10 LARGEST U.S.-BASED INSURANCE WHOLESALERS: CRUMP INSURANCE SERVICES INC.

Crump Insurance Services Inc.

7557 Rambler Road, Suite 350

Dallas, Texas 75231;

214-265-2660; fax: 214-265-2661

Internet: www.crumpins.com

1996 1995

Premium volume $522,550,000 $520,000,000

Gross revenues $38,669,000 $38,700,000

Employees 339 319

Commercial lines 100% 100%

Admitted business 40% 40%

Non-admitted 60% 60%

Crump Insurance Services Inc. is seeing a payoff in its aggressive response to the challenge of generating growth in a soft market.

New products and programs were a big reason Dallas-based Crump was able to show an increase in premium volume as surplus lines marketers and underwriters continue the fierce battle for new accounts.

Growing in the soft market means finding "new ways to write business," said Marcus Payne, Crump's president and chief operating officer. "You have to find new areas, new opportunities to be in."

Crump Insurance Services was known last year as Price Forbes North America. Since then, parent Sedgwick Group P.L.C. sold rights to the Price Forbes name and as part of that deal agreed to no longer use it in the United States.

That means the units that previously made up Price Forbes North America now operate under the banner of Crump Insurance Services.

Crump's wholesale operations and the other divisions generated 1996 premiums up slightly from 1995.

Premium volume in 1996 crept up 0.5% to $522.6 million. The increase comes after a 3.9% drop in 1995.

Gross revenues were off a fraction in 1996, dipping to slightly below $38.7 million.

Crump's performance keeps it in the No. 2 spot among wholesalers, the same position Price Forbes North America occupied last year.

The premium increase comes despite the loss of premiums from two units: Sedgwick International Marketing Services Inc. and Southern Marine & Aviation Inc.

Sedgwick International Marketing Services, the New York-based wholesaler of "reverse-flow" business, now is part of the Sedgwick Group operation.

Southern Marine & Aviation Inc., Crump's Houston-based energy unit, continued to see premiums dip in a competitive market. SMAI recorded 1996 premiums of $43.4 million, an 18% decline from 1995.

A strong performance by Crump's wholesale brokerage operations helped boost the 1996 numbers.

Separate from the smaller units, Crump Insurance Services itself recorded premiums of $450 million last year, a 10.5% rise from 1995. Through June of this year, the wholesaler has posted $250 million in premium writings.

"We're having a very good year," said Orville D. Jones, chairman and chief executive officer of Crump. The first half total compares with $212 million written during the same period in 1995.

Crump is seeing success with new packages such as one it recently introduced for gun dealers.

Written exclusively by CNA Insurance Cos., the coverage offers commercial general liability coverage to gun dealers, gunsmiths and gun ranges. Limits up to $5 million are available, and property insurance can be purchased as part of the program.

"We expect that it will bring in some significant accounts," said Mr. Payne, noting that one large gun dealer already has signed on.

Crump also has stepped up efforts to bring in more professional liability accounts by establishing departments in existing offices in New York and Dallas to concentrate on that business.

New producers were hired to service those accounts, focusing particularly on errors and omissions and directors and officers liability risks.

Adding to the producer ranks helped push Crump's employee roster to 339 at the end of last year, up from 319 in 1995.

Crump continues to compete for other business that increasingly moves to admitted insurers as the soft market continues apace. Umbrella liability business is a particular favorite of competitors in the standard market.

While umbrella writings make up about 9.5% of Crump's total book of business, it has become "more of a standard-lines coverage than it used to be," according to Mr. Payne.

"Every line of coverage is very competitive," he said, and not only on the casualty side. Competition for property business has heated up as well.

Earthquakes and hurricanes boost those rates for a time, but "the further away you get from the last natural disaster, the softer the market gets," he said.

Crump placed 40% of its business in the admitted market last year, with the remainder going to non-admitted insurers. Those percentages are unchanged from 1995.

