2016 TrueNorth Annual Report

DIRECTION S O U N D

U N W A V E R I N G

ANNUAL REPORT 2016

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“

PROFIT WILL DETERMINE WHO EXISTS. TECHNOLOGY WILL DETERMINE WHO COMPETES. QUALITY WILL DETERMINE WHO GROWS. PEOPLE WILL DETERMINE WHO WINS. TrueNorth Founding Principals, 2001

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Loren Coppock,

Chairman of the Board

A

MESSAGE

FROM

OUR CHAIRMAN When our founding principals formed TrueNorth in 2001, we created a philosophy (as shown on the adjacent page) describing what we believed would best determine our path to success. These words have become our ‘compass,’ guiding us toward our ‘true north.’ After 15 years, this philosophy still remains at the heart of what we do.

With more than 150 collective years of experience among the founding principals, we carry the belief that TrueNorth’s

purpose is to provide value to the customer beyond the point of sale. The products are a result of what we do,

specialization, and most importantly, attracting the talented individuals who enhance TrueNorth’s culture and fulfill its mission. In 2016, we achieved much to be proud of and set a strong pace for 2017.

We are grateful to share our story with you and look forward to continuing our journey with you in the future.

Sincerely,

but they’re not the beginning of what we do.

Our goal to perpetuate from within has created a unique environment that celebrates growth through innovation, 3

Loren Coppock Principal, Chairman of the Board

PROFIT WILL DETERMINE WHO EXISTS

Bill Teubel,

Chief Financial Officer

% ORGANIC GROWTH % PROFIT WITHOUT CONTINGENCIES

18.1

17.1

15.7

15.7

15.1

14.5

14.1 12.8

12.1

11.5

14.3

12.3

10.4

8.9

5.5 3.8 1.9 0.0

2008

-1.5

2010

0.9

2011

2012

2013

2014

2015

2016

2017

2009

OUR FINANCIAL PHILOSOPHY In the spirit of our entrepreneurial platform, we talk openly with our owners about our financial conditions (both good and bad), and have had to make critical choices over the years to maintain our promise of internal perpetuation. As a result of these conversations, our financial outlook is more stable today than ever before. From TrueNorth’s perspective, there are two main financial drivers that help us keep this perpetuation promise:

expanding our ownership from the original six founding principals to more than 50 owners today. We are proud that both areas continue to grow; as those are the things that make “writing the checks” both meaningful and rewarding.

1. HEALTHY CASH FLOW AND PROFIT MARGIN

As shown in the illustration above, ten years ago, we didn’t have much profit - and we sure didn’t have enough profit to meet the goals that are important to us. So, as an organization we rolled up our sleeves and made the necessary choices to lead TrueNorth in the right direction.

This really pointed out the need for all parts of the organization to work together in a holistic way, and was the genesis for our thoughts around our “Holistic Budget.”

Without profits, you cannot “pay the bills,” let alone perpetuate internally. We have focused on maintaining the “right level” of profits, so we can sustain growth and meet our obligations. Our biggest obligation is to our people – to create a “best in class” opportunity for our team members and clients. Over the last few years, we have created both fun and interesting career paths for our colleagues - while also

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Profit will determine who exists - but for awhile, we forgot about profit.

2. LEVERAGING OUR INTELLECTUAL CAPITAL: THE HOLISTIC BUDGET There are terms used throughout this report that have deep meaning to us; one such term is Holistic Budget – which is our indication of how well our structured entrepreneurial platform is working.

In our world, finance is just one of four areas that needs to be working well for us to maintain a “best in class” organization.

The four quadrants are: Finance, Business Development, Client Experience and Our People. It’s critical for these areas to remain balanced in terms of goals and accomplishments in order to achieve optimal organizational health. So while this may seem strange for a “finance person” to say, it is possible to be in a state where profits are too high if they negatively affect other areas. It’s certainly a different way to do business, but we believe it’s what is best for TrueNorth – because we want to invest in a long, bright future!

