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HomeMy WebLinkAbout08 - CC-7 - Insurance Broker Services - 8/1/2017CITY COUNCIL AGENDA REPORT MEETING DATE: August 1, 2017 SUBJECT: INSURANCE BROKER SERVICES DATE: July 25, 2017 ITEM NUMBER: CC -7 FROM: CITY MANAGER'S OFFICE / HUMAN RESOURCES DIVISION PRESENTATION BY: LANCE NAKAMOTO, HUMAN RESOURCES MANAGER FOR FURTHER INFORMATION CONTACT: RUTH WANG, HUMAN RESOURCES ANALYST (714) 754-5359 RECOMMENDATION: Staff recommends that the City Council authorize the City Manager to execute the professional services agreement and two 1 -year extensions with Alliant Insurance Services in the amount not to exceed $46,750 annually. BACKGROUND: The City of Costa Mesa contracts with a licensed insurance brokerage to purchase the necessary coverage to protect the City from a variety of losses. From 1990 to 2012, the City had a broker of record letter on file with Alliant Insurance Services, Inc and added a broker of record letter with Wigmore Insurance Agency for the City's Excess Workers Compensation policy in 2012. The City's current insurance broker is Arthur J. Gallagher Risk Management Services. They have served as the insurance broker since 2013 with an ending date of September 30, 2017. As the current contract comes to conclusion; and in keeping with the City's philosophy of providing services efficiently and cost effectively, the Human Resources Division released an RFP for Insurance Broker Services on February 1, 2017. ANALYSIS: In response to the City's RFP, proposals were received from only two (2) insurance broker firms: • Alliant Insurance Services, Inc • Arthur J. Gallagher Risk Management Services 1 Proposals were reviewed by an Evaluation Committee consisting of City staff and two outside agency staff members from the City of Newport Beach and the California Joint Powers Insurance Authority. The proposals were carefully reviewed using the following criteria: • Company Experience and Capabilities • Approach and Methodology • Staffing • Qualifications • Cost Proposal The Evaluation Team independently evaluated and scored the solicitations received. The Purchasing Division served as the facilitator of the solicitation to ensure the process was in compliance, fair and thorough. The Evaluation Committee met on May 19, 2017, to review both proposals. References were checked to verify the quality of services provided to agencies serviced by respective firms. Based on the review of each committee member ranking as well as references and financial information, the committee unanimously selected Alliant Insurance Services as the preferred insurance broker. Alliant Insurance Services is the largest public agency broker and provides services to more than 10,000 public agency clients. These include over 75% of the cities in California and 56 of the 58 California counties. Alliant Insurance Services coordinates its insurance marketing efforts through the use of programs, support and assistance to public entities and are able to access pooled insurance programs specific to public agencies that other brokers are unable to. Their headquarters is located nearby on Dove St. in Newport Beach. As they have previous experience as the City's insurance broker for over twenty (20) years, they have extensive knowledge of the City's risks and liabilities. Due to the large number of public entity clients in California, Alliant Insurance Services is able to create programs and pools that are specific to the City's needs. In addition, they are able to negotiate additional coverage within the standard policies because of their prominence in the industry. Alliant routinely markets on their client's behalf to ensure they are providing the best coverage. The City will continue utilizing Wigmore Insurance Agency for the City's Excess Workers Compensation policy. The City has had a broker of record letter with Wigmore Insurance Agency since 2012. FISCAL REVIEW: The City's insurance premium coverage is budgeted in the Self Insurance Fund. The FY 17-18 preliminary budget includes funding for insurance premium coverage and broker services. For Fiscal Year 16-17, the City paid $50,000 for all broker fees and services. I+• Alliant Insurance Services has proposed a two-year annual price of $46,750 while Arthur J. Gallagher Risk Management Services proposed an annual price of $50,000. This includes trainings and any other assistance to meet the City's needs. ALTERNATIVES CONSIDERED: The alternative to this Council action would be to reject all the proposals. If all the proposals are rejected, the City would need to readvertise the RFP. Staff believes that re - advertising the RFP will not result in lower bids. LEGAL REVIEW: A legal review is not required for this action, once the City Manager executes the contract, the professional services agreement will be reviewed and approved as to form by the City Attorney's Office. CONCLUSION: The Human Resources Division, released an RFP for insurance broker services. Following established procedures for procuring vendor proposals, including formation of an evaluation committee and development of a detailed scope of services, a total of two (2) firms submitted proposals for insurance broker services. Based on a thorough evaluation of all proposals, it was determined that Alliant Insurance Services is the best qualified firm. It is recommended the City Council authorize the City Manager to execute the professional services agreement and two 1 -year extensions with Alliant Insurance Services in the amount not to exceed $46,750 annually. LANCE M. NAKAMOTO Human Resources Manager STEVE DUNIVENT Interim Finance Director DISTRIBUTION: City Manager Assistant City Manager City Attorney Interim Finance Director City Clerk Human Resources Manager TAMARA LETOURNEAU Assistant City Manager THOMAS DUARTE City Attorney ATTACHMENTS: 1 Alliant Insurance RFP Proposal 2 Arthur J. Gallagher RFP Proposal 3 ATTACHMENT 1 ALLIANT INSURANCE SERVICES, INC. 1301 DOVE STREET, SUITE 2001 NEWPORT BEACH, CA 92660 MAIN: (949) 756-0271 1 CA LICENSE NO. OC36861 I www.alliant.com ,a4lliant VENDOR APPLICATION FORM AND COVER LETTER February 15, 2017 City of Costa Mesa — City Hall, Office of the City Clerk Attn: Terri Combs 77 Fair Drive Costa Mesa, CA 92628 Response to Request for Proposal (RFP) No. 17-10 for Insurance Broker Services Dear Terri Combs, We at Alliant Insurance Services, Inc. (Alliant) would like to express our appreciation for the opportunity to respond to the Request for Proposal (RFP) for Insurance Broker Services for the City of Costa Mesa (the City). We are excited to demonstrate to the City the value that we can bring to your entire Risk Management Program. We believe our response will highlight both the depth of our experience, as well as our desire to partner with the City. Alliant is the premier specialty brokerage firm in the country. Since our Chairman and CEO, Tom Corbett, established our Public Entity Division in 1977, the public sector has become our largest specialty area. As a result, we are extremely proud to say that we work with more California public agencies than any other broker. These include over 75% of California cities, 56 of the 58 California counties, hundreds of school districts and other special districts, and the State of California itself. We firmly believe that the experience, expertise, and market leverage derived from those relationships make us the best partner for the City. Our goal is to take a consultative approach in delivering the services desired by the City. First, we commit to spending the necessary time with your staff to understand the detail of your existing operations and programs, and what you desire for the future. Next, we commit to applying what we know and have learned to design a service plan, underwriting specifications, and coverage structure that achieve your goals. Finally, we commit to providing the risk management consultative services that the City desires to support and enhance your risk management efforts. With this approach, wealth of our experience, and our strong relationships with public insurers, we can deliver superior results for the City. We are committed to our reputation as an aggressive and innovative resource working diligently to meet our client's needs. As a result of this client - centric approach, our retention rate is 98% -- a testament to our delivery of superior services. Following are four compelling reasons for choosing Alliant as your brokerage partner: 1. Relevant Experience and Team Expertise — Alliant's Public Entity Division and specifically the proposed service team have developed a tremendous amount of expertise working with municipalities and other public entities in California. This relevant experience and expertise has allowed us to design, implement, and manage insurance solutions that have helped some of the largest public entities in the state save millions of premium dollars annually while providing the broadest coverage available. Alliant Insurance Services, Inc. • 1301 Dove Street • Suite 200 • Newport Beach, CA 92660 raoxE (949) 756-0271 • www.alliant.com • License No. OC36861 2. Creativity and Program Design Innovation — We do not believe in simply renewing programs and placements as -is, unless that option has been thoroughly reviewed and is in the best interest of our client. Instead, we constantly monitor client exposures, financial status, market conditions, changes in legislation, underwriter's changing appetites for risk, and other factors so that we can proactively propose adjustments to program structures, terms and coverage and/or alternative opportunities. This annual process allows us to take advantage of market opportunities that are currently available while also planning strategically for the long term. As a result, our programs and placements have stood the test of time over the last 25+ years, while retaining the flexibility to benefit our clients annually through all market cycles. 3. Options — Alliant offers the greatest access and largest array of insurance options for the City. These range from standard insurance placements, to customized proprietary programs, to membership in joint powers authorities such as CSAC-EIA where we provide the unique role of sole marketing agent. Alliant has long differentiated ourselves by creating advantaged programs that provide value to our clients because they allow us to leverage the combined size of the group to drive rates down, increase limits, and provide coverage enhancements. At the same time, we are experts at marketing individual excess policies, layering policies, and negotiating quota share placements, as well as helping evaluate actuarial studies to implement the most cost effective risk transfer programs. Finally, we have been entrusted to provide brokerage services to over 60 joint powers authorities in California, which are an avenue for public entities in California to pool risk if they so choose. With this unmatched combination of options, a partnership with Alliant will afford the City the largest selection of alternatives thereby, providing competitive results on a continual basis. 4. Integrity and Professionalism — Alliant is prepared to be held to the highest standards of integrity and professionalism. We recognize the importance of our role in representing the City to the insurance underwriting community. We will treat the City's issues and opportunities as if they are our own. We understand that clients have long memories and we know that our reputation is our most valuable corporate and personal asset. We will work hard every day to maintain that reputation and as a result you can be assured that the City will get our very best. Our national public entity practice is headquartered at 1301 Dove St., Newport Beach, CA 92660- 2436, telephone number (949) 660-8107 and is the office from which we will provide services to the City. We have thoroughly reviewed the scope of services contained within the RFP and can perform all tasks without exception. We hope this response offers a compelling reason for the City to select Alliant as your insurance broker partner. We are prepared to meet your service needs. B egards, Rennetta Poncy Senior Vice President VENDOR APPLICATION FORM FOR RFP NO. 17-10 INSURANCE BROKER SERVICES TYPE OF APPLICANT: ❑ NEW ❑ CURRENT VENDOR Legal Contractual Name of Corporation: Contact Person for Agreement: Corporate Mailing Address: City, State and Zip Code: E -Mail Address: Phone: Contact Person for Proposals: Title Business Telephone: Is your business: (check one) ❑ NON PROFIT CORPORATION Is your business: (check one) ❑ CORPORATION ❑ INDIVIDUAL ❑ PARTNERSHIP Fax: E -Mail Address: Business Fax: ❑ FOR PROFIT CORPORATION ❑ LIMITED LIABILITY PARTNERSHIP ❑ SOLE PROPRIETORSHIP ❑ UNINCORPORATED ASSOCIATION Page 24 of 35 RFP17-10-CO1250 RFP17-10-CO1250 Names & Titles of Corporate Board Members (Also list Names & Titles of persons with written authorization/resolution to sign contracts) Names Federal Tax Identification Number: City of Costa Mesa Business License Number: Title Phone (If none, you must obtain a Costa Mesa Business License upon award of contract.) City of Costa Mesa Business License Expiration Date: Page 25 of 35 RESPONSE TO RFP NO. 17-10 FOR INSURANCE BROKER SERVICES CITY OF COSTA MESA I FEBRUARY 15, 2017 TABLE OF CONTENTS Vendor Application Form and Cover Letter..................................................................................01 Backgroundand Project Summary................................................................................................03 Company Experience and Capabilities..........................................................................................04 Methodology..................................................................................................................................06 Staffing...........................................................................................................................................14 Qualifications.................................................................................................................................18 FinancialCapacity.........................................................................................................................19 CostProposal.................................................................................................................................19 Disclosure......................................................................................................................................19 Sample Professional Service Agreement.......................................................................................19 Forms.............................................................................................................................................19 Appendix........................................................................................................................................19 A. All Required Forms B. Draft Service Timetable C. Program Brochures D. Service Team Organizational Chart E. Audited Financial Statement F. Litigation Report G. Cost Proposal &)4lliant RESPONSE TO RFP NO. 17-10 FOR INSURANCE BROKER SERVICES CITY OF COSTA MESA I FEBRUARY 15, 2017 BACKGROUND AND PROJECT SUMMARY Alliant had the pleasure of working with the City for more than twenty years and through that partnership became intimately familiar with the risk purchasing philosophy of the City. The senior level staff members proposed for this account were involved in overseeing the City's placement for many years. The City is a full service City with exposures that include police and fire, animal control, emergency medical aid, and more. Combined with the wealth of knowledge and experience gained through our forty years of commitment to the public sector and our thousands of public agency clients, we are further able to employ those techniques within the specific public agency operational framework to provide viable and economically sound risk management solutions on an evolving basis to respond to constantly changing environments. Alliant understands that the City is looking for the most qualified broker who can bring a new approach to risk financing; you will find that Alliant's experience with public entities like City of Sacramento, City of Santa Ana, City of Newport Beach, City of Santa Monica and City of San Buenaventura makes Alliant a logical choice. Although Alliant can meet all of the requirements within the RFP such as the selling, solicitation, and negotiation of insurance; our real success has come from taking a focused, consultative approach in designing innovative programs and providing solutions specific to the public entity sector, successes we hope to share with the City. We believe what the City needs is not just an insurance broker to address the placement of "standard" insurance, but also a risk finance and risk management consulting partner to establish a specialized risk financing program that addresses specific exposures such as, the challenges involving police professional (a.k.a. "the Ferguson effect"), drones, unmanned aerial vehicles and automation, cyber liability, and other risks tailored to the City's operating environment. Below we detail a few examples in fulfillment of your stated scope of work requirements: a. Program Administration — Despite our vast experience in the public entity sector, we would seek to administer the City's policies without any preconceived notions. What this means for the City is that we will spend the necessary time to re -familiarize ourselves with its risk profile that will include an ongoing review and analysis of the City's current insurance program. Our ongoing administrative duties would include regular meetings with city staff and relevant stakeholders as needed, training, consultation services, written reports and coordinate loss control services that supplement and complement the city's own efforts. b. Claims — Alliant fully understands that the true value of any insurance contract can only be determined by its response to loss. We have developed an effective in-house claims department run by some of the most talented personnel in the public entity industry. Our Brokerage Claims Department is located in San Francisco, California and is led by Robert "Bob" Frey. Bob leads a team of seven senior claims professionals including three forensic accountants. Unlike other firms, Alliant does not separate the claims function from the placement function. The senior brokers assigned to the City all have large claims experience. Our national claims resources will support these local efforts. c. Contract Review — The Alliant team members are experts in policy, lease and contract review. We are capable of providing consulting services on specific contracts with thorny issues, as 441hant RESPONSE TO RFP NO. 17-10 FOR INSURANCE BROKER SERVICES CITY OF COSTA MESA I FEBRUARY 15, 2017 well as providing any necessary training to the City personnel. For our other clients, outside of insurance procurement, this is our single most active area of consulting work. Our IRIC Manual is available electronically for all of our clients and details recommended insurance requirements for vendors working with our clients. The manual provides guidance to your staff involved in securing contracts with a variety of contractors and vendors. This manual is offered at no additional cost and Alliant is prepared to offer full or half-day training presentations to the City on the concepts contained in our IRIC Manual. The City's team at Alliant will be prepared to assist in supporting your current practices and developing materials for your use. COMPANY EXPERIENCE AND CAPABILITIES Company Experience and Capabilities — Question A Alliant was established in 1925 in San Diego, California as the Robert F. Driver Company. Today it is a privately held corporation headquartered in Newport Beach, California. As a firm, we are the largest specialty broker in the country, with our entire focus on selected industry segments including public entity, education, construction, real estate, healthcare, tribal nations, hospitality, non -profits, and legal professionals. Business Insurance ranks Alliant as the second largest privately held broker. FOUNDED IN 1925 to( Largest in U.S. Nationwide distribution from 90+ offices S1,90 BILLION in revenue 21750+ II II II II 11 II II employees II II II II II I' Alliant Ownership S11.6 BILLION in premium jJ104 Entrepreneurial, client -focused culture Alliant's public entity division was established in 1977 when our current Chairman and CEO, Tom Corbett, opened our Newport Beach office with the goal of becoming a leader in providing services to the public sector. Since that time, we have become a nationally recognized leader in this specialized market. This leadership position is demonstrated by Alliant's extensive client list, including more than 10,000 public agency clients, many with significant catastrophe exposures. A4lliant RESPONSE TO RFP NO. 17-10 FOR INSURANCE BROKER SERVICES CITY OF COSTA MESA I FEBRUARY 15, 2017 Alliant's public entity experience, knowledge, and expertise allows us to deliver unique insurance and risk management solutions to our clients. Alliant's Public Entity Practice is our largest specialty division and represents more than 30% of our company's annual revenue. Our public entity clients range in different sizes from small regional entities to large public entity pools like the CSAC Excess Insurance Authority (CSAC EIA) — the largest public entity pool in the nation. With more than 300 employees dedicated solely to public entity, we are an industry leader in the public sector. Alliant's Public Entity Division is believed to be the largest concentrated collection of insurance professionals dedicated solely to the public agency sector. Historically known as the preferred public entity broker in the state of California, we have expanded our reach and have been selected to provide broker services for entities located from Alaska to Florida to Maine (48 states in all) where we now provide our resources and expertise. These clients include: ■ Over 75% of the cities in California, including Sacramento, San Francisco, San Diego, Anaheim, Burbank, Garden Grove, Fontana, Santa Ana, Newport Beach, Thousand Oaks, Santa Monica, Pomona, Ventura, Torrance and many others. ■ CSAC EIA (the largest public entity pool in the nation, which includes participation by all but two counties in California), numerous municipalities (including the City — Pollution Legal Liability), school districts, joint powers agencies, and pools. ■ Over 1,000 special districts, authorities, agencies, and airports. ■ State governments including: State of California, State of Montana, State of Texas, State of Nevada, State of Wyoming, and State of Michigan. ■ Over 60 joint powers authorities or pools across the country including: Arizona School Risk Retention Trust, Virginia Municipal League (VML), WSTIP (Washington State Transit Insurance Pool), TASB (Texas Association of School Boards), and MABE (Maryland Association of Boards of Education). The proposed service team collectively represents 166 years of insurance experience. We have detailed the years of experience on a per person basis in the Staffing Plan form, included in Appendix A. Company Experience and Capabilities — Question B We believe that the City is referring to "issues" meaning "number of policyholders" or "accounts." Therefore, we have answered this question based on that assumption. However, we stand ready to provide any additional information, if needed. Companywide, Alliant is proud to service 84,368 clients from its 71 offices nationwide. Rennetta Poncy 42 58 Courtney Ramirez 21 46 -5--Allant RESPONSE TO RFP NO. 17-10 FOR INSURANCE BROKER SERVICES CITY OF COSTA MESA I FEBRUARY 15, 2017 Company Experience and Capabilities — Question C As a full service broker, Alliant is committed to providing the best level of service(s) to our clients. We have drafted a comprehensive response to the City's RFP and have included information with details on what resources that are available to the City and how we intend to meet the City's needs in a timely manner. This includes attending meetings on an as needed basis (including City Council meetings) and preparing documentation. We have outlined some of these efforts and in Defined Client Services and Marketing Process. Alliant truly wishes to be an extension of the risk management department and will work as a partner to assist the city in fulfilling its risk management goals. METHODOLOGY Methodology — Question I Our Defined Client Service and Marketing Process, a technical practice we employ with all our clients, is the framework for our business approach. Purposefully, this process begins with transition planning, and includes an in-depth risk management analysis, in addition to service and marketing activities. This approach provides consistency in quality service, checkpoints and timelines for monitoring our jointly agreed upon service standards, and ensures the appropriate planning occurs well in advance of the expiration date. We will work closely with the City to ensure that this process aligns with the City's goals. Transition & Analysis 180 days orior to renewal Risk & Coverage 120 days orior to renewal Renewal Strategy 120 days orior to renewal 1 SubmissionUnderwriter ® ProcessFMI, Meetings 90 days orior to renewal days orior to renewal Policy Delivery and Account Summary & Bind Renewal Servicing Openitems4m Coverage Analysis Post Renewal ■ W Post Renewal ■ W Prior to renewal ■ W 30 days prior to renewal Negotiations 90 days orior to renewal Once appointed as the City's Broker of Record, we will begin to transition the work flow from your current broker(s) to Alliant. Given the absolute importance of a successful transition for each 441hant RESPONSE TO RFP NO. 17-10 FOR INSURANCE BROKER SERVICES CITY OF COSTA MESA I FEBRUARY 15, 2017 new Alliant client, we will employ the following steps during the implementation of the program to make the transition as seamless as possible for the City. Step 1: Identify Appropriate Personnel and Discuss the Service and Marketing Process Step 2: Notify Carriers ■ Alliant will prepare Broker of Record Letters and Confirm acceptance of all BORs filed. Step 3: Information Gathering/Data Acquisition ■ Exposure Data ■ Claims data ■ Policies/Summaries ■ Actuarial studies Step 4: Administrative ■ Create Open Items Report, Work Plan and Key Deliverables. Step 5: Risk Identification ■ Review all data accumulated from the information gathering/data acquisition process. ■ Discuss with key operational personnel (operations, finance, legal, quality, risk, claims). ■ Strategic discussions regarding mission, key City initiatives, financial goals, short- and long-term operational and financial goals, unique financial issues, and risk philosophy. ■ Discuss unique claims or risk issues as defined by the City. Step 6: Documentation and Implementation ■ Prepare a summary report detailing the process, observations, and key findings. Our service team will coordinate these activities to help ease the administrative burden on the City. For coverage assigned to us, we will develop a Risk Profile unique to the City. We will compare this Risk Profile to your current insurance coverage to: determine any serious or unanticipated gaps that exist; review the retentions and insurance limits; and provide you with a written report outlining our observations and recommendations, including limits, programs, products and markets capable of meeting the City's coverage needs. Before your major renewal date(s), we will coordinate a Renewal Strategy Meeting to: ■ Review Alliant's Prepared Risk Analysis. ■ Update the City on the current insurance market and differences in various markets' terms and conditions and discuss recent renewal results for similar clients. ■ Provide an analysis of viable underwriter alternatives, their capacity, and deductible preferences, obtain your thoughts on the desirability of any particular market and develop a marketing strategy. ■ Provide renewal pricing ranges, suggest a renewal timeline and renewal options. Our goal is to provide you with a concise report outlining our mutually agreed upon game plan. The underwriting submissions we prepare are unrivaled in our industry. Our responsibility is to portray, with integrity, your unique Risk Profile for each line of coverage. Your underwriters will A4lliant RESPONSE TO RFP NO. 17-10 FOR INSURANCE BROKER SERVICES CITY OF COSTA MESA I FEBRUARY 15, 2017 know that our submission will portray your unique risks and operations correctly, succinctly and in a clear and easily understandable format. We encourage meetings between you and the underwriters. We will solicit renewal information at least 90 days prior to renewal to allow ample time for the marketing process. Alliant will assist in developing underwriter information including loss data. We will coordinate all underwriter meetings benefiting the City as part of our renewal strategy. Where possible, we will attempt to schedule these at your office. To execute a successful renewal, we must focus on two key areas: market canvassing and the exploration of options. At our Renewal Strategy Meeting, we will have reviewed the listing of all possible market alternatives, solicited your input and agreed to those we want to approach. All contacts from qualified and non-qualified markets will be documented and provide results to the City. We will review alternative limit, retention and coverage structures. We will provide you with weekly renewal updates to keep you informed and to get your feedback and thoughts on the underwriters' responses. We are aware that while our clients want to have a bottom line comparison of all renewal alternatives, they also want to know the intricate details of each quotation. Therefore, our renewal proposals feature both an Executive Summary and a detailed Coverage Analysis section. Our analysis will help you make a more educated renewal decision. We will compile quotations for the program in an Excel spreadsheet, including declinations, and indicating why they chose not to quote. Additionally we will provide quotations for specialized types of insurance as requested. Once you have reviewed your renewal options, have selected an alternative and given authorization we will immediately process the following documents, all designed to be completed before your renewal date: ■ Confirmations of Coverage ■ Certificates of Insurance ■ Claims Reporting Instructions We will create a Desk Reference that will include original and electronic insurance summaries of the coverage's bound, claims reporting instructions and contact information for your dedicated service team. All coverage placed with multiple layers will be included on Excel showing the markets, policy numbers, limits, premiums, taxes, fees, and commissions, if applicable. Any open items will be placed on a formal report helping the City, Alliant and the underwriters to stay focused on unresolved items as well as operational issues. Alliant will assist the City when other related coverage needs to be added during the term of the contract, at no additional cost. -8-441hant RESPONSE TO RFP NO. 17-10 FOR INSURANCE BROKER SERVICES CITY OF COSTA MESA I FEBRUARY 15, 2017 Part of the service process is to provide the City with policies in a timely manner (within 14 days of receipt) without any lapse in coverage with reputable insurers. All insurance policies will be compared to the specifications and proposals for accuracy. Once policies have been checked we will create a summary of coverage. Servicing throughout the year includes acting as the City's independent consultant, providing advise and recommendations, ongoing review of the City's insurance program, remaining abreast of the City's exposures, being familiar with all insurance policies and documents issued to the City, service existing policies including processing changes, endorsements and verifying the accuracy of invoices (within 5 days of receipt), remain available to answer questions and attend meetings at the City's request at all times and provide loss control and claims services as needed and requested by the City. We will submit an annual Stewardship to evaluate our performance, review the results of your renewal, discuss any new operations or acquisitions you are contemplating, identify new and emerging risks, update you on recent market conditions/trends, and plan our renewal strategy meeting. Methodology — Question 2 Service Standard Guidelines — Shown below is an excerpt from our proposed Service Standards Guidelines that outlines our proposed service delivery commitment. Phone calls received in the morning returned in the Phone calls returned morning. Calls received in the afternoon returned in the afternoon. E-mails returned Review regularly (morning and afternoon) and respond within 24 hours to acknowledge receipt. Summons and complaint Upon receipt or prior to end of business day. Claim first report to carrier Immediate or no later than prior to end of business, even if complete data is not available. Claim follow up with carrier Within 24 hours of first report of loss. and client Open activities/suspense Daily. Pre -renewal letters to client 100 days prior to expiration. Renewal business applications to 90 days prior to expiration. market A4lliant RESPONSE TO RFP NO. 17-10 FOR INSURANCE BROKER SERVICES CITY OF COSTA MESA I FEBRUARY 15, 2017 Same day coverage is bound. If wholesale broker issued, Binders advise client written confirmation of coverage is on its way. Agency bill binder billing No later than the inception date of coverage. Certificates Within 24 hours of receipt into the agency. Policy reviewed for accuracy Within 10 days from receipt. Policy delivered to client Within 10 days from receipt. Agency bill additional and Within 5 days of receipt into the agency. return premium endorsements Claims review with client 45 days prior to expiration. Audit review and processing Within 48 hours of receipt. Meetings/Reports to Management — Built within our standard service plan are regularly scheduled meetings and/or reports that allow opportunities to review our progress on a regular basis. These include monthly open items meetings. A key objective for the City and the Alliant team is to ask if there are any service issues and to determine the most important items that need to be completed. Our Open Items Report is updated to reflect these issues and your Alliant team will take whatever corrective actions need to be undertaken, if any. We can schedule these meetings more frequently, depending on the City's needs. Informal Feedback — Our interactions at all levels allow us to judge almost on a daily basis how we are meeting your service expectations. Your Alliant core team will continually evaluate your needs, expectations and level of satisfaction as they interact daily with the City and their Risk Management staff members. Quality Scorecard — We negotiate specific performance metrics with many of our clients. These standards and metrics can be incorporated into our Service Agreement. Sample timelines and service objectives include: ■ Attend meetings when requested ■ Provide onsite support for mutually agreed upon projects/issues ■ Prompt response time to routine service requests ■ Claim management services ■ Marketing services ■ Loss analysis ■ Alliant will develop joint renewal goals with the City, adopt these goals as performance goals, and will prepare a post -renewal report addressing each goal and detailing how it was met or alternatively why it was not met. The results of the chosen metrics will be presented to the City annually in a Quality Scorecard format. Alliant is the only broker to apply such stringent quality standards to their service model and to actually measure results. 