wholesaler is placing more new business, he added.

Mr. Cooper pointed out that Stewart Smith is trying to "get more specialized and into more program areas."

Stewart Smith's brokers are "not hidebound by geographic restrictions or regional restrictions," he said. Instead, the wholesaler is forming "teams that specialize in different areas."

For example, Mr. Cooper said he expects growth in Stewart Smith's environmental impairment liability practice, which started last year as a one-person office in New York. This practice will design EIL programs for large manufacturers and municipalities, according to Mr. Cooper.

"What's got to evolve is we've got to become more specialized," he said.

Stewart Smith also plans to "cross-use people and facilities and expertise" from Willis Corroon's other wholesale operations, Mr. Cooper said. It is a "logical transition for us to try to use what's at hand" to expand the wholesaler's business.

Stewart Smith launched a new general liability and professional liability program last year for contractors with at least $10 million in revenues. The wholesaler provides extra services to clients under this program, such as loss control surveys prior to binding the coverage, Mr. Cooper said.

Stewart Smith Group units have binding authority for American Empire Surplus Lines Insurance Co.; CNA Insurance Co.; Essex Insurance Co.; General Star Indemnity Co.; Northfield Insurance Co.; and Western World Insurance Group.

The vast majority-95%-of Stewart Smith's business is brokerage, with 3% generated as an MGA and 2% generated as a Lloyd's of London coverholder.

Stewart Smith's clients primarily are independent agents and brokers. The company works with about 3,000 agencies and brokers around the country, according to Mr. Cooper. About 75% of Stewart Smith Group's premium volume is generated by 300 large regional or "good-sized" local brokers, he added.

Willis Corroon accounted for 23% of premium volume in 1996. Less than 2% of premium volume is generated by other alphabet house brokerages, Mr. Cooper said.

Stewart Smith placed 40% of its business with admitted markets and 60% with surplus lines markets in 1996, the same proportion as the previous three years.

Stewart Smith's major markets during the past year included: Admiral Insurance Co.; Chubb Custom Insurance Co.; First State Management Group; General Star Management Co.; units of Reliance Group Holdings Inc.; RLI Insurance Co.; Royal Specialty Underwriting Inc.; units of The St. Paul Cos. Inc.; and Westchester Specialty Group.

Stewart Smith Group in 1996 had 216 employees, close to the 215-employee range it has maintained for several years. About 60 of these employees are brokers; the rest are support staff.

Mr. Cooper said the company is "going to try to bring in some more good brokers" who have specialties that would complement Stewart Smith's business.

Although the company is not opposed to growing through acquisitions, "we'd rather grow through bringing in good, established brokers," Mr. Cooper said.

Stewart Smith's subsidiaries are: McAlear Associates Inc., which is based in Grand Rapids, Mich., and operates a branch office in Cleveland; Stewart Smith East Inc., which is based in New York and has branch offices in Philadelphia, Bernardsville, N.J., and Farmington, Conn.; Stewart Smith Southeast Inc., which is based in Tampa, Fla., and operates a branch office in Nashville, Tenn.; Stewart Smith Environmental Specialists, based in New York; Stewart Smith Southwest Inc., based in Dallas; Stewart Smith Mid America Inc., based in Chicago; Stewart Smith Specialty Risks Inc., based in Southfield, Mich.; and Stewart Smith West Inc., which is based in Glendale, Calif., and operates branch offices in San Francisco and Phoenix.

Stewart Smith Group closed a one-person office in Eugene, Ore., in December 1996. The office had not been profitable for several years, Mr. Cooper said. That business now is being handled out of the two California offices.

In addition to Mr. Cooper, other top officers of Stewart Smith Group Inc. include: Edward F. Casey, chief administrative officer; Sue Dudley, chief financial officer; David Martin, president and CEO of McAlear Associates; Jim Compton, president and CEO of Stewart Smith Southeast; Elliott Jones, president and CEO of Stewart Smith Mid America; John McGovern, president and CEO of Stewart Smith Environmental Specialists; Fred Anderson, president and CEO of Stewart Smith West; Mark Smith, president and CEO of Stewart Smith East; and George Clarke, executive vp of Stewart Smith Specialty Risks.

Stewart Smith Group Inc. is a member of NAPSLO.