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OUR CRITICAL INDICATORS

FINANCE & ACCOUNTING

BUSINESS DEVELOPMENT

Define • Measure • Manage

CLIENT EXPERIENCE & OPERATIONS

PEOPLE

PROFIT WILL DETERMINE WHO EXISTS DIVISIONAL LEADERSHIP

“

WITH THE GROWTH AND ABUNDANCE OF OPPORTUNITIES AROUND US, COMES A HEIGHTENED LEVEL OF RESPONSIBILITY THROUGHOUT OUR FIRM. Jason Smith

Jason Smith, Executive Vice President TRANSPORTATION

2016 Accomplishments • • •

18% organic growth - 5th consecutive year of 10%+ organic growth.

Corporate strategic partnership with American Trucking Association.

Expanded capabilities with additional talent and services within our speciality niches.

Josh Budke, Executive Vice President EMPLOYEE BENEFITS

2016 Accomplishments • • • 6

6.9% organic growth.

TruEx and Iowa League partnership.

Nexus Technology Platform was built and launched.

Dave Verhille, Executive Vice President

Max Smith, Executive Vice President

FINANCIAL STRATEGIES

RISK MANAGEMENT

2016 Accomplishments

2016 Accomplishments

• •

• •

•

30.3% organic growth.

Asset growth exceeding $75 million under management.

Focus on collaboration and integrated solutions across the firm.

• • •

10.3% organic growth.

Sourced $3.4M in revenue via acquisitions with a greater Des Moines area focus.

Development of new programs and proprietary technologies.

Creation of mentorship program for new sales associates.

Development of “Property Defender” and “Cyber Defender” specialties.

EXPANSION BY SQUARE FOOTAGE

17,000SQ FT Finished expansion at TrueNorth’s headquarters in Cedar Rapids, Iowa.

86,000SQ FT

Purchased a building behind our headquarters with four floors of office space and two floors of indoor parking.

43,000SQ FT

Planned for additional future expansion!

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T E C H N O LO GY W I L L D E T E R M I N E W H O CO M P E T E S

TECH BYTES

15 200 370 80+

TrueNorth locations connected

Virtual Servers Managed

Computers Supported

Software Applications In Use

INNOVATIVE INFRASTRUCTURE Having reliable resources and infrastructure for our team members and clients is the motivation behind our focus to develop a robust technology platform across TrueNorth. Our founders set the pace for us in 2001 with the saying, “Technology will determine who competes,” and we are constantly evaluating our internal process and systems for functionality improvements and efficiencies. With emphasis on providing solutions rather than resolving issues, our proactive approach ensures we’re offering solid solutions for our team members and clients.

As file hosting and cloud services mature, our focus on implementing these external services offers additional flexibility and mobility not previously available with traditional platforms. These services offer us time savings on maintenance and hardware costs, allowing our IT team to use resources for new innovations. As an example, with the 8

ever-increasing threat to information security, implementing the correct controls and processes are critical to the safety of our company and client information.

By expanding our security program from a “technology-only-platform” to a complete firm-wide strategy, we have been able to introduce new advancements, including a complete security awareness and assessment platform.

This program, along with increased involvement from our executive leaders, has enabled us to create our human firewall with a more knowledgeable and responsive userbase.

OPERATIONAL EXCELLENCE As we move through our technology pyramid (shown to the right), in simplest terms, we acknowledge that by putting the right tools and resources in place, we are making a greater impact for our clients.

Operational excellence in technology is really about focusing on ways to streamline workflows and processes internally. Many of our technology platforms - whether internal or client-facing - are intended to drive performance, ultimately resulting in a more sophisticated, positive client experience.

The results are a more creative, innovative environment for us, a competitive edge, and an improved landscape for our clients.

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WORKING THROUGH THE TECHNOLOGY PYRAMID

T E C H N O LO GY W I L L D E T E R M I N E W H O CO M P E T E S

CLIENT EXPERIENCE AT A GLANCE: THE CYBER DEFENDER Cyber Liability is an exposure that affects anyone using any form of technology to conduct business. Just as our exposure to risk is unique to TrueNorth, we have clients with varying degrees of vulnerability based on their industries and their use of technology; however,

...with the impact of ransomware and cyber criminals becoming more and more savvy and relentless, everyone faces the challenge to protect their data and reputations.