10A4lliant RESPONSE TO RFP NO. 17-10 FOR INSURANCE BROKER SERVICES CITY OF COSTA MESA I FEBRUARY 15, 2017 Methodology — Question 3 Our transition plan has been detailed within question 2, Defined Client and Service Marketing Approach. We have included a draft service timetable that we will review in detail and customize with the City's input. Refer to Appendix B. Alliant is committed to spending whatever time is necessary to get the job done. We understand that it is critical that we are flexible and accommodate the needs of the City as they arise. This has already been thoroughly contemplated within our proposed fee. The fee proposed is a flat fixed fee option. This means that it is firm and contemplates the services that we have outlined within the response. Methodology — Question 4 The enclosed draft service timetable has been prepared to allow for the team to mutually establish expectations from the City staff. Alliant's first and foremost goal will be to assist in the preparation of information when possible. However some of the tasks that the City will be responsible include preparation of applications, attendance at meetings, assist in the establishment of objectives and reasonable deliverables. Additional responsibilities include timely payment of invoices and compliance with agreed upon and bound insurance policy conditions. Refer to Appendix B. Methodology — Question S Alliant differs from its competitors in three major areas. First is our unparalleled public entity experience. As previously detailed, this has been a major focus of Alliant's business for approximately 40 years. Second, is our emphasis on providing service and services designed to meet the specific needs of our public entity clients. Finally, our public entity focus has allowed us to create exclusive insurance and risk transfer products that benefit our clients by providing broad coverage at competitive prices. Exclusive Alliant Proprietary Programs Desiined for Public Entities Alliant, more than any other brokerage, excels at leveraging the combined size of our clientele to the benefit of all. A major differentiator for which we believe makes Alliant most qualified is our unique ability to deliver proprietary insurance solutions that none of our competitors can access, these advantaged programs for our clients sets us apart from our peers. We embrace the concepts of combining volume and leveraging purchasing power to build programs based on our clients' needs. It is this unique approach that has provided tremendous coverage terms and reduced pricing to our public entity clients across the country. These proprietary programs are not shared risk pools, rather they are simply group purchase programs with guaranteed cost coverage that is not subject to assessments. The greatest example of our group purchase approach is our proprietary Alliant Property Insurance Program (APIP). The significant coverage and cost advantages can be identified immediately. There is no other broker that can access APIP. The program is a major reason why Alliant places more public entity property insurance than any other insurance broker. -11-441hant RESPONSE TO RFP NO. 17-10 FOR INSURANCE BROKER SERVICES CITY OF COSTA MESA I FEBRUARY 15, 2017 The depth of our success working with public entity clients is directly related to our ability to create and execute group purchase programs focusing on different segments of insurance along with our ability to leverage the worldwide marketplace on standalone placements. Alliant is first and foremost a broker. As such, our duty is to represent the best interests of our clients whether through a joint -purchase strategy or with a solution offered in the standard insurance marketplace. As both a broker and creator of joint -purchase programs for public entities, Alliant is uniquely positioned to represent the City's interest in the following areas: ■ The standard insurance marketplace in quoting for open market placements. ■ With direct underwriters who may have strong programs but fail to recognize the important concept of competition in keeping terms and pricing in line with current market conditions. ■ Joint Powers Authorities (risk sharing pools). ■ Advantaged programs such as APIP; ANML; OEL; ACIP; SLIP; Special Events. Alliant has created many industry-leading programs specific to the public entity sector. Working together with Alliant, the City will benefit from below market pricing; broad coverage terms and limits; and loss recovery for difficult claims from its participation in the following Alliant programs: ■ Alliant Property Insurance Program (APIP) (includes appraisal for locations valued over $5M at no cost; and loss control services). ■ Alliant National Municipal Liability Program (ANML). ■ Catastrophic Liability Insurance Program (CLIP). ■ Alliant Crime Insurance Program (ACIP). ■ Special Events Liability. ■ Special Liability Insurance Program (SLIP). ■ Fiduciary Liability Insurance Program (FLIP). See attached program brochures in Appendix C. Public Entity Based Service and Services Claims Advocacy As previously mentioned within this response, Bob Frey will act as the City's claims advocate. Bob's most valuable role will be to act solely as your claim consultant and advocate on difficult and severe claims to achieve prompt and equitable claims settlements. Bob's goal will be to complement and supplement your efforts in obtaining quick and equitable claims resolutions while acting as the City's claims resource. Claims Management Procedures — Bob and his service team's responsibilities include: ■ Report claims to the carrier or administrator. • Work with outside claims adjusters, as necessary. ■ Represent the City in policy interpretation and other negotiations with insurance carriers. ■ Assist the City with review of claims reserves, and represent the City to the insurer with regard to requested explanation or reduction of reserve amounts. Follow-up with insurer as -12-441hant RESPONSE TO RFP NO. 17-10 FOR INSURANCE BROKER SERVICES CITY OF COSTA MESA I FEBRUARY 15, 2017 necessary until resolution of any reserve reduction requested are accomplished or until claim is closed. Provide annual summaries by policy year for each of the last five years indicating total number of losses by type for each line of coverage and showing earned premium, incurred losses and loss ratio. We often assist our clients in gathering facts, information, and knowledge that is used in the discussion and negotiation of disputed claims. In addition, our Claims Advocacy Group has the ability to call upon the Chairman and the President of Alliant when intervention with a carrier's executive management is necessary. While this step is not one often utilized, our executives stand ready to assist the City whenever needed. Excellent communication helps build success and we make the commitment to effectively communicate with the City throughout the claims adjustment and settlement process. This will come in the form of onsite meetings, telephone discussions, e-mails, and written communication. As the claim develops, we will be in close contact with the City. It is our belief that nobody knows our client's business better than the client and accordingly, it is critical that we work closely with our clients to learn, gather information, and build an appropriate plan for successful resolution. Alliant Risk Control Consulting Services — Alliant Risk Control Consulting offers comprehensive property and liability loss control. We provide integrated loss control management solutions to public entities across the nation. Our extensive insurance background and unique approach to integrating the management of public entity risks distinguishes Alliant Risk Control Consulting from other firms. We offer risk control consulting services that focus on the priorities and values of our clients. Our unique service approach and technical competence combine to help clients solve their problems, while saving them time and money. Training — Alliant Risk Control offers the following services to help educate and equip our clients in the area of risk improvement. ■ Monthly Webinars: Alliant Risk Control Consulting offers ten property conservation and four casualty webinars per year at no charge to clients. We have archived past webinars and can provide links to past webinars. ■ Quarterly News Letter: Topics range from accident forensics, benefits of infrared surveys, roof inspections, crime prevention, WC, and many others. ■ Industry Alerts: Industry alerts are distributed to help educate our clients on an as needed basis. Most recently, we distributed an alert on preparing for storms with tools to assist stakeholders prepare for and mitigate loss from the heavy storm season. ■ Fact Sheets: We have over 250 fact sheets in our library that can be accessed through Alliant Connect or through our Risk Control Hotline or email request free of charge. ■ Videos: Safety videos are provided to Alliant clients upon request. We have 100's of topics in our video library. ■ Power Point Presentations: Over the years, Alliant Risk Control Consulting has developed power point presentations on a wide array of topics that clients may request free of charge. ■ On -Line Safety Training: Alliant has the capability of providing on-line training services. -13-miffiffi-ant RESPONSE TO RFP NO. 17-10 FOR INSURANCE BROKER SERVICES CITY OF COSTA MESA I FEBRUARY 15, 2017 The value added services we offer will be tailored to your organization's needs and may require an additional fee. Technology — In today's fast -paced, technology -driven environment, the capability to save clients time and improve operational efficiency is no longer a value-added benefit — it is a critical requirement of your broker. As partners, Alliant is committed to delivering truly integrated technology solutions to our clients — solutions that are designed to work together to provide our clients with the essential information and decision-making resources they require. We remain focused on developing and implementing advanced technology tools and resources that our clients need to effectively manage their insurance, risk management, loss prevention and employee benefits programs. AlliantConnect — Alliant is committed to technology. This dedication is evidenced by our success servicing clients throughout the country from specific service locations. Our significant concentration in the public sector insurance brokerage can only be achieved with the proper utilization of technology. We created AlliantConnect, which is a proprietary web -based program, to give our clients access to our Loss Prevention Library, the ability to access/share coverage and policy documents, view renewal documents, update exposure data, and communicate with Alliant. AlliantConnect is Alliant's web -based portal system with secure 24-hour access to all of your insurance program information including policy documents, fact sheets, and the IRIC manual, to name a few. CSR24 — Our certificate management system is accessed through AlliantConnect. This resource allows clients to request and create certificates of insurance, report/track claims on-line and has the ability to be used as a certificate tracking software for vendors. STAFFING We have proposed a team of highly experienced and talented individuals. Although we do not anticipate any changes to the primary broker team, we agree that the city will be given the opportunity to approve any necessary changes to the team. Primary Broker Team Rennetta Poncy, Senior Vice President I Team Leader I Newport Beach, CA Rennetta will have overall responsibility for delivery of services to the City. She will establish with the City an annual service plan, including service goals, activities, and deadlines. Rennetta's responsibilities will also include development of a marketing strategy, design and implementation of the City's coverage programs. Rennetta as with all members of the proposed primary team, will be committed to the city and is willing to spend whatever time is necessary to get the job done. We are estimating that Rennetta will spend approximately 130 hours per year on the City's insurance program providing risk management and brokerage consulting services. Courtney Ramirez, Vice President I Account Executive I Newport Beach, CA Courtney will work very closely with Rennetta in developing the marketing strategy and overall project management for the City. She will have the responsibility of managing the data for -14-A411ant RESPONSE TO RFP NO. 17-10 FOR INSURANCE BROKER SERVICES CITY OF COSTA MESA I FEBRUARY 15, 2017 underwriting submissions, coordinating loss control, and claims services. Rennetta and Courtney work closely as a team. Together they will ensure that all questions are answered in a timely manner and that the City's needs are met. Therefore, we estimate that Courtney will spend approximately 120 hours per year working with the City. Gordon DesCombes, Executive Vice President I Liability Peer Review I Newport Beach, CA Michael Simmons, Vice Chairman I Peer Review I San Francisco, CA Alliant believes that even the most seasoned brokers benefit from having other senior brokers within the firm available to consult with for a second opinion. For this reason, we will regularly include someone in a peer review role on our client service teams. For the City, Gordon and Michael will serve in this capacity. We estimate that Gordon and Michael will spend approximately 60 hours per year collectively working with the City. Service Team/Primary Broker Team Support Jennifer Rodriguez I Account Manager I Newport Beach, CA Jennifer's responsibilities will be to process either directly, or through others, the administrative aspects of the City's insurance program in the achievement of deliverables. She will be providing day-to-day account servicing and will participate in policy review, preparation for renewal submissions, certificates and policy issuance. Jennifer will have the responsibility for ensuring data integrity of underwriting submissions and will assist Rennetta and Courtney in the coordination of all account management services. As the day to day servicing representative for the City, Jenifer will spend approximately 115 hours per year working with the City. Mary McLaughlin I Account Representative I Newport Beach, CA As the Account Representative, Mary's responsibilities include but are not limited to supporting the account team by fulfilling the clerical functions within the office, review and preparation of certificates of insurance and assisting drafting coverage documents including proposals, binders, presentations and other materials as needed. Other Resources — Support Team/Experts Robert Frey, Senior Vice President I Claims Advocate I San Francisco, CA Bob will be available to the City as the lead claim consultant and advocate on difficult and severe claims. He heads up our Brokerage Claims Unit at Alliant, located in the San Francisco office. Bob leads a staff of seven and he will consult and advocate for the City on difficult or severe claims. Bob will also take the lead in advising and structuring any needed or desired pre -loss vendor agreements. Tim Leech, First Vice President I Loss Control Consultant I Newport Beach, CA Tim joined the Alliant Insurance Services team in 2008 bringing over 17 years of experience working with international insurance carriers and brokerage services. Tim is adept at providing service customized to clients' needs including property risk control, fire protection, crime prevention, safety compliance, custom training videos, and safety culture development. An organizational chart can be found in Appendix D. -15-441hant Key Team Resumes: RESPONSE TO RFP NO. 17-10 FOR INSURANCE BROKER SERVICES CITY OF COSTA MESA I FEBRUARY 15, 2017 Rennetta joined the Alliant team in 1984 following over a decade of retail brokerage experience. She offers a broad base of expertise including the development and management of property and casualty insurance programs. Rennetta understands insurance issues affecting public entities, special districts, and not for profit sectors. Her primary focus is on client retention, development, and service with an emphasis on insurance program management. Rennetta managed numerous Alliant programs over the years, including in-house programs for municipal liability, property, excess workers' compensation, and crime. She currently manages the California Municipal Excess Liability program for California public entities. Since joining Alliant, Rennetta continues to serve as program manager for the Special Events Liability program and the Vendors and Contractor's Liability insurance program that includes over 300 members. Her multi -line property and casualty experience began in 1975 when she started her career an Account Executive at Ray Herman Insurance. Well rounded, her expertise covers municipal liability, professional liability, public officials' liability, directors and officers' liability, watercraft, aircraft and airport, crime, workers' compensation, and property lines. Rennetta has completed over 100+ hours of insurance related training. Rennetta holds Property & Casualty retail broker licenses in California and several additional states. Courtney joined the Alliant team in 2006. Her expertise is in the public entity sector with an emphasis in municipalities, pooled risks, education, healthcare, and transit. She has been heavily involved in the Alliant National Municipal Liability program, Healthcare Program, and the National Program created for Public Charter Schools. Highly creative and resourceful, Courtney was brought in to help develop two new niche market programs: a workers' compensation program for California healthcare entities and a national cyber liability program for a growing book of charter schools. Prior to choosing Alliant, Courtney was a sales associate for a small personal lines insurance brokerage firm. During these several years, she gained valuable experience and was responsible for the production, marketing, and servicing of a sizeable book of individual policyholders. Being versatile, Courtney served in varying roles within Alliant including the management and day-to-day servicing of a large book of healthcare, real estate, educational institutions, and public entities. In addition, Courtney took on the added responsibility of bringing in new business. Courtney earned her Bachelor of Science degree in Business Management and Leadership from Wisconsin Lutheran College in Milwaukee, Wisconsin. Licensed by the California Department of Insurance as a Fire and Casualty Broker Agent, Courtney has completed many hours of continuing education. Courtney is licensed in multiple states nationwide as a non-resident as well. She earned her Certified Insurance Counselor (CIC) designation and Certified Insurance Services Representative (CISR) designation. She is currently completing coursework, the last of three courses, required for the Associate in Risk Management (ARM) designation. -16-A411ant RESPONSE TO RFP NO. 17-10 FOR INSURANCE BROKER SERVICES CITY OF COSTA MESA I FEBRUARY 15, 2017 Gordon joined the Alliant team in 1987. He created the first liability joint purchase program for public entities. Gordon initially set up this specialized program in California and has since expanded it across the country. His expertise allowed him to structure the first medical malpractice program for California public entities. This program has flourished and now serves over 40 counties and several other public agencies in the state. More recently, Gordon helped to launch the first joint purchase program for public entity pools across the country. In addition, Gordon continues to serve as the lead broker for the country's largest public entity pool, the CSAC EIA. Gordon's expertise extends to all lines of casualty coverages, including workers' compensation and professional liability coverages. He offers his specialized knowledge and significant experience when launching and operating joint purchase programs. His talents extend to placing a number of key property accounts. Comprehending the complexities and unique insurance needs of public entities, Gordon is ftequently called upon to consult on these issues. Gordon graduated from the University of California, Berkeley, with a Bachelor of Arts degree in Political Economies of Industrial Societies. Licensed by the California Department of Insurance as a Fire and Casualty Broker -Agent, he has completed many hours of continuing education. In addition, Gordon holds insurance licenses in numerous other states. Michael joined the Alliant team in 1984 and currently serves as the Vice Chairman for the Public Entity Group. He is a key liaison for all public entity operations and assists all offices in developing creative service products for their clients. He has direct involvement with all Public Entity Practice staff members and the accounts they manage. Often relied upon for his expertise in the public entity arena, Michael frequently serves as the lead broker for many of Alliant's larger public entity clients. Resourceful and inventive, Michael enjoys working with his clients to understand their issues and to create solutions to answer their needs. Recognized as a public entities insurance expert, Michael frequently addresses clients in board, council, and committee settings. Michael's deep roots in public entity began with his prior association with the Sedgwick Group, and Marsh & McLennan. Well rounded in many areas, Michael's career includes time with the Liberty Mutual Insurance Company where he worked in Property/Casualty Underwriting and Loss Control. Since joining Alliant, he has excelled in all areas that he served. He has advanced from Managing Executive, to Managing Director, to his current position as Vice Chairman where he now has nationwide responsibilities for both public and private group programs. In all roles, Michael never wavers from providing only the best interests of his clients. Michael graduated with a Bachelor of Arts degree in Economics from St. Lawrence University, located in Canton, New York. Licensed by the California Department of Insurance as a Fire and Casualty Broker -Agent, Michael has completed many hours of continuing education. -17-441liant RESPONSE TO RFP NO. 17-10 FOR INSURANCE BROKER SERVICES CITY OF COSTA MESA I FEBRUARY 15, 2017 QUALIFICATIONS Qualifications — Question I Account/Project Services Provide(] Responsibility City of Sacramento Brokerage & Rennetta Poncy (Team Leader); Courtney Consulting Ramirez (Account Executive); Gordon Services DesCombes (Peer Review); Jennifer Rodriguez (Account Manager) City of Newport Brokerage & Rennetta Poncy (Team Leader); Courtney Beach Consulting Ramirez (Account Executive); Gordon Services DesCombes (Peer Review) City of Garden Brokerage & Rennetta Poncy (Team Leader); Courtney Grove Consulting Ramirez (Account Executive); Jennifer Services Rodriguez (Account Manager) City of Thousand Brokerage & Rennetta Poncy (Team Leader); Courtney Oaks Consulting Ramirez (Account Executive); Jennifer Services Rodriguez (Account Manager) City of Fontana Brokerage & Rennetta Poncy (Team Leader); Courtney Consulting Ramirez (Account Executive); Jennifer Services Rodriguez (Account Manager) Qualifications — Question 2 We have previously highlighted Alliant's more than 40 years of experience working with accounts similar in size and scope as the City. Alliant currently affords coverage to approximately 75% of cities; 56 of 58 counties and 1,000 special districts and similar agencies in the State of California. As the 12th largest broker in the country, Alliant has more than 10,000 public entity clients. Qualifications — Question 3 This information can be found on the completed Company Profile & References form in Appendix A. Any public entity which submits a Proposal should describe in detail how it currently performs services like those identified in the scope of work within its or other jurisdictions, including photographs, written policies and/or video of services provided. If you have performed these services under contract for another public entity, please provide references for those entities as set forth above for private Proposers. This question is not applicable as Alliant is not a public entity. -18-441hant RESPONSE TO RFP NO. 17-10 FOR INSURANCE BROKER SERVICES CITY OF COSTA MESA I FEBRUARY 15, 2017 LEGAL COMPLIANCE As a licensed professional, Alliant has a duty to comply with all State and Federal Laws and regulations pertaining to insurance brokers licensed in the State of California. FINANCIAL CAPACITY Please refer to Appendix E for a copy of Alliant's most recent audited financial statement and to Appendix F for current litigation report outlining all administrative proceedings, claims, lawsuits, or other exposures. COST PROPOSAL See Appendix G for the Cost Proposal. Note, our proposal shall remain valid for a minimum of 180 days following this response's submission. DISCLOSURE Alliant was the broker of record for the City from 1995 to 2013. However, Alliant has had no past or current relationship with any current elected official, appointed official, city employee or family member thereof. SAMPLE PROFESSIONAL SERVICE AGREEMENT Alliant has no exceptions to the proposed agreement. FORMS Please refer to Appendix A for all completed requested forms. -19-441hant APPENDIX A. All Required Forms B. Draft Service Timetable C. Program Brochures D. Service Team Organizational Chart E. Audited Financial Statement F. Litigation Report G. Cost Proposal RESPONSE TO RFP NO. 17-10 FOR INSURANCE BROKER SERVICES CITY OF COSTA MESA I FEBRUARY 15, 2017 &)4lliant APPENDIX A. All Required Forms Please refer to the following page(s). RESPONSE TO RFP NO. 17-10 FOR INSURANCE BROKER SERVICES CITY OF COSTA MESA I FEBRUARY 15, 2017 &Alliant RFP17-10-CO1250 EX PARTE COMMUNICATIONS CERTIFICATION Please indicate by signing below one of the following two statements. Only sign one statement. I certify that Proposer and Proposer's representatives have not had any communication with a City Councilmember concerning RFP No. 17-10 INSURANCE BROKER SERVICES at any time after February 192017. Date: February 12 2017 Si nature Rennetta Poncy Print M I certify that Proposer or Proposer's representatives have communicated after February 1, 2017 with a City Councilmember concerning RFP No. 17-10 INSURANCE BROKER SERVICES. A copy of all such communications is attached to this form for public distribution. Signature Print Date: Page 26 of 35 RFP17-10-C01250 DISQUALIFICATION QUESTIONNAIRE The Contractor shall complete the following questionnaire: Has the Contractor, any officer of the Contractor, or any employee of the Contractor who has proprietary interest in the Contractor, ever been disqualified, removed, or otherwise prevented from bidding on, or completing a federal, state, or local government project because of a violation of law or safety regulation? Yes No If the answer is yes, explain the circumstances in the following space. Page 27 of 35 RFP17-10-C01250 DISCLOSURE OF GOVERNMENT POSITIONS Each Proposer shall disclose below whether any owner or employee of Contractor currently hold positions as elected or appointed officials, directors, officers, or employees of a governmental entity or held such positions in the past twelve months. List below or state "None." Page 28 of 35 COMPANY PROFILE & REFERENCES Company Profile Company Legal Name: Company Legal Status (corporation, partnership, sole proprietor etc.): Active licenses issued by the California State Contractor's License Board: Business Address: Website Address: Telephone Number: Facsimile Number: Email Address: Length of time the firm has been in business: Length of time at current location: Is your firm a sole proprietorship doing business under a different name: Yes No If yes, please indicate sole proprietor's name and the name you are doing business under: Is your firm incorporated: Yes No If yes, State of Incorporation: Federal Taxpayer ID Number: Regular business hours: Regular holidays and hours when business is closed: Contact person in reference to this solicitation: Telephone Number: Email Address: Contact person for accounts payable: Telephone Number: Email Address: Name of Project Manager: Telephone Number: Email Address: Facsimile Number: Facsimile Number: Facsimile Number: Page 29 of 35 RFP17-10-C01250 RFP17-10-C01250 COMPANY PROFILE & REFERENCES (Continued) Submit the company names, addresses, telephone numbers, email, contact names, and brief contract descriptions of at least five clients, preferably other municipalities for whom comparable projects have been completed or submit letters from your references which include the requested information. Company Name: Telephone Number: Contact Name: Contract Amount: Email: Address: Brief Contract Description: Company Name: Contact Name: Address: Email: Brief Contract Description: Company Name: Contact Name: Email: Address: Brief Contract Description: Company Name: Contact Name: Address: Email: Brief Contract Description: Company Name: Contact Name: Email: Address: Brief Contract Description: Telephone Number: Contract Amount: Telephone Number: Contract Amount: Telephone Number: Contract Amount: Telephone Number: Contract Amount: Page 30 of 35 RFP17-10-CO1250 STAFFING PLAN 1. Primary Staff to perform Agreement duties Name Classification/Title Years of Experience 2. Alternate staff (for use only if primary staff are not available) Name Classification/Title Years of Experience Substitution or addition of Proposer's key personnel in any given category or classification shall be allowed only with prior written approval of the City Project Manager. The Proposer may reserve the right to involve other personnel, as their services are required. The specific individuals will be assigned based on the need and timing of the service required. Assignment of additional key personnel shall be subject to City Project Manager approval. City reserves the right to have any of Contractor personnel removed from providing services to the City under this Agreement. City is not required to provide any reason for the request for removal of any Contractor personnel. Page 31 of 35 Bid 17-10-Addmdum#1-C01250 ADDENDUM NO. 1 REQUEST FOR PROPOSAL FOR INSURANCE BROKER SERVICES RFP No. 17-10 Costa Mesa HUMAN RESOURCES DEPARTMENT CITY OF COSTA MESA Released on February 9, 2017 The referenced document has been modified as per the attached Addendum No. 1 Please sign this Addendum where designated and return the executed copy with submission of your proposal. This addendum is hereby made part of the referenced proposal as through fully set forth therein. Any questions regarding this addendum should be addressed to Terri Combs, email terri.combs(a-)costamesaca.eov Bid 17-10-Addendum#1-C01250 2. Schedule of Events: This Request For Proposal will be governed by the following revised schedule: (Changes in bold) Release of RFP January 25, 2017 Deadline for Written Questions January 31, 2017 at 11:00 a.m. Responses to Questions Posted on Web February 10, 2017 Proposals are Due February 22, 2017 at 11:00 a.m. Interview (if held) March 21-23, 2017 Approval of Contract TBD "All dates are subject to change at the discretion of the City. All other provisions of the request for proposal shall remain in their entirety. Vendors hereby acknowledge receipt and understanding of the above Addendum. Complete and submit this Addendum with your proposal. Signature ate {--71'O'nC4 'typed Name and Titivi S_ Company Name dress State Zip APPENDIX B. Draft Service Timetable Please refer to the following page(s). RESPONSE TO RFP NO. 17-10 FOR INSURANCE BROKER SERVICES CITY OF COSTA MESA I FEBRUARY 15, 2017 &)4lliant * All required services including but not limited to: periodic training, loss control, budget estimates, assisting with contract language, contract review, issuance of certificates, and assisting with claims. Milestone Services Timetable — City of i Activity Responsibility Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Strategy meetings/delivery of an annual stewardship report City/Alliant X Finalize objectives City/Alliant X Develop exposure data Alliant X X Perform exposure analysis Alliant X X X X Review Policies Alliant X X X X Perform Retention Analysis Alliant X X Design and finalize program structures Alliant X X X X Select markets Alliant X X X Prepare market submissions Alliant X X X Present submissions to markets Alliant X X Accompany insurers on inspections, if needed Alliant X X X X X X X X X X X X Address insurer questions and requests Alliant X X X Evaluate insurer proposals Alliant X X X Negotiate with "finalist" markets Alliant X X X Prepare proposal comparisons Alliant X X X Present final proposals City/Alliant X X X Make program selections Alliant X X X Advise selected markets Alliant X X X Prepare and deliver binders and invoices Alliant X X X Check policies, request necessary corrections Alliant X X X Deliver policies Alliant X X X Provide ongoing service* Alliant X X X X X X X X X X X X * All required services including but not limited to: periodic training, loss control, budget estimates, assisting with contract language, contract review, issuance of certificates, and assisting with claims. APPENDIX C. Program Brochures Please refer to the following page(s). RESPONSE TO RFP NO. 17-10 FOR INSURANCE BROKER SERVICES CITY OF COSTA MESA I FEBRUARY 15, 2017 &)4lliant di Formed in 1993 to meet the unique property insurance needs faced by public entities, APIP has grown from 65 members in one state and $600 million in total insurable values (TIV) to more than 9,000 members in 45 states and more than $370 billion in TIV. APIP FEATURES ■ Broad insuring agreement ■ Coverage is not confined to a schedule; rather the policy provides coverage for all property of every description of an insurable nature—both real and personal— of the insured. Coverage also includes property of others in the care, custody, or control of the insured for which the insured is liable or under obligation to keep insured wherever located in the United States. ■ Replacement cost for physical damage, including comprehensive and collision damage as an option for automobiles ■ Automatic acquisition of new locations, which allows entities to grow without having to wait for underwriting approval ■ Blanket fine arts coverage (if scheduled) ■ Municipal bond and tax revenue interruption coverage ■ Course of construction coverage, including delay in start-up ■ Property appraisals for all real property over $5 million ■ Boiler and Machinery coverage is included in the program ■ Access to Alliant's proprietary OASYS-Net software system APIP subscribers are an experienced group of highly qualified worldwide insurers and reinsurers. The program offers per occur- rence limits up to $1 billion. Because of its large size, APIP offers members the best available pricing and access to large earthquake, flood, and wind limits with a carefully detailed spread of risk. In addition, Alliant leverages large premiums with the markets to obtain the best possible pricing and coverage terms. The program's tremendous growth is a result of highly competitive terms, comprehensive coverage and, most importantly, working closely with members to get their claims paid in a timely manner. In recent years, one of the primary marketing focuses of APIP has been on groups of public entities that jointly purchase their insurance. These "pools;' or joint powers authorities QPAs), have found that APIP coverage is significantly broader and typically 10% to 20% less expensive than similar placements offered by competitors. APIP BOILER AND MACHINERY The Boiler and Machinery program, with limits up to $100 million, is included in APIR The program partners with major boiler and machinery authorized inspection agencies for both jurisdictional and consultative services. It provides board-certified engineering expertise in machinery, equipment, elec- tronics, and HVAC through a nationwide field network. To manage a wide range of critical exposures, the program offers electrical loss prevention surveys, infrared thermography, industry and technical consultation, key account service plan, transformer oil gas analysis, boiler operation and maintenance training, and boiler and pressure vessel inspection services for non -code vessels (and vessels located in jurisdictions that do not require inspections). ENVIRONMENTAL LIABILITY When unaddressed, environmental issues can have catastrophic effects on the physical and financial infrastructure of an organiza- tion. APIP offers pollution liability protection against the broad range of environmental risks facing public entities. A single comprehensive policy includes coverage for premises, covered operations, transporta- tion, bodily injury/property damage from pollution conditions, pollution clean-up, mold, and both above -ground storage tanks (ASTs) and underground storage tanks (USTs). Our team of dedicated underwriters has exten- sive experience in environmental risk and a strong understanding of the unique needs of public entities. CA License No. OC36861 © 2015 Alliant Insurance Services, Inc. All rights reserved. [2013-2230] CYBER RISK When unchecked, cyber exposures can have a significant, negative impact on an organiza- tion's operations. APIP's cyber risk program provides a layer of protection against the ever-changing landscape of technology - related risks. The program is managed by a specialist that will help you assess the expo- sures that threaten your organization and deliver coverage that matches your unique risk profile. With cyber attacks looming larger than ever, cyber risk insurance is essential to the health of your organization. OASYS-NET OASYS-Net is the proprietary software program that Alliant uses to access property schedules, claims, vendor certificates, and place certificate requests via the Internet. It allows clients to update their property locations, report a claim, or request a certificate of insurance. Client input is reviewed and, once accepted, the changes become a part of the OASYS-Net database. ALLIANT INSURANCE SERVICES: THE PARTNER YOU DESERVE. With a history dating back to 1925, Alliant Insurance Services is one of the nation's leading distributors of diversified insurance products and services. Operating through a national network of offices, Alliant provides property and casualty, workers' compensa- tion, employee benefits, surety, and financial products and services to more than 26,000 clients nationwide. www.alliant.com CONTACT Tom Bryson Senior Vice President 805 777 4763 tbryson@alliant.com A �r 1 'AL j L r THE LIFEBLOOD OF OUR COMMUNITIES Public agencies are the lifeblood of our communities. They educate us, move us, protect us, and sustain us. With so many essential responsibilities, concerns over the coverage and cost of liability insurance should never stand in the way of the mission. We understand that each entity has a unique mission and requires a specialized approach to insurance. Alliant has extensive experi- ence in creating joint purchase insurance programs for public entities and will put this expertise to work in creating a customized solution to meet your needs. THE FREEDOM TO CHOOSE ANML offers public agencies a rare commodity in liability insurance: the freedom to choose. Since participants in ANML do not share risk, each entity has its own limits of liability and a choice of self-insured retentions. Despite this unprecedented level of freedom, you will not be vulnerable to The Alliant National Municipal Liability Program (ANML) is a group purchase program providing comprehensive liability coverage to public agencies and risk sharing public entity pools throughout the United States. insurance market fluctuations and rising costs. The combined size of ANML ensures that you will receive the most competitive costs in both hard and soft markets. PROGRAM FEATURES ANML was structured with the flexibility to serve a broad range of public agencies while providing comprehensive liability coverage. As a result, the program offers some of the most robust features in the industry to guar- antee your agency receives the coverage and peace of mind it requires. ■ Security is provided by Starr Indemnity & Liability Company or AmTrust Group. The program can provide reinsurance to public entity pools or excess insurance to individual self-insurance organizations. ■ Coverage can be provided to all types of public agencies, including (but not limited to) schools, universities, transit districts, special districts, cities, counties, and utilities. ■ Self-insured retentions start at $25,000 per occurrence. ■ Basic limits are provided up to $10 million. The only aggregate limit applies to completed operations with no aggregate applying to public officials E&O or employ- ment practices liability. There is no general aggregate. Additional excess limits are available through a number of carriers. CA License No. OC36861 © 2014 Alliant Insurance Services, Inc. All rights reserved. [2013-2230] ■ Coverage is provided on an occurrence basis. Basic municipal coverages include general liability, auto liability, public officials E&0, and employment practices liability. Nose coverage is available to assist clients that currently have claims - made coverage. ■ The coverage form that includes the above cover and limit structure is exclusive to Alliant Insurance under the ANML program. ALLIANT INSURANCE SERVICES: THE PARTNER YOU DESERVE. With a history dating back to 1925, Alliant Insurance Services is one of the nation's leading distributors of diversified insurance products and services. Operating through a national network of offices, Alliant provides property and casualty, workers' compensa- tion, employee benefits, surety, and financial products and services to more than 26,000 clients nationwide. www.alliant.com CONTACT Tom E. Corbett Senior Vice President 949 660 8132 tecorbett@alliant.com 3M P A A 1 P. — PROTECTING CIVIC PRIDE You can learn a lot about a community through its events. From culture to education to athletics, events reveal the soul of a vibrant and healthy community and serve as a catalyst for civic pride. Liability exposures should never hinder a community's event calendar. We'll help you ensure they don't. BROAD COVERAGE The special events program was designed with the flexibility to cover a wide array of events, providing public entities with broad protection and peace of mind. Available coverages include: ■ Tenant/User Liability Insurance Program (TULIP)—Provides coverage for events held or sponsored by companies, orga- nizations, or individuals that have been permitted to use a public entity's meeting rooms or other facilities. Liability insur- ance protects the public entity and the user of the facilities. The public entity determines the premium for the event and provides a certificate of insurance to the user. Events are reported quarterly, and reports, copies of certificates, and a check for the premium for all events are held within the quarter are remitted to Alliant. ■ Instructor/recreation class program— Provides coverage for events that are instructional to participants. Also covered are instructors who are not employed by the public entity but who provide instruc- tional services for a fee. The events are reported quarterly to Alliant, premiums are determined, and certificates are provided to the instructor by the public entity. Participant coverage requires signed waivers and prior approval from the underwriter. Alliant Insurance Services created the Special Events Program to provide comprehensive liability coverage to public entities for the myriad events held on their premises. Since many of these events are hosted by under -insured third parties in public assembly facilities, the program empowers the host institution to insure its own events, providing an additional layer of protection for both the public entity and the event organizer. Nominee event program—Coverage is offered for events held or sponsored by the public entity itself or by any of its departments or divisions. Coverage can be expanded to cover co-sponsors if desired. This is not a self -rated program and events must be approved by Alliant, which issues insurance certificates. PROGRAM FEATURES The advantages of Alliant's Special Events Program are twofold: first, public entities receive the power and autonomy to insure events that occur on their premises; and second, a robust