QUOTE AND NEWS
Benzinga  Aug 25  Comment 
Below are the top mid-cap insurance brokers stocks on the NYSE and the NASDAQ in terms of profit margin. The trailing-twelve-month profit margin at Brown & Brown (NYSE: BRO) is 14.60%. Brown & Brown's PEG ratio is 1.99. The...
The Economic Times  Aug 8  Comment 
BRO has received forest and environment clearance for constructing a 11-km long main tunnel at Baltal on Srinagar-Leh National Highway.
Benzinga  Jul 23  Comment 
In a report published Wednesday, Compass Point analyst Ken Billingsley reiterated a Neutral rating on Brown & Brown (NYSE: BRO), and raised the price target from $33.00 to $34.00. In the report, Compass Point noted, “The company reported...
Benzinga  Jul 23  Comment 
Below are the top insurance brokers stocks on the NYSE in terms of profit margin. The trailing-twelve-month profit margin at Brown & Brown (NYSE: BRO) is 14.60%. Brown & Brown's EPS for the same period is $1.43. The trailing-twelve-month...
SeekingAlpha  Jul 22  Comment 
Brown & Brown, Inc. (NYSE:BRO) Q2 2014 Earnings Conference Call July 22, 2014, 08:00 AM ET Executives Powell Brown - President and Chief Executive Officer Andy Watts - Chief Financial Officer Analysts Sarah DeWitt - Barclays ...
Benzinga  Jul 22  Comment 
In a report published Tuesday, Sterne Agee analyst Dan Farrell reiterated a Buy rating and $38.00 price target on Brown & Brown (NYSE: BRO). In the report, Sterne Agee noted, “While core EPS looks about $0.01 lower than our estimate and...
DailyFinance  Jul 21  Comment 
DAYTONA BEACH, FL--(Marketwired - July 21, 2014) - Brown & Brown, Inc. (NYSE: BRO) today announced its unaudited financial results for the second quarter of 2014. Revenues for the second quarter of 2014 under U.S. generally accepted accounting...
DailyFinance  Jul 18  Comment 
DAYTONA BEACH, FL and TAMPA, FL--(Marketwired - July 18, 2014) - Brown & Brown, Inc. (NYSE: BRO) today announced that the Board of Directors has declared a regular quarterly cash dividend of $0.10 per share. The dividend is payable on August 13,...
Benzinga  Jul 1  Comment 
Brown & Brown, Inc. (NYSE: BRO) today announced the appointment of Chris Walker as Programs Division President effective July 1, 2014. Since January 31, 2012, Mr. Walker has served as Regional Executive Vice President of Brown & Brown and has...
Insurance Journal  Jun 11  Comment 
Brown & Brown of New York Inc., a subsidiary of Brown & Brown Inc., said it acquired certain assets of Gaston & Associates Inc. in Mount Kisco, N.Y. Terms were not disclosed. With origins dating back to 1895, Gaston & … The article Brown &...




 
TOP CONTRIBUTORS


Brown & Brown (NYSE:BRO) is the world's sixth largest insurance broker by revenue.[1] [2] BRO has offices that sell property and casualty insurance in 38 states, with the most locations in Florida.[3] BRO does not take on any underwriting risks itself, profiting predominantly from commissions paid to them by the insurance companies that they sell insurance for.[4] BRO also sells professional insurance to dentists, lawyers, and opticians[5], and provides third party administration for companies who choose to self-insure.[6]

In 2007, BRO's internal revenue growth rate was negative for the first time since BRO began tracking that number in 1997. [7] Commissions and fees also decreased by 3.4% or $27.9 million in 2007 due to lower industry-wide commisions and the slowing home building market.[8] In 2007, the government of Florida started an insurance company offering below-market rates so that homeowners can afford hurricane insurance, which hurts private insurers like Brown & Brown.[9]

To combat the reduced internal growth, BRO made 41 acquisitions with estimated annual revenues of $108.3 million in 2007.[10] In January and February of 2008, BRO purchased seven insurance intermediaries, two customer accounts, and one general insurance agency for $71.08 million.[11]

Company Overview

From 2005 to 2007, BRO's total revenues have increased 22.13% and net income has increased 26.84%. [12]