Soft market conditions aren't likely to change soon, Mr. Jones noted. Insurers are making record profits, and "there's so much capital available, everybody's going after market share, and I don't see it changing," he said.

At a time when hanging on to business is especially important, Mr. Jones said Crump consistently retains 65% to 70% of its accounts. Less than 30% of its business comes from Sedgwick's retail operations.

Part of the wholesaler's strategy for adapting to the soft market is to look outside the mainstream for business.

To that end, Crump is high on its new Alternative Risk Programs Division, a unique arrangement created last year as the exclusive marketer for a Bermuda-based rent-a-captive.

The division offers insurance for all lines. Coverage is written primarily by Star Insurance Co., a member

of Meadowbrook Insurance Group. The coverage is reinsured by Bermuda-based Transglobal Insurance Ltd.

The arrangement allows policyholders to enjoy some of the benefits provided by captive insurers, such as low administrative costs and the ability to recoup some premiums if loss experience is favorable, without the expense and work of establishing a captive.

Three programs, called COMPASS I, II and III, are available through the facility. One is written for individual risks, and another is available to groups and associations. A third program is available to agents, brokers and managing general agencies that want to provide coverage to existing clients while realizing a greater return than is generally available from commissions.

On an annualized basis, the Alternative Risk Division is generating about $20 million in premium volume, according to Mr. Jones.

The division has "an awful lot of potential for growth," he emphasized.

Mr. Jones believes SMAI eventually will contribute an increasing amount of premium volume to Crump's yearly total.

Although SMAI's premium volume has decreased steadily in recent years, 1997 is looking brighter, according to Mr. Jones. "They're having a very good year this year. We're very happy with their results."

Energy market factors and the runoff of Americas Insurance Co., a Sedgwick Group unit, has hurt SMAI in recent years. SMAI held MGA and underwriting management agreements with Americas.

Mr. Payne pointed out that SMAI's operations in Houston and New York are "both doing very well" in bringing in new cargo business. The New York office "just picked up a significant national account," he added.

Cargo owners and shipowners can purchase up to $40 million in coverage for a single loss incurred aboard a single vessel. The coverage is written through an underwriting management agreement with Dallas-based Gulf Insurance Co., which in turn shares the risk with insurers in London.

Mr. Jones pointed out that factors affecting the energy industry have made it tough for SMAI to generate new business. Competition for energy accounts is coming from several areas.

"I don't think anything that is happening in the energy field right now is going to help anybody in the wholesale business," he remarked. Mergers and acquisitions have trimmed the number of accounts, and major brokers are bypassing wholesalers by establishing their own energy departments, which are finding coverage in the admitted market, Mr. Jones noted.

"It's unbelievable how competitive the energy rates are right now," he said. "In the U.S. and London, it's very, very competitive."

In addition, "the major energy companies are taking on more and more risk themselves and not buying near as much insurance as they were buying," Mr. Jones said. "Even though premiums are lower and lower, we still see them taking more self-insured risks, which is driving rates down even lower."

While rates are dampened, Crump's enthusiasm for growth is not.

"We're going to continue with an aggressive growth strategy," Mr. Payne said. "That's really been the secret to our success over the years. We've always felt that we could grow" no matter the state of the market, he added.

One avenue of growth could steer Crump into premium financing, Mr. Payne said. "Right now our premium financing is passed on to whoever's out there."

While growth through acquisition is possible, it isn't a priority for Crump. "We're open to acquisitions, although we're not out in the marketplace looking to buy," Mr. Payne noted. "If the right acquisition comes along, we're willing to do that."

Crump always is searching for good talent to help grow its operations, Mr. Payne pointed out. "We're going to continue to have an active recruitment program, which has been a cornerstone. We look for the best people that are available."

In addition to Messrs. Payne and Jones, Patrick R. O'Brien is executive vp and chief financial officer.

Crump is a member of NAPSLO and AAMGA.