profile of features provides great efficiency, security, and service. Key features include: ■ Lessees, instructors, or event holders as named insured ■ Primary/non-contributory wording as respects the public entity ■ Volunteer employees as insureds ■ Entity or venue owner as additional insured ■ Premises and products/completed operations liability ■ Personal and advertising injury ■ Fire damage and medical payments ■ A.M. Best's guide rating CA License No. OC36861 C 2014 Alliant Insurance Services, Inc. All rights reserved. [2013-2230] ■ Optional coverage ■ Liquor liability with payment or additional premium ■ Athletic participants included with underwriter's approval and signed waiver ■ Vendors, exhibitors, and conces- sionaries included with payment of additional premium ALLIANT INSURANCE SERVICES: THE PARTNER YOU DESERVE. With a history dating back to 1925, Alliant Insurance Services is one of the nation's leading distributors of diversified insurance products and services. Operating through a national network of offices, Alliant provides property and casualty, workers' compensa- tion, employee benefits, surety, and financial products and services to more than 26,000 clients nationwide. www.alliant.com CONTACT Rennetta Poncy First Vice President 949 660 8107 rponcy@alliant.com A PROTECTING THOSE WHO PROTECT You are the steward of your employees' future. As a fiduciary, the decisions you make are integral to the long-term stability of your workforce, protecting their physical and financial health. You need an insurance partner that understands the magnitude of this responsibility and can protect you from its many inherent risks. Alliant Insurance Services created the Fiduciary Liability Insurance Program (FLIP) to provide extensive individualized fiduciary liability coverage for public entities with built-in cost savings. The cost advantages associated with group purchase coverage enable public entities to take advantage of the broad coverage of FLIP at a cost that averages a staggering 25% below market for standalone policies. THE POWER OF CHOICE FLIP is employed by a broad array of public entities and is customized to meet the unique needs of each organization. Each participating entity has its own limits of liability and a choice of deductibles or self-insured retention. Eligible risk classes include but are not limited to: ■ Public Employee Retirement Systems (PERS) ■ State Teachers Retirement Systems (STRS) ■ Standalone retirement systems ■ Fire/police, pension systems ■ States, counties, cities ■ Special districts SIZE. STRENGTH. SAVINGS. The size and strength of Alliant creates a twofold benefit for FLIP participants: cost savings and broad coverage. Alliant's Public Entity Property Insurance Program (PEPIP) is the largest single property program in the world. The sheer size and reach of this program enables FLIP to absorb volatility in the insurance market. Additionally, because FLIP is a group purchase program and not a pool, participants do not share risk, providing further insulation from market fluctuations. A WEALTH OF BENEFITS FLIP offers one of the industry's most extensive fiduciary liability programs, creating a substantial layer of protection for both your organization and the people making the difficult decisions. Key benefits include: ■ Limits: Annual individual member aggregates are inclusive of defense costs; various limits available ■ Sublimits ■ S1,500,000 Health Insurance Portability and Accountability Act (HIPAA) penalties (or equal to policy limits whichever is less) ■ S500,000 Closing Agreement Program (CAP) penalties and voluntary compliance programs ■ $250,000 Health Information Technology for Economic and Clinical Health Act (HITECH) ■ S250,000 Patient Protection & Affordable Care Act fines and penalties (PPACA) ■ $250,000 tax penalty under Internal revenue code Section 4975 ■ $1,000,000 settlor claims coverage (when purchased) ■ Continuity of coverage provided (provides seamless transition for retro dates and warranty statements when moving from current carrier to FLIP program) ■ Prior acts coverage with no retroactive date ■ Flat fee ($100) for waiver of recourse regardless of number of trustees ■ Choice of counsel available with prior approval ■ Definition of loss to include punitive, exemplary, and multiplied damages (where insurable) with most favorable venue wording CA License No. OC36861 © 2014 Alliant Insurance Services, Inc. All rights reserved. [2013-2230] ■ Defense costs for investment loss coverage ■ Definition of insured persons to include employees of any insured plan ■ Non -cancellable by insurer other than for non-payment of premium ■ Policy is non -rescindable by Insurer ■ Wrongful act definition includes admin- istrative duties; counseling employees, participants, and beneficiaries; handling of records; failure to comply with privacy provisions of HIPAA ■ Notice/claim reporting provision: notice required after general counsel, risk manager, trustee or functional equivalent of the insured plan first learns of claim ■ No libel or slander exclusion ■ Defense cost coverage for performance of managed care services with respect to selection of medical or health service providers ■ Employee benefit law defined to acknowledge public entity risks not subject to ERISA ■ Modified consent to settle clause to 80%/20% ALLIANT INSURANCE SERVICES: THE PARTNER YOU DESERVE. With a history dating back to 1925, Alliant Insurance Services is one of the nation's leading distributors of diversified insurance products and services. Operating through a national network of offices, Alliant provides property and casualty, workers' compensa- tion, employee benefits, surety, and financial products and services to more than 26,000 clients nationwide. www.alliant.com CONTACT Rennetta Poncy Senior Vice President 949 660 8107 rponcy@alliant.com A THE LIABILITY SOLUTION FOR SMALLER PUBLIC ENTITIES AND NOT-FOR-PROFIT ORGANIZATIONS The need for small public entities and not-for-profit organizations to guard against liability exposures has never been more essential, but policies remain cost prohibitive, while budget increases are not an option. There is a solution. Il PROTECTION FROM THE CONSTANT THREAT Crime is swift and unpredictable. It can strike at a moment's notice, creating staggering costs and long-term damage. It occurs in the light of day and the dark of night and, in its many manifestations, poses an insidious and constant threat to your organization. It doesn't have to. SIZE AND STABILITY ACIP is among the state's largest programs of its kind and is comprised primarily of public entities with fewer than 1,000 employees. ACIP has a strong track record of results and a historically low loss ratio. This combination of size and stability empowers Alliant to offer competitive rates that are impervious to fluctuations in the general insurance market. Additionally, as a group purchase program, there is no risk sharing and, therefore, no possibility of assessments. Alliant Insurance Services created the Alliant Crime Insurance Program (ACIP) to protect California's public entities from the scourge of crime. The program offers broad coverage for illegal acts committed by employees while on the job, offering valuable peace of mind and an iron -clad layer of protection against crime -related damages. PROGRAM FEATURES ACIP is a flexible insurance solution with a broad array of best -in -class features. It is customized to meet the wide-ranging needs of California's public entities, providing access to: ■ Basic program limits of $1 million with a $25,000 deductible for each coverage ■ The option to buy down the $25,000 deductible to $2,500 ■ Program limits up to $10 million available ■ Faithful performance of duty up to the full employee theft limit ■ Coverage for the treasurer/tax collector and any employees required by statute to carry individual bonds ■ Coverage for volunteers CA License No. OC36861 C 2014 Alliant Insurance Services, Inc. All rights reserved. [2013-2230] ALLIANT INSURANCE SERVICES: THE PARTNER YOU DESERVE. With a history dating back to 1925, Alliant Insurance Services is one of the nation's leading distributors of diversified insurance products and services. Operating through a national network of offices, Alliant provides property and casualty, workers' compensa- tion, employee benefits, surety, and financial products and services to more than 26,000 clients nationwide. www.alliant.com CONTACT Tom E. Corbett Senior Vice President 949 660 8132 tecorbett@alliant.com THE FREEDOM TO CHOOSE SLIP offers public agencies and not-for-profit organizations a rare commodity in liability insurance: the freedom to choose. Since participants in SLIP do not share risk, each entity has its own limits of liability and a choice of self-insured retentions with no possibility of future assessments. Despite this unprecedented level of freedom, you will not be vulnerable to insurance market fluctuations and rising costs. The combined size of SLIP ensures that you will receive the most competitive rates in both hard and soft markets. Additionally, while joint powers authorities (JPAs) typically require a minimum of three years of participation, SLIP has no minimum participation requirement. Alliant Insurance Services developed the Special Liability Insurance Policy (SLIP) to provide small public entities and not-for-profit organi- zations with comprehensive and cost-effective individualized liability coverage. The program uses the power of group purchase to provide affordable coverage that conveniently accommodates all of your liability needs under one contract. COVERAGE BUILT FOR YOU SLIP was developed specifically for small public entities and not-for-profit organiza- tions, offering a breadth of coverage options that can be customized to meet your individual needs. SLIP also provides the administrative advantage of placing multiple coverages under one A.M. Best "A' (Excel- lent) rated carrier. SLIP offers deductibles as low as $1,000 or self-insured retentions, with basic policies including up to S10 million per occurrence. Available coverages include: ■ Primary general liability ■ Public officials errors and omission liability (for public entities) ■ Directors and officers liability (for not -for -profits) ■ Owned automobile liability, including non -owned and hired ■ Primary employment practice liability ■ Primary broadcasters legal liability coverage for public, educational and governmental (PEG) access organizations and community media centers across the country CA License No. OC36861 C 2014 Alliant Insurance Services, Inc. All rights reserved. [2013-2230] ALLIANT INSURANCE SERVICES: THE PARTNER YOU DESERVE. With a history dating back to 1925, Alliant Insurance Services is one of the nation's leading distributors of diversified insurance products and services. Operating through a national network of offices, Alliant provides property and casualty, workers' compensa- tion, employee benefits, surety, and financial products and services to more than 26,000 clients nationwide. www.alliant.com CONTACT Chris Tobin First Vice President 949 660 8143 ctobin@alliant.com RESPONSE TO RFP NO. 17-10 FOR INSURANCE BROKER SERVICES CITY OF COSTA MESA I FEBRUARY 15, 2017 APPENDIX A Service Team Organizational Chart Please refer to the following page(s). &)4lliant CITY OF COSTA MESA Primary Broker Team —4 Gordon DesCombes Rennetta Poncy Michael Simmons Liability Peer Review Team Leader Peer Review Courtney Ramirez Account Executive Jennifer Rodriguez Account Manager Mary McLaughlin Account Representative Robert Frey Tim Leech Claims Advocate Loss Control Consultant F.11 9191 A 01191 E. Audited Financial Statement Please refer to the following page(s). RESPONSE TO RFP NO. 17-10 FOR INSURANCE BROKER SERVICES CITY OF COSTA MESA I FEBRUARY 15, 2017 441hant Alliant Holdings, L.P. and Subsidiaries Consolidated Financial Statements as of December 31, 2015 (Successor's Basis) and 2014 (Predecessor's Basis), and for the Period from August 14, 2015 to December 31, 2015 (Successor's Basis), the Period from January 1, 2015 to August 13, 2015 (Predecessor's Basis) and the Years Ended December 31, 2014 and 2013 (Predecessor's Basis), and Independent Auditors' Report ALLIANT HOLDINGS, L.P. AND SUBSIDIARIES TABLE OF CONTENTS Page INDEPENDENT AUDITORS' REPORT 1-2 CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2015 (SUCCESSOR'S BASIS) AND 2014 (PREDECESSOR'S BASIS), AND FOR THE PERIOD FROM AUGUST 14, 2015 TO DECEMBER 31, 2015 (SUCCESSOR'S BASIS), THE PERIOD FROM JANUARY 1, 2015 TO AUGUST 13, 2015 (PREDECESSOR'S BASIS), AND YEARS ENDED DECEMBER 31, 2014 and 2013 (PREDECESSOR'S BASIS): Balance Sheets 3-4 Statements of Operations and Comprehensive Loss Statements of Equity 6-7 Statements of Cash Flows 8-9 Notes to Consolidated Financial Statements 10-35 Deloitte. Deloitte 9 Touche LLP Suite 700 655 W Broadway San Diego, CA 92 10 1-8590 USA Tel: +1 619 232 6500 Fax: +1 619 237 6802 www.deloitte.com INDEPENDENT AUDITORS' REPORT To the Board of Directors of Alliant Holdings, L.P. Newport Beach, California We have audited the accompanying consolidated financial statements of Alliant Holdings, L.P. and its subsidiaries ("Alliant"), which comprise the consolidated balance sheets as of December 31, 2015 (Successor's Basis) and 2014 (Predecessor's Basis), and the related consolidated statements of operations and comprehensive loss, equity, and cash flows for the period from August 14, 2015 to December 31, 2015 (Successor's Basis), the period from January 1, 2015 to August 13, 2015 (Predecessor's Basis), and the years ended December 31, 2014 and 2013 (Predecessor's Basis), and the related notes to the consolidated financial statements. Management's Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Member of Deloitte Touche Tohmatsu Limited Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Alliant Holdings, L.P. and its subsidiaries as of December 31, 2015 (Successor's Basis) and 2014 (Predecessor's Basis), and the results of their operations and their cash flows for the period from August 14, 2015 to December 31, 2015 (Successor's Basis), the period from January 1, 2015 to August 13, 2015 (Predecessor's Basis), and the years ended December 31, 2014 and 2013 (Predecessor's Basis) in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Notes 1 and 3 to the consolidated financial statements, in 2015, Alliant Holdings I, L.P. and its subsidiaries (predecessor entity) were acquired in a business combination transaction accounted for as an acquisition by Alliant Holdings, L.P. (successor entity). As a result of the acquisition, the consolidated financial statements for the periods subsequent to the acquisition are presented on a different basis of accounting than those for the periods prior to the acquisition and, therefore, are not directly comparable. Our opinion is not modified with respect to this matter. r. +Oe � l,-� U -P April 29, 2016 ALLIANT HOLDINGS, L.P. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2015 AND 2014 (In thousands) Successor's Predecessor's Basis Basis December 31, December 31, 2015 2014 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 68,647 $ 21,639 Fiduciary funds 138,897 102,063 Premiums and commissions receivable—net 269,705 200,843 Income takes receivable 3,959 18,079 Deferred tax assets 36,778 26,347 Other 4,327 5,048 Total current assets 522,313 374,019 PROPERTY AND EQUIPMENT — Net 31,057 15,318 GOODWILL 1,831,921 1,239,430 INTANGIBLE ASSETS—Net 1,942,806 721,441 DEFERRED FINANCING COSTS — Net 50,548 28,669 OTHER ASSETS 52,070 10,138 TOTAL $ 4,430,715 $ 2,389,015 (Continued) -3- ALLIANT HOLDINGS, L.P. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2015 AND 2014 (In thousands, except units) See notes to consolidatcd financial statcmcnts -4- Successor's Predecessor's Basis Basis December 31, December 31, 2015 2014 LIABILITIES AND EQUITY CURRENT LIABILITIES: Commissions payable $ 42,710 $ 33,092 Insurance premiums payable 329,757 243,927 Current portion of long-term debt 13,400 5,646 Accrued expenses and accounts payable 115,603 71,782 Other 6,152 9,462 Total current liabilities 507,622 363,909 LONG-TERM DEBT 1,850,807 1,212,589 OTHER 59,502 27,252 DEFERRED INCOME TAXES 659,167 241,134 Total liabilities 3,077,098 1,844,884 COMMITMENTS AND CONTINGENCIES EQUITY: Class A Units — 314,557,715 (291,551,811 vested) and 0 (0 vested) units issued and outstanding 1,462,323 - Class A Units — 0 (0 vested) and 138,046,313 (135,198,026 vested) units issued and outstanding - 696,505 Class B Units —18,586,319 (0 vested) and 0 (0 vested) units issued and outstanding - - Class B Units — 0 (0 vested) and 18,237,001 (0 vested) units issued and outstanding - - Class C Units — 0 (0 vested) and 3,160,200 (0 vested) units issued and outstanding - - Class D Units — 0 (0 vested) and 1,000 (0 vested) units issued and outstanding - - Accumulated deficit (108,940) (151,668) Accumulated other comprehensive income (loss) 234 (495) Noncontrolling interest - (211) Total equity 1,353,617 544,131 TOTAL $ 4,430,715 $ 2,389,015 See notes to consolidatcd financial statcmcnts -4- ALLIANT HOLDINGS, L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS FOR THE PERIOD FROM AUGUST 14, 2015 TO DECEMBER 31, 2015, THE PERIOD FROM JANUARY 1, 2015 TO AUGUST 13, 2015, AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (In thousands) REVENUES: Commissions and fees Interest income Total revenues EXPENSES: Compensation and employee benefits Subbrokerage expense Other operating expenses Acquisition transaction costs Amortization Depreciation Interest and related fees Loss on extinguishment of debt Total expenses LOSS BEFORE INCOME TAXES INCOME TAX PROVISION (BENEFIT) NET LOSS NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST NET LOSS ATTRIBUTABLE TO ALLIANT HOLDINGS, L.P. COMPREHENSIVE LOSS, Net of taxes: Net loss Unrealized gain (loss) on interest rate swaps COMPREHENSIVE LOSS, Net of taxes See notes to consolidated financial statements. Successor's Basis Period from August 14, 2015 to December 31, 2015 $ 281,985 30 282,015 Predecessor's Basis Period from January 1, 2015 to August 13, 2015 $ 546,856 99 546,955 Predecessor's Basis Year Ended December 31, 2014 $ 620,787 67 620,854 Predecessor's Basis Year Ended December 31, 2013 $ 547,944 376 548,320 161,266 311,064 394,000 294,589 30,157 53,367 40,779 29,976 53,948 65,782 80,739 90,690 2,292 6,114 3,379 473 79,879 77,646 134,775 138,060 4,589 5,456 6,378 6,296 55,882 72,057 73,178 79,977 58,700 - - - 446,713 591,486 733,228 640,061 (164,698) (44,531) (112,374) (91,741) (55,758) 2,121 (37,805) (41,722) (108,940) (46,652) (74,569) (50,019) - - - 211 $ (108,940) $ 46,652 $ (74,569) $ (49,808) $ (108,940) $ (46,652) $ (74,569) $ (49,808) 234 1,401) (4,381) 3,886 $ (108,706) $ (48,053) $ (78,950) $ (45,922) -5- ALLIANT HOLDINGS, L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY FOR THE PERIOD FROM AUGUST 14, 2015 TO DECEMBER 31, 2015, THE PERIOD FROM JANUARY 1, 2015 TO AUGUST 13, 2015, AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (In thousands, except units) Accumulated Other Class A Class B Class C Class D Member Notes Accumulated Comprehensive Noncontrolling Total Units Amount Units Amount Units Amount Units Amount Receivable Deficit Income Interest Equity Predecessor's Basis BALANCEJanuary 1, 2013 128,966,720 $ 642,699 - $ - - $ - - $ - $ - $ (27,291) $ - S - $615,408 Issuance ofunits for acquisitions 1,975,642 11,299 - - - - - - - - - - 11,299 Issuanceofunits 218,380 1,466 - - - - - - - - - - 1,466 Issuanceofunvestedunits 214,020 - 13,503,743 - 3,160,200 - - - - - - - - Vesting of units - 3,222 - - 3,222 Repurchase of units (85,156) (426) (426) Forfeiture of unvested units (23,522) - (71,104) - - - - - - - - - - Unrealized gain on interest rate hedges, net of tax - - - - - - - - - - 3,886 - 3,886 Net loss - - - -4( 9,808) - (211) 5( 0,019) BALANCE - December 31, 2013 131,266,084 658,260 13,432,639 3,160,200 (77,099) 3,886 (211) 584,836 Issuance ofunits for acquisitions 4,560,738 33,827 - - - - - - - - - - 33,827 Issuance ofunits 880,087 5,721 640,000 5,721 Issuance ofunvested units 2,874,082 - 4,393,115 1,000 - Vesting of units - 8,599 - - 8,599 Repurchase of units (1,523,428) (9,902) (9,902) Forfeiture ofunvested units (11,250) - (228,753) - - - - - - - - - - Unrealized loss on interest rate hedges, net of tax - - - - - - - - - - (4,381) - (4,381) Net loss - - - - 74,569 - 74,569 BALANCE - December 31, 2014 138,046,313 696,505 18,237,001 3,160,200 1,000 (151,668) (495) (211) 544,131 Issuance ofunits for acquisitions 1,755,237 17,433 - - - - - - - - - - 17,433 Issuance ofunits 1,233,403 9,251 9,251 Issuance ofunits for notes 941,966 7,065 - - - - - - (7,065) - - - - Issuance ofunvested units 408,838 - 3,809,058 - - - - - - - - - - Vesting of units - 13,099 - 23,906 9,227 10,500 56,732 Repurchase ofunits (556,459) (4,086) - - - (4,086) Forfeiture of unvested units - - (39,690) - - - - - - - - - - Unrealized loss on interest rate hedges, net of tax - - - - - - - - - - (1,401) - (1,401) Net loss (46,652) (46,652) BALANCE - August 13, 2015 141,829,298 $ 739,267 22,006,369 $ 23,906 3,160,200 $ 9,227 1,000 $ 10,500 $ (7,065) $(198,320 ) $ (1,896) $ (211) $575,408 (Continued) 19011 ALLIANT HOLDINGS, L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY FOR THE PERIOD FROM AUGUST 14, 2015 TO DECEMBER 31, 2015, THE PERIOD FROM JANUARY 1, 2015 TO AUGUST 13, 2015, AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (In thousands, except units) See notes to consolidated financial statements. Accumulated Other Class A Class B Accumulated Comprehensive Noncontrolling Total Units Amount Units Amount Deficit Income Interest Equity Successor's Basis BALANCE —August 14, 2015 - $ - $ $ $ $ $ - Issuance of units for acquisitions 300,859 1,504 1,504 Issuance of units 294,471,347 1,472,608 - - 1,472,608 Issuance of unvested units 23,487,558 - 18,586,319 - Vesting of units - 6,721 - 6,721 Repurchase of units (3,702,049) (18,510) (18,510) Unrealized gain on interest rate hedge, net of tax 234 234 Net loss - - (108,940) (108,940) BALANCE December 31, 2015 314,557,715 $1,462,323 18,586,319 $ $(108,940) $ 234 $ $ 1,353,617 See notes to consolidated financial statements. ALLIANT HOLDINGS, L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE PERIOD FROM AUGUST 14, 2015 TO DECEMBER 31, 2015, THE PERIOD FROM JANUARY 1, 2015 TO AUGUST 13, 2015, AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (In thousands) (Continued) i Successor's Predecessor's Basis Basis Period from Period from Predecessor's Predecessor's August 14, January 1, Basis Basis 2015 to 2015 to Year Ended Year Ended December 31, August 13, December 31, December 31, 2015 2015 2014 2013 CASH FLOWSFROM OPERATING ACTIVITIES: Net loss $ (108,940) $ (46,652) $ (74,569) $ (50,019) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 87,385 87,395 146,863 150,091 Amortization of discount on term loan 257 793 502 504 Loss on extinguishment of debt 58,700 - - - Costs related to amendment of credit agreement - 10,178 - 2,058 Deferred tax asset and liability (61,586) (180) (39,677) (47,671) Share -based compensation 9,831 57,578 8,998 3,222 Gain on disposal of assets - - (2,804) (731) Other (200) 760 349 Changes in operating assets and liabilities (excluding effect of acquisitions): Premiums and commissions receivable 35,705 (71,954) 20,058 (29,386) Insurance premiums payable - net of fiduciary funds (7,983) 24,055 (21,619) 26,545 Commissions payable (7,904) 17,814 5,195 7,154 Accrued expenses and accounts payable 9,967 18,909 (1,390) (5,472) Income taxes receivable and payable 1,393 12,727 (317) 80 Other assets and liabilities 8,054 7,428 4,148 2,629 Net cash provided by operating activities 24,679 118,091 46,148 59,353 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (8,838) (8,076) (7,918) (6,299) Cash paid for businesses acquired (15,083) (299,628) (125,236) (29,541) Proceeds from sale of businesses - 2,503 1,939 Cash deposited into escrow (117,500) - - Cash released from escrow 85,000 - Net cash used in investing activities (23,921) (340,204) (130,651) (33,901) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of long-term debt 1,870,650 440,550 - Financing costs related to issuance of long-term debt (53,476) - - Costs related to amendment of credit agreement - (10,178) - (2,058) Proceeds from revolving loan 87,000 26,300 Repayment of debt (6,700) (92,559) (14,246) (33,351) Extinguishment of debt (1,601,311) - Proceeds from issuance of units - merger transaction 684,909 - - - Proceeds from issuance of units 275 9,251 5,721 1,464 Repurchase of units - merger transaction (950,635) - - - Repurchase of units (18,510) (3,903) (9,866) (426) Net cash provided by (used in) financing activities (74,798) 343,161 68,609 (8,071) NET CHANGE IN CASH AND CASH EQUIVALENTS (74,040) 121,048 (15,894) 17,381 CASH AND CASH EQUIVALENTS Beginning ofperiod 142,687 21,639 37,533 20,152 CASH AND CASH EQUIVALENT S- End of period $ 68,647 $ 142,687 $ 21,639 $ 37,533 (Continued) i ALLIANT HOLDINGS, L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE PERIOD FROM AUGUST 14, 2015 TO DECEMBER 31, 2015, THE PERIOD FROM JANUARY 1, 2015 TO AUGUST 13, 2015, AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (In thousands) Successor's Predecessor's Basis Basis Period from Period from August 14, January 1, 2015 to 2015 to December 31, August 13, 2015 2015 Predecessor's Predecessor's Basis Basis Year Ended Year Ended December 31, December 31, 2014 2013 SUPPLEMENTAL DISCLOSURES: Cash paid during the period for: Interest $ 15,459 $ 56,996 $ 65,574 $ 72,124 Taxes — net of refunds received $ 4,247 $ 2,283 $ 2,515 $ 4,060 Noncash activities during the period for: Units issued for acquisitions $ 1,504 $ 17,433 $ 33,827 $ 11,299 Issuance of member notes — net of cancellation of notes $ - $ 7,065 $ - $ - Consideration for acquisitions in accrued expenses and accounts payable and other long-term liabilities $ $ 18,642 $ 17,704 $ 8,002 Receivable from sale of assets $ $ - $ 9,648 $ 1,000 Issuance of units in exchange from predecessor to successor $ 785,806 $ $ - $ - Issuance of units in accrued expenses and accounts payable $ 1,343 $ $ - $ - ALLIANT HOLDINGS, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2015 (SUCCESSOR'S BASIS) AND 2014 (PREDECESSOR'S BASIS), AND FOR THE PERIOD FROM AUGUST 14, 2015 TO DECEMBER 31, 2015 (SUCCESSOR'S BASIS), THE PERIOD FROM JANUARY 1, 2015 TO AUGUST 13, 2015 (PREDECESSOR'S BASIS), AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (PREDECESSOR'S BASIS) 1. ORGANIZATION Alliant Holdings, L.P. and subsidiaries ("Holdings" or "Alliant") operate as an integrated distributor of insurance and financial products and services. Alliant's strategy is to acquire and operate insurance -related operations as the platform for continuing to develop a national distribution network for insurance and financial products and services. Through its operating subsidiaries, Alliant currently operates general insurance agencies and provides ancillary services. Alliant provides insurance brokerage and advisory services primarily to middle -market businesses and governmental entities nationwide. Services include the placement of property and casualty insurance and employee benefits products, and specialize in various industries including public entities, Indian Nations, construction, law firms, energy and marine, healthcare, real estate, and community associations. On August 14, 2015, investment funds managed by an affiliate of Stone Point Capital LLC ("Stone Point"), along with preexisting employee owners and investment funds managed by an affiliate of Kohlberg Kravis Roberts & Co. L.P. ("KKR"), acquired 100% of the ownership interest of Alliant Holdings I, L.P. ("Alliant Holdings") pursuant to an agreement and plan of merger (the "Stone Point Merger Transaction"). Under the terms of the Stone Point Merger Transaction, Wayne Merger Sub, LLC, a wholly owned subsidiary of Alliant, was merged with and into Alliant Holdings, with Alliant Holdings then merging into Alliant Holdings Intermediate, LLC ("Alliant Intermediate"), with Alliant Intermediate continuing as the surviving entity. Alliant Intermediate continues to operate its subsidiary companies. As a result of the Stone Point Merger Transaction, Alliant has become the ultimate parent of Alliant Intermediate. The transaction was accounted for as a business combination under the acquisition method. These consolidated financial statements include the operations of Alliant Holdings and subsidiaries prior to the Stone Point Merger Transaction (the period from January 1, 2015 to August 13, 2015) and include the operations of Alliant subsequent to the Stone Point Merger Transaction (the period from August 14, 2015 to December 31, 2015). The consolidated financial statements for the period subsequent to the Stone Point Merger Transaction are based on different carrying values than those for the periods prior to the Stone Point Merger Transaction and, therefore, are not directly comparable. See Note 3 for further discussion of the Stone Point Merger Transaction. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation — The consolidated financial statements include the accounts of Alliant Holdings, L.P. (Alliant Holdings I, L.P. prior to the Stone Point Merger Transaction) and its wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. Revenue Recognition — For insurance products, Alliant recognizes commission revenue principally on the later of the effective date of the policy or the billing date, net of policy cancellation reserves, which are estimated based on historic and current data on cancellations. Alliant records installment premiums and related commissions periodically as billed for policies where the premiums are not readily estimable. Contingent commissions and override commissions are recorded the earlier of when estimable or received. -10- Fees in lieu of commissions are recognized principally on the later of the effective date of the policy or the billing date. Premiums and commissions receivable in the consolidated balance sheets are net of allowances for estimated policy cancellations and doubtful accounts. The allowance for estimated policy cancellations is established through a charge to revenues, while the allowance for doubtful accounts is established through a charge to other operating expenses. Both of these allowances are based on estimates and assumptions using historical data to project future expense. Alliant periodically reviews the adequacy of these allowances and makes adjustments as necessary. The use of different estimates or assumptions could produce different results. Subbrokerage expenses, which are paid to third parties, are recognized as incurred when the related commission revenue is recognized. Fees for services are primarily recorded as earned when services are rendered. Cash and Cash Equivalents — Cash and cash equivalents include highly liquid investments, such as money market accounts and certificates of deposit with original maturities of three months or less when purchased. The carrying amount reported in the consolidated balance sheets approximates fair value. Fiduciary Funds — Insurance premiums and retirement plan deposits received from clients, but not yet remitted to the insurance company or broker-dealer are restricted as to use by law in certain states in which Alliant operates. Accordingly, Alliant invests these funds in interest-bearing accounts. Alliant earns interest income on these unremitted funds, which is included in interest income in the accompanying consolidated statements of operations and comprehensive loss. Property and Equipment — Property and equipment are stated at cost. Depreciation is recorded using the straight-line method over the estimated useful lives of the related assets, which range from three to five years. Assets recorded under capital leases are amortized using the straight-line method over the shorter of the expected useful life or the term of the related lease. Intangible Assets and Goodwill Intangible assets primarily represent customer lists and restrictive covenants of employment agreements. Customer lists are records and files obtained from acquired businesses that contain information on clients and their retirement accounts, insurance policies and other information that is essential to maintaining and expanding services provided to clients. Customer lists are amortized on a straight-line basis over their estimated lives of 5 to 24 years (successor's period) and 3 to 14 years (predecessor's period). The costs of restrictive covenants of employment agreements are amortized on a straight-line basis over the term of the estimated restrictive period. The initial terms of such agreements are one to five years (successor's period and predecessor's period). Alliant's trade name has also been identified as an intangible asset that is deemed to have an indefinite life and is, therefore, not subject to amortization. Trade names acquired as a result of acquisitions are amortized on a straight-line basis over their estimated useful lives of three to four years (successor's period) and four years (predecessor's period), or have been determined to have an indefinite life and is, therefore, not subject to amortization. The carrying value of intangible assets with definite useful lives is reviewed whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If such a review indicates that the intangibles will not be recoverable, as determined based upon the undiscounted future net cash flows of the assets, an impairment charge would be recognized for the amount by which the carrying amount of the assets exceeds the fair value of the assets. Goodwill is established as the excess of cost over the fair value of net assets acquired in business combinations. Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 350, Intangibles — Goodwill and Other, requires that goodwill and intangible assets with indefinite useful lives not be amortized, but instead be tested for impairment at least annually. In accordance with ASC 350, Alliant -11- performs an annual impairment test for goodwill and intangible assets with indefinite lives in the fourth quarter of the year using financial information as of September 30, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Such indicators include, but are not limited to, a sustained significant decline in the value of Alliant or a significant decline in expected future cash flows due to changes in company -specific factors or the broader business climate. The evaluation of such factors requires considerable judgment. Any adverse change in these factors could have a significant impact on the recoverability of goodwill and could have a material impact on Alliant's consolidated financial statements. The goodwill impairment test has two steps. The first step of the test identifies potential impairments at the reporting unit level. Alliant has four reporting units in 2015 and 2014. For each reporting unit, Alliant first compares its estimated fair value with its net book value. If the estimated fair value exceeds its net book value, there is no impairment of goodwill. If the net book value of the reporting unit exceeds its estimated fair value, Alliant then performs a second test to calculate the amount of impairment, if any. To determine the amount of impairment, Alliant calculates the implied fair value of goodwill. Specifically, Alliant determines the fair value of all of the assets and liabilities of the reporting unit, including any unrecognized intangible assets, in a hypothetical calculation that yields the implied fair value of goodwill. If the implied fair value of goodwill is less than recorded goodwill, Alliant records an impairment charge for the difference. The fair value of a reporting unit is determined using a combination of income and market approaches. The valuation methodologies used to derive the estimated fair value of the reporting units are as follows: Alliant uses a weighting method in assessing fair value for each reporting unit using the discounted cash flow (DCF) method, the guideline public company (GPC) method, and the guideline transactions (GT) method. The DCF method involves an analysis of future cash flow projections for each reporting unit. Cash flows are discounted at a rate reflective of the perceived risks inherent in the projections. A terminal value, the estimated value of the reporting unit at the end of the discrete forecast, is calculated by dividing the terminal year net cash flow by an appropriate capitalization rate, which assumes constant growth into perpetuity. Under the GPC method, the fair value of a reporting unit is estimated by comparing the reporting unit to similar companies with publicly traded ownership interests. From these guideline companies, valuation multiples are derived and then applied to the appropriate operating statistics of the reporting unit to arrive at indications of value. Alliant identified five guideline companies for use in its analysis of reporting units. For purposes of this analysis, the guideline companies selected represented reasonably similar, but alternative investment opportunities to an investment in the reporting unit. Under the GT method, the fair value of a reporting unit is estimated by identifying transactions that involve companies with similar operations and analyzing those transactions for comparability. From these guideline companies, valuation multiples are derived and then applied to the appropriate operating statistics of the reporting unit to arrive at indications of value. Alliant identified seven and fourteen guideline transactions in 2015 and 2014, respectively, for use in the analysis of reporting units. For purposes of this analysis, the guideline transactions selected represented reasonably similar but alternative investment opportunities to an investment in the reporting unit. -12- The determination of fair value of reporting units requires significant estimates and assumptions. These estimates and assumptions primarily include, but are not limited to, earnings and required capital projections, discount rates, terminal growth rates, and the weighting assigned to the results of each of the valuation methods described above. Changes in certain assumptions could have a significant impact on the impairment assessment. Alliant evaluated the significant assumptions used to determine the estimated fair values of each reporting unit, both individually and in the aggregate, and concluded they are reasonable. If these estimates or related assumptions change in the future, Alliant may be required to revise the assessment and, if appropriate, record an impairment charge. Based on the results of the process described above, Alliant did not recognize any impairment of goodwill or intangible assets during 2015. Income Taxes Alliant Holdings, L.P. is a partnership. However, the operating subsidiaries are C corporations and, as such, are treated as taxpayers for federal, state, and local income tax purposes. Income taxes are accounted for under the liability method. Deferred tax assets and liabilities are determined based on the differences between financial statement and tax bases of assets and liabilities using currently enacted tax rates. Uncertain Tax Positions — The calculation of Alliant's tax liabilities involves dealing with uncertainties in the application of complex tax regulations. In accordance with the applicable accounting guidance for uncertainty in income taxes, Alliant recognizes liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. If Alliant determines that a tax position will more likely than not be sustained on audit, then the second step requires Alliant to estimate and measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as Alliant has to determine the probability of various possible outcomes. Alliant reevaluates these uncertain tax positions on an annual basis. