10-KPeriod: FY2008

BROWN & BROWN, INC. Annual Report, Year Ended Dec 31, 2008

Filed March 2, 2009For Securities:BRO

Summary

Brown & Brown, Inc. (BRO) reported its fiscal year results for 2008 amidst a challenging economic environment. Total revenues increased by 1.9% to $977.6 million, driven by acquisitions, though internal core commission and fee revenue experienced a decline of 5.5%. This decline was attributed to a "soft market" for insurance premiums, reduced insurable exposure units due to the economic downturn, and specific regional impacts like the competitive pricing from Florida's Citizens Property Insurance Corporation. Despite these headwinds, the company successfully completed a record number of acquisitions in 2008, integrating 43 insurance intermediary entities and several books of business, which contributed significantly to the overall revenue growth. The company maintained a solid financial position with a current ratio of 1.00 and managed its debt effectively, ending the year with $78.6 million in cash and cash equivalents. Management highlighted the ongoing challenges related to premium rate declines and economic weakness, projecting that declining exposure units would have a greater impact in 2009 than rate declines. However, the company's decentralized sales culture and consistent focus on long-term growth through acquisitions remain core strategies. The company also continued to pay quarterly dividends, demonstrating a commitment to shareholder returns. The report also noted the upcoming succession of J. Powell Brown as CEO in July 2009, with J. Hyatt Brown remaining Chairman.

Financial Highlights

25 data points
Beta

Revenue

$977.55M

Net Income

$166.12M

17.0% Net Margin

EPS (Diluted)

$0.58

Free Cash Flow

$327.64M

Financial Statements
Beta
Revenue$977.55M
Operating Expenses$705.06M
Interest Expense$14.69M
Net Income$166.12M
EPS (Basic)$0.59
EPS (Diluted)$0.58
Shares Outstanding (Basic)272.64M
Shares Outstanding (Diluted)273.77M

Key Highlights

  • 1Total revenues grew 1.9% to $977.6 million in 2008, largely driven by acquisitions.
  • 2Internal core commission and fee revenue declined by 5.5% due to a "soft market" and economic weakness impacting insurable exposure units.
  • 3The company completed a record 43 acquisitions in 2008, integrating significant annualized revenues.
  • 4Net income decreased by 12.5% to $166.1 million, reflecting the challenging operating environment.
  • 5The company ended 2008 with $78.6 million in cash and cash equivalents and a current ratio of 1.00.
  • 6Continued dividend payments demonstrate a commitment to shareholder returns.
  • 7A planned CEO succession is scheduled for July 2009, with J. Powell Brown taking over from J. Hyatt Brown.

Frequently Asked Questions

Brown & Brown's total revenues in 2008 were driven by a combination of factors. Acquisitions of 43 insurance intermediary entities and several books of business contributed significantly to the overall revenue growth. However, internal core commission and fee revenue experienced a decline of 5.5% due to a 'soft market' for insurance premiums and a reduction in insurable exposure units resulting from the weakening economy.

The company faced several significant challenges in 2008, including a continued 'soft market' characterized by declining insurance premium rates. The weakening U.S. economy led to a decrease in insurable exposure units (such as sales and payroll), which directly impacted commission revenues. Additionally, the competitive pricing environment, particularly influenced by Florida's Citizens Property Insurance Corporation, put pressure on certain business segments.

Brown & Brown had its best year for acquisitions in 2008, completing 43 transactions. These acquisitions contributed substantially to the company's overall revenue growth, helping to offset the negative internal revenue growth experienced in core commission and fee lines. Management indicated these acquisitions were crucial for expanding core businesses and attracting talent.

Management anticipates that the challenges faced in 2008 will persist into 2009. They expect that declining exposure units will have a greater negative impact on commission and fee revenues than declining insurance premium rates. The company's strategy remains focused on organic growth and strategic acquisitions to navigate these market conditions.