Looking back five years ago, to when “Cyber” was first identified as a potential bankrupting type of event, we were just scratching the surface to understanding this risk. Just 18 months ago, our client approach was still very reactive. While our approach was helpful for clients, it did not address the root of the problem.

OUR RESPONSE:

As the Cyber Defender has matured, we have realized the need to start looking at the risk more proactively. With help from Aaron Voss, our Certified Ethical Hacker and Certified Information Systems Security Professional and member of TrueNorth’s Technology team, we started to look at this from another angle: taking a step back from insurance policies, we developed a “Cyber and IT Infrastructure” discovery interview that addresses physical security, infrastructure security, data encryption, cyber and phishing trainings, and much more.

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As part of this program maturity, we are partnering with businesses who can provide “starting point vulnerability assessments,” as well as virtual Chief Information Security Officers for our clients. As an example, we have created tools that can test our clients’ employees in an efficient way, to see how educated they are with respect to cyber security. We even utilize these tools internally to help inform team members, and ultimately protect TrueNorth’s intellectual capital, sensitive information, data and more.

Knowledge is power, and today, we are all safer and much more secure.

And here’s the best part - our tools, relationships and expertise can help our clients, without slowing down day-to-day business. These resources and tools separate TrueNorth from our peers, proactively creating and measuring results that empower our clients to act on, and use to improve their short and long term success.

Matt Evans Risk Management Principal & Specialist

Aaron Voss, Certified Ethical Hacker & ISSP, IT Infrastructure Manager

In addition to our focus on cyber defense, we continue to leverage business intelligence and data analytics to bring insights to our clients that can help them reduce risks and decrease costs.

Self-service portal for clients with access to documents, policies, certificates, claims reporting, printing ID cards, and service team information.

iNERGYRMIS Workers Compensation Claims Management System where clients can report and monitor claims, customize dashboards, track OSHA logs and create monthly reports.

Web platform designed to automate the Owner Operator insurance enrollment process by synchronizing data in real time between the motor carrier and insurance providers.

iNERGY

BUSINESS INTELLIGENCE Measures client’s key performance indicators to create customized dashboards of data insights, resulting in a clearer picture of resource imbalances and costs.

OTHER INTEGRATED CLIENT TECHNOLOGIES: • • • •

Benefits Client Portals – Provides benefits resources, plan details, online benefits enrollments, educational videos, as well as employee and manager self-service.

Compliance Dashboard – Allows plan administrators to stay on top of employee benefits compliance regulations.

ThinkHR – HR insights, compliance and educational resources.

ZyWave – Risk Management, safety, compliance and educational resources.

CLIENT TESTIMONIAL

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CREATIVE SOLUTIONS

Business can sometimes be stressful, tedious, overwhelming and downright no fun.

For me, the reward of playing this greatest of sports (business) is having the privilege of meeting and working with an organization like TrueNorth and the high caliber talent you have – kudos to you and all of TrueNorth’s management team!

At Genova, we are always presenting ourselves as partners with our customers, striving to help them achieve their goals.

From a customer’s view point, I can shout “YOU GUYS GET IT” – TRUENORTH IS THE BEST CUSTOMER-FACING ORGANIZATION THAT I HAVE EVER HAD THE PRIVILEGE OF WORKING WITH! You should be very proud of the organization you have built and the talent you have attracted.

One of my favorite phrases I use to guide a business in their efforts to be successful is ‘WORK HARD, HAVE FUN, MAKE HISTORY.’ You guys are doing it.

David Taylor

Genova Technologies

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QUALITY WILL DETERMINE WHO GROWS

Dru Bridges,

Chief Operating Officer

ABOUT “SERVCO” When TrueNorth was first established, the three founding companies agreed to create one unifying team, the Service Corporation or “Servco” - that would support the entrepreneurial infrastructure of the organization and ensure cohesion amongst divisions. Today, we are defined teams of specialists who are experts in our field of work, offering important resources firm-wide: • • • • • • • •

DEFINE. MEASURE. MANAGE. In 2016, we launched the Project Management Center of Excellence in an effort to define our overall vision for quality client engagement.

