This is an independent estimate of pre-tax owner-operator benefit for an existing U.S. property-and-casualty insurance agency operating under the Keystone Insurers Group franchise model. The base scenario is approximately $242,000. It includes the economic value of the owner’s labor and should not be read as passive business profit or after-tax take-home pay.
Legal franchisor: Keystone Insurers Group LLC, a subsidiary of Keystone Agency Partners LLC. FDD issuance date: April 4, 2025. Item 19 status: no financial performance representation. Applicable model: an independently owned, already-operating insurance agency that joins the Keystone network, rather than a standardized new storefront. Public benchmarks: 2023 IRS Statistics of Income, 2024 property-and-casualty commission-expense data summarized by the Insurance Information Institute, and May 2023 BLS wage data adjusted to 2025 dollars. Evidence confidence is LIMITED because no same-brand revenue or profit distribution is disclosed and the estimate relies materially on external industry proxies. Date checked: July 19, 2026.
Pre-tax analytical result after the modeled Keystone monthly service fee.
Illustrative residual after a $165,000 replacement-manager wage, before benefits and payroll burden.
2024 carrier-side net commission and brokerage expense ratio; not a Keystone agency commission rate.
IRS Schedule C net income divided by receipts for insurance agencies and brokerages, including loss returns.
$1,101 per month at the modeled $6.6 million gross-premium level.
System count from Item 20; it is not an earnings sample and supplies no performance distribution.
What does Keystone Insurers Group Item 19 actually disclose?
Officially, Item 19 discloses no outlet sales, agency revenue, operating profit, owner compensation, or owner earnings. The 2025 Franchise Disclosure Document states that Keystone Insurers Group LLC does not make representations about the future performance of a franchisee or the past performance of franchised or company-owned outlets. That makes a same-brand average, median, quartile, or margin unavailable.
Item 20 does provide system structure. It reports 280 franchised outlets at the end of 2024, down from 298 at the start of that year, with eight openings, 17 terminations, five reacquisitions, and four outlets ceasing operations for other reasons. Those counts help a buyer evaluate network turnover, but they cannot be converted into annual owner income.
Gross written premium is the amount of insurance premium written through the agency. Agency revenue is the commission, fee, and contingent-compensation income retained from that production. Owner benefit is what remains after payroll and other operating costs, including applicable franchise charges. The three measures are not interchangeable.
The Federal Trade Commission’s franchise-buying guide explains that a franchisor is not required to provide earnings information, but any financial performance claim must appear in Item 19 and have a reasonable basis. A buyer should therefore treat any oral income figure that is not supported by Item 19, or by the actual records of an existing agency being acquired, as unverified.
How is the annual owner-benefit range calculated?
The model converts a plausible gross-written-premium range into agency revenue, applies an owner-labor-inclusive industry margin, and then subtracts Keystone’s disclosed monthly service fee. The result is estimated pre-tax owner-operator benefit, not Item 19 profit.
- Gross written premium: $4.4 million, $6.6 million, and $8.8 million. The 2025 FDD uses $4.4 million to $8.8 million when describing required insurance costs for a “typical” property-and-casualty agency; $6.6 million is an editorial midpoint, not a franchisor-reported median.
- Agency revenue proxy: 10.7% of gross written premium. The Insurance Information Institute’s 2024 property-and-casualty table, based on industry data, reports net commissions and brokerage expenses equal to 10.7% of net premiums written. This carrier-side ratio is only a broad conversion proxy and may not match an individual agency’s commission schedule.
- Owner-benefit margin: 33.1%, 36.1%, and 39.1% of modeled agency revenue. The 36.1% center comes from 2023 IRS Schedule C receipts and net income less deficit for “Insurance agencies and brokerages”; the lower and upper margins are explicit minus-three and plus-three percentage-point sensitivities.
- Keystone service fee: $11,892, $13,212, and $14,532 annually, based on the Item 6 monthly fee table at the three gross-premium levels.