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax laws, effective settlement of audit issues, and new audit activity. Such a change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision. Deferred Financing Costs — Deferred financing costs are nonrefundable amounts paid by Alliant in connection with the establishment and amendment of its credit facilities (see Note 8). Such costs are being amortized over the expected term of the credit facilities and are included in interest and related fees in the consolidated statements of operations and comprehensive loss. Amortization of deferred financing costs was $2.9 million, $4.3 million, $5.7 million and $5.7 million for the period from August 14, 2015 to December 31, 2015, and the period from January 1, 2015 to August 13, 2015, the years ended December 31, 2014 and 2013, respectively. In connection with the amendment to the credit agreement in 2013 (see Note 8), Alliant expensed $2.1 million in financing costs in December 2013, included in interest and related fees in the consolidated statement of operations and comprehensive loss. Fair Value of Financial Instruments — Cash and cash equivalents, fiduciary funds, premiums and commissions receivable, other current assets, insurance premium payable, payables and accrued expenses, other current liabilities, and long-term debt are considered financial instruments. Alliant believes that due to the short duration of these financial instruments, other than long-term debt, carrying amounts approximate fair value. For long-term debt, Alliant uses market trading information and the present value of future cash flows, discounted at Alliant's current incremental rate of borrowing on similar debt, to estimate a fair value. At December 31, 2015 and 2014, the fair value of Alliant's debt was estimated to be $1,797.5 million and - 13 - $1,219.1 million, respectively. Interest rate swaps and liabilities for contingent consideration arrangements are carried at fair value, estimated as described in Note 5. Concentration of Credit Risk — Financial instruments, which potentially subject Alliant to a concentration of credit risk, principally consist of cash, cash equivalents, fiduciary funds, and receivables. Alliant invests available cash in cash equivalents and money market securities of high -credit -quality financial institutions. Alliant had cash and cash equivalents in the amount of $66.3 million and $29.0 million as of December 31, 2015 and 2014, respectively, in excess of federally insured limits. At December 31, 2015 and 2014, Alliant's receivables were primarily from insurance carriers and clients in various industries. To reduce credit risk, Alliant performs periodic credit evaluations of its clients, but does not generally require collateral. Derivatives — Alliant accounts for derivative instruments in accordance with the provisions of ASC 815, Derivatives and Hedging. On the date Alliant enters into a derivative contract, Alliant may designate the derivative as a hedge of the identified exposure. Derivatives are reported in the accompanying consolidated balance sheets at fair value. For derivatives designated as hedges, changes in fair value are reported in other comprehensive loss to the extent that the hedge is effective. Alliant formally measures effectiveness of its hedging relationships, both at the hedge inception and on an ongoing basis, in accordance with its risk management policy. For derivatives not designated as hedges, changes in fair value are reported as a component of interest and related fees in the accompanying consolidated statements of operations and comprehensive loss. Alliant has no derivatives that were not designated as hedges. Litigation — Alliant is the defendant in various legal actions related to claims, lawsuits, and proceedings incidental to the nature of its business. Alliant records undiscounted liabilities for loss contingencies, including legal costs to be incurred, when it is probable that a liability has been incurred on or before the balance sheet date and the amount of the liability can be reasonably estimated. To the extent recovery of such losses and legal costs is probable under Alliant's insurance programs, estimated recoveries are recorded concurrently with the losses recognized. Significant management judgment is required to estimate the amounts of such contingent liabilities and the related insurance recoveries. In order to assess Alliant's potential liability, Alliant analyzes litigation exposure based on available information, including consultation with outside counsel handling the defense of these matters. These liabilities are uncertain by their nature and the recorded amounts may change due to a variety of factors, including new developments or changes in approach, such as changing the settlement strategy as applicable to each matter. Use of Estimates — The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Accumulated Other Comprehensive Income (Loss) — Accumulated other comprehensive income (loss) refers to revenues, expenses, gains, and losses that are recorded as an element of equity but are excluded from net income (loss). Alliant's other comprehensive income consists of net gains and losses on certain derivative instruments accounted for as cash flow hedges. As of December 31, 2015, accumulated other comprehensive income was $0.4 million, recorded net of tax expense of $0.2 million, or $0.2 million. As of December 31, 2014, accumulated other comprehensive loss was $0.8 million, recorded net of tax benefit of $0.3 million, or $0.5 million. Noncontrolling Interest — Noncontrolling interest in a subsidiary is presented within total equity in Alliant's consolidated balance sheets. The amount of consolidated net income (loss) attributable to the noncontrolling interest is presented in the consolidated statements of operations and comprehensive loss. The carrying amount -14- of the noncontrolling interest is adjusted based on an allocation of subsidiary income (loss) based on ownership interest. Share -Based Compensation — Alliant accounts for share -based payments under ASC 718, Compensation — Stock Compensation, which requires compensation cost related to share -based payment transactions to be recognized in an issuer's consolidated financial statements. Alliant has issued unvested units to employees with stated vesting periods that require continued employment with Alliant and, in some cases, with stated performance conditions. The excess of the value of such units over the purchase price is generally recognized as compensation expense ratably over the requisite service period. Alliant's determination of compensation expense includes estimated forfeitures of unvested units and assessment of the probability of the performance conditions being met by the holders of the unvested units. Changes in estimates are recognized currently in the consolidated statements of operations and comprehensive loss. Alliant has also issued unvested units to employees that include, in addition to time or performance conditions, forfeiture provisions that terminate only upon the earlier of uncertain future events: a change in control (as defined in Alliant's partnership agreement) or the consummation of an initial public offering. No compensation expense is recognized for such units until the forfeiture provisions terminate. New Accounting Pronouncements — In March 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-09, Improvements to Employee Share -Based Payment Accounting. The standard simplifies the accounting for share -based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification of the statement of cash flows. ASU No. 2016-09 is effective for annual periods beginning after December 15, 2017, with early adoption permitted. Alliant has not yet assessed whether the adoption of the ASU will have a material impact on Alliant's consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers: Principal versus Agent Consideration. This standard requires an entity to evaluate whether it is the principal or agent for each specified good or service promised in a contract with a customer. ASU No. 2016-08 is effective for fiscal periods beginning after December 15, 2019. Alliant has not yet assessed whether the adoption of the ASU will have a material impact on Alliant's consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases, which changes the presentation of leases in the financial statements. Under this standard, the entity presents all leases on the balance sheet. For non-public entities, ASU No. 2016-02 is effective for fiscal years beginning after December 15, 2019, with early adoption permitted, and is effective for interim periods in the year of adoption. Alliant has not yet assessed whether the adoption of the ASU will have a material impact on Alliant's consolidated financial statements. In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Liabilities. This standard allows non-public entities to elect to not disclose the fair value of financial instruments measured at amortized cost. ASU No. 2016-01 is effective for fiscal periods beginning after December 15, 2018. Alliant has not yet assessed whether the adoption of the ASU will have a material impact on Alliant's consolidated financial statements. In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes. This update requires entities to classify deferred tax liabilities and assets as noncurrent in a classified statement of financial position. The amendments must be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented and early adoption is permitted. ASU No. 2015-17 is effective for financial statements issued for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. Alliant has not yet assessed whether the adoption of the ASU will have a material impact on Alliant's consolidated financial statements. - 15 - In September 2015, the FASB issued ASU No. 2015-16, Business Combinations: Simplifying the Accounting for Measurement -Period Adjustments. The standard requires the acquirer to recognize adjustments to provisional amounts that are identified during the measurement period for a business combination in the reporting period in which the adjustment amount is determined. Additionally, it requires acquirers to present separately on the face of the income statement, or disclose in the notes, the portion of the amount recorded in current -period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. ASU No. 2015-16 is effective for fiscal years beginning after December 15, 2016. Alliant has not yet assessed whether the adoption of the ASU will have a material impact on Alliant's consolidated financial statements. In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, which changes the presentation of debt issuance costs in financial statements. Under this standard, an entity presents such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs is reported as interest expense. ASU No. 2015-03 is effective for fiscal years beginning after December 15, 2015, and interim periods beginning after December 15, 2016. Alliant will adopt this pronouncement effective January 1, 2016. Alliant has not yet assessed whether the adoption of the ASU will have a material impact on Alliant's consolidated financial statements. In August 2014, the FASB issued ASU No. 2014-15, Disclosures of Uncertainties about an Entity's Ability to Continue as a Going Concern. This standard provides guidance on disclosing going concern uncertainties in the financial statements. The standard requires management to perform interim and annual assessments of the entity's ability to continue as a going concern within one year of the issuance of the financial statements. ASU No. 2014-15 is effective for annual periods ending after December 31, 2016. Alliant has not yet assessed whether the adoption of the ASU will have a material impact on Alliant's consolidated financial statements. In June 2014, the FASB issued ASU No. 2014-12, Accounting for Share -Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period, which applies to reporting entities that grant their employees share -based awards where the terms of the award provide a performance target that affects vesting and the performance target can be achieved after the requisite service period. The standard requires that he performance target is accounted for as a performance condition in accordance with Topic 718 and is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. Alliant has not yet assessed whether the adoption of the ASU will have a material impact on Alliant's consolidated financial statements. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which outlines a single comprehensive model for all entities to use in accounting for revenue arising from contracts with customers. The new standard supersedes most existing revenue recognition guidance, including industry - specific guidance. ASU No. 2014-09 will be effective for Alliant's annual financial statements for 2018 and interim financial statements for 2019, and may be applied either 1) retrospectively to each prior reporting period presented or 2) retrospectively with the cumulative effect of initially applying the ASU recognized at the date of initial application. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which defers the effective date of ASU No. 2014- 09 by one year for all entities and permits early adoption on a limited basis. Alliant has not yet assessed whether the adoption of the ASU will have a material impact on Alliant's consolidated financial statements. The Private Company Council of the FASB (PCC) has issued a number of pronouncements specifically for entities that are not required to file or furnish financial statements with the Securities and Exchange Commission or another domestic or foreign regulatory agency, or otherwise make financial statements publicly available. Alliant is not required to, and does not anticipate that it will, implement PCC pronouncements and therefore does not believe that any of these pronouncements will have an impact on Alliant's consolidated financial statements. -16- 3. MERGER TRANSACTION As discussed in Note 1, Alliant Holdings entered into the Stone Point Merger Transaction on August 14, 2015. Under the terms of this transaction, holders of Alliant Holdings Class A, Class B, and Class C units were offered cash consideration of $11.45, $6.45 and $6.45 per unit, respectively. Certain holders of Class A, Class B and Class C units elected to exchange their holdings for units in Alliant. Concurrent with the Stone Point Merger Transaction, Alliant entered into a new debt facility (Note 8). The total consideration received in the Stone Point Merger Transaction was $3,341.4 million, consisting of debt proceeds of $1,870.7 million, proceeds from new shareholders of $684.9 million and $785.8 million relating to continuing owners who exchanged their shares of Alliant Holdings for units in Alliant. The proceeds were primarily used to pay off existing debt of $1,573.2 million and call premium of $28.2 million, to pay selling shareholders $950.6 million, and to pay merger transaction costs of approximately $58.2 million, including approximately $4.7 million and $53.5 million of such costs that were expensed or were capitalized as deferred financing costs, respectively. As a result of the Stone Point Merger Transaction, Alliant recorded customer lists of $1,784.9 million, restrictive covenants of $135.9 million, trade name of $92.4 million, and goodwill of $1,831.9 million. These amounts reflect the results of Alliant's purchase price allocation, based upon estimated valuations of acquired assets and liabilities. 4. ACQUISITIONS Alliant's acquisitions may include provisions for contingent additional consideration based on future financial results of the acquired companies. In accordance with ASC 805, Business Combinations, contingent future cash payments related to acquisitions are recognized at estimated fair value as of the acquisition date, and such amount is included in the determination of the acquisition date purchase price. Any subsequent changes in the fair value of the contingent future cash payments are recognized in earnings in the period that the change occurs. The basic structure for an acquisition by Alliant generally includes employment agreements with the employee shareholders of the acquired company. Compensation under these agreements, which is consistent with prevailing market rates, is generally in the form of salary, plus an incentive -based bonus. Such amounts are expensed as incurred. In connection with acquisitions, Alliant records the estimated fair value of the net tangible assets purchased and the fair value of the identifiable intangible assets purchased, which typically consist of purchased customer accounts and noncompete agreements. Purchased customer accounts primarily represent the present value of the underlying cash flows expected to be received over the estimated future renewal periods of the insurance policies comprising those purchased customer accounts. Noncompete agreements are valued based on their duration and any unique features of particular agreements. The valuation of purchased customer accounts and noncompete agreements involves significant estimates and assumptions. Any change in assumptions could affect the carrying value of purchased customer accounts or noncompete agreements. On July 1, 2015, Alliant acquired Preferred Concepts Holdings, LLC and its subsidiaries ("PCH") pursuant to a stock purchase agreement. PCH's subsidiaries are engaged in the business of property and casualty and underwriting services. The aggregate purchase price was $91.4 million and included cash of $72.5 million, Class A units with an estimated fair value of $10.0 million, and an accrued liability of $8.9 million relating to potential contingent purchase payments. The excess of the purchase price over the estimated aggregate tangible net assets acquired of $2.4 million was $89.0 million, which has been estimated to consist of customer lists of $44.4 million, restrictive covenants of $5.1 million, trade name of $0.4 million, and goodwill 17- of $39.1 million. Transaction costs relating to this acquisition amounted to $1.0 million and are expensed in the period incurred. Alliant estimated the fair value of the contingent consideration to be $8.9 million at the close of the transaction, which was determined using a discounted cash flow methodology based on financial forecasts determined by Alliant that includes assumptions about growth in earnings before interest, taxes, depreciation, and amortization over three years, and discount rates. Alliant has recorded the contingent consideration of $9.4 million as of December 31, 2015, within other long-term liabilities, and remeasures contingent consideration at fair value at each reporting period with changes recognized in earnings (see Note 5). The total remaining maximum contingent consideration payable is $32.5 million and the minimum is zero, payable in cash and in Class A units. Effective July 1, 2015, Alliant acquired the assets of Todd Garibaldi Insurance Agency ("TGI"). TGI is a provider of property and casualty and risk management services. The aggregate purchase price was $14.6 million and included cash of $10.0 million, Class A units with an estimated fair value of $4.6 million, and an accrued liability of $20,000 relating to potential contingent purchase payments. The purchase price has been estimated to consist of customer lists of $6.9 million, restrictive covenants of $1.0 million, and goodwill of $6.7 million. Transaction costs relating to this acquisition amounted to $0.2 million and are expensed in the period incurred. Alliant estimated the fair value of the contingent consideration to be $20,000 at the close of the transaction, which was determined using a discounted cash flow methodology based on financial forecasts determined by Alliant that includes assumptions about growth in earnings before interest, taxes, depreciation, and amortization over three years, and discount rates. Alliant has recorded the contingent consideration of $21,000 as of December 31, 2015, within other long-term liabilities, and remeasures contingent consideration at fair value at each reporting period with changes recognized in earnings (see Note 5). The total remaining maximum contingent consideration payable is $2.1 million and the minimum is zero, payable in cash and in Class A units. On February 2, 2015, Alliant acquired all the outstanding stock of QBE U.S. Agencies, Inc. and its subsidiaries ("QBE"). QBE's direct and indirect subsidiaries, including Community Association Underwriters of America, Inc., Deep South Surplus, Inc., S.I.U., LLC, DSCM Inc., and Deep South Surplus of Texas, L.P., are engaged in the business of insurance services and administering insurance claims. The aggregate purchase price was $230.5 million, all of which was cash. The excess of the purchase price over the estimated aggregate tangible net assets acquired of $25.7 million was $204.8 million, which has been estimated to consist of customer lists of $64.8 million, restrictive covenants of $2.7 million, trade name of $4.2 million, and goodwill of $133.1 million. Transaction costs relating to this acquisition amounted to $2.9 million and are expensed in the period incurred. Alliant estimated the fair value of the contingent consideration to be zero at the close of the transaction, which was determined using a discounted cash flow methodology based on financial forecasts determined by Alliant that indicates assumptions about growth in revenue over two to five years, and discount rates. The total maximum contingent consideration payable is $82.5 million and the minimum is zero, payable in cash. During the year ended December 31, 2015, $32.5 million was deposited into an escrow account and is included in other long-term assets in the accompanying consolidated balance sheets. Effective December 31, 2014, Alliant acquired all the outstanding stock of Worth Corporate Planning, Inc. (and its subsidiary American Benefits Consulting, LLC) and American Benefits and Compensation Systems, Inc., and the assets of ABC Benefits Consulting PA, LLC (collectively known as "ABC"), a provider of employee benefit and risk management services. The aggregate purchase price was $97.6 million and included cash of $73.9 million, Class A units with an estimated fair value of $14.1 million, and an accrued liability of $9.6 million relating to potential contingent purchase payments. The excess of the purchase price over the estimated aggregate tangible net assets acquired of $1.7 million was $95.9 million, which has been estimated to consist of customer lists of $32.6 million, restrictive covenants of $3.3 million, trade name of $0.4 million, and goodwill of $59.6 million. Transaction costs relating to this acquisition amounted to $0.6 million and are expensed in the period incurred. Alliant estimated the fair value of the contingent consideration to be $9.6 million at the close of the transaction, which was determined using a discounted cash flow methodology based on financial forecasts determined by Alliant that includes assumptions about growth in earnings before interest, taxes, depreciation, and amortization over three years, and discount rates. Alliant has recorded the contingent consideration of $11.2 million and $9.6 million as of December 31, 2015 and 2014, respectively, within other long-term liabilities, and remeasures contingent consideration at fair value at each reporting period with changes recognized in earnings (see Note 5). The total remaining maximum contingent consideration payable is $17.4 million and the minimum is zero, payable in cash and in Class A units. Effective December 1, 2014, Alliant acquired the assets of The Camps Group, LLC ("Camps"), a provider of employee benefit and risk management services. The aggregate purchase price was $19.2 million and included cash of $16.0 million, Class A units with an estimated fair value of $1.7 million, and an accrued liability of $1.5 million relating to potential contingent purchase payments. The excess of the purchase price over the estimated aggregate tangible net assets acquired of $0.2 million was $19.0 million, which has been estimated to consist of customer lists of $6.9 million, restrictive covenants of $1.5 million, and goodwill of $10.6 million. Transaction costs relating to this acquisition amounted to $0.3 million and are expensed in the period incurred. Alliant estimated the fair value of the contingent consideration to be $1.5 million at the close of the transaction, which was determined using a discounted cash flow methodology based on financial forecasts determined by Alliant that includes assumptions about growth in earnings before interest, taxes, depreciation, and amortization over three to four years, and discount rates. Alliant has recorded the contingent consideration of $1.7 million and $1.5 million as of December 31, 2015 and 2014, respectively, within other long-term liabilities, and remeasures contingent consideration at fair value at each reporting period with changes recognized in earnings (see Note 5). The total remaining maximum contingent consideration payable is $5.3 million and the minimum is zero, payable in cash and in Class A units. Effective August 31, 2014, Alliant acquired the assets of Moloney, O'Neill, Corkery & Jones, Inc. and all the outstanding stock of Moloney & O'Neill Life, Inc. and Corkery & Jones Benefits, Inc. (collectively known as "Moloney"), a provider of property and casualty, employee benefit, and risk management services. The aggregate purchase price was $54.6 million and included cash of $35.4 million, Class A units with an estimated fair value of $13.6 million, and an accrued liability of $5.6 million relating to potential contingent purchase payments. The excess of the purchase price over the estimated aggregate tangible net assets acquired of $1.2 million was $53.4 million, which has been estimated to consist of customer lists of $24.3 million, restrictive covenants of $3.9 million and goodwill of $25.2 million. Transaction costs relating to this acquisition amounted to $0.6 million and are expensed in the period incurred. Alliant estimated the fair value of the contingent consideration to be $5.6 million at the close of the transaction, which was determined using a discounted cash flow methodology based on financial forecast determined by Alliant that includes assumptions about growth in earnings before interest, taxes, depreciation, and amortization over three years, and discount rates. Alliant has recorded contingent consideration of $8.2 million and $5.8 million as of December 31, 2015 and 2014, respectively, within other long-term liabilities, and remeasures contingent consideration at fair value at each reporting period with changes recognized in earnings (see Note 5). The total remaining maximum contingent consideration payable is $12.4 million and the minimum is zero, payable in cash and in Class A units. -19- The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of the acquisitions described above (in thousands): During the period from August 14, 2015 to December 31, 2015 and the period from January 1, 2015 to August 13, 2015, Alliant had other acquisitions with a total purchase price of $8.9 million and $14.8 million, respectively, in cash and units. Effective December 31, 2013, Alliant acquired the assets of Sagewell Partners, Inc. ("Sagewell"). The aggregate purchase price included an accrued liability relating to potential contingent purchase payments. Alliant estimated the fair value of the contingent consideration to be $2.4 million at the close of the transaction, which was determined using a discounted cash flow methodology based on financial forecasts determined by Alliant that includes assumptions about growth in earnings before interest, taxes, depreciation, and amortization over one to four years, and discount rates. Alliant has recorded contingent consideration of $6.6 million and $2.6 million as of December 31, 2015 and 2014, respectively, within other long-term liabilities, and remeasures contingent consideration at fair value at each reporting period with changes recognized in earnings (see Note 5). The total remaining maximum contingent consideration payable is $7.8 million and the minimum is zero, payable in cash and in Class A units. During the period from January 1, 2015 to August 13, 2015, Alliant paid $1.8 million of the contingent consideration in cash and Class A units. Effective September 30, 2013, Alliant acquired the assets of EnRisk Services, Inc. ("EnRisk). The aggregate purchase price included an accrued liability relating to potential contingent purchase payments. Alliant estimated the fair value of the contingent consideration to be $5.6 million at the close of the transaction, which was determined using a discounted cash flow methodology based on financial forecasts determined by Alliant that includes assumptions about growth in earnings before interest, taxes, depreciation, and amortization, over three to four years, and discount rates. Alliant has recorded the contingent consideration of $8.2 million and $6.5 million at December 31, 2015 and 2014, respectively, within accrued expenses and other long-term liabilities, and remeasures the contingent consideration at fair value at each reporting period with changes recognized in earnings (see Note 5). The total remaining maximum payable is $9.0 million and the minimum is zero, payable in cash and in Class A units. 5. FAIR VALUE MEASUREMENTS ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a fair value hierarchy -20- PCH TGI QBE ABC Camps Moloney 2015 2015 2015 2014 2014 2014 Current assets $ 30,870 $ - $ 62,620 $ 3,249 $ 400 $ 3,910 Intangible assets 49,953 7,933 71,716 36,291 8,444 28,227 Goodwill 39,047 6,679 133,062 59,588 10,550 25,225 Other noncurrent assets 844 - 6,280 1,377 - 183 Total assets acquired 120,714 14,612 273,678 100,505 19,394 57,545 Current liabilities 29,343 - 42,568 2,878 168 2,909 Noncurrent liabilities - - 656 - - - Total liabilities assumed 29,343 - 43,224 2,878 168 2,909 Net assets acquired $ 91,371 $ 14,612 $230,454 $ 97,627 $ 19,226 $ 54,636 During the period from August 14, 2015 to December 31, 2015 and the period from January 1, 2015 to August 13, 2015, Alliant had other acquisitions with a total purchase price of $8.9 million and $14.8 million, respectively, in cash and units. Effective December 31, 2013, Alliant acquired the assets of Sagewell Partners, Inc. ("Sagewell"). The aggregate purchase price included an accrued liability relating to potential contingent purchase payments. Alliant estimated the fair value of the contingent consideration to be $2.4 million at the close of the transaction, which was determined using a discounted cash flow methodology based on financial forecasts determined by Alliant that includes assumptions about growth in earnings before interest, taxes, depreciation, and amortization over one to four years, and discount rates. Alliant has recorded contingent consideration of $6.6 million and $2.6 million as of December 31, 2015 and 2014, respectively, within other long-term liabilities, and remeasures contingent consideration at fair value at each reporting period with changes recognized in earnings (see Note 5). The total remaining maximum contingent consideration payable is $7.8 million and the minimum is zero, payable in cash and in Class A units. During the period from January 1, 2015 to August 13, 2015, Alliant paid $1.8 million of the contingent consideration in cash and Class A units. Effective September 30, 2013, Alliant acquired the assets of EnRisk Services, Inc. ("EnRisk). The aggregate purchase price included an accrued liability relating to potential contingent purchase payments. Alliant estimated the fair value of the contingent consideration to be $5.6 million at the close of the transaction, which was determined using a discounted cash flow methodology based on financial forecasts determined by Alliant that includes assumptions about growth in earnings before interest, taxes, depreciation, and amortization, over three to four years, and discount rates. Alliant has recorded the contingent consideration of $8.2 million and $6.5 million at December 31, 2015 and 2014, respectively, within accrued expenses and other long-term liabilities, and remeasures the contingent consideration at fair value at each reporting period with changes recognized in earnings (see Note 5). The total remaining maximum payable is $9.0 million and the minimum is zero, payable in cash and in Class A units. 5. FAIR VALUE MEASUREMENTS ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a fair value hierarchy -20- that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows: Level 1— Quoted prices in active markets for identical assets or liabilities. Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, DCF methodologies, and similar techniques that use significant unobservable inputs. ASC 820 requires Alliant to maximize the use of observable inputs and minimize the use of unobservable inputs. If a financial instrument uses inputs that fall in different levels of the hierarchy, the instrument will be categorized based upon the lowest level of input that is significant to the fair value calculation. Alliant's financial assets and liabilities measured at fair value on a recurring basis consist of cash equivalents, derivative financial instruments, and liabilities for contingent consideration arising from business combination transactions. Certain other assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value measurement in certain circumstances, for example, when evidence of impairment exists. Alliant has categorized all financial assets and liabilities that are measured at fair value on a recurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date in the table below. -21- Assets and liabilities measured at fair value on a recurring basis as of December 31, 2015 and 2014 are summarized below (in thousands): a) Cash equivalents include money market accounts held at various financial institutions. This amount includes Alliant's own accounts and the fiduciary accounts. b) Interest rate swap positions are valued using readily observable market parameters. The inputs include current prevailing interest rate swap curves and the terms of the hedges that Alliant has locked in. c) Consideration for some acquisitions made by Alliant includes contingent consideration arrangements, which are included in other current and long-term liabilities, as appropriate, in the accompanying consolidated balance sheets. The contingent consideration is measured at fair value on a recurring basis using significant unobservable inputs (Level 3). Contingent consideration is measured by discounting to present value the contingent payments expected to be made based on Alliant's estimates of certain financial targets expected to result from the acquisitions. -22- 2015 Level Level Level Assets — cash equivalents (a) $ 474 Total assets at fair value $ 474 Liabilities: Interest rate swaps (b) $ - $ 4,966 $ - Contingent consideration (c) - - 45,548 Total liabilities at fair value $ - $ 4,966 $ 45,548 2014 Level Level Level Assets — cash equivalents (a) $ 4,780 $ - $ - Total assets at fair value $ 4,780 $ - $ - Liabilities: Interest rate swaps (b) $ - $ 967 $ - Contingent consideration (c) - - 26,789 Total liabilities at fair value $ - $ 967 $ 26,789 a) Cash equivalents include money market accounts held at various financial institutions. This amount includes Alliant's own accounts and the fiduciary accounts. b) Interest rate swap positions are valued using readily observable market parameters. The inputs include current prevailing interest rate swap curves and the terms of the hedges that Alliant has locked in. c) Consideration for some acquisitions made by Alliant includes contingent consideration arrangements, which are included in other current and long-term liabilities, as appropriate, in the accompanying consolidated balance sheets. The contingent consideration is measured at fair value on a recurring basis using significant unobservable inputs (Level 3). Contingent consideration is measured by discounting to present value the contingent payments expected to be made based on Alliant's estimates of certain financial targets expected to result from the acquisitions. -22- There were no transfers between Levels 1, 2 and 3 of the fair value hierarchy during 2015 or 2014. Changes in Level 3 Recurring Fair Value Measurements — The table below provides information on the valuation technique, significant unobservable inputs and the rates utilized by Alliant in measuring fair value on a recurring basis of the Level 3 liabilities at December 31, 2015 and 2014 (in thousands): Alliant determines the fair value for its contingent consideration obligations using an income approach whereby Alliant assesses the probability and timing of the achievement of the applicable milestones, which are based on contractually negotiated financial or operating targets that vary by acquisition transaction, such as earnings before interest, taxes, depreciation and amortization, and commission revenue. The contingent payments are estimated using a probability -weighted multi -scenario analysis of expected future performance of the acquired businesses. Alliant then discounts these expected payment amounts to calculate the fair value as of year-end. Alliant's management evaluates the underlying projections and other related factors used in determining fair value each period and makes updates when there have been significant changes in management's expectations. The principal significant unobservable input used in the valuations of Alliant's contingent consideration obligations is a risk-adjusted discount rate. An increase in the discount rate will result in a decrease in the fair value of contingent consideration. Conversely, a decrease in the discount rate will result in an increase in the fair value of contingent consideration. A reconciliation of the fair value of contingent consideration liabilities for the years ended December 31, 2015 and 2014 is as follows (in thousands): Successor's Predecessor's Basis Basis 2015 2014 Fair value at beginning of year $ 26,789 $ 11,907 Contingent consideration current year acquisitions 8,923 16,980 Remeasurement of fair value 12,120 2,287 Payment of contingent consideration (2,284) (4,385) Fair value at end of year $ 45,548 $ 26,789 -23- December 31, 2015 Valuation Unobservable Weighted -Average Fair Value Technique Input Rate Contingent consideration $ 45,548 Discounted cash Discount rate 11.3% December 31, 2014 Valuation Unobservable Weighted -Average Fair Value Technique Input Rate Contingent consideration $ 26,789 Discounted cash Discount rate 11.2% Alliant determines the fair value for its contingent consideration obligations using an income approach whereby Alliant assesses the probability and timing of the achievement of the applicable milestones, which are based on contractually negotiated financial or operating targets that vary by acquisition transaction, such as earnings before interest, taxes, depreciation and amortization, and commission revenue. The contingent payments are estimated using a probability -weighted multi -scenario analysis of expected future performance of the acquired businesses. Alliant then discounts these expected payment amounts to calculate the fair value as of year-end. Alliant's management evaluates the underlying projections and other related factors used in determining fair value each period and makes updates when there have been significant changes in management's expectations. The principal significant unobservable input used in the valuations of Alliant's contingent consideration obligations is a risk-adjusted discount rate. An increase in the discount rate will result in a decrease in the fair value of contingent consideration. Conversely, a decrease in the discount rate will result in an increase in the fair value of contingent consideration. A reconciliation of the fair value of contingent consideration liabilities for the years ended December 31, 2015 and 2014 is as follows (in thousands): Successor's Predecessor's Basis Basis 2015 2014 Fair value at beginning of year $ 26,789 $ 11,907 Contingent consideration current year acquisitions 8,923 16,980 Remeasurement of fair value 12,120 2,287 Payment of contingent consideration (2,284) (4,385) Fair value at end of year $ 45,548 $ 26,789 -23- 6. PROPERTY AND EQUIPMENT At December 31, 2015 and 2014, property and equipment consists of the following (in thousands): Furniture, equipment and software Leasehold improvements Less accumulated depreciation Successor's Predecessor's Basis Basis 2015 2014 $ 29,253 $ 24,306 6,316 3,822 35,569 28,128 (4,512) (12,810) Property and equipment net $ 31,057 $ 15,318 Depreciation expense was $4.6 million, $5.5 million, $6.4 million, and $6.3 million for the period from August 14, 2015 to December 31, 2015, the period from January 1, 2015 to August 13, 2015, and the years ended December 31, 2014 and 2013, respectively. 