With this new lens of focus around project management, we’ve been able to understand and build detailed strategies that help us achieve our vision for excellence and create accountability across the firm.

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2016

Grown from seven team members to

2001

We’ve developed unique internal communication and education strategies that ensure team players across the firm are engaged in a real and meaningful way. Innovative educational opportunities, like the “Accidental Project Manager” training sessions, have helped us share our goals, and then translate and scale proficiencies across TrueNorth’s divisions. And most importantly, we’re developing ways to measure our success. When we understand the process, then we can measure the output and thus, manage the fulfillment process.

Ultimately, our collegeaues have a clear understanding of expectations and how to get there, and as a result, our clients receive all that we’ve committed to them.

Accounting/Finance Administration Business Development Human Resources Legal Marketing Operations Technology

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THE POWER OF EXPERTISE AREAS OF SPECIALIZATION

THE BOND

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BLUEPRINT • PEOPLE • PR

THE

RISK ™

DEFENDER

GLOBAL RISK MANAGEMENT SOLUTIONS

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Advantage™

RISK SOLUTIONS

ES

RISK

PERSONAL PROTECTION

C

IC

The

Property Defender Risk Defender Risk Solutions SAFE Culture The Bond Blueprint The PRO Advantage Truckers Service Corporation TrueChoices

CONSTRUCTION

SPECIALTY GROUP

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OF

SS • RESOU

DIRECTOR

• • • • • • • •

PEOPLE • S • PR

SS • RESO

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401k QRP Benefits Navigator Construction Specialty Group Cyber Defender Director of IC Risk Personal Protection Advantage Primary Practice & Risk Financing Private Client Advantage Private Family Offices Advantage

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BENEFITS NAVIGATOR

• • • • • • • • •

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The fabric of TrueNorth has been built upon the intention of creating value through specialization. When working with clients to service their unique needs, we collaborate with each other as experts in our respective fields, rather than trying as individuals to “be all things to all people.” By means of specialization, TrueNorth is now better equipped to help our clients than ever before.

the

PRIMARY

PRACTICE &

PR advantage

™

RISK FINANCING

PROPERTY COMMERCIAL | ASSOCATIONS | TENANTS | HOME

TRUE

CHOICES SERVICE ASS OCIATION

BENEFITS CREATED EXCLUSIVELY FOR TSA MEMBERS

QUALITY WILL DETERMINE WHO GROWS

Jason Smith

Executive Vice President

”

WE UNDERSTAND AND PLAN FOR THE TRADEOFF BETWEEN GROWTH AND PROFITABILITY.

2017 GROWTH GOALS RISK MANAGEMENT: • • • • •

Enhance our Alternative Risk Financing capabilities.

Develop our Private Client Service Platform and introduce to all locations.

Advance our technology and business intelligence to uncover issues and develop client solutions.

Develop Mergers & Acquisitions Due Diligence process and niche.

Deploy a new workflow management system for client deliverables.

EMPLOYEE BENEFITS: •

OUR GROWTH PHILOSOPHY Having a shared vision and strategy around our client is critical to the health and longevity of our organization. Not only do client centric conversations drive firm cohesion, they also foster a team approach and have pushed us to think creatively and holistically.

In 2016, we enhanced our Business Development team to move the needle on our growth plans, create resources and leverage skillsets across the firm. TrueNorth reached 14.5% organic growth, which is in line with our targeted internal growth rate to support reinvestment and perpetuation. Additionally, through mergers and acquisitions we grew topline revenue another 8% and expanded our specialties and locations.

• •

TRANSPORTATION:

• • • • •

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Attract and develop high performing talent.

Additional focus on identifying and solving the evolving needs of our clients.

Innovate to create value.

Continue to develop our Last Mile (ICX) industry platform.

Expand the capabilities of Business Intelligence Platform (iNergy).

FINANCIAL STRATEGIES: • •

As our business development focus and resource expands through the continued drive of executives and divisional leaders, we remain relentlessly focused on assisting clients with protecting and maximizing assets, resources and opportunities, all wrapped in a world-class service experience.