- Not separately deducted: ordinary payroll, rent, required insurance, accounting, and other agency overhead. They are assumed to be embedded in the all-in IRS net-income margin. Subtracting the FDD’s $37,000 to $99,000 required-insurance range again would double count operating costs.
- Excluded: contingent compensation and bonus distributions, personal income tax, financing principal, acquisition debt, and owner-specific capital expenditures. Contingent payments are excluded because the FDD does not disclose a representative amount and their value depends on carrier terms, premium volume, growth, and loss-ratio performance.
| Scenario | Gross written premium | Modeled agency revenue | Estimated owner-operator benefit |
|---|---|---|---|
| Conservative | $4,400,000 | $470,800 | $144,000 |
| Base | $6,600,000 | $706,200 | $242,000 |
| Upside | $8,800,000 | $941,600 | $354,000 |
Pre-tax analytical scenarios in thousands of dollars; values include owner labor.
Interpretation: the spread is driven by both gross-written-premium scale and a three-percentage-point margin sensitivity around the IRS benchmark. Sources: 2025 FDD, Item 6 and Item 7; 2023 IRS Statistics of Income; 2024 industry commission-expense data. Calculations are rounded to the nearest $1,000.
How does owner involvement change the result?
Owner involvement is central to this franchise model, and replacing the owner’s management work with a paid executive can reduce the modeled annual residual by roughly $165,000 before employer payroll taxes and benefits. Item 15 says equity owners must personally and directly supervise the operation, act as business managers, and participate in the business unless Keystone agrees otherwise in writing.
The owner-operator figures therefore combine two economic components: residual business income and compensation for management labor performed by the owner. They are appropriately labeled owner-operator benefit, not passive profit. For sensitivity only, the manager-run calculation subtracts a rounded $165,000 replacement wage. That value is derived from the May 2023 BLS mean annual wage of $155,900 for general and operations managers in the insurance-agencies-and-brokerages industry group, adjusted to 2025 dollars using the annual Consumer Price Index.
Thousands of dollars per year; the square shows modeled residual after a $165,000 manager wage, and the circle shows owner-operator benefit.
Interpretation: at the conservative revenue level, the modeled business does not cover the full replacement-manager wage; at the base level, the residual is about $77,000. A true replacement cost would normally exceed the wage because benefits, payroll taxes, incentives, and recruiting costs are not included. Sources: 2025 FDD, Item 15; BLS insurance-industry management wage data; BLS annual CPI averages.
A higher owner-operator figure does not mean the agency creates that amount as passive distributable profit. Part of the result compensates the owner for supervising staff, managing carrier relationships, monitoring production and loss ratios, and running the existing agency.
Which Keystone fees can materially change owner earnings?
The recurring monthly service fee is the most directly measurable Keystone charge in the model, but contingent-compensation and bonus fees can also change realized owner benefit. The service fee is tied to gross written premium and is subject to annual cost-of-living review. The 2025 Item 6 schedule begins at $881 per month below $1 million of gross premium, reaches $1,211 per month above $8 million through $9 million, and continues upward as premium grows.
- Monthly service fee
- Official FDD charge based on the immediately preceding gross-premium accrual period. The three scenarios use $11,892, $13,212, and $14,532 per year.
- Aggregate contingency fee
- Keystone retains 2% of total contingency-compensation funds received from each applicable carrier.
- Individual contingency fee
- For gross premium above $200,000, the FDD schedule ranges from 0% to 7.5% of an individual distribution depending on adjusted loss ratio. Different treatment applies at or below $200,000.
- Bonus distribution fee
- The FDD lists 5%, 10%, or 15% of the individual bonus distribution, based on the franchisee’s premium-growth ranking among eligible agencies.
- Required insurance
- The FDD estimates $37,000 to $99,000 for errors-and-omissions, employee dishonesty and employment-practices liability, and cyber coverage. This scenario treats those costs as embedded in the IRS operating-margin proxy rather than subtracting them twice.