7. GOODWILL AND INTANGIBLE ASSETS Goodwill — The changes in the carrying amounts of goodwill for the period from August 14, 2015 to December 31, 2015, the period from January 1, 2015 to August 13, 2015, and the years ended December 31, 2014 and 2013, are as follows (in thousands): -24- Successor's Predecessor's Basis Basis Period from Period from Predecessor's Predecessor's August 14, January 1, Basis Basis 2015 to 2015 to Year Ended Year Ended December 31, August 13, December 31, December 31, 2015 2015 2014 2013 Balance—beginning of period $ - $ 1,239,430 $ 1,132,845 $ 1,105,921 Acquired during period - 188,227 105,290 25,436 Additional consideration for prior periods' acquisitions - 145 1,295 114 Dispositions - - - - KKR Merger Transaction - - - 1,374 Stone Point Merger Transaction 1,831,921 - - - Balance — end of period $ 1,831,921 $ 1,427,802 $ 1,239,430 $ 1,132,845 -24- Intangible Assets — At December 31, 2015 and 2014, intangible assets consist of the following (in thousands): Successor's Predecessor's Basis Basis 2015 2014 Restrictive covenants $ 135,882 $119,869 Accumulated amortization (26,948) (95,302) Net restrictive covenants 108,934 24,567 Customer lists 1,793,779 810,224 Accumulated amortization (52,194) (178,282) Net customer lists 1,741,585 631,942 Trade names 92,368 64,932 Accumulated amortization 81 - Net trade names 92,287 64,932 Total intangible assets — net $1,942,806 $721,441 Amortization expense of $79.9 million, $77.6 million, $134.8 million, and $138.1 million was recorded for the period from August 14, 2015 to December 31, 2015, the period from January 1, 2015 to August 13, 2015, and the years ended December 31, 2014 and 2013, respectively. Estimated amortization expenses for the years ending December 31 are as follows (in thousands): 2016 $ 202,439 2017 175,044 2018 142,544 2019 137,826 2020 134,400 Thereafter 1,058,839 Total $ 1,851,092 Alliant acquired lease intangible assets for $8.8 million which are amortized over the leases remaining terms, which range from one to six years and is included in other assets. Amortization expense of the lease intangible assets for the period from August 14, 2015 to December 31, 2015 was $0.8 million. In accordance with ASC 350, Intangibles – Goodwill and Other, Alliant performs an annual impairment test for goodwill and intangible assets with indefinite lives in the fourth quarter of the year using financial information as of September 30, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Such indicators -25- include, but are not limited to, a sustained significant decline in the value of Alliant or a significant decline in expected future cash flows due to changes in Alliant-specific factors or the broader business climate. The evaluation of such factors requires considerable judgment. Any adverse change in these factors could have a significant impact on the recoverability of goodwill and intangible assets and could have a material impact on Alliant's consolidated financial statements. There were no indicators of possible impairment of Alliant's goodwill and intangible assets during the years ended December 31, 2015 and 2014. 8. DEBT Alliant's debt as of December 31, 2015 and 2014 consists of the following (in thousands): Successor's Predecessor's Basis Basis 2015 2014 Senior notes $ 535,000 $ - Senior Credit Facility - term loan — net of $4,093 discount at December 31, 2015 1,329,207 - Senior notes 450,000 Senior Credit Facility - term loan — net of $2,503 discount at December 31, 2014 - 681,235 Senior Credit Facility — line of credit - 87,000 Total 1,864,207 1,218,235 Less current portion of long-term debt (13,400) (5,646) Long-term debt — net of current portion $1,850,807 $1,212,589 On August 14, 2015, Alliant entered into a credit agreement providing for a term loan (the "2015 Senior Term Loan") of $1,340.0 million and issued senior notes totaling $535.0 million (collectively, the "2015 Senior Credit Facility"). Concurrently, Alliant paid off the existing Senior Term Loans of $1,123.0 million as well as the existing senior notes totaling $450.0 million. Included in loss on extinguishment of debt in the consolidated statement of operations and comprehensive loss for the period August 14, 2015 to December 31, 2015, are previously unamortized deferred financing costs of $24.4 million and $6.1 million of unamortized discount. In connection with paying off the senior notes, Alliant paid a call premium of $28.2 million which is included in the loss on extinguishment of debt in the accompanying consolidated statement of operations and comprehensive loss for the period from August 14, 2015 to December 31, 2015. Under the Senior Credit Facility, $200.0 million is available as a revolving line of credit that expires on August 14, 2020. The 2015 Senior Term Loan expires on August 14, 2022. The 2015 senior notes are due on August 1, 2023. Borrowings for the 2015 Senior Term Loan bear interest based on either the London InterBank Offered Rate (LIBOR) plus a maximum of 3.5% or prime plus a maximum of 2.5% at Alliant's option, provided that if at any time the LIBOR rate is less than 1.00%, then the LIBOR rate will be deemed at such time to be equal to 1.00%, and if the prime rate is less than 2.00%, then the prime rate will be deemed at such time to equal 2.00%. Revolving loans bear interest based on either LIBOR plus 3.50% or prime plus 2.50%, at Alliant's option. Additionally, there is a maximum commitment fee of 0.50% on the unused portion of the revolving loan commitment. The weighted -average interest rate in effect was 4.5% at December 31, 2015 and 4.25% at December 31, 2014. The proceeds of the 2015 Senior Credit Facility can be used for acquisition financing and for general corporate purposes. Additionally, the revolving loan commitment is available on a revolving basis for loans denominated in U.S. dollars and for letters of credit. The amount available under the term loan facility can be -26- increased subject to the terms of the credit agreement including, with respect to the additional facility, compliance with a maximum senior leverage ratio. The 2015 Senior Term Loan contains provisions that limit the payment of dividends or other distributions to unit holders and which limit the incurrence of indebtedness, liens on assets, sale of assets, certain acquisitions, investments, and other limitations. Alliant is in compliance with all debt covenants governing its 2015 Senior Term Loan indebtedness. Substantially all of the assets of Alliant are pledged as collateral against the 2015 Senior Term Loan. The 2015 senior notes are unsecured and bear interest at 8.25%. Interest payments are due on a semiannual basis in February and August of each year until maturity. The indenture governing the 2015 senior notes contains provisions that limit Alliant's ability to incur additional indebtedness, which limit the payment of certain dividends and distributions to partners, and which limit the incurrence of asset sales, certain acquisitions, investments and other limitations. Alliant is in compliance with all debt covenants governing its 2015 senior notes. On December 20, 2012, Alliant entered into a credit agreement providing for a term loan (the "2012 Senior Term Loan") of $705.0 million and issued senior notes totaling $450.0 million (collectively, the "Senior Credit Facility"). Concurrently, Alliant paid off the existing Senior Term Loan of $358.8 million and the incremental term loans of $201.2 million, as well as the existing senior notes totaling $265.0 million. Under the Senior Credit Facility, $100.0 million was available as a revolving line of credit that was due on December 20, 2017. The senior notes were due on December 20, 2020. In December 2013, Alliant entered into an amendment to its Senior Credit Facility to refinance the 2012 Senior Term Loan in an aggregate principal amount of $699.7 million with a new term loan ("2013 Senior Term Loan") in the same principal amount. The 2013 Senior Term Loan was due on December 20, 2019. In February 2015, Alliant entered into amendment to the 2013 Senior Term Loan providing for additional term loans totaling $360.0 million ("2015-1 New Term Loan") and $85.0 million ("2015-2 New Term Loan"). The proceeds of the 2015-1 New Term Loan were used to finance in part the consideration paid in connection with the acquisition of QBE, to pay fees and expenses related to the acquisition and the associated financing, and for certain other purposes. Maturities of Alliant's long-term debt as of December 31, 2015, exclusive of any mandatory principal prepayments that may be required in years subsequent to 2016, are as follows (in thousands): Years Ending December 31 2017 $ 13,400 2018 13,400 2019 13,400 2020 13,400 2021 13,400 Thereafter 1,783,807 Long-term debt net of current portion $1,850,807 In 2013, Alliant entered into five forward interest rate swap agreements, each with a notional amount of $50.0 million (the "2013 Swaps") that Alliant has designated as cash flow hedges against future interest payments associated with a portion of the variable rate Senior Term Loan. In August 2015, the swaps were -27- redesignated and associated with a portion of the variable rate 2015 Senior Term Loan. Under the terms of the 2013 Swaps, Alliant receives a three-month LIBOR rate and pays a fixed rate of approximately 1.25%. The 2013 Swaps have an effective date of December 20, 2016, and a maturity date of December 20, 2019. During the period from August 14, 2015 to December 31, 2015, the period from January 1, 2015 to August 13, 2015, and the years ended December 31, 2014 and 2013, Alliant recognized $0.3 million, ($1.4) million, ($4.3) million and $3.9 million, respectively, in other comprehensive income (loss) representing the change in fair value of the 2013 Swaps, net of income tax expense (benefit) of $0.2 million, $0.9 million, ($2.7) million and $2.3 million, respectively. The fair value of the 2013 Swaps at December 31, 2015 and 2014 amounted to $5.0 million and $1.0 million and is included within other long-term liabilities in the accompanying consolidated balance sheets. 9. EQUITY Alliant Holdings, L.P. has authorized the issuance of Class A and Class B units. Class A partners are entitled to elect the board of directors with each such partner having one vote for each Class A unit held by such partner. Pursuant to the Limited Partnership agreement, partners have agreed to delegate their authority to act on behalf of Alliant to Alliant's board of directors. Distributions, to the extent distributable, are made first to Class A units that are entitled to receive a preferred return equal to the original issuance price of $5.00 per unit. Distributions will then be made among all unitholders of Class A and Class B units, pro rata according to the number of units held by each partner. Alliant Holdings I, L.P. had authorized the issuance of Class A, Class B, Class C, and Class D units. Class A partners were entitled to elect the board of directors with each such partner having one vote for each Class A unit held by such partner. Pursuant to the Limited Partnership agreement, partners had agreed to delegate their authority to act on behalf of Alliant to Alliant's board of directors. Distributions, to the extent distributable, were made first to Class A units that were entitled to receive a preferred return equal to the original issuance price of $5.00 per unit, and second to the Class C units until each Class C unit received an amount equal to $5.00 per unit, and third to the Class D units until the Class D return had been achieved. The Class D return represents a tracking interest related to certain employees, as calculated on the earlier of a liquidity event, or December 31, 2017. After the aforementioned Class A, Class C and Class D distributions had been satisfied, the remaining funds available were to be distributed pro rata among the Class A and Class B partners, according to the number of units held by each partner, until a value of $5.00 per unit was achieved, which for the Class A units was in addition to the first distribution. Lastly, distributions were to be made among all unitholders of Class A, Class B and Class C units, pro rata according to the number of units held by each partner. There was $685.2 million, $9.3 million, $5.7 million, and $1.5 million in cash proceeds from sale of Class A units, during the period from August 14, 2015 to December 31, 2015, the period from January 1, 2015 to August 13, 2015, and the years ended December 31, 2014 and 2013, respectively. During the period from August 14, 2015 to December 31, 2015, the period from January 1, 2015 to August 13, 2015, and the years ended December 31, 2014 and 2013, Alliant repurchased Class A units in cash for the amount of approximately $969.1 million, $3.9 million, $9.9 million, and $0.4 million, respectively. As part of its incentive compensation program, Alliant granted Class B units on an annual basis to certain employees. The units were typically granted subject to a five-year vesting term, with one-fifth vesting in each year of the five-year term. Alliant issued $16.3 million in Class A units to certain employees during the period from January 1, 2015 to August 13, 2015, $7.1 million of which was recorded as member receivable. In August 2015, the member receivable was settled in connection with the Stone Point Merger Transaction. For the period from August 14, 2015 to December 31, 2015, the period from January 1, 2015 to August 13, 2015, and the years ended December 31, 2014 and 2013, Alliant recognized $9.8 million, $57.6 million, $9.0 million, and $3.2 million, respectively, of share -based compensation expense under ASC 718 related to the vesting of unvested units. A summary of the status of Alliant's unvested units as of December 31, 2015, 2014, and 2013, and changes during the years then ended, is presented below (units in thousands): Weighted- Weighted- Weighted- Weighted - Average Average Average Average Grant -Date Grant -Date Grant -Date Grant -Date Class A Fair Value Class B Fair Value Class C Fair Value Class D Fair Value Units Class A Units Class B Units Class C Units Class D Predecessor's Basis Unvested January 1, 2013 427 $ 5.00 - $ - - $ - $ Granted 214 5.00 13,504 1.31 3,160 2.92 Vested (543) 5.00 - - - - Forfeited (24) 5.00 (71) 1.31 - - Unvested — December 31, 2013 74 5.00 13,433 1.31 3,160 2.92 Granted 2,874 7.40 5,033 1.96 - - 1,000 Vested (89) 5.43 - - - Forfeited (11) 5.00 (229) 1.58 - - - Unvested — December 31, 2014 2,848 7.40 18,237 1.49 3,160 2.92 1,000 Granted 409 7.42 3,809 1.96 - - - Vested (2,798) 7.42 (16,187) 1.48 (3,160) 2.92 Forfeited - - (40) 1.55 - - Unvested — August 13, 2015 459 $ 7.39 5,819 $ 1.75 $ - 1,000 $ Successor's Basis Unvested— August 14, 2015 - $ - - $ - Granted 23,488 5.00 18,586 0.77 Vested (34) 5.00 - - Forfeited Cancelled Unvested— December 31, 2015 23,454 $ 5.00 18,586 $ 0.77 - $ $ For unvested Class A Units, as of December 31, 2015, 2014, and 2013, there was $113.5 million, $12.6 million, and $0.0 million, respectively, of total unrecognized compensation cost related to unvested share -based compensation arrangements granted. That cost is expected to be recognized over a weighted - average period of 3.5 years, 2.4 years, and 0.1 years, respectively. During 2015, Class B Units were issued to employees which have a performance condition related to a change in control or consummation of an initial public offering (the "Event"). Because an Event is not deemed probable until it has occurred, compensation expense will not be recognized until it is probable that the -29- employee will satisfy the requisite service periods. Upon the Event, all unvested portions of the time -based units vest immediately prior to the Event. Performance-based units may vest immediately prior to the Event subject to meeting certain performance conditions. As of December 31, 2015, there was approximately $14.3 million of total unrecognized compensation cost related to Class B unvested unit -based compensation arrangements. That cost is expected to be recognized on the occurrence of an Event. All units subject to this performance are outstanding and unvested as of December 31, 2015. Alliant did not record any compensation expense in the year ended December 31, 2015 in connection with these units. 10. INCOME TAX For the period from August 14, 2015 to December 31, 2015, the period from January 1, 2015 to August 13, 2015, and the years ended December 31, 2014 and 2013, the provision (benefit) for income taxes consists of the following (in thousands): -30- Successor's Predecessor's Bas is Bas is Period from Period from Predecessor's Predecessor'. August 14, January 1, Basis Basis 2015 to 2015 to Year Ended Year Ended December 31, August 13, December 31, December 31 2015 2015 2014 2013 Current provision (benefit): Federal $ (131) $ 5,519 $ (617) $ 1,699 State 804 1,434 2,512 2,541 Foreign 7 148 96 - Total current provision 680 7,101 1,991 4,240 Deferred benefit: Federal (48,310) (4,770) (38,373) (38,058) State (8,128) (210) (1,423) (7,904) Total deferred benefit (56,438) (4,980) (39,796) (45,962) Total income tax provision (benefit) $ (55,758) $ 2,121 $ (37,805) $ (41,722) -30- Income taxes recorded by Alliant differ from the amounts computed by applying the statutory U.S. federal tax rate to income before income taxes. Significant reconciling items for the period from August 14, 2015 to December 31, 2015, the period from January 1, 2015 to August 13, 2015, and the years ended December 31, 2014 and 2013 are as follows (in thousands): Successor's Basis Period from August 14, 2015 to December 31, 2015 U.S. federal income tax at statutory rate $ (57,644) State income taxes — net of federal benefit (4,760) Reversal of uncertain tax positions - Reversal of valuation allowance - Stock compensation 3,109 Meals and entertainment 278 Nontaxable income 1 Nondeductible transaction costs 568 Litigation expense - Other 2,690 Total income tax provision (benefit) $ (55,758) -31- Predecessor's Bas is Period from Predecessor's Predecessor': January 1, Basis Basis 2015 to Year Ended Year Ended August 13, December 31, December 31, 2015 2014 2013 $ (15,586) $ (39,331) $ (32,109) 795 708 (3,486) - (290) - - (30) - 16,233 357 105 358 528 371 2 77 44 431 - - - - (7,613) (112) 176 966 $ 2,121 $ (37,805) $ (41,722) The tax effects of the significant temporary differences giving rise to Alliant's net deferred tax liability as of December 31, 2015 and 2014, are as follows (in thousands): Successor's Predecessor's Deferred tax liabilities: Purchased intangible assets Basis Basis Deductible goodwill 2015 2014 Deferred tax assets: (2,376) (3,443) Deferred revenue $ 3,344 $ 3,104 Accrued compensation 7,401 8,328 Accrued professional fees 5,063 2,640 Cancellation reserve 2,161 1,796 Interest rate swaps 1,923 312 Net operating losses 13,610 8,003 Transaction costs 6,103 3,796 Other 4,830 4,120 Gross deferred tax assets 44,435 32,099 Valuation allowance (7) (5) Deferred tax liabilities: Purchased intangible assets (660,968) (225,938) Deductible goodwill (2,664) (12,863) Installment sale (2,376) (3,443) Earnout bonus - (4,195) Other (809) (442) Gross deferred tax liabilities (666,817)2( 46,881) Net deferred tax liability $(622,389) $(214,787) In assessing the realizability of deferred tax assets, Alliant considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. Alliant is required to record a valuation allowance to reduce its net deferred tax asset to the amount that management believes is more likely than not to be realized. Annually, Alliant performs an assessment of its deferred tax assets and maintains a valuation allowance against a foreign loss. -32- For the period from August 14, 2015 to December 31, 2015, the period from January 1, 2015 to August 13, 2015, and the years ended December 31, 2014 and 2013, a reconciliation of Alliant's total gross unrecognized tax benefits, excluding accrued interest, is as follows (in thousands): Alliant's policy is to record interest and penalties as part of the income tax provision. At December 31, 2015, Alliant had no material interest or penalties recorded. Alliant does not expect any significant increases or decreases to its unrecognized tax benefits within the next 12 months. Alliant's tax returns are generally subject to examination by the U.S. federal and state taxing authorities beginning in year 2012 and 2011, respectively. At December 31, 2015, Alliant had a Federal income tax net operating loss carryforward of $33.3 million which will expire beginning in 2035. As of December 31, 2015, Alliant had state income tax net operating loss carryforwards of $38.9 million that will expire beginning 2022. Alliant incurred a Section 382 ownership change on August 14, 2015; however, does not anticipate that this change will result in a limitation on the future utilization of these losses. It is possible that future utilization of the losses could be limited if another ownership change were to occur for purposes of Section 382. 11. LEASES Alliant leases various facilities and equipment under noncancelable operating leases. These leases generally contain renewal and/or purchase options and escalation clauses. Minimum aggregate rental commitments at December 31, 2015, under Alliant's noncancelable operating leases having an initial term of more than one year are as follows (in thousands): Years Ending December 31 Amount 2016 Successor's Predecessor's 20,624 2018 19,859 Basis Basis 2020 12,825 Thereafter Period from Period from Predecessor's Predecessor August 14, January 1, Basis Basis 2015 to 2015 to Year Ended Year Ended December 31, August 13, December 31, December 3 2015 2015 2014 2013 Balance — beginning of period $ - $ - $ 191 $ 191 Increase related to prior periods 172 - - Increase related to prior periods of acquired entities 4,966 - - Increase (decrease) relating to settlements with taxing authorities - (191) - Balance — end of period $ 5,138 $ - $ - $ 191 Alliant's policy is to record interest and penalties as part of the income tax provision. At December 31, 2015, Alliant had no material interest or penalties recorded. Alliant does not expect any significant increases or decreases to its unrecognized tax benefits within the next 12 months. Alliant's tax returns are generally subject to examination by the U.S. federal and state taxing authorities beginning in year 2012 and 2011, respectively. At December 31, 2015, Alliant had a Federal income tax net operating loss carryforward of $33.3 million which will expire beginning in 2035. As of December 31, 2015, Alliant had state income tax net operating loss carryforwards of $38.9 million that will expire beginning 2022. Alliant incurred a Section 382 ownership change on August 14, 2015; however, does not anticipate that this change will result in a limitation on the future utilization of these losses. It is possible that future utilization of the losses could be limited if another ownership change were to occur for purposes of Section 382. 11. LEASES Alliant leases various facilities and equipment under noncancelable operating leases. These leases generally contain renewal and/or purchase options and escalation clauses. Minimum aggregate rental commitments at December 31, 2015, under Alliant's noncancelable operating leases having an initial term of more than one year are as follows (in thousands): Years Ending December 31 Amount 2016 $ 20,904 2017 20,624 2018 19,859 2019 16,409 2020 12,825 Thereafter 13,615 Total $104,236 -33- Total rental expense was $7.2 million, $11.0 million, $13.7 million, and $13.6 million for the period from August 14, 2015 to December 31, 2015, the period from January 1, 2015 to August 13, 2015, and the years ended December 31, 2014 and 2013, respectively. 12. EMPLOYEE BENEFITS Alliant has a 401(k) plan (the "Plan"), which covers substantially all employees of Alliant. The Plan allows for matching contributions and discretionary profit-sharing contributions. Alliant's contribution expense related to the Plan was $1.2 million, $3.2 million, $3.1 million, and $2.6 million for the period from August 14, 2015 to December 31, 2015, the period January 1, 2015 to August 13, 2015, and the years ended December 31, 2014 and 2013, respectively. 13. RELATED -PARTY TRANSACTIONS In connection with theStone Point Merger Transaction, Alliant entered into a monitoring agreement with affiliates of Stone Point and KKR, whereby such entities will provide management services to Alliant. In 2015 and 2014, the monitoring fee was approximately $3.9 million and $3.7 million, respectively. 14. BUSINESS CONCENTRATIONS A significant portion of Alliant's commissions and fees are received from insureds in the state of California. Accordingly, the occurrence of adverse insurance markets, economic conditions, or regulatory climate in California could have a material adverse effect on Alliant. However, Alliant believes, based on the nature of its business, diversified customer base and product lines within the states in which it operates, that there is minimal risk of a material adverse occurrence due to these concentrations. 15. CONTINGENCIES Prior Disclosed Matter — On June 12, 2013, a confidential settlement agreement was reached, resolving previously disclosed litigation involving certain producers who were hired by Alliant in 2011. At December 31, 2012, Alliant had recorded a current liability of $13.0 million representing its estimate of future legal costs. Alliant recorded additional expenses of $17.5 million during the year ended December 31, 2013 related to this matter, in other operating expenses. Alliant does not expect any future expense related to this matter. Other Transitioning Producer Litigation Matters — Alliant's operating subsidiaries are occasionally involved in routine litigation related to the transition of new producers to Alliant from their former employers that has arisen in the ordinary course of business. Specifically, the litigation involves the transfer of business from the prior brokerage firms. Although an estimate of the possible loss or range of loss cannot be made, the conclusions of such matters are not expected to have a material adverse effect on Alliant's consolidated financial statements. General Litigation Matters — Alliant's operating subsidiaries are occasionally involved in routine insurance policy -related and employment practices litigation that has arisen in the ordinary course of business. The litigation is covered in whole or in part by insurance. Although an estimate of the possible loss or range of loss cannot be made, the conclusions of such matters are not expected to have a material adverse effect on Alliant's consolidated financial statements. Self -Insurance Beginning in March 2009, Alliant became self-insured for employee health, with stop -loss coverage for claims in excess of $250,000 per year for each beneficiary. At December 31, 2015 and 2014, -34- Alliant has recorded a liability in accrued expenses and accounts payable of approximately $1.3 million and $1.3 million, respectively, representing estimated claims incurred, but not yet reported, under the employee health coverage plan. 16. SUBSEQUENT EVENTS Alliant has evaluated subsequent events through April 29, 2016, the date the consolidated financial statements were issued. In February and March 2016, Alliant entered into four interest rate cap agreements, each with a notional amount of $100.0 million ("the 2016 Caps") that Alliant has designated as cash flow hedges against future interest payments associated with a portion of the variable rate 2015 Senior Term Loan described in Note 8. Under the terms of the 2016 Caps, should three-month LIBOR exceed 3.50% on a rate reset date during the effective period of the caps, Alliant will receive an amount equal to the cap notional multiplied by the three- month LIBOR minus 3.50%, multiplied by the number of days in the period divided by 360. The 2016 Caps have 5 year a maturity. On February 1, 2016, Alliant acquired the assets of John F. Throne & Co. Insurance Marketing, Inc. ("Throne"). Throne is engaged in the business of property and casualty and risk management services for the aviation industry. The aggregate consideration paid in connection with the transaction was approximately $49.4 million in cash and units, subject to adjustment for closing working capital and further post -closing adjustments, and potential future earn -out payments totaling a maximum of $12.0 million. -35- APPENDIX F. Litigation Report Please refer to the following page(s). RESPONSE TO RFP NO. 17-10 FOR INSURANCE BROKER SERVICES CITY OF COSTA MESA I FEBRUARY 15, 2017 &)4lliant Costa Mesa RFP Describe any administrative proceedings, claims, lawsuits, or other exposures pending against the Proposer. Below is a disclosure of litigation and legal proceedings that are currently pending against Alliant Insurance Services, Inc. Employment related matter have been excluded. There are no pending administrative proceedings. Tutor Perini Corporation BC624623 Superior Court of 6/21/2016 Pending Pleading Pending vs. Alliant Insurance California, County of Stage Services, AON Risk Los Angeles, Central Insurance Services West, District Inc., AIG Claims, Inc. et al. Abel Mendoza, Inc., v STK-CV-JMC-2016-381 Superior Court of 1/14/2016 Pending Pleading Pending Applied Underwriters, Inc., California, County of Stage Applied Underwriters San Joaquin Captive Risk Assurance Company, Inc., et al. Mark Sauer Construction, RIC 1514370 Superior Court Of 12/8/2015 Pending Pleading Pending Inc. vs. Liberty Mutual The State Of Stage Insurance Company, West California, County Of American Insurance Riverside, Unlimited Company, Alliant Jurisdiction Insurance Services, Inc. The City of Westminster vs 30 -2015 -00822401 -CU -IC- Superior Court of 11/24/2015 Pending Pleading Pending Everest National Insurance CXC California, County of Stage Company, Zurich American Orange Insurance Company, Am WINS Insurance Brokerage of California, LLC, and Alliant Insurance Services, Inc. Dean Henderson vs Tribal 2015 -CV -CV -2490 In The Chippewa 11/20/2015 Pending Pleading Pending First, Alliant Insurance Cree Tribal Court Of Stage Services, Inc. Rocky Boy, Montana BUR -L-2652-15 Superior Court of 11/17/2015 Pending Pleading Pending Columbus Farmers Market, New Jersey, Stage LLC and Columbus Flea Burlington County, World, LLC vs. Bruce Chris, Law Division Inc. t/a R/G Electric, et al Urban Index No.: 653636/2015 Supreme Court of 11/3/2015 Pending Discovery Pending Foundation/Engineering, the State of New LLC vs. T&H Brokers Inc. York, County of New Produce International, LLC BC587309 Superior Court of 7/8/2015 Pending Pleading Pending and P.I. Trucking, Inc. vs. California, County of Stage Robert Underwood et al Los Angeles 2/11/2017 Privileged and Confidential 1 of 2 Paulson & Nace, PLLC vs. 2015 CA 003701 B Alliant Insurance Services, the State of New Inc. 10/3/2014 Pending Myria Carson vs. Brent 580,040 A Coleman 10/1/2014 Pending Ausonio, Inc et al vs Lee M129454 Contractors and US District Court for 2/17/2011 Pending Consultants, Inc 7/22/2014 Pending Bergnat Realty Associates 14-cv-05487-GBD L.P. vs. Alliant Insurance Services, Inc. 5/13/2014 Pending United States of America, 3:14-cv-553-J-32MCR for the Use of JSC Systems, Inc. flk/a Jacksonville Sound and Communications, Inc. d/b/a Charleston Systems and/or Savannah Systems vs. Alliant Insurance Services, Inc., et. al. Costa Mesa RFP Superior Court, 5/20/2015 Pending District Of Columbia the State of New Caddo Parish District 10/3/2014 Pending Court, Louisiana United States District 6/28/2013 Pending Superior Court of 10/1/2014 Pending California. County of District of New York Monterey US District Court for 2/17/2011 Pending United States District 7/22/2014 Pending Court, Southern District of New York U.S. District Court 5/13/2014 Pending Middle District, Florida Swan Lake Resort, LLC v 2013-2111 Supreme Court of 8/21/2013 Pending Columbia Casualty et. al. the State of New York, County of Cammeby's v. Affiliated 13 -CV -2814 (JSR) United States District 6/28/2013 Pending FM et al Court, Southern District of New York Western Marine Insurance 2:10-CV-03172-KJM-JFM US District Court for 2/17/2011 Pending Services Corporation (third the Eastern District party plaintiff) v. Alliant Insurance Services, Inc., et. al. Discovery Pending AIS Pending Incorrectly Named AIS Pending Incorrectly Named Discovery Pending AIS Pending Incorrectly Named Discovery Pending Not in Pending Litigation Litigation Pending 2/11/2017 Privileged and Confidential 2 of 2 APPENDIX G. Cost Proposal Please refer to the following page(s). RESPONSE TO RFP NO. 17-10 FOR INSURANCE BROKER SERVICES CITY OF COSTA MESA I FEBRUARY 15, 2017 &)4lliant RFP17-10-CO1250 ATTACHMENT B COST PROPOSAL FOR INSURANCE BROKER SERVICES Provide hourly rates, along with estimated annual pricing in accordance with the City's current requirements, as set forth in section Scope of Work, Attachment A. Also provide your firm's proposed Staffing Plan on a separate sheet of paper. Proposer should use a separate form to state pricing for any added value. Pricing shall remain firm for a minimum of two (2) years. Any and all requests for pricing adjustments for follow-on contract renewal periods shall be provided no later than sixty (60) days prior to the end of the contract period. Any such proposed price adjustments shall not exceed The Bureau of Labor Statistics Consumer Price Index (CPI) data for Los Angles -Riverside -Orange County, CA, All Items, Not Seasonally Adjusted, "annualized change comparing the original proposal month and the same month in the subsequent year. (This information may be found on the U.S. Department of Labor's website at www.bls.gov.) Employee Hourly Rate Hours worked Total Cost Overtime rate Total Estimated Annual Price $ Page 35 of 35 We have provided an anticipated breakdown of the costs associated with the work expected under the scope of services. However, Alliant does not track hours as a regular process. The proposed fixed fee shall be effective for the first and second terms of the agreement. Subsequent years shall have a fixed price that includes a 2.5% inflation factor applied and impounded year over year. Loss Control and Appraisal Services outside of those provided within our proprietary programs are available at additional discounted charges, based on the required service. Loss Control via Alliant Business Services is available at a rate starting at $150 per hour plus expenses. Appraisal services are available at rates beginning at $225 per building. Additionally, it will be Alliant's goal to seek and obtain additional loss control services from the various policy carriers as part of the standard quoting process. We wish to emphasize our flexibility in working with the City in this area and are open to any alternatives that the City may prefer Special Events and Vendors/Contractors Programs are not included within the fee schedule as these premiums are paid by the vendor or event holder. The proposed fee does not include Alliant Underwriting Services (AUS) who are paid directly from the carriers for providing underwriting services to the APIP, ANML, OEL, CAMP, CALIP and SLIP Programs, should the City choose to participate in any of these programs. It also does not include any fees for wholesalers or intermediaries, whose use is deemed necessary and beneficial in the placement of some of the City's insurance programs. As previously noted Alliant does not own any wholesaler or intermediary firm. Alliant Underwriting Services (AUS): Alliant Underwriting Services (AUS) is a separate division of Alliant that employs underwriters to work on a variety of specialty programs distributed by Alliant brokers to specific industry segments. This activity originated in property/casualty and workers' compensation programs for Tribal Nations, quickly followed by the APIP program for public agencies, and now AUS provides underwriting services for a wide variety of Alliant programs including restaurants, waste haulers, auto parts manufacturers, contractors, commercial real estate owners, and others. In all cases, the underwriters employed by AUS are just that — seasoned and experienced underwriters, some with over 30 years of underwriting experience for insurers. The services provided for these programs, for example the APIP and ANML Liability Programs for the City, are paid by the carrier to Alliant because Alliant is performing the underwriting services that otherwise would be performed by the carrier themselves. In other words, the carrier has outsourced this function. In all of these cases, AUS underwriters have the necessary expertise and can provide the underwriting services on a product or program more efficiently than the carrier(s) itself, and therefore the carriers on these AUS underwritten programs choose to utilize AUS for that purpose. It is important to note that efforts are not duplicated by this team. Your Alliant retail producers and service staff are responsible for the delivery of services outlined in the "scope of services" including but not limited to: the preparation of underwriting information, submission of insurance specifications to all agreed upon markets, negotiations with underwriters and analysis of the proposed policy forms. This is work that must be done to properly market and place the City's risks with any market or carrier, whether an Alliant program, or not. Intermediary or wholesaler compensation may be included in a given placement depending on whether an intermediary was utilized, or not. We use intermediaries or wholesalers for a variety of placements where we believe they add value, and that value is typically easy to calculate when we and you analyze the various options for a given insurance placement. So, if the cost of involving a wholesaler is too high, then we and you will decide to place the business elsewhere. It is also important to note that in some cases, one may be a required to use a wholesale broker to access numerous insurers. A long list of competitive carriers choose to only allow access via a wholesale broker, and therefore one must use the wholesaler in order to obtain terms from that carrier. Alliant owns no intermediary or wholesaler and uses a variety of independent wholesale firms in order to obtain the best possible terms for each placement or program. For most insurance placements, the "expense" involved in underwriting a policy is built in to the overall expenses of the insurer. These can therefore be difficult to specifically discern on a given placement. Generally, the entire expense component of an insurer is in the 25 — 30% range of the overall cost of the policy. This, of course, varies by coverage line and by carrier. This number also necessarily includes other costs of the insurer (i.e. claims staff, as an example), not just the underwriting costs. Alliant Business Services (ABS) provides the Loss Control and Appraisal Services for the APIP program. The City can choose to opt out of (ABS) and handle the Loss Control and Appraisals separately. Keeping in mind the APIP underwriters require that all locations over $5 million be appraised once every five years. (�10- Arthur J. Gallagher & Co. BUSINESS WITHOUT BARRIERS" City of Costa Mesa February 22, 2017 Response to Request for Proposals No. 17-10 for Insurance Broker Services John Chino, ARM -PE, CSRM Area Senior Vice President Arthur J. Gallagher Risk Management Services, Inc. 18201 Von Karman Avenue, Suite 200 Irvine, CA 92612 John_Chino@ajg.com www.ajg.com © 2017 Arthur J. Gallagher & Co. Insurance Brokers of California, Inc. This proposal of coverage is intended to facilitate your understanding of the insurance program. It is not intended to replace or supersede your insurance policies. ATTACHMENT 2 I�L0le_ 0f col&-�J Vendor Application Form & Cover Letter ....................................... 