Further define our specialty sales team approach: financial, technology, voluntary.

Develop quality programs for an enhanced client experience.

Increased effort on financial analytics and client key performance indicators.

• •

Focus on creating more profitable revenue growth.

Extend business development processes to all areas of the Financial Strategies division.

Increased focus on providing “best-in-class” client experience.

Define criteria for “right fit” mergers and acquisitions.

OUR LOCATIONS Cedar Rapids, IA (2001) Corporate Headquarters Arlington, TX (2012) Brentwood, TN (2009) Cedar Falls, IA (2011) Dallas, TX (2012) Des Moines, IA (2005, 2012) Des Plaines, IL (2016) Fort Worth, TX (2012) Grand Rapids, MI (2013) Longmont, CO (2012) Moline, IL (2010) Peoria, IL (2010) Perry, IA (2016)

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Rowles, Hayes & Carney Agency, Inc. joined TrueNorth in 2016, with locations in Perry, IA and Minburn, IA.

Meeker-Magner Company joined TrueNorth January 1, 2016, and completed their brand transition, now fully operating as our Chicago area TrueNorth office.

PEOPLE WILL DETERMINE WHO WINS

on the list of Eastern Iowa’s

#5 Most Influential People

Duane Smith President & CEO

Duane Smith was recognized as fifth on

Each year, we’re proud to share the recognition our team members have received from around the country. We truly believe we work with the best of the best, and it’s reinforced year after year with meaningful awards and accolades.

the Corridor Business Journal’s list of Top 25 Most Influential People in the Eastern Iowa Corridor. This list includes community leaders like Cedar Rapids Mayor Ron Corbett (#2) and University

In that spirit, each year our executive leadership team gives its highest praise to a “TrueBlue Award Winner.” This honor recognizes a TrueNorth employee who exhibits “best-in-class” service, making a true and lasting difference for their customer, their team and TrueNorth as a whole.

of Iowa President Bruce Harreld (#6).

This list is comprised of many great leaders, and TrueNorth is priviledged to call one of them our own.

Ted Messer was named one of the Top 10 Individual Agents for Wellmark Blue Cross/Blue Shield in Iowa and South Dakota.

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Scott Kanemoto was named to the list of 40 Under Forty in Boulder Valley, Colorado.

PRIDE IN OUR PEOPLE

Jennifer Luse was awarded the National Alliance 2016 Iowa Outstanding CSR of the Year.

Meeker-Magner, now known as TrueNorth’s Chicago office, was recently named a Safeco Key Agency.

Matt Evans was recognized

by Nationwide for his dedication to community service and outstanding agency performance.

Teri Rstom was recognized by her colleagues and clients with the TrueBlue Award for her commitment to excellence.

NATIONAL RECOGNITION MARSHBERRY •

Best of the Best

Recipient for two consecutive years: 2015 & 2016.

Inc. 5000 •

#3669

0 P/C Age 10

y nc

Top

Fastest Growing Private Companies in America.

Insurance Journal

• #51

Top 100 Independent Agency.

2016

Business Insurance

• #63

Brokers of U.S. Business Top 100.

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REGIONAL AWARDS Regional awards as voted in 2016 by Corridor Business Journal’s readers in the Cedar Rapids/Iowa City area.

• Largest Privately Held Company • Best Life Insurance Provider • Best Property/Casualty Insurance Provider

IR POTE E THE NT EV IA HI L AC C E RE U E L AT VA E Dev

We believe attracting and hiring the right people is the foundation to our success. identify if someone is a “culture fit.”

We’ve shifted our mindset from simply filling positions, to determining what unique skills and passions we need at TrueNorth, and create careers from there. This change in mindset forced us to 18

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TE N TI L A

VA L

re

treat “attracting talent” more like a sales function. Now, we utilize our centers of influence and relationships to find team members with specific skills in mind, which has led to much greater success.

