01—Abstract
Summary
Summary of the 10-K filed March 15, 1999. Cited figures are marked; the original filing is the authoritative source.
Poe & Brown, Inc. (now Brown & Brown, Inc.) reported 1998 commissions and fees of $150.44 milliona, up from $133.25 million in 1997, and total revenues of $153.79 million.
Pre-tax income rose to $37.49 millionb from $30.46 million, and net income reached $23.05 million, or $1.72 per share, versus $18.67 million, or $1.40 per share, in 1997. The company, headquartered in Daytona Beach and Tampa, Florida, is a diversified insurance brokerage and agency earning commissions and fees, with a Service Division providing third-party administration and benefit consulting. Management attributed growth to new business production and acquisitions, while noting that a soft property and casualty premium-rate environment continued to weigh on commissions.
The company made 19 agency acquisitions plus several customer-account purchases in 1998 at an aggregate cost of $34.6 millionc, and completed a pooling-of-interests merger with Daniel-James Insurance Agency. Long-term debt rose to $17.21 million from $6.26 million, mainly because the revolving credit facility balance reached $12.0 million, and the facility was expanded to $50 million.
Shareholders' equity grew to $84.21 milliond, and the company paid cash dividends of $0.41 per share. Florida concentration, reliance on one insurance carrier for about 17% of revenues, and Year 2000 readiness were highlighted as risks.
02—Key points
Key Highlights
- Commissions and fees rose 12.9% to $150.44 million in 1998, with the Retail Division contributing $98.38 million (65.4% of the total).
- Net income increased 23.5% to $23.05 million, and diluted EPS rose to $1.72 from $1.40.
- Pre-tax income was $37.49 million, or 24.4% of total revenues, compared with 22.0% in 1997.
- The company acquired 19 general insurance agencies and several books of business in 1998 for an aggregate cost of $34.60 million.
- Long-term debt increased to $17.21 million from $6.26 million, with $12.0 million drawn on the revolving credit facility at year-end.
- Approximately 17% of 1998 revenues came from policies underwritten by one insurance company, and the business is concentrated in Florida.
- Year 2000 internal assessment was about 90% complete, with about $320,000 spent to date and $200,000 to $500,000 of further expenditures estimated.
03—Questions
Frequently Asked Questions
What drove the increase in revenue and earnings in 1998?
Management attributed the 13% increase in commissions and fees to new business growth across all operating divisions, along with acquisitions. Excluding acquisitions, commissions and fees rose 2%. Operating efficiency improvements also helped pre-tax margins improve to 24.4% of total revenues.
How much did the company spend on acquisitions, and how was it funded?
The company spent $29.61 million in net cash on acquisitions in 1998, with total acquisition cost of $34.60 million including $4.99 million in notes payable. Funding came from operating cash flow of $36.31 million and $12.0 million of proceeds from long-term debt.
What are the main risks identified in the filing?
The filing cites soft property and casualty premium rates, which have declined since 1986 and could continue to pressure commissions. It also notes geographic concentration in Florida, dependence on one insurance carrier for about 17% of 1998 revenues, and Year 2000 compliance risks affecting internal systems, carriers and independent agents.
How did the company return cash to shareholders in 1998?
The company paid cash dividends of $0.41 per share, totaling $5.49 million, and used $9.23 million to purchase its own stock. Quarterly dividends rose from $0.10 to $0.11 during the year.
04—Continue