3 Background & Project Summary Section ......................................... 7 Company Experience & Capabilities ............................................... 8 MethodologySection..................................................................... 10 Staffing........................................................................................... 13 Qualifications................................................................................. 17 FinancialCapacity.......................................................................... 22 CostProposal.................................................................................. 23 Disclosure....................................................................................... 24 Sample Professional Service Agreement ........................................ 24 Checklist of Forms to Accompany Proposal .................................. 25 Appendix A — Core 360 Overview..................................................33 Appendix B — Sample Broker Plan.................................................37 Appendix C — Sample Transition Plan............................................40 Appendix D — Financials.................................................................41 This information was developed from proprietary sources and constitutes the confidential work product of Arthur J. Gallagher & Co. (AJG). By accepting delivery of this information, City of Costa Mesa agrees to maintain the contents as confidential. No part of this information may be reproduced or distributed to any other party beyond City of Costa Mesa, its members. and its consultant without the written permission of AJG. GArthur J. Gallagher & Co. GArthur J. Gallagher & Co. Venalo'l 30,4iri -k CoveJt oCe.& Complete Appendix B, Forms and attach this form to the cover letter. A cover letter, not to exceed three pages in length, should summarize key elements of the Proposal. An individual authorized to bind the Contractor must sign the letter. Indicate the address and telephone number of the contractor's office located nearest to Costa Mesa, California, and the office from which the project will be managed. Earlier this month, the Daily Pilot in a story by Luke Money reported that while the City of Costa Mesa has a current surplus of $10.7 Million the immediate future is not as bright: " an updated five year financial plan showing that Costa Mesa could face growing annual budget deficits ranging from $2.5 million in fiscal 2018-2019 to almost $7.8 million in 2021-22. " We are here to help. Since we began as your Insurance Broker of Record, and working with your staff, together we reduced premium costs from $507,178 in 2013/14 to $425,300 in 2016/17; a cost savings of more than $80,000 or 16%. And, we were able to (slightly) improve upon coverage for the City. The overall savings achieved during our three year contract period is $232,000 (15%). Together with staff, we achieved these savings despite the fact that the City was larger and had more exposure units to insure (vehicles, employees, budget etc.). The main reason for our joint success was our approach to marketing and placement of insurance for the City whereby we used a very aggressive campaign to some thirty different companies. It should be emphasized the City's excellent risk profile is also an asset for the advantageous pricing, terms and conditions. In order to continue the savings, we are again recommending the City and Gallagher "shop the insurance market" for value. The City is still an outstanding risk and our geographical location helps to entice Underwriters in Chicago and New York to come for a visit and add the City to their portfolio of municipal risks. I Comparison of Insurance Premiums $600,000 $500,000 $400,000 — $300,000 - $200,000 - — $100,000 $0 Property/ Auto Physical Damage/ EQ and Total Flood 2013-2014 2014-2015 2015-2016 2016-2017 Alliant AJG AJG AJG Arthur J. Gallagher & Co. Insurance Brokers of California, Inc. p 949.349.9800 18201 Von Karmanl Suite 200 f 949.349.9900 Irvine, CA 92612 ajg.com CA Corporate License #0726293 GArthur J. Gallagher & Co. Costs savings in the procurement of insurance is not the only benefit we offer. We are proposing that we move forward in three additional areas to save the City money and hopefully reduce those budget deficits for future years. The additional areas to increases savings include: Losses with in the Liability Deductible Retention Our team includes several municipal risk management experts and we are proposing three new services to reduce the cost of property and liability claims for the City. The cost to the City for these services is zero although there would be a time commitment of city personnel. Uninsured Losses The City maintains a comprehensive risk management program with appropriate retentions, deductibles and coverage. However, there have been some innovations in the insurance market which could bolster the insurance program to include currently uninsured exposures, such as drones and terrorism. New policies would be additional cost to the City but uncovered costs could be much higher; in other words, the insurance premium is a small known loss while the uninsured loss is potentially a very large unknown amount. Contractual Liability The City uses a very cost efficient structure to balance retention and transfer of losses. The contracting of services allows the City to transfer risk to another entity. However, the protection offered via a contract is measured by the indemnification agreement and the insurance required in the contract. We are proposing that Gallagher provide the City with a manual and training to assist staff with this critical process. Cost to the City is zero. The Irvine office located at 18201 Von Karman Avenue, Irvine shall continue to be the office that manages the project. Our phone number is (949) 349-9800. In summary, we have been a good partner for the City and in our own small way contributed to the current budget surplus however as rougher times are ahead our services are more critical than ever. We look forward to continuing and deepening our engagement with the City. Very truly yours, John Chino, ARM -PE, CSRM Area Senior Vice President (949) 349-9827 1 John—Chino@ajg.com Arthur J. Gallagher & Co. Insurance Brokers of California, Inc. p 949.349.9800 18201 Von Karmanj Suite 200 f 949.349.9900 Irvine, CA 92612 ajg.com CA Corporate License #0726293 RFP17-10-CO1250 VENDOR APPLICATION FORM FOR RFP NO. 17-10 INSURANCE BROKER SERVICES TYPE OF APPLICANT: ❑ NEW 0 CURRENT VENDOR Legal Contractual Name of Corporation: Arthur J. Gallagher & Co. Insurance Brokers of California, Inc. Contact Person for Agreement: John Chino Corporate Mailing Address: 18201 Von Karman Avenue, Suite 200 City, State and Zip Code: Irvine, CA 92612 E -Mail Address: John Chino(&,,ajg.com Phone: (949) 349-9827 Fax: (949) 349-9927 Contact Person for Proposals: John Chino Title: Area Senior Vice President Business Telephone: (949) 349-9827 Is your business: (check one) E-mail Address: John Chino(d,ajg.com Business Fax: (949) 349-9827 ❑ NON PROFIT CORPORATION 0 FOR PROFIT CORPORATION Is your business: (check one) Q CORPORATION ❑ LIMITED LIABILITY PARTNERSHIP ❑ INDIVIDUAL ❑ SOLE PROPRIETORSHIP ❑ PARTNERSHIP ❑ UNINCORPORATED ASSOCIATION Page 24 of 35 Names & Titles of Corporate Board Members (Also list Names & Titles of persons with written authorization/resolution to sign contracts) Names Title Phone Alice Youngbar John Chino Area President Area Senior Vice President Federal Tax Identification Number: 94-3015711 City of Costa Mesa Business License Number: (If none, you must obtain a Costa Mesa Business License upon award of contract.) City of Costa Mesa Business License Expiration Date: Page 25 of 35 RFP17-10-CO1250 (949) 349-9817 9) 349-9827 &ckrand -/_ Ao4ed Jccm_Ma y Jec%on. The Background and Project Summary Section should describe your understanding of the City, the work to be done, and the objectives to be accomplished. Refer to Attachment A, Scope of Work, of this RFP. Approximately five years ago, we began our relationship with the City of Costa Mesa through the RFP process of 2012. At that time we believed we understood the needs of the City, we studied the Scope of Work that was provided in the 2012 RFP and researched the City's website. We reviewed financial statements and the minutes of City Council meetings. And, we had our own our own experience as residents of Costa Mesa! Based on our analysis we emphasized our strength in the area of workers' compensation and an aggressive marketing program. We were half right. Since 2012 the City has changed the workers' compensation TPA and seen significant improvement in the workers' compensation program. Gallagher did not contribute to the success and lower costs achieved via the changes the City made to the claims process. We congratulate the City on the excellent results attained. Beginning in late 2013, Gallagher with strong support of City staff pursued a strategy to introduce the City to as many qualified insurance companies as possible as well as a few well vetted JPA's. The results of this aggressive marketing exercise were twofold. (1) Coverage was improved upon and premiums were reduced. (2) The Insurance Industry became acquainted with the outstanding qualities of the City and more importantly our excellent risk profile. As we look forward to the opportunity to renew our relationship with the City, these are our objectives to be of value to the City: Goal #1 in 2017 we shall again undertake an aggressive marketing of the property, liability lines of coverage. It has been nearly four years since the last comprehensive marketing campaign and it's our experience that marketing should be done every three to four years. There are several reasons to do this, but most important is that we learn about benefits and advantages being offered by the insurance industry for the City we won't know otherwise. These benefits might include better pricing, terms or conditions. Sometimes you just need to ask. Goal #2 we are offering the City our Core 360 Loss Control platform which provides more than 70 on-line training applications at no cost to the City. There is a comprehensive description of the benefits of Core 360 in the Methodology section. Goal #3 we shall include in our renewal proposal an indication for a proprietary terrorism product. This program provides unique coverage such as the replacement of tax revenue lost from an incident at South Coast Plaza (for example) as well as the more standard exposures associate with terrorism. 7 Coiyan� �x�oeJtcence 4- CaOaZ&&J a. Identify the years of experience your firm and the principals who will be assigned to work with the City have in providing project manager services for governmental agencies. Please indicate years of experience both on a firm and an individual basis. Arthur J. Gallagher & Co. John Chino, Area Senior Vice President 35 years Audra Powers, Client Service Executive 27 years Kiki Goldsmith, Client Service Manager 9 years Denise Simpson, Senior Account Executive 13 years Marco Guardi, Vice President — Risk Control 20 years b. Identify the number of issues for which your firm and the principals who will be assigned to work with the City have acted as lead project manager in the past three (3) years. Please indicate numbers of issues both on a firm and an individual basis. In the past three years, John Chino, Audra Powers, and Marco Guardi have managed projects concerning the following issues concerning our municipal clients: • Property • Equipment Breakdown • Terrorism • Automobile Liability • Employment Practices • Railroad Quiet Zones • Workers' Compensation • Safety • Litigation Management • Environmental • Ergonomic Evaluations • Inspections • General Liability • Sexual Abuse & Molestation • Law Enforcement • Automobile Physical Damage • Reinsurance • Cyber Liability • Risk Management • Human Resources • Contracts • Certificates of Insurance • Fiduciary • Public Official's E&O • Director's & Officers • Excess Insurance • Crime • Loss Prevention • OSHA • Construction • Claims management • Professional Liability 8 c. Briefly discuss and provide examples that illustrate the firm's resources, commitment and demonstrated ability to complete all components of all projects in a timely manner, including but not limited to, attending meetings, advising staff on matters specific to the scope of service, preparing and presenting reports to City staff and members of the City Council, and assisting with due diligence and disclosure processes relevant to the scope of services. Since 2013 Gallagher has had the privilege of providing the City with Insurance marketing, policy administration, risk management services, claims advocacy and legal reviews. At the start of our contract and for a period of 18 months, we held monthly meetings with the City. At a certain point these meetings became less than helpful to staff so we transitioned to approximately seven meetings a year. The schedule of seven meetings produced desired outcomes for City staff and we believe this is probably the best option. We have no issue with a more frequent schedule if it is helpful to City staff. To date, we have never addressed Council, nor have we been asked to do so. We would be happy to present to any group that staff asks us to meet with or present to. On one occasion in 2016, we were part of a presentation made by Fireman's Fund to the Fire Department concerning a grant of funds. We have included samples of the documents that we have used to keep our meetings productive and useful. Anhm J. Gallagher RA M.rwnaens Services Ropnr!4x30 PM1Pr 0-- I Mn•ari LaMyaaba and .loud IROxiT 1711-=2914 MOrP [antlnmral Guakym-t[ka1 narnal[awalry[a.ILSt+V City of Costa Mesa dj� Arthur J. Gallayhcr Risk M ... y,—, Se, _ City of Costa Mesa Market Review rYopxtr unrt n,amern] 511130 Suaa kmrna ma (cxmadrmn.dk.¢x L.0, ar—) a,.. 'dm 5]30 11044 l9.kt510.530 qba Im1i1Y 5530 5530 5x eyr. ..dwkla.MaeLlmlyxdF, 5HA99 Meeting Agenda—February 19, 2015 MW sxl5100.wg0 —r 514oA0a y.. k—c SIM,00914+y,O- anxdaan PWlk 9ak Gerd LkWldy, Mao LItWIM xaE1r Lp,GAy �°°��°°°`°°�°m aRa:LLmailiy'01Oe u.euly Aepa I. Introduction of Attendees City of Costa Mesa i,aaxea. ward Lae'lar.Mw Llw�lny, ROPea arc.esLw�lro 535.000 515.000 [e¢na�c eenavrrea, ,waarx,a.wr.�maay.a• —4..Mb umlllyxd ar II. AWAC provides status upd 6aoss trr4m.daa oa.r. Lkeoly, weP.ry .underwriting slam eme>s arsem s.lr-1.au,°a axx.um rvxf Menuvrw«w aa.m Lwoly,Rwaar 2h1t-mJ • Company Strength/Gr umde.lRaQam omxJ,v.a1 lou-mrs prs auks re. .d .rr..�.M. w. 1.d 1ya>a�.eac.. wo. awx m.a.,e BaaaLWlldy,w�aly unrl slma 51om S'E', lam axwwknpkr SLtxa—. Y. waver . Services Available Swr SLe SW.EPEa sly ill0,Mr $1x fp EPLan053�. as IXetr Sm fOrEHar453x a11IXMr Oka Mason 0.s.!-11 rra.nrar, 9!6,615 Imms 5H.953 SiOw imwlx. RaaMya Caw.q gprel-11,, Mao L1."araRr amrdukllLy.rwurw4 Ra III. Update from City B,a meed Spraeb usa dwel Lmaley. Mae -1m xa Pre • Personnel GPW —.1-14.. MaoL 11"xd Ro 5!030 rrcrx IXS]Ox aM 5314 SE1f•1x,Ny Mlrm oo 51aL lcnav, caTd • New Operations or Se 3941-3419 3014-mts 121E -30u 3016 -lora Aga Rapt CariArRoem rw...ne IM" A, alioiul lmu— to, nMlel naLxmrlanr--[u. rkkynaLonal xeuranee [a. eeul6 Y,uneeerrp.ry RaV.M rM[ swm swm ave.. lam IV, Sexual Abuse Trai ning Offt swm unee.rlrr LerenSeena SIm S,a swm uoeemne w.er.aeaw w�vbv,l.,nsmc.a9a eaa SI w 5130514 lum uax• MPlsr»a•aR Ens Sjm51a ,n.yk,a.d n..,a�ca.,wn Rapp .aa.mrL sEum wast 544530 5 tat R'a°ro R.v.m V. Employment Practices Liak R=n.sr sw se.a.romen wawro VI. Summary and Next Steps tnk>>ou 3014=m1s tors—mu 3014=oma 9Ms ib �'�' [arblProem Prov kdlai nx6or kn. [o- 1Mien narhw Ina. L.a. n Harbor 1na.[o- °ioP°'h `"`"""• svn ox oaurmxelHm Slm vx oaurrenm 15130 1�M rnralslm 1 on .—a. µ,yr aapreyatr tea• fM Slsk S15k Sk Pree',riaa, I,W¢dW Ya,Sw[y eml¢m 911.99i.N 533,aaa.73 l MIk 52Ip3.33 Ropnr!4x30 PM1Pr 0-- I Mn•ari LaMyaaba and .loud IROxiT 1711-=2914 MOrP [antlnmral Guakym-t[ka1 narnal[awalry[a.ILSt+V lnmral[arwny W.t[uj dj� Arthur J. Gallayhcr Risk M ... y,—, Se, _ S1aiTtr.. �1 arnP rYopxtr unrt n,amern] 511130 Suaa 4rtl¢¢ake d�L S1n 530 'dm 5]30 11044 l9.kt510.530 5530 5530 5x ft AR Y SWAM 5HA99 590,mO,400 MW sxl5100.wg0 —r 514oA0a y.. k—c SIM,00914+y,O- $mt roneslAv, $][stall hood 9lR oNn rosea ss0kpx1oraram S50kee .Lim palocalim aua. P051k S1S.000 535.000 515.000 Z5,009 Ivanhrm 5151,914 Hr5?99 H1ep49 H1S994 . /l dlwclo�ocy� �ec�con. Provide a detailed description of the approach and methodology to be used to accomplish the Scope of Work of this RFP. The Methodology Section should include: 1. An implementation plan that describes in detail (i) the methods, including controls by which your firm or entity manages projects of the type sought by this RFP; (ii) methodology for soliciting and documenting views of internal and external stakeholders; (iii) and any other project management or implementation strategies or techniques that the respondent intends to employ in carrying out the work. We have read your request for proposal for broker of record in its entirety and we can comply with all vendor general responsibilities and additional requirements. We have had the pleasure of serving the City in the insurance broker capacity since 2013 and our first step with the City was to gather and analyze copies of your insurance policies. We also collected and reviewed the loss runs for all open and closed claims for the prior ten (10) years. We did extensive marketing to more than thirty (30) insurance carriers as well as several JPA's. Working together with staff we were successful in placing coverage with financially stable and reputable insurance carriers, and saw reductions to self-insured retentions as well as an overall premium reduction of more than $75,000 in the first year alone. We have been and will continue to be committed to consistent meeting schedule with City staff to ensure that we understand your goals and objectives with respects to insurance and risk management. Through these consultations we shall mutually agree upon a detailed action plan for marketing, loss control services and other areas we identify to be included. Since our selection as your BOR in 2013 our meeting schedule has been every month unless the meeting is not needed. Also, providing the City with opportunities to meet your insurance carrier partners is important and we have organized several get-togethers with insurance carriers over the past four years. The accomplishments garnered from these conferences have been significant. 2. Detailed description of efforts your firm or entity will undertake to achieve client satisfaction and to satisfy the requirements of the Scope of Work. First it's important for us to share that our philosophy is simply to "do it right the first time". Second, we have a significant number of public agency clients, but we want to emphasize we selectively respond to public agency RFP opportunities that match our skill set. This way we can ensure all of our clients the time and devotion to their business and maintain the highest standards of satisfaction. Third, the critical component to project completion is our single-minded devotion to accuracy and efficiency which requires a broad expertise in six separate disciplines: • Insurance & Reinsurance Marketing & Placement • Claims Advocacy • Administration of the Account • Loss Control • Legal Review • Innovation (Technology) 10 The local Arthur J. Gallagher Public Entity team is comprised of 10 people. The professionals that make up our team were chosen specifically to meet the needs of our public agency clients. We believe we are best matched with clients that have a desire for a broad array of services at no additional cost. As is indicated above our knowledge starts with the marketing of insurance, reinsurance and alternative market placements and importantly, extends to critical services which reduce risk: legal assistance, claims advocacy, loss control and technology (innovation). The other most significant philosophical characteristic which colors our service commitment is transparency. In fact, a cornerstone of the Gallagher culture is to place the client's interest's first, and transparency in remuneration and communication is one way that we achieve this objective. All of your communication with Gallagher will reinforce that you, as our client, know exactly what we are doing on your behalf and how it impacts our income. 3. Detailed project schedule, identifying all tasks and deliverables to be performed, durations for each task, and overall time of completion, including a complete transition plan. Include your plan to deal with fluctuation in service needs and any associated price adjustments. We have been the Broker of Record (BOR) for the City since 2012 and during that period we have worked with staff to meet all tasks and delivered proposals, binders, invoices and policies with in agreed upon schedule per our counterparts at the City. Having said that, while past performance is an indicator of future capabilities it does not guarantee it. Therefore, we have provided a comprehensive Broker Service Plan that addresses the Statement of Work including specific time periods for all tasks. Additionally, we have managed to be accountable to the City through the regular and periodic attention to face to face meetings held from December to June and less frequently from July to November. Please see our Sample Broker Service Plan as Chart #3 in Appendix B of our response. We have provided a transition plan (see Appendix C), but want to emphasize that no transition plan is necessary if Gallagher is chosen to continue as BOR. 4. Detailed description of specific tasks you will require from City staff. Explain what the respective roles of City staff and your staff would be to complete the tasks specified in the Scope of Work. Our municipal clients have several approaches to working with us and their market partners. Some prefer that the broker perform virtually all services and require minimal investment on the part of the City; others are deeply engaged in the process and maximize the use of all of our services. Our work with the City since 2013 has been primarily engaged with the marketing and placement of the insurance program. City staff has always been responsive and proactive in working with us. We do not see any change to the roles going forward. Proposers are encouraged to provide additional innovative and/or creative approaches for providing the service that will maximize efficient, cost-effective operations or increased performance capabilities. In addition, the City will consider Proposals that offer alternative service delivery means and methods for the services desired. As previously outlined, our program offering is unique and the results have been reduced costs and predictable loss amounts for the City's budget. Our team is committed to the City and our staff has 11 many years of experience, which contribute to the various creative solutions to assist the City. Outlined below is information on the expertise of two individuals on our team which provide services to the City as well as an in-depth description of our expanded risk management services and an innovative approach to risk transfer the terrorism exposure. Contract Review / Insurance Compliance Denise Simpson, JD, Senior Account Executive - Denise acts as our client resource for insurance compliance. She consults with our clients on memorandum of coverage documents, coverage analysis, contract review, and claims advocacy. She has over 15 years of legal experience, including representation of insureds and insurance carriers, complex litigation, and risk mitigation strategies for reducing overall organizational risk. Loss Control / Safety / Risk Management Marco Guardi, ARM, CRIS, Vice President, Risk Control - Marco has over 24 years of experience and a unique background where he has served as a risk manager for various public entities and as a risk consultant for brokerages that specialize in the public sector marketplace. In addition to his risk control consultation work, he also held risk control leadership positions where he designed and implemented loss control services across all coverage lines for municipalities, schools and community college districts, including the largest public entity workers' compensation pool in the US. Marco is a member of RIMS and PRIMA. See Appendix A for description of innovative services. 12 Provide a list of individual(s) who will be working on this project and indicate the functions that each will perform and anticipated hours of service of each individual. Include a resume for each designated individual. Upon award and during the contract period, if the contractor chooses to assign different personnel to the project, the Contractor must submit their names and qualifications including information listed above to the City for approval before they begin work. John Chino Principal, Marketing / Placement of Insurance 240 Audra Powers Marketing / Administration 240 Marco Guardi Loss Control / Risk Management 24 Denise Simpson Insurance Compliance / Contract Review 40 Kiki Goldsmith Administration 60 Audra Powers, cic, CRM Client Service Executive Arthur J. Gallagher & Co. Insurance Brokers of California, Inc. — Orange County (949) 349-9840 1 Audra—Powers@ajg.com Audra is an account executive with the Public Entity & Scholastic services niche. She has 27 years of experience in the insurance industry. She has been working specifically with Public Entities including School Districts, Municipalities, Charter Schools, and Joint Powers Authorities for the past eleven years. She holds both a Certified Insurance Counselors (CIC) and Certified Risk Management (CRM) designation from The National Alliance. KEY RESPONSIBILITIES • Oversee Respond to any and all service needs • Manage the marketing and placement of insurance • Handle all billing and invoicing • Immediate response to daily inquiries • Handle all Auto and Equipment changes • Issue Automobile Identification cards • Account Management EXPERIENCE 24 years of experience in the insurance industry Primary focus on public entities Back ground includes working at an insurance company as well as insurance brokerages DESIGNATIONS, CREDENTIALS & AFFILIATIONS Certified Insurance Counselors Certified Risk Management 13 John Chino, ARM- PE, CSRM Area Senior Vice President Arthur J. Gallagher Risk Management Services — Orange County T 949-349-9827 1 F 949-349-9927 1 John Chino@ajg.com AREAS OF RESPONSIBILITY • Areas of expertise include: public entity property & casualty insurance brokerage, policy design/manuscript, market trends/strategy, self-insurance approaches, owner controlled insurance programs (OCIP), and education/training specialist • Works with clients to establish goals, strategies, marketing and renewal activities • Participates in renewal meetings, and other meetings as may be necessary • Coordinates the completion of actuarial studies • Assists with contract language, coverage agreements and other documents • Been with AJG for 35 years EXPERIENCE • Over 35 years insurance industry experience working with public entity and scholastic accounts • Developed 18 self-insurance pools for public entities • Crafted 8 coverage documents • Completed 2 -year internship at Lloyd's of London specializing in placement of self-insured public entity programs EDUCATION, PROFESSIONAL DESIGNATIONS & AFFILIATIONS • Bachelor of Science in Finance, University of South California • Associate in Risk Management for Public Entities designation (ARM -P) • Enterprise Risk Management designation (ARM -PE) • Current Course Leader — The Institutes Course RMPE (Risk Management for Public Entities) • Faculty of The National Alliance — teaches the CSRM program • Speaker at National PRIMA Conventions and STRIMA, PARMA, CAJPA, and AGRIP conferences • Risk & Insurance Magazine "Power Broker" Public Sector — 2007, 2008, 2009, 2010, 2011, 2012, 2015 & 2017 • Non -Profit Board Member: Community Matters (since 2011) 14 Marco Guardi, ARM, CBIS Vice President — Risk Control Arthur J. Gallagher Risk Management Services — Orange County T 949-349-9884 1 F 949-349-9984 1 Marco_Guardi@ajg.com Marco has a unique background where he has served as a risk manager for various public entities and as a risk consultant for brokerages that specialize in the public sector marketplace. In addition to his risk control consultation work, he also held risk control leadership positions where he designed and implemented loss control services across all coverage lines for municipalities, school and community college districts, including the largest public entity workers' compensation pool in the US. Marco is a member of RIMS and PRIMA. KEY RESPONSIBILITIES • Provide loss prevention and risk management consultation to public sector clients, across multiple coverage lines • Evaluate effectiveness of clients' risk and loss prevention measures • Advise clients on improving pre and post loss measures • Oversee OCIP and Master Builders Risk programs' risk control, claims management and marketing EXPERIENCE • 14 years employer based risk, safety and environmental management experience • 10 years broker based loss control/safety consultation experience EDUCATION • Bachelor of Science in Environmental and Occupational Health, California State University Northridge • Master in Public Administration (MPA), California State University Fullerton DESIGNATIONS, CREDENTIALS AND AFFILIATIONS • Associate in Risk Management Designation • Construction Risk and Insurance Specialist • Licensed General Lines Insurance Agent • Recipient of Public Entity Excellence in Risk Services award 15 Denise Simpson, JD Senior Account Executive Arthur J. Gallagher & Co. — Orange County (949) 349-9886 1 Denise_Simpson@ajg.com Denise is an account executive with the Public Entity & Scholastic services niche. She is our client resource for assistance with coverage agreements, contract/indemnity clause review, and claims assistance. Denise acts as our client resource for insurance compliance. She consults with our clients on memorandum of coverage documents, coverage analysis, contract review, and claims advocacy. She has over 13 years of legal experience, including representation of insured's and insurance carriers, complex litigation, and risk mitigation strategies for reducing overall organizational risk. KEY RESPONSIBILITIES • Contract Review EXPERIENCE • Over 13 years of legal experience, including representation of insureds and insurance carriers • Expertise with risk management, healthcare, litigation, and contract negotiations • Focused on risk analysis and mitigation strategies for reducing overall organization risk EDUCATION • Juris Doctor — Loyola Law School Los Angeles • Bachelor of Arts, Political Science — Chapman University DESIGNATIONS, CREDENTIALS & AFFILIATIONS • Licensed Attorney, The State Bar of California — Active Status, admitted 1997 16 The information requested in this section should describe the qualifications of the firm or entity, key staff and sub- contractors performing projects within the past five years that are similar in size and scope to demonstrate competence to perform these services. Fast Facts about Gallagher in California: • 2,000+ employees in California • 39 years' experience providing innovative insurance solutions to CA Public Agencies since our first public agency client: Sacramento County 1978 • Currently place liability reinsurance and excess insurance for 88 of the Cities in LA and Orange County • Commitment to California Public Agency associations including PARMA, PRIMA, and CAJPA. AJG AT A GLANCE ■ Publicly traded corporation ■ 90 years' experience providing innovative insurance solutions 50+ years' experience providing insurance for public sector property and casualty lines ■ 22,000+ employees globally ■ Family run by its third generation of leadership True expertise in public sector risk management is hard to find, especially with the complexity of risk management issues growing exponentially. That is where Arthur J. Gallagher & Co. comes in. Having worked with the public sector for more than 50 years, our Public Sector Practice is the largest area of expertise at Arthur J. Gallagher & Co. We dive deep to understand your unique organization and its people, the specific risks you face and your tolerance for those risks. We then tailor a solution that accounts for each unique requirement. In fact, as a market leader in public sector risk management, we drive much of the innovative thinking around the products, services and tools the industry uses today. Our risk management solutions: • Insurance brokerage • Risk management consulting • Loss control services • Enterprise risk management • Insurance pools • Alternative risk financing • Tools and technology support • Claims advocacy 17 Information shall include: Names of key staff that participated on named projects and their specific responsibilities with respect to this scope of work. John Chino, ARM -PE, CSRM, PROJECT MANAGER / TEAM LEADER John, based out of our Irvine office, is the Team Leader and is responsible for all services included in the RFP. Audra Powers, CIC, CRM, CLIENT SERVICE EXECUTIVE Audra will work closely with the entire team to keep a focus on placements, policy administration, claims advocacy, legal reviews and technology issues.. Kiki Goldsmith, CIC, CLIENT SERVICE MANAGER Kiki will assist Audra in the day-to-day account administration. She has 9 years of experience in the insurance industry, and holds a Certified Insurance Counselors (CIC) designation from The National Alliance and is actively working towards her Certified Risk Management (CRM) designation. Marco Guardi, ARM, CRIS, LOSS CONTROL & SAFETY Marco, based out of our Irvine office, has over 20 years' risk experience, primarily in the public sector. He served as a risk manager in the higher education and waste water sectors. Denise Simpson, JD, INSURANCE COMPLIANCE — LEGAL ANALYST Denise, based out of our Irvine office, acts as our client resource for insurance compliance. She consults with our clients on memorandum of coverage documents, coverage analysis, contract review, and claims advocacy. A summary of your firm's or entity's demonstrated capability, including length of time that your firm has provided the services being requested in this Request for Proposal. Included below. 2. For private Proposers, provide at least five references that received similar services from your firm. The City of Costa Mesa reserves the right to contact any of the organizations or individuals listed. Information provided shall include: • Client name: • Project description • Project start and end dates • Client project manager name, telephone number, and e-mail address. Client Project Manager for All Accounts Listed Below: John Chino, Area Senior Vice President (949) 349-9827 1 John Chinokajg.com 18 City and County of San Francisco 25 Van Ness Avenue #750, San Francisco, CA 94102 Matt Hansen — Director of Risk Management T (415) 554-2302 1 Matt. Hansen&sf o�g Project Dates: 2007 —Present City of Albuquerque PO Box 470, Albuquerque, NM 87103 Peter Ennen — Risk Manager T (505) 768-3209 1 PEnnen&cabq.gov Project Dates: 2009 —Present City of Santa Fe 200 Lincoln Avenue, Santa Fe, NM 87504 Barbara Boltrek — Risk & Safety Manager T (505) 955-5627 1 bcboltrekkci.santa-fe.nm.us Project Dates: 2003 — Present California Joint Powers Insurance Authority (CJPIA) 8081 Moody Street, La Palma, CA 90623 James Thyden — Insurance Programs Manager T (562) 688-8126 1 jthydenncipia.org Project Dates: 2007 —Present Independent Cities Risk Management Association (ICRMA) 320 W Newmark Avenue, Monterey Park, CA 91754 Beth Lyons, Executive Director I T (562) 277-0847 Project Dates: 2016 — Present Project Description Brokerage ✓ - - ✓ ✓ Administration ✓ ✓ Risk Management & Loss Control ✓ ✓ Claims Advocacy ✓ ✓ Legal Review ✓ ✓ ✓ Tools & Technoloffv ✓ ✓ It ✓ 19 Any public entity which submits a Proposal should describe in detail how it currently performs services like those identified in the scope of work within its or other jurisdictions, including photographs, written policies and/or video of services provided. If you have performed these services under contract for another public entity, please provide references for those entities as set forth above for private Proposers. Description of Services for our comparable clients City & County of San Francisco Brokerage • Place Excess Liability, Public Official's Liability, Cyber Liability and Crime Coverage. • Provided Owner Protective Professional Insurance for the $1.7 billion Central Subway Project in the City & County of San Francisco. • Designed and placed a unique liability program for MUNI, the transportation division of the City & County of San Francisco. . Risk Management Arthur J. Gallagher & Co. was provided an opportunity to work with Matt Hansen, the newly hired director of the risk management division, to craft a "true" enterprise risk management program (ERM). The City had several enterprises which were about to sell debt/issue bonds for the first time in many years. It was determined that the bond ratings could be strengthened with an ERM platform. The enterprises included The Port, Public Utilities Commission (PUC), and the MTA or MUNI. Other departments had also indicated a desire to implement ERM in a second or third phase. Tools and Technology The next step was to implement the software to run the project. Gallagher has vetted numerous potential software providers for ERM clients and discovered that the best option was the one being used by our British counterparts. The UK has mandated ERM for public agencies and the software use by virtually every county in the UK is from a company known as JCAD. Gallagher introduced JCAD to the City and they agreed it was the solution they needed. California JPIA (125 members) Brokerage California JPIA did not have an effective plan for the purchase of reinsurance and therefore was subject to market cycles. The result was that the JPA was forced to maintain very high retentions and inadequate limits often creating unstable cash flow demands on the pool's surplus position. By providing an analysis of losses based on levels of coverage, the JPA could properly assess the value of self-insurance or retained limits. Gallagher using their intimate knowledge of the reinsurance market were able to craft a reinsurance program that not only matched membership needs but better protected the equity of the pool. For the first time in the JPA's history they had a strategic plan for renewal based on their strengths and were protected from the whims of the marketplace. Risk Management Gallagher has been working with the California JPIA since 2007 and we have implemented a strategy to improve the delivery of loss control services to members. Gallagher's unique knowledge 20 of loss control services available on all medium (DVD, video streaming and on-line) has allowed the JPIA to quickly assess the value to membership. This project is ongoing. Tools & Technology Gallagher and the reinsurance intermediary (JLT re) began their work with the JPA by assessing the quality of the current application process to collect member data. The Gallagher/JLT team provided improvements to the system based upon their knowledge of the reinsurance and excess insurance underwriting process as well as management information systems (MIS). ICRMA Risk to public agencies are continuously emerging, like drone usage and child molestation. Through risk identification and analysis, AJG's Risk Control staff will provide education, consultation and solutions to address emerging and ongoing risks. City of Albuquerque Brokerage The City hired Gallagher as their broker of record three years ago and our first accomplishment was to restructure the program to provide better efficiency to the program by combining renewal dates and more efficient deductibles and limits. Coverage gaps were eliminated or reduced and significant pricing reductions were achieved. Legal Review The City's prior broker had not reviewed the insurance requirements or indemnification agreements. Gallagher began working with several City departments including legal, contracts, the airport and others to review all contracts and make recommendations for clear and accurate insurance requirements. Gallagher trained department personnel on implementation of contract language as well as a verification process to insure compliance by vendors. Tools and Technology Another shortcoming of the City's prior broker was a failure to provide an easy to use application process for renewal we changed that by utilizing an on-line platform known as Gallagher Insight to store applications. Gallagher Insight also became an important tool for the City's policies and contracts. City of Santa Fe City of Santa Fe/Brokerage Gallagher took over the City's property and liability program in 2011 d have been the worker's compensation broker since 2007. The major accomplishment of Gallagher in respect of the placement of the program for the City was a savings of $400,000 achieved via a reduction to premium with no reduction to coverage. In addition, Gallagher helped the City to get a handle on the claims process working with the carrier to schedule regular claims reviews with Counsel/risk management. 