AT

EI

E CR

TH

VA L

E

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While it’s important to hire the best possible employees, we’ve also learned UE VE HE IE H LPI that it’s critical to follow up with an N G PE O PLE AC effective training and development plan for each individual to help us maintain a culture of “People will determine who wins.” By expanding our Training and Development program in 2017, we not only hope to retain talent, but offer advancement opportunities that help people achieve their greatest potential.

T EA

Many workforces talk about organizational culture; it can be difficult to define, but through our focused efforts, we’re now able to

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OUR PEOPLE

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In the fall, we celebrated a special milestone of 15 years as TrueNorth!

Before we broke for the Thanksgiving holiday, we shared our gratitude with team members by hosting a celebratory lunch in all of our office locations. We wouldn’t be where we are today without each and every TrueNorth employee.

HELPI NG PE O PL CR EA T Att

OUR PEOPLE

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” September, 2016

Preparing for the Flood of 2016 outside TrueNorth’s Headquarters.

FLOOD OF 2016 In September of 2016, while temporary barriers were put in place by the National Guard, city workers and volunteers were preparing for another devastating flood threat. TrueNorth’s leaders were working diligently at our headquarters to configure a plan that would protect our building from the rising waters. Projections were above 22 feet, which was six feet above what is considered a major flood stage for the Cedar River.

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TrueNorth team members in the Cedar Rapids office rolled up their sleeves to sandbag, kept up with client needs and claims, and even had help from our clients with resources and capacity to help us build sandbagging barricades around doorways. Staff packed up their desks to work remotely until the waters would recede and limited access to downtown Cedar Rapids would be lifted. Our technology team worked with partners at Kirkwood Community College to create makeshift offices, provide meeting space and keep our operational infrastructure running.

Through the efforts of many, we were able to protect our building while continuing to provide services to our clients in need.

We’re truly proud to be part of such a strong and resilient community.

TrueNorth thanks the many volunteers, employees and business partners who worked tirelessly this past fall to help our city and surrounding areas prepare for the Flood of 2016.

IN 2016,

$672,000+ WAS DONATED TO THE COMMUNITIES IN WHICH WE LIVE AND WORK.

INVESTING OUR TIME, TALENTS AND EARNINGS INTO THE CITIES IN WHICH WE LIVE IS PART OF THE FABRIC OF TRUENORTH. WE ARE PROUD TO HAVE EXCEEDED OUR MONETARY GIVING IN 2015 BY NEARLY $100,000 TO CHARITABLE ORGANIZATIONS ACROSS THE COUNTRY.

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Jason Smith Executive Vice President

Bill Teubel Chief Financial Officer

Dru Bridges Chief Operating Officer

Duane Smith

To create a legacy company through an entrepreneurial platform that attracts, develops and coordinates high performing talent and opportunities.

“

VISION

President & CEO

PROFIT WILL DETERMINE WHO EXISTS. TECHNOLOGY WILL DETERMINE

MISSION To assist companies and people with protecting and maximizing assets, resources and opportunities.

PURPOSE To create value.

WHO COMPETES. QUALITY WILL DETERMINE WHO GROWS. PEOPLE WILL DETERMINE WHO WINS. TrueNorth Founding Principals, 2001

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TrueNorth is proud to be the first-ever recipient of MarshBerry’s prestigious “Best of the Best” award for two consecutive years.

ONWARD INTO 2017 By every account, 2016 was a banner year! Our growth in a single year exceeded the entire revenue of the company when we merged in 2001.

Our commitment to a best in class experience for our clients, our market partners and our staff continues to challenge us to innovate and develop creative solutions to meet the challenges we face in today’s ever-changing environment.

One accomplishment that I am especially proud of is the MarshBerry “Best of the Best” award. Every year, MarshBerry, a leading consulting firm in our industry, recognizes an agency that excels in growth, profit and client engagement. The award is given to only one agency that participates in their networking peer group. We received this award in 2015 and were also recognized as the top performer in 2016, which is a testament to the hard work and dedication of over 300 colleagues that make TrueNorth what it is today.

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Thank you again for your trust and confidence in TrueNorth. We look forward to building our legacy company with your continued support.

Sincerely,

Duane Smith President & CEO

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