- Initial investment
- The $27,250 to $99,200 Item 7 range is a startup or conversion requirement, not a recurring annual expense. It is not deducted from one year of modeled earnings.
Keystone’s official explanation of contingency programs emphasizes premium volume, growth, loss-ratio performance, and aggregate network results. Because the 2025 FDD supplies no representative payout, adding a contingent-income amount to the earnings range would create false precision.
What could move actual annual earnings outside the range?
The largest unresolved uncertainty is the absence of same-brand revenue and expense data. A 10.7% premium-to-revenue proxy and a 36.1% Schedule C margin are broad industry anchors, not evidence that Keystone agencies achieve those exact economics. The estimate is therefore most useful as a diligence framework, not as a forecast.
The IRS benchmark covers sole proprietors classified as insurance agencies and brokerages, including businesses with losses. It can include the proprietor’s labor in net income and may not represent incorporated agencies, multi-owner firms, acquired books, or agencies with materially different commercial-lines and personal-lines mixes. The commission ratio is measured from the carrier side and may include compensation channels that do not map one-for-one to a Keystone franchisee.
What should a buyer verify before relying on an income estimate?
Verify the agency’s own records and separate owner labor from residual business profit. The most decision-useful evidence will come from the target agency’s historical financial statements and from current and former franchisees with a comparable premium volume and product mix.
- Reconcile at least three years of gross written premium to commission income, fee income, contingent compensation, and other operating revenue.
- Identify whether owner salary, payroll, draws, distributions, and retained earnings are recorded separately or blended.
- Normalize payroll for the work the owner actually performs and include benefits, payroll taxes, and incentive compensation when testing a manager-run structure.
- Confirm the exact monthly service-fee tier, annual cost-of-living adjustment, required insurance premiums, and all contingent-distribution deductions under Item 6.
- Verify available carrier appointments, the 80% or 90% Premium Placement Requirement, loss-ratio thresholds, and the agency’s historical eligibility for bonuses.
- Ask for written substantiation of any financial-performance statement and compare it with the no-representation language in 2025 Item 19.
- Use Item 20 contacts to interview current and former franchisees about owner hours, staffing levels, carrier mix, contingent income, and reasons for transfers or exits.
- Model acquisition debt and financing principal separately; do not confuse pre-tax operating benefit with cash remaining after debt service or personal taxes.
Calculation detail: Conservative = ($4.4 million × 10.7% × 33.1%) − $11,892 = $143,943. Base = ($6.6 million × 10.7% × 36.1%) − $13,212 = $241,726. Upside = ($8.8 million × 10.7% × 39.1%) − $14,532 = $353,634. Published scenario values are rounded to the nearest $1,000. The manager-run sensitivity subtracts a rounded $165,000 wage derived from $155,900 in May 2023 BLS data adjusted by the 2023-to-2025 CPI-U annual-average change. It does not include employer payroll burden. The IRS margin is a net-income proxy rather than EBITDA and may include business interest and depreciation reported by sole proprietors. Personal income taxes and financing principal are excluded.
What is the strongest defensible annual earnings range?
Use $144,000 to $354,000 as a limited-confidence, scenario-based range for estimated pre-tax owner-operator benefit, with approximately $242,000 as the base case. It is not an official Keystone Insurers Group earnings disclosure. The most important driver is the agency revenue generated from gross written premium after payroll and other operating costs. The largest unresolved uncertainty is that 2025 Item 19 provides no same-brand sales or profitability distribution and no representative contingent-compensation amount.
For a structure that requires a paid general manager, the modeled residual changes to approximately −$21,000, $77,000, and $189,000 across the same three scenarios before employer burden, debt principal, and personal taxes. A buyer should verify the target agency’s actual records, request written substantiation for any earnings claim, review Item 19 and Item 20 together, and interview comparable current and former franchisees before treating any figure as decision-grade evidence.
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