Business Segments

BRO 2007 Commissions and Fees Revenue
BRO 2007 Commissions and Fees Revenue [13]
  • Retail Division (60.20% Total Revenues, 65.53% Income Before Taxes) sells insurance to commercial, professional, and individual customers. This segment sells property, legal liability, workers compensation, life, and health insurance.[14] The retail division also offers risk management consulting services to their clients.[15] Commission and fees revenue for the retail division has increased 11.94% since 2005. [16]
  • Wholesale Brokerage Division (19.15% Total Revenues, 11.51% Income Before Taxes) sells insurance to other retail insurance brokers, including BRO itself. This division is also involved in offering reinsurance as well as specialty insurance. In August 2007, BRO acquired The Combined Group, Inc., which has estimated annualized revenues of $12.6 million, to expand this arm of BRO. [17] Since 2005, this segment's commission and fees revenue has increased 39.63%. [18]
  • National Programs Division (16.86% Total Revenues, 19.39% Income Before Taxes) consists of two units, the professional programs and specialized programs. The professional programs sells insurance specialized for professionals, such as dentists, lawyers, and optometrists. The specialized programs offers products tailored for specific industries, trade groups, niche markets, and public and quasi-public entities. Since 2005, commission and fees revenue has increased 17.92%. [19]
  • Services Division (3.79% Total Revenues, 3.56% Income Before Taxes) provides insurance-related administrative services to clients. This segment provides risk management and third party administration services for workers' compensation and liability plans. Other offerings of this segment include medical utilization management services and Medicare compliance related services. Since 2005, commission and fees revenue for the services division has 33.65%. [20]

Business and Financial Metrics

On October 20, 2008, BRO announced 3rd Quarter 2008 net income per share of $0.29 down from $0.33 per share the same quarter of 2007. [21] The Chairman and CEO, J. Hyatt Brown, named falling property and casualty insurance rates as the main contributor to the decrease. [22] In that same press release, BRO announced that in the first 3 quarters of 2008 BRO has made 44 transactions with estimated annualized revenues of $100.2 million.[23] Jim W. Henderson, the Vice Chairman and Chief Operating Officer, said that the acquisitions would continue as soft market conditions and a weak economy are making mergers and acquisitions more attractive.[24] BRO also announced on October 22, 2008 that it would be increasing its quarterly dividend to 7.5 cents per share, a 7.1% increase.[25]

2003 2004 2005 2006 2007
Revenue (Thousands) 551,040 646,934 785,807 878,004 959,667
Expenses (Thousands) 374,558 439,985 541,677 597,963 648,140
Net Income (Thousands) 110,322 128,843 150,551 172,350 190,959
Revenue per Employee 159,699 173,046 184,896 189,368 196,251

[26]

Key Trends and Forces

Continued Slump in Home Construction Reduces Customers

The current downturn in housing prices has led to reduced home building and lower house prices. Brown's retail segment specializes in insuring the home building segment and professional liability coverage for title agents. The rate of home building has decreased and insurance sales have also been hit by the slump. This segment also operates primarily in Florida, which was one of the hardest areas in the housing slump. Moreover, the reduced housing prices will lower the amount people insure through their property insurance. Since people will be paying less is premiums, BRO will receive less in commissions.[27]

Government-backed Insurance Corporation Increases Competition

Brown & Brown has been hurt by government regulation in Florida. After devastating natural disasters, it is common for the government to create an organization which will provide insurance to homeowners. This results from an inability for people to purchase insurance from private insurers, who have also been hurt form paying out claims. An example of this type of government organization, Citizens' Property Insurance Corporation, which establishes a residual market for property insurance in Florida, has reduced rates and become the most competitive insurance broker in the Florida market. This puts private insurers at a significant disadvantage because the government program, which was initially designed to be a short term insurer of last resort, has become the cheapest option.[28]

Soft Insurance Market Hurts Profits

After two consecutive years of lower-than-average hurricane losses, insurance carriers are cutting prices to win new business. [29] According to the Council of Insurance Agents & Brokers in Washington, premiums for commercial property/casualty insurance decreased 11% in the 3rd Q of 2008 from a year before. [30] As the price of insurance decreases, the commissions BRO earns for selling the insurance also go down. Continued softness in the insurance markets means reduced commission revenue for BRO.

