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Burns & Wilcox Ltd.

30833 Northwestern Highway,

Suite 220,

Farmington Hills, Mich. 48334;

248-932-9000; fax: 248-932-9050

1996 1995

Premium volume $271,650,000 $258,500,000

Gross revenues $37,986,000 $33,901,000

Employees 500 483

Commercial lines 92% 92%

Admitted business 19% 12%

Non-admitted 81% 88%

Independent wholesalers are feeling aftershocks of the recent megamergers in the insurance brokerage industry, and the vibrations are pretty good, according to Herbert W. Kaufman, president and chief executive officer of Burns & Wilcox Ltd.

The consolidation, in particular Aon Corp.'s acquisitions of Alexander & Alexander Services Inc. and Minet Group, ultimately will result in more business for independent wholesalers, Mr. Kaufman predicts.

"It seems to be the thinking" that large retail brokers are uneasy about placing business with an insurance wholesaler owned by one of its broker competitors, he explained.

Over the past year, Swett & Crawford Group and Alexander Howden North America Inc., two major competitors of Burns & Wilcox, have become a part of Aon, the parent of three of the top 10 wholesalers. In addition, Sedgwick Group P.L.C., Willis Corroon Group P.L.C. and Marsh & McLennan Cos. Inc. each own separate wholesale units ranked in the top 10.

As more of the largest wholesalers become aligned with retail brokers, the more other retail brokers will look to independent firms like Burns & Wilcox to help place business, Mr. Kaufman said.

"We feel the megamergers are going to help the independent wholesalers," he said. As one of the largest independent wholesalers, "we're sitting in a good position for the future."

In the meantime, the Farmington Hills, Mich.-based wholesaler continues to report premium vol Continued on next pageContinued from previous page

ume and gross revenue increases despite the continued soft pricing environment and increasing competition from admitted insurers, which increasingly are writing on an admitted basis what had been surplus lines business.

In 1996, Burns & Wilcox's premium volume rose 5.1% to $271.7 million, which translated into a 12% increase in gross revenues to $38.0 million. Based on its premium volume, Burns & Wilcox ranks as the third-largest managing general agency and seventh-largest U.S. wholesaler according to Business Insurance's rankings.

For the first six months of this year, the wholesaler had premium volume of about $142 million, up 1.4% from $140 million in the same period in 1996.

"It's a difficult marketplace we're in, but we are attuned to the market the way it is," Mr. Kaufman said.

To maintain its growth strategy, the wholesaler continues to acquire smaller MGAs, beef up its personal lines and large-account brokerage operations and expand its binding authority with several of its programs.

During 1996, Burns & Wilcox acquired three general insurance MGAs-Monson Agency Corp. in New Orleans; Donaldson Morford Agency Corp. in Indianapolis; and the Denver office of Crump Insurance Services Inc.-which together added about $6.5 million to premium volume, Mr. Kaufman said.

This acquisition strategy continued into 1997 with the purchase of the Mountain View, Calif., office of Hull & Co. Inc., an MGA that specializes in transportation programs. That office since has merged into Burns & Wilcox's San Francisco office.

In addition to Hull, Burns & Wilcox also purchased several books of business from 12 insurers that had taken over accounts from an agency no longer in business, Mr. Kaufman said. The books of business were added to the wholesaler's existing St. Paul, Minn., St. Louis and Springfield, Ill., offices. As part of the transaction, Burns & Wilcox also acquired the agency's former Milwaukee office.

Mr. Kaufman declined to identify the agency and the insurers involved in the deal.

Burns & Wilcox will continue on its acquisition quest, he said. However, it will acquire wholesalers only "where we can enhance our present locations. We are not looking to add new locals." Mr. Kaufman said, "We want to enhance our present offices with business from local competitors, but if the opportunity presents itself in another city, we would definitely explore it. At the present time, we are looking in a city which is a new area to us."

With the exception of the new Milwaukee office, Burns & Wilcox neither closed nor opened another office during 1996. It has 38 branch offices across the United States.

The wholesaler did, however, expand its binding authority in 1996.

Burns & Wilcox now has nationwide binding authority for up to $1 million for its profit and non-profit directors and officers liability business, errors and omissions, and architects and engineers professional liability program business. Previously, binding authority was limited to the Midwest, Mr. Kaufman said.

Mr. Kaufman also has plans this year to expand the wholesaler's Mexico trucking program into its Southern California office. The two-year-old program, on which Burns & Wilcox has binding authority for up to $1 million, currently is offered only in its Dallas office.

While most of the wholesaler's business stems from placing property/casualty coverage in the surplus lines market for commercial risks such as jewelry stores, pawn shops, condominiums, health clubs, contractors, hotels, restaurants and antique dealers, the firm continues to expand its personal lines division.

During 1995, the wholesaler expanded to 20 from 12 the number of offices with personal lines departments, called Service General.

"This is one particular area that's going nicely," Mr. Kaufman said. "We now have 21 offices and soon will have 22 offices with separate Service General departments."

Service General specializes in homeowners and boat programs with $1 million in limits and personal umbrella programs with up to $5 million in limits.

While Burns & Wilcox is expanding its personal lines business, it also is expanding its large brokerage account business.

The wholesaler's bread and butter lies in the middle market, placing $1,000 to $2,500 premium accounts for midsize regional agencies with $5 million to $25 million in annual premium volume.

However, to answer requests from clients, Burns & Wilcox decided in 1995 to expand into larger risks-those generating $50,000 in premiums on up.

"The intent was to increase the size of our brokerage accounts," Mr. Kaufman said. "And that went well in (all classes of) professional liability, but we were not as successful in other lines."

It is still a goal for the wholesaler to expand its brokerage department, Mr. Kaufman said, adding that the middle market, however, will continue to be "our salvation."

Burns & Wilcox is owned by H.W. Kaufman Financial Group Inc., a private holding company.

The wholesaler placed 57% of its 1996 premium volume as a managing general agent and has binding authority with: Colony Insurance Co.; Essex Insurance Co.; General Agents Insurance Co.; Scottsdale Insurance Co.; Acceptance Insurance Co.; Western World Insurance Co.; Canal Insurance Co.; Century Surety Insurance Co.; First Financial Insurance Co.; National Indemnity Insurance Co.; U.S. Liability Insurance Co.; Empire Fire & Marine Insurance Co.; Landmark Insurance Co.; Guaranty National Co.; American Empire Surplus Lines Insurance Co.; Jefferson Insurance Co.; and Legion Insurance Co.

Burns & Wilcox placed 11% of its premium volume as a Lloyd's of London coverholder and has binding authority to issue documentation on behalf of Lloyd's underwriters.

The remaining 32% of its 1996 premium volume was generated as a broker placing coverage with such non-admitted markets as: Admiral Insurance Co.; units of American International Group Inc.; Commercial Underwriters Insurance Co.; Coregis Insurance Co.; Evanston Insurance Co.; Fireman's Fund Insurance Co.; and Great American Insurance Co.

Of its 1996 premium volume, 92% was in commercial lines, and 81% was placed with non-admitted insurers.

In addition to Mr. Kaufman, other top Burns & Wilcox officers include: Gerald Wesolowski, chief financial officer; Gerald W. Horton and Alan J. Kaufman, executive vps; Steve Allen and David Price, senior vps.

Burns & Wilcox is a member of AAMGA and NAPSLO.