10-KPeriod: FY2002

BROWN & BROWN, INC. Annual Report, Year Ended Dec 31, 2002

Filed March 24, 2003For Securities:BRO

Summary

Brown & Brown, Inc. (BRO) presents its 2002 annual report, highlighting its position as a leading insurance agency and brokerage. The company operates through four main segments: Retail, National Programs, Services, and Brokerage. A significant portion of its revenue is generated by the Retail Division, which serves a broad range of customers with property and casualty, as well as life and health insurance products. The company's growth strategy, as evidenced by its history of acquisitions, remains a key focus, with 32 operations acquired in 2002 alone. Management anticipates continued growth in premium rates through at least 2003, which could positively impact commission revenues. Investors should note Brown & Brown's diversified business model and its strong presence in the southeastern United States. The company's ability to integrate acquired businesses and navigate the cyclical nature of the insurance market will be crucial for future performance. The report also mentions a change in independent auditors, with Deloitte & Touche LLP replacing Arthur Andersen LLP, effective mid-2002. The company states that there were no disagreements with the former auditor. The disclosures around controls and procedures, particularly in light of the Sarbanes-Oxley Act, are also noteworthy for investors.

Key Highlights

  • 1Brown & Brown is the sixth largest insurance agency and brokerage in the U.S. and largest in the southeastern U.S., based on 2001 revenues.
  • 2The company completed 32 acquisitions in 2002, indicating a continued aggressive growth strategy.
  • 3The Retail Division is the largest revenue generator, accounting for 75.7% of total commission and fee revenues in 2002.
  • 4Management anticipates premium rates will continue to increase through at least 2003, potentially boosting revenues.
  • 5The company is subject to regulatory oversight in all states where it operates, with licensing laws that can vary and be subject to change.
  • 6Deloitte & Touche LLP replaced Arthur Andersen LLP as the independent public accountant in June 2002, with no disclosed disagreements with the prior auditor.
  • 7The company has a significant investment in Rock-Tenn Company (559,970 shares) which represents a notable portion of its equity securities.

Frequently Asked Questions

Brown & Brown, Inc. operates as an insurance agency and brokerage, marketing and selling insurance products and services, primarily in property and casualty. They also offer risk management products and services. Revenue is generated mainly through commissions paid by insurance companies, which are typically a percentage of the premium paid by the insured, and fees paid by customers for specific services. Contingent commissions based on profitability and volume are also a source of income.

Brown & Brown's growth strategy is heavily focused on acquisitions. The company has a long history of acquiring insurance agency operations, with 118 acquired between 1993 and 2002. In 2002 alone, they acquired 32 operations, demonstrating an ongoing commitment to expanding its business through strategic purchases.

Key risks identified include material adverse changes in economic conditions in their markets, future regulatory actions, competition within the insurance agency and brokerage business, challenges in integrating acquired operations and realizing expected benefits, and other general risks and uncertainties detailed in their filings. Fluctuations in insurance premium rates also impact revenues.

Yes, the company changed its independent public accountants. Effective June 14, 2002, Brown & Brown decided to no longer engage Arthur Andersen LLP and engaged Deloitte & Touche LLP. The company stated there were no disagreements with Arthur Andersen on any accounting principles, practices, or financial statement disclosures.