Global Expansion Demands Large Investment

Thus far, BRO has solely operated in the U.S., but has announced plans to expand to the U.K.[31] Challenges of the expansion include adapting to different government regulation and insurance markets, and establishing the infrastructure to support a U.K. insurance brokerage operation. The U.K. insurance brokerage market is already very established, as large competitors such as Arthur J. Gallagher are active there. [32]

Competition

The insurance brokerage is a highly competitive business where companies compete mainly on the basis of prices as well as the services that the company can provide. The six largest brokers of business in the world and the U.S. are BRO, Marsh & McLennan, Aon, Willis, Arthur J. Gallagher, and Wells Fargo (WFC).[33] [34] BRO is the world's 6th largest 3rd party property/casualty claims administrator and the 6th largest insurance broker based on revenues. [35] [36] These five companies are the five largest competitors of BRO however competition comes from all over in this industry. The top 50 companies in size control only 20% of the market, showing how many players there are. [37] Moreover, BRO faces competition from government entities such as the Citizens Property Insurance Corporation, which are created by the government to provide people who live in areas often hit by natural disasters to receive affordable insurance. The competition which BRO faces will only increase as they enter into the new U.K. market.[38]

Description Mkt. Cap P/e Return on Equity (ROE) % Dividend Yield % Debt to Equity Price-to-book Profit Margins Qrtrly Rev Growth YoY % Qrtrly Earnings Growth YoY % [39]
Insurance Brokers 24.91B 11.0 21.0 3.1 0.6 58.0 12.8
Brown & Brown Inc. 2.54B 14.9 15.6 1.4 0.2 2.2 16.8 (-1.1) (-22.4)
Marsh & McLennan Companies, In 13.91B 7.5 0.2 2.8 0.5 1.8 2.1 9.4 (-60.0)
Willis Group Holdings Ltd. 3.42B 9.4 27.5 3.8 1.0 2.4 5.9 6.1 (-48.9)
Arthur J Gallagher & Co. 2.22B 20.3 19.3 5.2 0.7 3.1 9.5 0.3 (-1.7)




References

  1. Kevin Edison and Karen Tucker (July 16, 2007). World’s 10 largest insurance brokers.
  2. Kevin Edison and Karen Tucker (July 16, 2007). 100 largest brokers of U.S. business.
  3. BRO 2007 10-k pg. 3-4  
  4. BRO 2007 10-k pg. 3  
  5. BRO 2007 10-k pg. 8  
  6. BRO 2007 10-k pg. 9  
  7. BRO 2007 10-k pg. 5  
  8. BRO 2007 10-k pg. 5  
  9. BRO 2007 10-k pg. 5  
  10. BRO 2007 10-k pg. 5  
  11. BRO 2007 10-k pg. 6  
  12. BRO 2007 10-k pg. 3, 21  
  13. BRO 2007 10-k pg. 3, 21  
  14. BRO 2007 10-k pg. 3, 7  
  15. BRO 2007 10-k pg. 3, 7  
  16. BRO 2007 10-k pg. 3, 6  
  17. BRO 2007 10-k pg. 3, 7  
  18. BRO 2007 10-k pg. 3, 6  
  19. BRO 2007 10-k pg. 3, 6  
  20. BRO 2007 10-k pg. 3, 6  
  21. Brown & Brown, Inc. Announces an 8.1% Increase in Commissions.
  22. Brown & Brown, Inc. Announces an 8.1% Increase in Commissions.
  23. Brown & Brown, Inc. Announces an 8.1% Increase in Commissions.
  24. Brown & Brown, Inc. Announces an 8.1% Increase in Commissions.
  25. Brown & Brown, Inc. Announces an Increase in Its Quarterly Cash.
  26. BRO 2007 10-k pg. 21  
  27. BRO 2007 10-k pg. 3, 22  
  28. BRO 2007 10-k pg. 3, 5  
  29. Andrew Frye (July 18, 2008). Brown & Brown Leads Brokerages Lower on Profit Drop.
  30. Commercial P/C Premiums Continue to Drop in Third Quarter (October 22, 2008).
  31. BRO 2007 10-k pg. 3, 13  
  32. BRO 2007 10-k pg. 3, 13-14  
  33. Kevin Edison and Karen Tucker (July 16, 2007). World’s 10 largest insurance brokers.
  34. Kevin Edison and Karen Tucker (July 16, 2007). 100 largest brokers of U.S. business.
  35. Kevin Edison and Karen Tucker (July 16, 2007). World’s 10 largest insurance brokers.
  36. Kevin Edison and Karen Tucker (July 16, 2007). 100 largest brokers of U.S. business.
  37. Hoover's Insurance Agency Overview
  38. BRO 2007 10-k pg. 3, 13-14  
  39. Yahoo Insurance Brokers Overview
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