21 3�na.nccal Ca�oa�c% Provide the Proposer's latest audited financial statement or other pertinent information such as internal unaudited financial statements and financial references to allow the City to reasonably formulate a determination about the financial capacity of the Proposer. Describe any administrative proceedings, claims, lawsuits, or other exposures pending against the Proposer. Our latest financial results are included in Appendix D. As with any business, Arthur J. Gallagher & Co. and its affiliates ("Gallagher") may be involved in multiple regulatory actions, investigations or lawsuits (collectively, "Actions"). Specific details of Actions to which Gallagher is subject are noted in reports to the SEC, which are available in the Investor Relations/SEC Filings section at www.ajg.com, particularly in the "Commitments, Contingencies and Off -Balance Sheet Arrangements" footnote to Gallagher's financial statements set out in Gallagher's most -recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q. You may access these forms at ajg.com, under the tab "Investor Relations." We respect your interest in asking this question but are unable to give any more specific detail than can be found within the public information locations noted in this response. 22 Coil Aovo,sal All Proposers are required to use Attachment B, Cost Proposal to be submitted with their Proposal. Pricing instructions should be clearly defined to ensure fees proposed can be compared and evaluated. Proposals shall be valid for a minimum of 180 days following submission. ATTACHMENT B COST PROPOSAL FOR INSURANCE BROKER SERVICES Provide hourly rates, along with estimated annual pricing in accordance with the City's current requirements, as set forth in section Scope of Work, Attachment A. Also provide your firm's proposed Staffing Plan on a separate sheet of paper. Proposer should use a separate form to state pricing for any added value. Pricing shall remain firm for a minimum of two (2) years. Any and all requests for pricing adjustments for follow-on contract renewal periods shall be provided no later than sixty (60) days prior to the end of the contract period. Any such proposed price adjustments shall not exceed The Bureau of Labor Statistics Consumer Price Index (CPI) data for Los Angles -Riverside -Orange County, CA, All Items, Not Seasonally Adjusted, "annualized change comparing the original proposal month and the same month in the subsequent year. (This information may be found on the U.S. Department of Labor's website at www.bls.gov.) Employee Hourly Rate Hours Worked Total Cost Overtime Rate N/A $ $ $ Total Estimated Annual Price $50,000 Flat Fee 23 ISI-JC10,3cU2e Please disclose any and all past or current business and personal relationships with any current Costa Mesa elected official, appointed official, City employee, or family member of any current Costa Mesa elected official, appointed official, or City employee. Any past or current business relationship may not disqualify the firm from consideration. The City of Costa Mesa is well known for its many qualities not the least of which is the engagement of our City Council in civic and public activities. It is not uncommon to see and speak with an elected official at a Little League game or a city sponsored event such as the Snoopy House Holiday Display. In fact, I have met officials at both. In addition, we organized and attended a grant presentation from Fireman's Fund insurance Company to the fire department which a City Council member joined just last year. We do not interpret these instances as "business or personal" within the context of the disclosure but wanted to be clear that we do have some contact with elected and appointed officials from time to time. We do not have a past or current business personal relationship with any Costa Mesa elected official or appointed officials beyond what is included above. We do have an employee, Dan Guth, that is a member of the Police Officer Reserve Program at the City of Costa Mesa. Please see completed Disclosure of Government Positions form included in our forms checklist. Ja.oV�e- �/1of2,S,Scona� �eJll/cCe .�` The firm selected by the City will be required to execute a Professional Service Agreement with the City. A sample of the Agreement is enclosed as Appendix A, but may be modified to suit the specific services and needs of the City. If a Proposer has any exceptions or conditions to the Agreement, these must be submitted for consideration with the Proposal. Otherwise, the Proposer will be deemed to have accepted the form of Agreement. See No. 12 of this RFP below. We agree to execute a Professional Service Agreement with the City should our firm be selected by the City. We have no exceptions or conditions to the Agreement at this time. 24 Chzr-ezjs of 3o/1nj % AcoiyatV Aoao,sal As a convenience to Proposers, following is a list of the forms, included as appendices to this RFP, which should be included with Proposals: 1. Vendor Application Form 2. Company Profile & References 3. Ex Parte Communications Certificate 4. Cost Proposal 5. Disclosure of Government Positions 6. Disqualifications Questionnaire 7. Staffing Plan 25 COMPANY PROFILE & REFERENCES Company Profile RFP17-10-CO1250 Company Legal Name: Arthur J. Gallagher & Co. Company Legal Status (corporation, partnership, sole proprietor etc.): Corporation Active licenses issued by the California State Contractor's License Board: CA License No. 0726293 Business Address: 18201 Von Karman Avenue, Suite 200, Irvine, CA 92612 Website Address: www.AJG.com Telephone Number: (949) 349-9827 Facsimile Number: (949) 349-9927 Email Address: John—Chino@ajg.com Length of time the firm has been in business: Since 1927 Length of time at current location: 5 years Is your firm a sole proprietorship doing business under a different name: Yes ✓ No If yes, please indicate sole proprietor's name and the name you are doing business under: N/A Is your firm incorporated: ✓ Yes No. If yes, State of Incorporation: Illinois Federal Taxpayer ID Number: 94-3015711 Regular business hours: 8:00 AM — 4:30 PM Regular holidays and hours when business is closed: President's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving/Day After Thanksgiving, Christmas, and New Year's Day Contact person in reference to this solicitation: John Chino Telephone Number: (949) 349-9827 Facsimile Number: (949) 349-9927 Email Address: John Chino@ajg.com Contact person for accounts payable: Natalie Bates Telephone Number: (949) 349-9856 Facsimile Number: (949) 349-9956 Email Address: Natalie Bates@ajg.com Name of Project Manager: John Chino Telephone Number: (949) 349-9827 Facsimile Number: (949) 349-9927 Email Address: John—Chino@ajg.com Page 29 of 35 RFP17-10-CO1250 COMPANY PROFILE & REFERENCES (Continued) Submit the company names, addresses, telephone numbers, email, contact names, and brief contract descriptions of at least five clients, preferably other municipalities for whom comparable projects have been completed or submit letters from your references which include the requested information. Company Name: City and County of San Francisco Telephone Number: (415) 554-2302 Contact Name: Matt Hansen, Director of Risk Management Contract Amount: Confidential Email Address: Matt.Hansen@sfgov.org Address: 25 Van Ness Avenue #750. San Francisco. CA 94102 Brief Contract Description: Auto, Crime, Bonds, Public Officials Liability, Excess Liability, Muni Company Name: City of Albuquerque Telephone Number: (505) 768-3209 Contact Name: Peter Ennen, Risk Manager Contract Amount: Confidential Email Address: PEnnen@cabq.gov Address: PO Box 470. Albuaueraue. NM 87103 Brief Contract Description: All Lines of California Joint Powers Insurance Authority Company Name: (CJPIA) Telephone Number: (562) 467-8784 Contact Name: Jim Thyden, Insurance Programs Manager Contract Amount: Confidential Email Address: jthyden@cjpia.org Address: 8081 Moody Street, La Palma, CA 90623 Brief Contract Description: Railroad Crossings Company Name: City of Santa Fe Contact Name: Barbara Boltrek, Risk Manager Email Address: bcboltrek@ci.santa-fe.nm.us Address: 200 Lincoln Avenue. Santa Fe. NM 87504 Brief Contract Description: All Lines of Telephone Number: (505) 768-3209 Contract Amount: Confidential Independent Cities Risk Management Agency Company Name: (ICRMA) Telephone Number: (562) 277-0847 Contact Name: Beth Lyons, Executive Director Contract Amount: Confidential Email Address: Beth Lyons@riskpooladministrators.com Address: 320 West Newmark Avenue, Monterey Park, CA 91754 Brief Contract Description: The Irvine office leads the risk management services component for ICRMA Page 29 of 35 RFP17-10-CO1250 EX PARTE COMMUNICATIONS CERTIFICATION Please indicate by signing below one of the following two statements. Only sign one statement. I certify that Proposer and Proposer's representatives have not had any communication with a City Councilmember concerning RFP No. 17-10 INSURANCE BROKER SERVICES at any time after February 1, 2017. Signature John Chino Print OR Date: I certify that Proposer or Proposer's representatives have communicated after February 1, 2017 with a City Councilmember concerning RFP No. 17-10 INSURANCE BROKER SERVICES. A copy of all such communications is attached to this form for public distribution. Signature Print Page 26 of 35 Date: RFP17-10-CO1250 ATTACHMENT B COST PROPOSAL FOR INSURANCE BROKER SERVICES Provide hourly rates, along with estimated annual pricing in accordance with the City's current requirements, as set forth in section Scope of Work, Attachment A. Also provide your firm's proposed Staffing Plan on a separate sheet of paper. Proposer should use a separate form to state pricing for any added value. Pricing shall remain firm for a minimum of two (2) years. Any and all requests for pricing adjustments for follow-on contract renewal periods shall be provided no later than sixty (60) days prior to the end of the contract period. Any such proposed price adjustments shall not exceed The Bureau of Labor Statistics Consumer Price Index (CPI) data for Los Angles -Riverside -Orange County, CA, All Items, Not Seasonally Adjusted, "annualized change comparing the original proposal month and the same month in the subsequent year. (This information may be found on the U.S. Department of Labor's website at www.bls.gov.) Employee Hourly Rate Hours Worked Total Cost Overtime Rate N/A $ $ $ Total Estimated Annual Price $50,000 Flat Fee Page 35 of 35 RFP17-10-CO1250 DISCLOSURE OF GOVERNMENT POSITIONS Each Proposer shall disclose below whether any owner or employee of Contractor currently hold positions as elected or appointed officials, directors, officers, or employees of a governmental entity or held such positions in the past twelve months. List below or state "None." Name Position Organization Dan Guth Reserve Police Officer City of Costa Mesa Page 35 of 35 RFP17-10-C01250 DISQUALIFICATION QUESTIONNAIRE The Contractor shall complete the following questionnaire: Has the Contractor, any officer of the Contractor, or any employee of the Contractor who has proprietary interest in the Contractor, ever been disqualified, removed, or otherwise prevented from bidding on, or completing a federal, state, or local government project because of a violation of law or safety regulation? Yes No X If the answer is yes, explain the circumstances in the following space. Page 27 of 35 RFP17-10-CO1250 STAFFING PLAN 1. Primary Staff to perform Agreement duties Name Classification/Title Years of Experience John Chino Area Senior Vice President 35 years Audra Powers Client Service Executive 27 years Kiki Goldsmith Client Service Manager 9 years Marco Guardi Area Vice President — Risk Control 20 years Denise Simpson Senior Account Executive 13 years 2. Alternate Staff (for use only if primary staff are not available) Name Classification/Title Years of Experience None Substitution or addition of Proposer's key personnel in any given category or classification shall be allowed only with prior written approval of the City Project Manager. The Proposer may reserve the right to involve other personnel, as their services are required. The specific individuals will be assigned based on the need and timing of the service required. Assignment of additional key personnel shall be subject to City Project Manager approval. City reserves the right to have any of Contractor personnel removed from providing services to the City under this Agreement. City is not required to provide any reason for the request for removal of any Contractor personnel. Page 31 of 35 ,,�ajaenc& .34 - Cote 360 gve/tvicew Core 360 Loss Control Platform At Gallagher we offer the full complement of services for a self-insured *0*0' C 0 R E 3 6 0 municipality including risk management services and loss control. Our offering Evaluating and Minimizing shall be led by Marco Guardi a former public agency risk manager (OCSD) and Your Total cost of Risk is now formally structured as Core 360. We are particularly excited to offer a loss control portal to the City for no cost that provides training for more than 70 topics. Our objectives for the 2017 to 2020 loss control plan will provide options for education and loss control services. Below is an outline of what AJG is prepared to offer. There is more than one option under some sections. It would be AJG's intent to provide one offering under each topic for each of the upcoming years in order to meet the desired results. This way City staff and Gallagher have enough time to implement each phase. Losses within Deductible/Retention Our data driven approach allows us to implement programs for the City of Costa Mesa that will increase safety, minimize losses and mitigate claims, resulting in a lower total cost of risk. Resources Offered: • CORE 360 Loss Control Portal (See Appendix B for overview) • Claims Analysis - Update Loss analysis for frequency and severity drivers — The loss analysis is now several years old and to ensure we have a good understanding of the leading frequency and severity drivers, we suggest the loss analysis be updated in 2017. RM Surveys and Analysis - o Claims reporting o Incident reporting and investigation o Number and cost of claims o Employment practices policies and procedures o Vehicle usage policies and procedures o Contracts and risk transfer policies and procedures o Law enforcement policies and procedures, etc. 33 Uninsurable/Uninsured Losses At Gallagher, we help you understand all your potential risks, both known and unknown. Un insured With our vast network of municipal coverage area experts, we shall provide the City with actionable advice to help you make informed decisions, develop creative solutions, and manage your non-traditional risk. Resources Offered: Informational Lessons on Emerging Risks o Drones o TRIPA vs. Terrorism Plus Policy Contractual Liability Arthur J. Gallagher & Co. works closely with you to develop a program to transfer the appropriate liabilities and not assume any hidden or unknown liabilities, reducing your total cost of risk Resources Offered: • Contracts Manual o Development of contract manual. o Provide training for staff Terrorism Plus Arthur J Gallagher leads the Nation in placement of insurance and self-insurance for public agencies as such we are frequently called upon to create risk management products and services that protect our clients from emerging risks. Perhaps no creation better represents the manifestation of this goal than Terrorism Plus. Terrorism insurance has been available to public agencies since 2001 when the domestic insurance industry moved to an absolute exclusion for terrorism. The Federal Government provides a "back -stop' program known as TRIA but municipalities that sought real protection for terrorism had opted for the procurement of a "true" terrorism policy for property damage and/or for third party claims. Beginning in 2011, Gallagher in conjunction with Lloyd's Underwriters implemented a policy to provide both property damage and liability in a single form and importantly to add previously excluded hazards such as chemical, nuclear, biological and radioactive events, (NCBR). This risk transfer product is known as Terrorism Plus and is only available through Gallagher. Since 2011 we were able to add coverage to insure the revenue streams associated with large enterprises (such as stadiums, malls etc.) that are located within the City limits but not owned by the City. For example if an event should impact South Coast Plaza, the City could procure the Terrorism Plus program to insure tax revenues that were lost. The proprietary policy is cost effective and can provide $100,000,000 in limits and use low deductibles if desired. 34 Powered by: go boyond I'R.'aw 1 = CORE360 Evaluating and Minimizing Your Total Cost of Risk Focusing on: • Losses Within Deductible/Retention Learn more at www.aig.com/CORE360 CORE360 Loss Control Portal Your online safety training and resource system Safety programs are critical to reducing losses and minimizing your total cost of risk. Arthur J. Gallagher & Co.'s CORE360 Loss Control Portal provides online training to support your safety program. Key features include, • Managers and employees gain annual access to ten training modules of your choosing, with the opportunity to refresh your ten modules annually • Learning Management System (LMS) software uses SCORM to track and run reports on participants' progress and quiz results • Automatic email function notifies employees of training assignments with a direct system link • Safety Bulletins and Weekly Best Management Practices Training Bulletins emailed regularly to users • Online resource tools, model workplace policies, procedures and forms available, plus Human Resources Self -Assessment tools, with the ability to add your own customized information • Easy on -boarding of unlimited users and user assignment levels • The CORE360 Loss Control Portal can be customized to fit your organization's needs Online Training Modules Keep your training fresh! Select ten replacement modules each year you renew with Arthur J. Gallagher & Co. Most training modules run 10-25 minutes with a quiz. Safety Shorts run less than 5 minutes, with no quiz. View a full demo of the CORE360 Loss Control Portal here. 35 Available Modules Human Resources Training • Americans with Disabilities Act (ADA) • Anti -Discrimination Training • California Ethics • California Sexual I larassment Prevention & Hespnnse (f notsh & Spanish) • (',nrtneodicut Sexual I Iarassment Prevention & Hesponsc • Discrimination • Diversity Ethics in Action Safety Training • Aeeident InveSfigation 'Techniques • Asbestos Awareness ({general Industry] • Basic Conveyor Safety • Bloodborne Pathogens (English & Spanish) • Creating a Safe Holiday Celebration • Defensive Driving -Accident Scene Management • Defensive Drfving•BaCkingSafely, R iS for Heversc • Defensive Driving €3sSice-Part I • Defensive Driving -Changing Lanes Safely • Defensive Driving -Driving Safely in School zones • Defensive Driving -General Auto Risk Management • Defensive Driving -Intersections • Delensive Or"rving-ReduChig Deer Related nuiderrts Safety Shorts Two Safety Shorts are mmiaercd one module sdeeuon. • elrxdhome Pathogens • Flectrical Safety • I mergenCy Procedures • hire Prevention and Protection • Hand and POWN Tods • I latard CPmmmniOtiofr CZ Arthur J. Gallagher & Co. • Fair & Accurate Credit Transaction Act (FACTA) • Family Medical Leave Act (FMLA) • Interviewing Strategies • Maine Sexual I Ierawrlent Prevention & Response • Personnel riles • Prevuntiun of Harassment and Discrimination • Sensitivity Basics: Creating Positive Working Rel at on sh i ps Defensive Driviny, Safc I-dlloxiog Distance • DefenSive Driving Spring Weather Conditions • Defensive Driving -Winter Weather Conditions • Determining the Roof Cause of Accidents • Disaster Planning 101 • Electrical Safety • I or P". & Family Disaster Planning • Eire Prevention Practices • Forklift Safety Basics for General Industry • I larard Comm uniCation (English & Spanish) • I fearing Proteetion • Housekeeping --Custodial, Safe Housekouping Practices • Identifying Strain & Exertion Exposures (English & Spanish) • Lead-based Paint • LockouVTagout • HousekeepingfCustodial Hefore You Start • Housekeepineustodial Cleaning by Hand • Housekeepirngg:ustodial 1 mptying Trash • HnuSekeepirng/L:ustodial Mopping and Lmptying Buckets • HuusektepinpjCustadiall--Pmventi rip. Slips, Trips and Falls • Secual Harassment (English & Spanish) Smart Hiring • SRM—Core Principles • Them Unsafe Acts • Violence PreVenllOn • Workers Compensation • Workplace Investigations B"Cs • Wrongful Tormination • Machine Guarding (English & Spanish] • Means of Egreus • Mold • Officu Ergonomics Defined • Office Ergonomics -Working in Comfort • Office Workstation Safety • Office Workstation Safety for Supervisors • Personal Protective Equipment (English & Spanish) • Portable Fire Extinguishers I • Portable fire Extinguishers II • Preparation for Physical Activity • Preventing Back Injuries (English & Spanish) • PrewcntingSlips, Trips and Falls • Safety Pays for Life • Temp Staffing Services Emplojee Safety Orientation (Tnglish & Spanish) • Housekeeping -General • Ladder Safety UXkout/lagout • Personal Protective I quipment • Safe Lifting Practices • Slip, Trip and Fall 36 BROKER SERVICE PLAN — BASED UPON A 7/1 RENEWAL 1. BROKER SERVICES Aug Sept Oct Nov Dec Jan Feb March A. ASSIGNED PERSONNEL 1. The BROKER shall designate a Principal to be assigned to this account to act as the primary contact for the CITY. The CITY must approve the Principal and any other personnel assigned to perform services for the CITY (hereafter collectively referred to as "assigned personnel"). If for any reason the CITY finds, in its sole discretion, that the service replacement personnel is unsatisfactory, the BROKER will agree to assign replacement personnel that must also be approved by the CITY. Personnel assigned to the account must have a minimum of five (5) years full-time experience as a broker and a minimum of three (3) years experience with public agency insured and self- insured insurance program management is preferred. B. AUDIT 1. The BROKER will cooperate with the CITY and make available any and all files and records available for audits. The CITY will have reasonable access to the necessary portions of the BROKER facilities, records and files for review or audit purposes. C. PROGRAM ADMINISTRATION 1. Act as an independent insurance advisor to the City and proactively provide ongoing unbiased professional advice and recommendations that benefit the city. 2. Proactively provide ongoing review and analysis of the City's insurance programs and identification of risk transfer and risk financing options. 3. Be familiar with the major exposures of the City. 4. Be familiar with the coverage provided by all relevant insurance policies and documents issued to the City. 5. Assure that insurance policies are placed in a timely manner, without lapses in coverage periods, with reputable and financially responsible insurers. 6. Provide service for the insurance policies placed for the City including processing all changes and endorsements and verifying the accuracy of invoices within a reasonable time. 7. Provide early warning of rate and coverage changes or renewal problems through a process to be mutually agreed upon with the City. 8. Upon request of the City, but at least once a year, provide a comprehensive report that reviews all of the City's insurance programs. 9. Through a mutually agreed upon process, monitor the City's operations and loss exposures and make any appropriate recommendations for coverage changes or new coverage. 10. Be available to answer questions or obtain answers from underwriters for 37 BROKER SERVICE PLAN — BASED UPON A 7/1 RENEWAL BROKER SERVICES (CONTINUED) Aug Sept Oct Nov Dec Jan Feb March April May June July 11. Meet with City staff and designated representatives as reasonably requested. 12. Provide consultation service and written reports as normally expected of a professional broker to a large client. 13. Provide loss control services and assistance with claims as requested by the City. Assist in analyzing loss exposures from existing and new operations, and determine the appropriate risk management alternatives, including types, availabili ,costs and extent of Covera e that should be considered. SPECIAL REQUIREMENTS A. PERIOD OF AGREEMENT The selected broker will be appointed as the City's Broker(s) of Record for property/casualty and other insurance as required for a period of three (3) years with two (2) additional one-year options, at the City's sole discretion. Appointment as Broker of Record creates no right to reappointment or continued service. If negotiations for renewal of this contract are delayed for reasons beyond control of broker, the contract shall automatically be extended under the same terms and conditions until terminated by written notice by either party or be execution of a new contract. B. POLICY REVIEW Review policies and other documents in detail within 14 days of receipt of the documents. Check the wording and accuracy of each policy, binder, certificate, endorsement or other document received from insurers. Ensure that the intended coverage is provided, all coverage, terms, conditions and other wording is complete and accurate, and in compliance with financial arrangements and administrative procedures acceptable to the City. Obtain revisions needed to achieve compliance with coverage request. C. POLICY AMENDMENTS Process requests for additions or deletions to policies within five (5) business days of receipt. Provide follow up with insurer that the insurer has handled the request. Advise in writing of any changes to insurance pohcy(ies) within 14 days. D. MARKETING 1. Monitor expiration dates of policies and provide the City with written notification at least 90 days prior to expiration, including a description of information needed to process the renewal. 2. Develop and implement a marketing strategy, including identifying potential markets, for program renewals at least 90 days before policy expiration. 3. Develop underwriting information and assist in gathering and organizing exposure and loss data for renewals of policies placed. 4. Work with carriers to design policies and programs most advantageous to the City for coverage of exposures, policy form, exclusions, deductibles, self- insured retentions, coordination with other policies, costs and other pertinent factors. 38 BROKER SERVICE PLAN — BASED UPON A 7/1 RENEWAL SPECIAL REQUIREMENTS (CONTINUED) Aug Sept Oct Nov Dec Jan Feb March April May June July 5. Market renewal coverage for the City by obtaining timely and competitive quotations from available and responsible insurers & reinsurers. 6. Provide quotations to the City at least thirty (30) days prior to insurance policy expiration unless otherwise approved by the City. 7. If requested by the City, provide the City with copies of declination letters and all premium quotations received with a summary of coverage explaining deficiencies or benefits of the quote compared to the recommended insurance program. 8. Provide quotations for specialized types of insurance, as requested by the City. E. CLAIMS 1. Assist the City staff, as necessary with filing claims. 2. Work with outside claims adjustors as necessary. 3. Represent the interests of the City in policy interpretation and other negotiations with insurance carriers. 4. Assist the City with review of claim reserves and represent the City to the insurer with regard to requested explanation or reduction of reserve amounts. Follow-up with insurer as necessary until resolution of any reserve reduction requests are accomplished or until claim is closed. 5. Provide annual summaries by policy year for each of the last five years indicating total number of losses by type for each line of coverage and showing earned premium, incurred losses and loss ratio. F. CERTIFICATES OF INSURANCE Issue certificates of insurance within three (3) business days following the date of request. G. CONTRACT REVIEW Review contracts and lease agreements as requested and notify the City whether the insurance programs of the City are in compliance with insurance requirements of contracts and/or agreements. H. LEGAL COMPLIANCE Comply with all State and Federal laws and regulations pertaining to insurance brokers licensed in the State of California. Continuous throughout year = = Quarterly = = As Needed _ = Specific 39 .S �o�oena�cx C - JairV. e- T/tan z6l'oa gan Transition & Marketin Tasks g Responsible 120-60 60-30 Party Days Days 30-0 Days I -AEL=� 1 File Broker of Record Letters with respective markets. City 2 Request Cert Holder and other materials from prior broker. Establish Client Service Expectations, Safety/Loss Control Goals City & AJG and Claims Reporting Procedures. Request list of appropriate insurance contacts 3 Issue request for renewal information AJG 4 Update Renewal Information City 5 Request updated loss runs and status reports on all open claims from AJG current & prior carriers 6 Send a letter of introduction to each Insurance Contact. Make contact with all International Partners and establish service needs. AJG 7 Renewal Strategy Meeting City & AJG 8 Prepare & Send Submission to Market AJG 9 Transition any applicable international operations into respective AJG network partners. Create Electronic policy digest for locally AJG admitted policies. 10 Review current Loss Control & Disaster Program Perform Engineering Needs Analysis City & AJG Assist in coordination of carrier renewal inspections 11 Provide loss runs and summary AJG 12 Client - Carrier Meetings, As Necessary City & AJG 13 Negotiation with Markets AJG 14 Bind Order City 15 Forward Bind Order to Market(s). Transmit Binders once received and checked for accuracy. Provide Summary of Insurance. Process AJG Renewal Certificates. Invoice LS&CO/Premium Financing Arrangements. Process & File Surplus Lines Filings, As Necessary 16 Quarterly Program & Service Review AJG Quarterly Loss Control Meeting & Goal Status Review 17 Prepare Loss Control status reports AJG 40 .S �o�oena�cx ,CSI - .3�na iLzal s 41 GArthur J. Gallagher & Co. NEWS RELEASE ARTHUR J. GALLAGHER & CO. ANNOUNCES FOURTH QUARTER AND FULL YEAR 2016 FINANCIAL RESULTS ITASCA, IL, January 26, 2017 - Arthur J. Gallagher & Co. (NYSE: AJG) today reported its financial results for the quarter and year ended December 31, 2016. Management will host a webcast conference call to discuss these results on Friday, January 27, 2017 at 9:00 a.m. ET/8:00 a.m. CT. To listen to the call, and for printer -friendly formats of this release and the "Supplemental Quarterly Data" and "CFO Commentary," which may also be referenced during the call, please visit aig.com/IR. These documents contain both GAAP and non -GAAP measures. Investors and other users of this information should read carefully the section entitled "Information Regarding Non -GAAP Measures" beginning on page 9. Summary of Financial Results - Fourth Quarter Reconciliations of non -GAAP measures begin on page 2 (Dollars in millions, except per share data) 4th Q 2016 4th Q 2015 Change Reported Adjusted Reported Adjusted Reported Adjusted Brokerage Segment GAAP Non -GAAP GAAP Non -GAAP GAAP Non -GAAP Revenues $ 885.7 $ 883.8 $ 851.8 $ 821.4 4% 8% Organic revenues $ 833.2 $ 804.4 3.6% Net earnings $ 78.6 $ 51.7 52% Net earnings margin 8.9% 6.1% +280 bpts Adjusted EBITDAC $ 228.2 $ 209.5 9% Adjusted EBITDAC margin 25.8% 25.5% +31 bpts Diluted net earnings per share $ 0.44 $ 0.54 $ 0.30 $ 0.50 47% 8% Risk Management Segment Revenues $ 185.6 $ 185.6 $ 181.3 $ 180.9 2% 3% Organic revenues $ 185.3 $ 180.1 2.9% Net earnings $ 15.1 $ 11.4 32% Net earnings margin 8.1% 6.3% +185 bpts Adjusted EBITDAC $ 33.2 $ 31.6 5% Adjusted EBITDAC margin 17.9% 17.5% +42 bpts Diluted net earnings per share $ 0.08 $ 0.09 $ 0.06 $ 0.08 33% 13% Corporate Segment Diluted net earnings (loss) per share $ 0.01 $ 0.03 $ (0.01) $ 0.01 200% 200% Total Company Diluted net earnings per share $ 0.53 $ 0.66 $ 0.35 $ 0.59 51% 12% "We had a terrific quarter to finish an excellent 2016. For both the quarter and the full year, we delivered strong growth in revenue, improvement in our margin and disciplined execution of our tuck -in M&A strategy," said J. Patrick Gallagher, Jr., Chairman, President and CEO. "We are well positioned for 2017. Our unique Gallagher culture is as strong as ever, our integration efforts are largely complete and we have a robust M&A pipeline. We continue to see an environment where our talented production and claims staff can drive growth." (1 of 14) Summary of Financial Results - Year Ended December 31, 2016 Revenues Reconciliations of non -GAAP measures begin on page 3 (Dollars in millions, except per share data) Year 2016 $ 885.7 Year 2015 Gains on book sales Reported Adjusted Reported Adjusted Brokerage Segment Workforce & lease termination GAAP Non -GAAP Acquisition related adjustments GAAP Non -GAAP Revenues $ 3,527.9 $ 3,521.3 $ 3,324.0 $ 3,232.0 Organic revenues 821.4 Risk Management, as reported $ 3,286.7 181.3 Workforce & lease termination $ 3,173.9 Net earnings $ 357.1 - $ 268.1 (0.4) Net earnings margin 185.6 10.1% Corporate, as reported 313.7 8.1% Impact of 2015 litigation settlement Adjusted EBITDAC - Corporate, as adjusted * $ 948.7 301.8 Total Company, as reported $ 856.8 Adjusted EBITDAC margin Total Company, as adjusted * $1,383.1 26.9% Total Brokerage & Risk 0.59 26.5% Diluted net earnings per share $ 1.98 $ 2.30 $ 1.54 $ 2.13 Risk Management Segment $1,002.3 Revenues $ 718.1 $ 718.1 $ 727.1 $ 723.4 Organic revenues $ 713.9 $ 705.1 Net earnings $ 57.2 $ 57.2 Net earnings margin 8.0% 7.9% Adjusted EBITDAC $ 124.4 $ 124.9 Adjusted EBITDAC margin 17.3% 17.3% Diluted net earnings per share $ 0.32 $ 0.33 $ 0.33 $ 0.36 Corporate Segment Diluted net earnings per share $ 0.02 $ 0.11 $ 0.19 $ 0.09 Total Company Diluted net earnings per share $ 2.32 $ 2.74 $ 2.06 $ 2.58 Quarter Ended December 31 Reported GAAP to Adjusted Non -GAAP Reconciliation: Net Earnings 4th Q16 4th Q15 Revenues Segment 4th Q 16 4th Q 15 3.6% (in millions) 0.2 Brokerage, as reported $ 885.7 $ 851.8 Gains on book sales (1.9) 0.3 Acquisition integration - - Workforce & lease termination - - Acquisition related adjustments - - U.K. statutoryincome taxrate change - - Levelized foreign currency translation - (30.7) Brokerage, as adjusted * 883.8 821.4 Risk Management, as reported 185.6 181.3 Workforce & lease termination - - Client run-off - - Levelized foreign currency translation - (0.4) Risk Management, as adjusted * 185.6 180.9 Corporate, as reported 313.7 301.8 Impact of 2015 litigation settlement - - Corporate, as adjusted * 313.7 301.8 Total Company, as reported $1,385.0 $1,334.9 Total Company, as adjusted * $1,383.1 $1,304.1 Total Brokerage & Risk 0.59 Management, as reported $1,071.3 $1,033.1 Total Brokerage & Risk Management, as adjusted * $1,069.4 $1,002.3 Net Earnings 4th Q16 4th Q15 Reported GAAP (in millions) $ 78.6 $ 51.7 3.6% (1.4) 0.2 +205 bpts 7.7 20.6 11% 6.5 3.6 29% 5.3 14.7 0.03 - (4.2) - 1.0 (0.02) 96.7 87.6 15.1 11.4 0.08 0.6 0.8 - 2.4 - - 0.4 15.7 15.0 0.09 7.3 5.1 4.5 4.6 (0.01) 11.8 9.7 $ 101.0 $ 68.2 $ 124.2 $ 112.3 Reported GAAP Adjusted Non -GAAP 6% 9% 0.3 3.6% 33% 8.6 +205 bpts 0.5 0.7 11% (1.4) +43 bpts 29% 8% 1.3% 0% +10 bpts 0% +5 bpts -3% -8% EBITDAC 4thQ16 4thQ15 (in millions) $ 210.8 $ 170.4 (1.9) 0.3 10.2 34.4 8.6 5.1 0.5 0.7 - (1.4) 228.2 209.5 32.3 27.1 0.9 1.0 - 3.0 - 0.5 33.2 31.6 (45.8) (34.8) 5.6 5.7 (40.2) (29.1) $ 197.3 $ 162.7 $ 221.2 $ 212.0 -89% 22% 13% 6% Diluted Net Earnings Per Share 4th Q16 4th Q15 $ 0.44 $ 0.30 (0.01) - 0.04 0.11 0.04 0.02 0.03 0.09 - (0.02) 0.54 0.50 0.08 0.06 0.01 - - 0.02 0.09 0.08 0.01 (0.01) 0.02 0.02 0.03 0.01 $ 0.53 $ 0.35 $ 0.66 $ 0.59 $ 93.7 $ 63.1 $ 243.1 $ 197.5 $ 0.52 $ 0.36 $ 112.4 $ 102.6 $ 261.4 $ 241.1 $ 0.63 $ 0.58 (2 of 14) * For 2016, the pretax impact of the Brokerage Segment adjustments totals $23.9 million, with a corresponding adjustment to the provision for income taxes of $5.8 million relating to these items. The pretax impact of the Risk Management Segment adjustments totals $0.9 million, with a corresponding adjustment to the provision for income taxes of $0.3 million relating to these items. The pretax impact of the Corporate Segment adjustments totals $5.6 million, with a corresponding adjustment to the provision for income taxes of $1.1 million relating to this item. A detailed reconciliation of the 2016 and 2015 provision for income taxes is shown on page 13. Year Ended December 31 Reported GAAP to Adjusted Non -GAAP Reconciliation: Segment Brokerage, as reported Gains on book sales Acquisition integration Workforce & lease termination Acquisition related adjustments U.K. statutoryincome taxrate change Levelized foreign currency translation Brokerage, as adjusted * Risk Management, as reported Workforce & lease termination Client run-off / bankruptcy Acquisition related adjustments Levelized foreign currency translation Risk Management, as adjusted Corporate, as reported Impactof 2015 litigation settlement Corporate, as adjusted * Total Company, as reported Total Company, as adjusted Total Brokerage & Risk Management, as reported Total Brokerage & Risk Management, as adjusted * For 2016, the pretax impact of the Brokerage Segment adjustments totals $80.5 million, with a corresponding adjustment to the provision for income taxes of $23.9 million relating to these items. The pretax impact of the Risk Management Segment adjustments totals $2.2 million, with a corresponding adjustment to the provision for income taxes of $0.7 million relating to these items. The pretax impact of the Corporate Segment adjustments totals $20.2 million, with a corresponding adjustment to the provision for income taxes of $4.1 million relating to this item. A detailed reconciliation of the 2016 and 2015 provision for income taxes is shown on page 14. (3 of 14) Diluted Net Revenues Net Earnings EBITDAC Earnings Per Share Year 16 Year 15 Year 16 Year 15 Year 16 Year 15 Year 16 Year 15 (in millions) (in millions) (in millions) $3,527.9 $3,324.0 $ 357.1 $ 268.1 $ 885.2 $ 746.2 $ 1.98 $ 1.54 (6.6) (6.7) (4.7) (5.0) (6.6) (6.7) (0.03) (0.03) - - 32.8 69.2 45.7 100.9 0.18 0.40 - - 15.1 16.3 20.7 23.0 0.09 0.09 - - 14.9 28.5 3.7 3.4 0.09 0.16 - - (1.5) (4.2) - - (0.01) (0.02) - (85.3) - (1.1) - (10.0) - (0.01) 3,521.3 3,232.0 413.7 371.8 948.7 856.8 2.30 2.13 718.1 727.1 57.2 57.2 122.2 119.1 0.32 0.33 - - 1.5 2.1 2.2 2.9 0.01 0.01 - 1.0 - 3.1 - 4.0 - 0.02 - - - (0.3) - - - - - (4.7) - (0.6) - (1.1) - - 718.1 723.4 58.7 61.5 124.4 124.9 0.33 0.36 1,348.8 1,341.3 30.7 63.8 (157.8) (94.0) 0.02 0.19 - (31.0) 16.1 (17.7) 20.2 (16.2) 0.09 (0.10) 1,348.8 1,310.3 46.8 46.1 (137.6) (110.2) 0.11 0.09 $5,594.8 $5,392.4 $ 445.0 $ 389.1 $ 849.6 $ 771.3 $ 2.32 $ 2.06 $5,588.2 $5,265.7 $ 519.2 $ 479.4 $ 935.5 $ 871.5 $ 2.74 $ 2.58 $4,246.0 $4,051.1 $ 414.3 $ 325.3 $1,007.4 $ 865.3 $ 2.30 $ 1.87 $4,239.4 $3,955.4 $ 472.4 $ 433.3 $1,073.1 $ 981.7 $ 2.63 $ 2.49 * For 2016, the pretax impact of the Brokerage Segment adjustments totals $80.5 million, with a corresponding adjustment to the provision for income taxes of $23.9 million relating to these items. The pretax impact of the Risk Management Segment adjustments totals $2.2 million, with a corresponding adjustment to the provision for income taxes of $0.7 million relating to these items. The pretax impact of the Corporate Segment adjustments totals $20.2 million, with a corresponding adjustment to the provision for income taxes of $4.1 million relating to this item. A detailed reconciliation of the 2016 and 2015 provision for income taxes is shown on page 14. (3 of 14) Brokerage Segment Reported GAAP to Adjusted Non -GAAP Reconciliations (dollars in millions): Organic Revenues (Non -GAAP) 4th Q 16 4th Q 15 Change Year 16 Year 15 Change Base Commissions and Fees Commissions and fees, as reported $ 816.5 $ 790.1 3.3% $ 3,214.8 $ 3,044.5 5.6% Less commissions and fees from acquisitions (33.9) - (173.2) - Less disposed of operations - (1.4) - (3.3) Levelized foreign currency translation - (27.4) - (78.7) Organic base commissions and fees $ 782.6 $ 761.3 2.8% $ 3,041.6 $ 2,962.5 2.7% Supplemental Commissions Supplemental commissions, as reported $ 40.2 $ 34.6 16.2% $ 147.0 $ 125.5 17.1% Less supplemental commissions from acquisitions (0.1) - (1.5) - Less disposed of operations - (0.1) - (0.3) Levelized foreign currency translation - (2.8) - (6.3) Organic supplemental commissions $ 40.1 $ 31.7 26.5% $ 145.5 $ 118.9 22.4% Contingent Commissions Contingent commissions, as reported $ 10.5 $ 11.9 -11.8% $ 107.2 $ 93.7 14.4% Less contingent commissions from acquisitions - - (7.6) - Less disposed of operations - (0.1) - (0.2) Levelized foreign currency translation - (0.4) - (1.0) Organic contingent commissions $ 10.5 $ 11.4 -7.9% $ 99.6 $ 92.5 7.7% Total reported commissions, fees, supplemental commissions and contingent commissions $ 867.2 $ 836.6 3.7% $ 3,469.0 $ 3,263.7 6.3% Less commissions and fees from acquisitions (34.0) - (182.3) - Less disposed of operations - (1.6) - (3.8) Levelized foreign currency translation - (30.6) - (86.0) Total organic commissions, fees, supplemental commissions and contingent commissions $ 833.2 $ 804.4 3.6% $ 3,286.7 $ 3,173.9 3.6% Our domestic and international operations both posted growth similar to the 3.6% growth in total organic revenues for fourth quarter 2016. Acquisition Activity 4th Q 16 4th Q 15 Year 16 Year 15 Number of acquisitions closed 9 15 37 42 Estimated annualized revenues acquired (in millions) $ 40.1 $ 46.3 $ 137.9 $ 223.2 Gallagher issued 114,000 shares in connection with tax-free exchange acquisitions in the fourth quarter of 2016. In anticipation, a similar number of shares were repurchased in June 2016. For the full year, Gallagher issued 1,998,000 shares in connection with tax-free exchange acquisitions and repurchased 2,265,000 shares to fully offset the impact of the issued shares. Through January 26, 2017, Gallagher closed an additional 5 acquisitions with estimated annualized revenues of approximately $32.2 million. No shares were issued related to these acquisitions. (4 of 14) Brokerage Segment Reported GAAP to Adjusted Non -GAAP Reconciliations (continued): Compensation Expense and Ratios 4th Q 16 4th Q 15 Year 16 Year 15 Compensation expense, as reported $ 526.7 $ 509.5 $2,041.8 $1,939.7 Acquisition integration (1) (2.9) (8.5) (16.9) (38.3) Workforce and lease termination related charges (8.2) (4.5) (17.5) (20.0) Acquisition related adjustments (0.5) (0.7) (3.7) (3.4) Levelized foreign currency translation - (18.5) - (52.9) Compensation expense, as adjusted $ 515.1 $ 477.3 $2,003.7 $1,825.1 Reported compensation expense ratios using reported revenues on pages 2 and 3 59.5% 59.8% 57.9% 58.4% Adjusted compensation expense ratios using adjusted revenues on pages 2 and 3 58.3% 58.1% 56.9% 56.5% Reported fourth quarter compensation ratio was 0.3 pts lower than the same period in 2015. Adjusted fourth quarter compensation ratio was 0.2 pts higher than the same period in 2015. All items were essentially consistent with the prior period. Operating Expense and Ratios 4th Q 16 4th Q 15 Year 16 Year 15 Operating expense, as reported $ 148.2 $ 171.9 $ 600.9 $ 638.1 Acquisition integration (1) (7.3) (25.9) (28.8) (62.6) Workforce and lease termination related charges (0.4) (0.6) (3.2) (3.0) Levelized foreign currency translation - (10.8) (22.4) Operating expense, as adjusted $ 140.5 $ 134.6 $ 568.9 $ 550.1 Reported operating expense ratios using reported revenues on pages 2 and 3 16.7% 20.2% 17.0% 19.2% Adjusted operating expense ratios using adjusted revenues on pages 2 and 3 "* 15.9% 16.4% 16.2% 17.0% Reported fourth quarter operating expense ratio was 3.5 pts lower than the same period in 2015. This ratio was primarily impacted by decreased technology costs, lease abandonment charges and outside consulting fees related to our integration efforts. '* Adjusted fourth quarter operating expense ratio was 0.5 pts lower than the same period in 2015. This ratio was primarily impacted by savings in professional fees and travel and meeting expenses. Net Earnings to Adjusted EBITDAC (Non -GAAP) 4th Q 16 4th Q 15 Change Year 16 Year 15 Change Net earnings, as reported $ 78.6 $ 51.7 52.0% $ 357.1 $ 268.1 33.2% Provision for income taxes 45.3 21.6 194.1 145.3 Depreciation 14.6 15.2 57.2 54.4 Amortization 61.4 67.2 244.7 237.3 Change in estimated acquisition earnout payables 10.9 14.7 32.1 41.1 EBITDAC 210.8 170.4 23.7% 885.2 746.2 18.6% Gains from books of business sales (1.9) 0.3 (6.6) (6.7) Acquisition integration (1) 10.2 34.4 45.7 100.9 Acquisition related adjustments 0.5 0.7 3.7 3.4 Workforce and lease termination related charges 8.6 5.1 20.7 23.0 Levelized foreign currency translation - (1.4) - (10.0) EBITDAC, as adjusted $ 228.2 $ 209.5 8.9% $ 948.7 $ 856.8 10.7% Net earnings margin, as reported using reported revenues on pages 2 and 3 8.9% 6.1% +280 bpts 10.1% 8.1% +205 bpts EBITDAC margin, as adjusted using adjusted revenues on pages 2 and 3 25.8% 25.5% +31 bpts 26.9% 26.5% +43 bpts (1) Acquisition integration costs consist mostly of IT system conversion costs, professional fees, and compensation related to certain of our large acquisitions outside the scope of our usual tuck -in strategy. (5 of 14) Risk Management Segment Reported GAAP to Adjusted Non -GAAP Reconciliations (dollars in millions): Organic Revenues (Non -GAAP) 4th Q 16 4th Q 15 Change Year 16 Year 15 Change Fees $ 183.9 $ 178.9 2.8% $ 713.5 $ 710.9 0.4% International performance bonus fees 1.4 2.2 -36.4% 3.6 15.6 -76.9% Fees as reported 185.3 181.1 2.3% 717.1 726.5 -1.3% Less fees from acquisitions - - $ 45.4 (3.1) - 24.3% Less client run-off - (0.6) 23.9% (0.1) (16.7) 25.1% Levelized foreign currency translation - (0.4) 24.4% - (4.7) Organic fees $ 185.3 $ 180.1 2.9% $ 713.9 $ 705.1 1.3% Compensation Expense and Ratios 4th Q 16 4th Q 15 Year 16 Year 15 Compensation expense, as reported $ 108.2 $ 105.7 $ 424.5 $ 427.2 Client run-off - (0.7) - (0.7) Workforce and lease termination related charges (0.7) (0.5) (1.9) (2.2) Levelized foreign currency translation - (0.6) - (2.6) Compensation expense, as adjusted $ 107.5 $ 103.9 $ 422.6 $ 421.7 Reported compensation expense ratios using reported revenues on pages 2 and 3 58.3% 58.3% 59.1% 58.8% Adjusted compensation expense ratios using adjusted revenues on pages 2 and 3 *" 57.9% 57.4% 58.9% 58.3% Reported fourth quarter compensation ratio was flat compared to the same period in 2015. All items were essentially consistent with the prior period. ** Adjusted fourth quarter compensation ratio was 0.5 pts higher than the same period in 2015. This ratio was primarily impacted by increased employee benefits. Operating Expense and Ratios Operating expense, as reported Client run-off Workforce and lease termination related charges Levelized foreign currency translation Operating expense, as adjusted Reported operating expense ratios using reported revenues on pages 2 and 3 Adjusted operating expense ratios using adjusted revenues on pages 2 and 3 4th Q 16 4th Q 15 Year 16 Year 15 $ 45.1 $ 48.5 $ 171.4 $ 180.8 - (2.3) - (2.3) (0.2) (0.5) (0.3) (0.7) - (0.3) - (1.0) $ 44.9 $ 45.4 $ 171.1 $ 176.8 24.3% 26.8% 23.9% 24.9% ** 24.2% 25.1% 23.8% 24.4% Reported fourth quarter operating expense ratio was 2.5 pts lower than the same period in 2015. This ratio was primarily impacted by expenses related to former client run-off occurring in the prior period. "* Adjusted fourth quarter operating expense ratio was 0.9 pts lower than the same period in 2015. This ratio was primarily impacted by savings in technology expenses and travel and meeting expenses. (6 of 14) Risk Management Segment Reported GAAP to Adjusted Non -GAAP Reconciliations (continued): Net Earnings to Adjusted EBITDAC (Non -GAAP) 4th Q 16 4th Q 15 Change Year 16 Year 15 Change Net earnings, as reported $ 15.1 $ 11.4 32.5% $ 57.2 $ 57.2 0.0% Provision for income taxes 9.5 8.2 15.5 35.3 35.1 2016 and $7.5 million in 2015. Pretax earnings for the year ended are presented net of amounts attributable to Depreciation 7.0 6.7 (2) During the third quarter of 2015, Gallagher settled litigation against certain former U.K. executives and their advisors for a 27.2 24.3 matter will result in after-tax charges of up to $4.5 million per quarter through June 30, 2017. Amortization 0.7 0.8 2.5 3.0 Change in estimated acquisition earnout payables - - - (0.5) EBITDAC 32.3 27.1 19.2% 122.2 119.1 2.6% Workforce and lease termination related charges 0.9 1.0 2.2 2.9 Client run-off/bankruptcy - 3.0 - 4.0 Levelized foreign currency translation - 0.5 - (1.1) EBITDAC, as adjusted $ 33.2 $ 31.6 5.1% $ 124.4 $ 124.9 -0.4% Net earnings margin, as reported using reported revenues on pages 2 and 3 8.1% 6.3% +185 bpts 8.0% 7.9% +10 bpts EBITDAC margin, as adjusted using adjusted revenues on pages 2 and 3 17.9% 17.5% +42 bpts 17.3% 17.3% +5 bpts Corporate Segment Reported GAAP to Adjusted Non -GAAP Reconciliations (dollars in millions): 2016 2015 Net Earnings Net Earnings Pretax Income Attributable to Pretax Income Attributable to Earnings Tax Controlling Earnings Tax Controlling (Loss) Benefit Interests (Loss) Benefit Interests 4th Quarter Interest and banking costs $ (29.2) $ 11.7 $ (17.5) $ (26.3) $ 10.5 $ (15.8) Clean energy related (1) (35.1) 63.7 28.6 (27.3) 47.7 20.4 Acquisition costs (0.9) 0.1 (0.8) (0.9) 0.1 (0.8) Corporate (15.3) 10.4 (4.9) (11.8) 10.2 (1.6) Litigation settlement (2) (5.6) 1.1 (4.5) (5.7) 1.1 (4.6) Reported 4th quarter (86.1) 87.0 0.9 (72.0) 69.6 (2.4) Litigation settlement (2) 5.6 (1.1) 4.5 5.7 (1.1) 4.6 Adjusted 4th quarter $ (80.5) $ 85.9 $ 5.4 $ (66.3) $ 68.5 $ 2.2 Year Interest and banking costs $ (112.8) $ 45.1 $ (67.7) $ (105.4) $ 42.1 $ (63.3) Clean energy related (1) (133.2) 247.6 114.4 (116.1) 217.0 100.9 Acquisition costs (4.6) 0.7 (3.9) (4.3) 0.6 (3.7) Corporate (43.0) 20.0 (23.0) (33.2) 14.8 (18.4) Litigation settlement (2) (20.2) 4.1 (16.1) 16.2 1.5 17.7 Reported full year (313.8) 317.5 3.7 (242.8) 276.0 33.2 Litigation settlement (2) 20.2 (4.1) 16.1 (16.2) (1.5) (17.7) Adjusted full year $ (293.6) $ 313.4 $ 19.8 $ (259.0) $ 274.5 $ 15.5 (1) Pretax earnings for the fourth quarter are presented net of amounts attributable to noncontrolling interests of $6.4 million in 2016 and $7.5 million in 2015. Pretax earnings for the year ended are presented net of amounts attributable to noncontrolling interests of $27.0 million in 2016 and $30.6 million in 2015. (2) During the third quarter of 2015, Gallagher settled litigation against certain former U.K. executives and their advisors for a pretax gain of $31.0 million ($22.3 million net of costs and taxes). Incremental expenses that arose in connection with this matter will result in after-tax charges of up to $4.5 million per quarter through June 30, 2017. (7 of 14) Interest and banking costs and debt - At December 31, 2016, Gallagher had $2,450.0 million of borrowings from private placements, $278.0 million of short-term borrowings under its line of credit facility and $125.6 million outstanding under a revolving loan facility that provides funding for premium finance receivables, which are fully collateralized by the underlying premiums held by insurance carriers and as such are excluded from our debt covenant computations. On December 1, 2016, Gallagher entered into a note purchase agreement for a private placement of $100.0 million of senior unsecured notes. Proceeds were primarily used to fund the $50.0 million of private placement debt that matured on November 30, 2016 and partially fund acquisitions. Clean energy - Consists of the operating results related to our investments in 34 clean coal production plants and royalty income from clean coal licenses related to Chem -Mod LLC. Additional information regarding these results is available in the "CFO Commentary" at ajg.com/IR. Acquisition costs - Consists mostly of external professional fees and other due diligence costs related to acquisitions. Corporate - Consists of overhead allocations mostly related to corporate staff compensation. Income Taxes Gallagher allocates the provision for income taxes to its Brokerage and Risk Management segments using the local country statutory rates. Gallagher's consolidated effective tax rate for the quarters ended December 31, 2016 and 2015 was (46.8)% and (140.1)%, respectively, which was lower than the statutory rate due to the amount of IRC Section 45 tax credits earned. At -the -market equity program - Gallagher has an at -the -market equity program under which up to $15.6 million of its common stock remaining in the program may be sold through Morgan Stanley & Co. LLC as sales agent. During fourth quarter 2016, Gallagher did not sell any shares of its common stock under the program. Balance Sheet Reclassifications In first quarter 2016, Gallagher adopted new accounting guidance related to the presentation of both debt issuance costs and income taxes in the consolidated balance sheet. The new debt issuance costs guidance requires such costs to be presented in the balance sheet as a direct deduction from the associated debt liability. The new income tax guidance requires that deferred tax assets and liabilities be classified as noncurrent on the balance sheet rather than being separated into current and noncurrent components. The new guidance has been applied on a retrospective basis. Accordingly, Gallagher reclassified debt issuance costs of $3.3 million included in Other noncurrent assets to Corporate related borrowings - noncurrent in its consolidated balance sheet as of December 31, 2015. Gallagher also reclassified the current deferred taxes to noncurrent in its consolidated balance sheet as of December 31, 2015, which increased Noncurrent deferred income taxes by $122.1 million and increased Other noncurrent liabilities by $4.6 million. In addition, in fourth quarter 2016, Gallagher reclassified work in process type assets related to its new corporate headquarters and other projects of $46.3 million included in Other noncurrent assets to Fixed assets in its consolidated balance sheet as of December 31, 2015. Webcast Conference Call Gallagher will host a webcast conference call on Friday, January 27, 2017 at 9:00 a.m. ET/8:00 a.m. CT. To listen to this call, please go to aia.com/IR. The call will be available for replay at such website for at least 90 days. About Arthur J. Gallagher & Co. Arthur J. Gallagher & Co., an international insurance brokerage and risk management services firm, is headquartered in Itasca, Illinois, has operations in 33 countries and offers client -service capabilities in more than 150 countries around the world through a network of correspondent brokers and consultants. Cautionary Information This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this press release, the words "anticipates," "believes," "contemplates," "see," "should," "could," "will," "estimates," "expects," "intends," "plans" and variations thereof and similar expressions, are intended to identify forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements regarding (i) the amount of, and potential uses for, investment returns generated by Gallagher's clean energy investments; (ii) our corporate income tax rate; (iii) anticipated future results or performance of any segment or the Company as a whole; (iv) the premium rate environment; (v) the economic environment; and (vi) anticipated acquisition integration costs. Gallagher's actual results may differ materially from those contemplated by the forward-looking statements. Readers are therefore cautioned against relying on any of the forward-looking statements, which are neither statements of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include the following: • Risks and uncertainties related to Gallagher's clean energy investments, including uncertainties related to political and regulatory risks, such as potential actions by Congress or challenges by the IRS eliminating or reducing the availability of tax credits under IRC Section 45 retroactively and/or going forward; the ability to maintain and find co -investors; the potential for divergent business objectives by co -investors and other stakeholders; plant operational risks, including supply - chain risks; utilities' future use of, or demand for, coal; the market price of coal; the costs of moving a clean coal plant; intellectual property litigation risks; and environmental risks - all of which could impact (i) and (ii) above; and (8 of 14) • Changes in worldwide and national economic conditions (including a possible economic downturn or recession in the U.K. because of the recent Brexit vote); changes in premium rates and in insurance markets generally; changes in the insurance brokerage industry's competitive landscape; and the uncertainties and challenges inherent in the acquisition integration process - all of which could impact (iii) - (vi) above. Please refer to Gallagher's filings with the SEC, including Item 1A, "Risk Factors," of its Annual Report on Form 10-K for the fiscal year ended December 31, 2015 and its Quarterly Report on Form 10-Q for the quarter ended June 30, 2016 for a more detailed discussion of these and other factors that could impact its forward-looking statements. Any forward-looking statement made by Gallagher in this press release speaks only as of the date on which it is made. Except as required by applicable law, Gallagher does not undertake to update the information included herein or the corresponding earnings release posted on Gallagher's website. Information Regarding Non -GAAP Measures In addition to reporting financial results in accordance with GAAP, this press release provides information regarding EBITDAC, EBITDAC margin, adjusted EBITDAC, adjusted EBITDAC margin, diluted net earnings per share, as adjusted (adjusted EPS), for the Brokerage and Risk Management segments, adjusted revenues, adjusted compensation and operating expenses, adjusted compensation expense ratio, adjusted operating expense ratio and organic revenue measures for each operating segment. These measures are not in accordance with, or an alternative to, the GAAP information provided in this press release. Gallagher's management believes that these presentations provide useful information to management, analysts and investors regarding financial and business trends relating to Gallagher's results of operations and financial condition. See further below for definitions and the reason each of these measures is useful to investors. Gallagher's industry peers may provide similar supplemental non -GAAP information with respect to one or more of these measures, although they may not use the same or comparable terminology and may not make identical adjustments. The non -GAAP information provided by Gallagher should be used in addition to, but not as a substitute for, the GAAP information provided. As disclosed in its most recent Proxy Statement, Gallagher does not make determinations regarding executive officer incentive compensation on the basis of "adjusted" measures such as those described below in "Adjusted revenues and expenses" or "Adjusted EBITDAC". Instead, incentive compensation determinations for executive officers are made on the basis of revenue and EBITAC (defined as earnings before interest, taxes, amortization and change in estimated earnout payables) for the combined Brokerage and Risk Management segments. Certain reclassifications have been made to the prior year amounts reported in this press release in order to conform them to the current year presentation. Adjusted Non -GAAP presentation - Gallagher believes that the adjusted non -GAAP presentations of the current and prior year information, presented in this earnings release, provide stockholders and other interested persons with useful information regarding certain financial metrics of Gallagher that may assist such persons in analyzing Gallagher's operating results as they develop a future earnings outlook for Gallagher. The after-tax amounts related to the adjustments were computed using the normalized effective tax rate for each respective period. See pages 13 and 14 for a reconciliation of the adjustments made to income taxes. • Adjusted revenues and expenses - Revenues, compensation expense and operating expense, respectively, each adjusted to exclude the following: o Net gains realized from sales of books of business, which are primarily net proceeds received related to sales of books of business and other divestiture transactions. o Acquisition integration costs, which include costs related to certain of our large acquisitions, outside the scope of our usual tuck -in strategy, not expected to occur on an ongoing basis in the future once we fully assimilate the applicable acquisition. These costs are typically associated with redundant workforce, extra lease space, duplicate services and external costs incurred to assimilate the acquisition with our IT related systems. o Workforce related charges, which primarily include severance costs related to employee terminations and other costs associated with redundant workforce. o Lease termination related charges, which primarily include costs related to terminations of real estate leases and abandonment of leased space. o Acquisition related adjustments, which include change in estimated acquisition earnout payables adjustments, impacts of acquisition valuation true -ups, impairment charges and acquisition related compensation charges. o The impact of foreign currency translation, as applicable. The amounts excluded with respect to foreign currency translation are calculated by applying current year foreign exchange rates to the same periods in the prior year. • Adjusted ratios - Adjusted compensation expense and adjusted operating expense, respectively, each divided by adjusted revenues. Non -GAAP Earnings Measures • EBITDAC and EBITDAC margin - EBITDAC is net earnings before interest, income taxes, depreciation, amortization and the change in estimated acquisition earnout payables and EBITDAC margin is EBITDAC divided by total revenues. These measures for the Brokerage and Risk Management segments provide a meaningful representation of Gallagher's operating performance and, for the overall business, provide a meaningful way to measure its financial performance on an ongoing basis. (9 of 14) • Adjusted EBITDAC and Adjusted EBITDAC Margin - Adjusted EBITDAC is EBITDAC adjusted to exclude net gains realized from sales of books of business, acquisition integration costs, workforce related charges, lease termination related charges, acquisition related adjustments and the period-over-period impact of foreign currency translation, as applicable and Adjusted EBITDAC margin is Adjusted EBITDAC divided by total adjusted revenues (defined above). These measures for the Brokerage and Risk Management segments provide a meaningful representation of Gallagher's operating performance, and are also presented to improve the comparability of our results between periods by eliminating the impact of the items that have a high degree of variability. • Adjusted EPS for the Brokerage and Risk Management segments - Net earnings adjusted to exclude the after-tax impact of net gains realized from sales of books of business, acquisition integration costs, the impact of foreign currency translation, workforce related charges, lease termination related charges and acquisition related adjustments divided by diluted weighted average shares outstanding. This measure provides a meaningful representation of Gallagher's operating performance (and as such should not be used as a measure of Gallagher's liquidity), and is also presented to improve the comparability of our results between periods by eliminating the impact of the items that have a high degree of variability. Organic Revenues (a non-GAAP measure) - For the Brokerage segment, organic change in base commission and fee revenues excludes the first twelve months of net commission and fee revenues generated from acquisitions and the net commission and fee revenues related to operations disposed of in each year presented. These commissions and fees are excluded from organic revenues in order to help interested persons analyze the revenue growth associated with the operations that were a part of Gallagher in both the current and prior year. In addition, change in base commission and fee revenue organic growth excludes the period-over-period impact of foreign currency translation. For the Risk Management segment, organic change in fee revenues excludes the first twelve months of fee revenues generated from acquisitions and the fee revenues related to operations disposed of in each year presented. In addition, change in organic growth excludes the impact of run-off of the New South Wales Workers' Compensation Scheme and other closed down operations and the period-over- period impact of foreign currency translation to improve the comparability of our results between periods by eliminating the impact of the items that have a high degree of variability or are due to the limited-time nature of these revenue sources. These revenue items are excluded from organic revenues in order to determine a comparable, but non-GAAP, measurement of revenue growth that is associated with the revenue sources that are expected to continue in the current year and beyond. Gallagher has historically viewed organic revenue growth as an important indicator when assessing and evaluating the performance of its Brokerage and Risk Management segments. Gallagher also believes that using this non-GAAP measure allows readers of our financial statements to measure, analyze and compare the growth from its Brokerage and Risk Management segments in a meaningful and consistent manner. Reconciliation of Non-GAAP Information Presented to GAAP Measures - This press release includes tabular reconciliations to the most comparable GAAP measures, as follows: for EBITDAC (on pages 11 and 12), for adjusted revenues, adjusted EBITDAC and adjusted diluted net earnings per share (on pages 2 and 3), for organic revenue measures (on pages 4 and 6, respectively, for the Brokerage and Risk Management segments), for adjusted compensation and operating expenses and adjusted EBITDAC margin (on pages 5, 6 and 7, respectively, for the Brokerage and Risk Management segments). Reported compensation and operating expense ratios can also be found in the "Supplemental Quarterly Data" available at aia.com/IR. (10 of 14) Brokerage Segment Arthur J. Gallagher & Co. Reported Statement of Earnings and EBITDAC - 4th Qtr and Year Ended December 31, (Unaudited - in millions except per share, percentage and workforce data) 4th Q Ended 4th Q Ended Year Ended Year Ended na, si 2nia na, si 9n16 nam sl 2nia nam sl 9n15 Commissions Fees Supplemental commissions Contingent commissions Investment income and gains realized on books of business sales Revenues Compensation Operating Depreciation Amortization Change in estimated acquisition earnout payables Expenses Earnings before income taxes Provision for income taxes Net earnings Net earnings (loss) attributable to noncontrolling interests Net earnings attributable to controlling interests $ 596.8 $ 590.1 $ 2,439.1 $ 2,338.7 219.7 200.0 775.7 705.8 40.2 34.6 147.0 125.5 10.5 11.9 107.2 93.7 18.5 15.2 58.9 60.3 885.7 851.8 3,527.9 3,324.0 526.7 509.5 2,041.8 1,939.7 148.2 171.9 600.9 638.1 14.6 15.2 57.2 54.4 61.4 67.2 244.7 237.3 10.9 14.7 32.1 41.1 761.8 778.5 2,976.7 2,910.6 123.9 73.3 551.2 413.4 45.3 21.6 194.1 145.3 78.6 51.7 357.1 268.1 (0.5) (1.6) 3.6 1.7 $ 79.1 $ 53.3 $ 353.5 $ 266.4 EBITDAC Net earnings $ 78.6 $ 51.7 $ 357.1 $ 268.1 Provision for income taxes 45.3 21.6 194.1 145.3 Depreciation 14.6 15.2 57.2 54.4 Amortization 61.4 67.2 244.7 237.3 Change in estimated acquisition earnout payables 10.9 14.7 32.1 41.1 EBITDAC $ 210.8 $ 170.4 $ 885.2 $ 746.2 4th Q Ended 4th Q Ended Year Ended Year Ended Risk Management Segment Dec 31, 2016 Dec 31, 2015 Dec 31, 2016 Dec 31, 2015 Fees $ 185.3 $ 181.1 $ 717.1 $ 726.5 Investment income 0.3 0.2 1.0 0.6 Revenues 185.6 181.3 718.1 727.1 Compensation 108.2 105.7 424.5 427.2 Operating 45.1 48.5 171.4 180.8 Depreciation 7.0 6.7 27.2 24.3 Amortization 0.7 0.8 2.5 3.0 Change in estimated acquisition earnout payables - - - (0.5) Expenses 161y 161.7 625.6 634.8 Earnings before income taxes 24.6 19.6 92.5 92.3 Provision for income taxes 9.5 8.2 35.3 35.1 Net earnings 15.1 11.4 57.2 57.2 Net earnings attributable to noncontrolling interests - - - - Net earnings attributable to controlling interests $ 15.1 $ 11.4 $ 57.2 $ 57.2 EBITDAC Net earnings $ 15.1 $ 11.4 $ 57.2 $ 57.2 Provision for income taxes 9.5 8.2 35.3 35.1 Depreciation 7.0 6.7 27.2 24.3 Amortization 0.7 0.8 2.5 3.0 Change in estimated acquisition earnout payables - - - (0.5) EBITDAC $ 32.3 $ 27.1 $ 122.2 $ 119.1 4th Q Ended 4th Q Ended Year Ended Year Ended Corporate Segment Dec 31, 2016 Dec 31, 2015 Dec 31, 2016 Dec 31, 2015 Revenues from consolidated clean coal facilities $ 303.2 $ 288.8 $ 1,303.8 $ 1,254.6 Royalty income from clean coal licenses 11.5 13.3 48.1 57.5 Loss from unconsolidated clean coal facilities (0.6) (0.3) (1.8) (1.3) Other net revenues (0.4) (1.3) 30.5 Revenues 313.7 301.8 1,348.8 1,341.3 Cost of revenues from consolidated clean coal facilities 329.5 316.5 1,408.6 1,351.5 Compensation 24.3 18.5 72.6 62.0 Operating 5.7 1.6 25.4 21.8 Interest 28.3 25.8 109.8 103.0 Depreciation 5.6 3.9 19.2 15.2 Expenses 393.4 366.3 1,635.6 1,553.5 Loss before income taxes (79.7) (64.5) (286.8) (212.2) Benefit for income taxes (87.0) (69.6) (317.5) (276.0) Net earnings 7.3 5.1 30.7 63.8 Net earnings attributable to noncontrolling interests 6.4 7.5 27.0 30.6 Net earnings (loss) attributable to controlling interests $ 0.9 $ (2.4) $ 3.7 $ 33.2 EBITDAC Net earnings $ 7.3 $ 5.1 $ 30.7 $ 63.8 Benefit for income taxes (87.0) (69.6) (317.5) (276.0) Interest 28.3 25.8 109.8 103.0 Depreciation 5.6 3.9 19.2 15.2 EBITDAC $ (45.8) $ (34.8) $ (157.8) $ (94.0) See "Information Regarding Non -GAAP Measures" on page 9 of 14. (11 of 14) Total Company Arthur J. Gallagher & Co. Reported Statement of Earnings and EBITDAC - 4th Qtr Ended December 31, (Unaudited - in millions except share and per share data) 4th Q Ended 4th Q Ended Year Ended Year Ended nuc 31 9n16 noc 31 9015 noc 31 9016 noc 31 9015 Commissions $ 596.8 $ 590.1 $ 2,439.1 $ 2,338.7 Fees 405.0 381.1 1,492.8 1,432.3 Supplemental commissions 40.2 34.6 147.0 125.5 Contingent commissions 10.5 11.9 107.2 93.7 Investment income and gains realized on books of business sales 18.8 15.4 59.9 60.9 Revenues from clean coal activities 314.1 301.8 1,350.1 1,310.8 Other net revenues - Corporate (0.4) (1.3) 30.5 Revenues 1,385.0 1,334.9 5,594.8 5,392.4 Compensation 659.2 633.7 2,538.9 2,428.9 Operating 199.0 222.0 797.7 840.7 Cost of revenues from clean coal activities 329.5 316.5 1,408.6 1,351.5 Interest 28.3 25.8 109.8 103.0 Depreciation 27.2 25.8 103.6 93.9 Amortization 62.1 68.0 247.2 240.3 Change in estimated acquisition earnout payables 10.9 14.7 32.1 40.6 Expenses 1,316.2 1,306.5 5,237.9 5,098.9 Earnings before income taxes 68.8 28.4 356.9 293.5 Benefit for income taxes (32.2) (39.8) (88.1) (95.6) Net earnings 101.0 68.2 445.0 389.1 Net earnings attributable to noncontrolling interests 5.9 5.9 30.6 32.3 Net earnings attributable to controlling interests $ 95.1 $ 62.3 $ 414.4 $ 356.8 Diluted net earnings per share $ 0.53 $ 0.35 $ 2.32 $ 2.06 Dividends declared per share $ 0.38 $ 0.37 $ 1.52 $ 1.48 EBITDAC Net earnings $ 101.0 $ 68.2 $ 445.0 $ 389.1 Benefit for income taxes (32.2) (39.8) (88.1) (95.6) Interest 28.3 25.8 109.8 103.0 Depreciation 27.2 25.8 103.6 93.9 Amortization 62.1 68.0 247.2 240.3 Change in estimated acquisition earnout payables 10.9 14.7 32.1 40.6 EBITDAC $ 197.3 $ 162.7 $ 849.6 $ 771.3 Arthur J. Gallagher & Co. Consolidated Balance Sheet (Unaudited - in millions except per share data) Dec 31, 2016 Dec 31, 2015 Cash and cash equivalents $ 545.5 $ 480.4 Restricted cash 1,392.1 1,412.1 Premiums and fees receivable 1,844.8 1,734.0 Other current assets 633.7 587.2 Total current assets 4,416.1 4,213.7 Fixed assets - net 377.6 249.0 Deferred income taxes (includes tax credit carryforwards of $477.9 in 2016 and $341.6 in 2015) 796.5 643.5 Other noncurrent assets 504.3 442.6 Goodwill - net 3,767.8 3,662.9 Amortizable intangible assets - net 1,627.3 1,698.8 Total assets $ 11,489.6 $ 10,910.5 Premiums payable to insurance and reinsurance companies $ 2,996.1 $ 2,877.1 Accrued compensation and other accrued liabilities 772.1 812.7 Unearned fees 69.0 61.3 Other current liabilities 70.9 54.0 Premium financing borrowings 125.6 137.0 Corporate related borrowings - current 578.0 245.0 Total current liabilities 4,611.7 4,187.1 Corporate related borrowings - noncurrent 2,144.6 2,071.7 Other noncurrent liabilities 1,077.5 963.5 Total liabilities 7,833.8 7,222.3 Stockholders' equity: Common stock - issued and outstanding 178.3 176.9 Capital in excess of par value 3,265.5 3,209.4 Retained earnings 916.4 774.5 Accumulated other comprehensive loss (763.6) (522.5) Total controlling interests stockholders' equity 3,596.6 3,638.3 Noncontrolling interests 59.2 49.9 Total stockholders' equity 3,655.8 3,688.2 Total liabilities and stockholders' equity $ 11,489.6 $ 10,910.5 See "Information Regarding Non -GAAP Measures" on page 9 of 14. (12 of 14) Arthur J. Gallagher & Co. Other Information (Unaudited - data is rounded where indicated) 4th Q Ended 4th Q Ended Year Ended Year Ended OTHER INFORMATION Dec 31, 2016 Dec 31, 2015 Dec 31, 2016 Dec 31, 2015 Basic weighted average shares outstanding (000s) 178,174 176,810 177,560 172,239 Diluted weighted average shares outstanding (000s) 179,089 177,551 178,387 173,215 Number of common shares outstanding at end of period (000s) 178,329 176,947 Workforce at end of period (includes acquisitions): Brokerage 18,635 17,841 Risk Management 5,449 5,439 Total Company 24,790 23,857 Prior to September 1, 2016, most of Gallagher's India -based workforce was provided by a third -party on a cost -pass-through basis. During the 3rd quarter of 2016, Gallagher consummated a transaction whereby it now directly employees those associates thereby adding approximately 2,700 employees to our global workforce counts shown above. Reconciliation of Non -GAAP Measures - Pre-tax Earnings and Diluted Net Earnings per Share (Unaudited) (Unaudited - in millions except share and per share data) Net Earnings Net Earnings Earnings Provision (Loss) (Loss) Diluted Net (Loss) (Benefit) Attributable to Attributable to Earnings Before Income for Income Net Noncontrolling Controlling (Loss) Taxes Taxes Earnings Interests Interests per Share 4th Q Ended Dec 31, 2016 Brokerage, as reported $ 123.9 $ 45.3 $ 78.6 $ (0.5) $ 79.1 $ 0.44 Gains on book sales (1.9) (0.5) (1.4) (1.4) (0.01) Acquisition integration 10.2 2.5 7.7 7.7 0.04 Workforce & lease termination 8.6 2.1 6.5 6.5 0.04 Acquisition related adjustments 7.0 1.7 5.3 5.3 0.03 Brokerage, as adjusted $ 147.8 $ 51.1 $ 96.7 $ (0.5) $ 97.2 $ 0.54 Risk Management, as reported $ 24.6 $ 9.5 $ 15.1 $ $ 15.1 $ 0.08 Workforce & lease termination 0.9 0.3 0.6 0.6 0.01 Risk Management, as adjusted $ 25.5 $ 9.8 $ 15.7 $ - $ 15.7 $ 0.09 Corporate, as reported $ (79.7) $ (87.0) $ 7.3 $ 6.4 $ 0.9 $ 0.01 Impact of 2015 litigation settlement 5.6 1.1 4.5 - 4.5 0.02 Corporate, as adjusted $ (74.1) $ (85.9) $ 11.8 $ 6.4$ 5.4 $ 0.03 4th Q Ended Dec 31, 2015 Brokerage, as reported $ 73.3 $ 21.6 $ 51.7 $ (1.6) $ 53.3 $ 0.30 Gains on book sales 0.3 0.1 0.2 0.2 - Acquisition integration 34.4 13.8 20.6 20.6 0.11 Workforce & lease termination 5.1 1.5 3.6 3.6 0.02 Acquisition related adjustments 20.9 6.2 14.7 14.7 0.09 U.K. statutory income tax rate change - 4.2 (4.2) (4.2) (0.02) Levelized foreign currency translation 1.3 0.3 1.0 1.0 - Brokerage, as adjusted $ 135.3 $ 47.7 $ 87.6 $ (1.6) $ 89.2 $ 0.50 Risk Management, as reported $ 19.6 $ 8.2 $ 11.4 $ $ 11.4 $ 0.06 Workforce & lease termination 1.0 0.2 0.8 0.8 - Client run-off 3.0 0.6 2.4 2.4 0.02 Acquisition related adjustments - - - - - Levelized foreign currency translation 0.6 0.2 0.4 0.4 - Risk Management, as adjusted $ 24.2 $ 9.2 $ 15.0 $ - $ 15.0 $ 0.08 Corporate, as reported $ (64.5) $ (69.6) $ 5.1 $ 7.5 $ (2.4) $ (0.01) Impact of 2015 litigation settlement 5.7 1.1 4.6 4.6 0.02 Corporate, as adjusted $ (58.8) $ (68.5) $ 9.7 $ 7.5 $ 2.2 $ 0.01 See "Information Regarding Non -GAAP Measures" on page 9 of 14. (13 of 14) Reconciliation of Non -GAAP Measures - Pre-tax Earnings and Diluted Net Earnings per Share (Unaudited) - Continued (Unaudited - in millions except share and per share data) Net Earnings Net Earnings Earnings Provision (Loss) (Loss) Diluted Net (Loss) (Benefit) Attributable to Attributable to Earnings Before Income for Income Net Noncontrolling Controlling (Loss) Taxes Taxes Earnings Interests Interests per Share Year Ended Dec 31, 2016 Brokerage, as reported $ 551.2 $ 194.1 $ 357.1 $ 3.6 $ 353.5 $ 1.98 Gains on book sales (6.6) (1.9) (4.7) - (4.7) (0.03) Acquisition integration 45.7 12.9 32.8 32.8 0.18 Workforce & lease termination 20.7 5.6 15.1 15.1 0.09 Acquisition related adjustments 20.7 5.8 14.9 14.9 0.09 U.K. statutory income tax rate change - 1.5 (1.5) (1.5) (0.01) Brokerage, as adjusted $ 631.7 $ 218.0 $ 413.7 $ 3.6 $ 410.1 $ 2.30 Risk Management, as reported $ 92.5 $ 35.3 $ 57.2 $ $ 57.2 $ 0.32 Workforce & lease termination 2.2 0.7 1.5 1.5 0.01 Risk Management, as adjusted $ 94.7 $ 36.0 $ 58.7 $ - $ 58.7 $ 0.33 Corporate, as reported $ (286.8) $ (317.5) $ 30.7 $ 27.0 $ 3.7 $ 0.02 Impact of 2015 litigation settlement 20.2 4.1 16.1 16.1 0.09 Corporate, as adjusted $ (266.6) $ (313.4) $ 46.8 $ 27.0 $ 19.8 $ 0.11 Year Ended Dec 31, 2015 Brokerage, as reported $ 413.4 $ 145.3 $ 268.1 $ 1.7 $ 266.4 $ 1.54 Gains on book sales (6.7) (1.7) (5.0) - (5.0) (0.03) Acquisition integration 100.9 31.7 69.2 69.2 0.40 Workforce & lease termination 23.0 6.7 16.3 16.3 0.09 Acquisition related adjustments 39.8 11.3 28.5 28.5 0.16 U.K. statutory income tax rate change - 4.2 (4.2) (4.2) (0.02) Levelized foreign currency translation (1.8) (0.7) (1.1) (1.1) (0.01) Brokerage, as adjusted $ 568.6 $ 196.8 $ 371.8 $ 1.7 $ 370.1 $ 2.13 Risk Management, as reported $ 92.3 $ 35.1 $ 57.2 $ $ 57.2 $ 0.33 Workforce & lease termination 2.9 0.8 2.1 2.1 0.01 Client run-off/bankruptcy 4.0 0.9 3.1 3.1 0.02 Acquisition related adjustments (0.5) (0.2) (0.3) (0.3) - Levelized foreign currency translation (0.8) (0.2) (0.6) (0.6) - Risk Management, as adjusted $ 97.9 $ 36.4 $ 61.5 $ - $ 61.5 $ 0.36 Corporate, as reported $ (212.2) $ (276.0) $ 63.8 $ 30.6 $ 33.2 $ 0.19 Impact of 2015 litigation settlement (16.2) 1.5 (17.7) - (17.7) (0.10) Corporate, as adjusted $ (228.4) $ (274.5) $ 46.1 $ 30.6 $ 15.5 $ 0.09 See "Information Regarding Non -GAAP Measures" on page 9 of 14. Contact: Ray lardella Vice President - Investor Relations 630-285-3661 or ray_iardella@ajg.corr (14 of 14)