01—Abstract
Summary
Summary of the 10-K filed March 1, 2010. Cited figures are marked; the original filing is the authoritative source.
Brown & Brown, Inc. (BRO) experienced a challenging year in 2009, marked by a 0.1% decline in total revenues to $967.9 milliona, the first revenue decrease since 1993.
This downturn was attributed to a prolonged "soft market" in insurance premium rates and, more significantly, a decline in "insurable exposure units" due to the weakening U.S. economy. Net income also saw a decrease, falling to $153.3 millionb from $166.1 million in 2008. Despite the revenue headwinds, the company demonstrated resilience through strategic acquisitions, adding 11 new entities.
Management highlighted the company's long-term growth trajectory, with a 15.6%c compound annual growth rate in revenue from 1993 to 2009 and a 20.3% compound annual growth rate in net income over the same period. The company maintained a strong focus on managing expenses, with employee compensation and benefits as a percentage of revenue rising slightly, but controlled through headcount reductions. The report also indicates no goodwill impairment for the year.
Investors should note the company's heavy concentration in nine key states (California, Florida, Indiana, Michigan, New Jersey, New York, Pennsylvania, Texas, and Washington), which accounted for 74.3%d of revenues in 2009, making it susceptible to regional economic downturns and regulatory changes. Additionally, the company is navigating a competitive landscape and ongoing governmental investigations into industry compensation practices, which could pose future risks.
02—Key points
Key Highlights
- Total revenues declined by 0.1% to $967.9 million in 2009, marking the first year-over-year revenue decrease since 1993.
- Net income decreased to $153.3 million in 2009 from $166.1 million in 2008.
- The company continued its acquisition strategy, adding 11 new insurance intermediaries and books of business in 2009.
- Despite a challenging economic environment, employee compensation and benefits were managed, with headcount reductions contributing to cost control.
- Goodwill was not impaired in 2009, indicating that the acquired assets retained their value.
- A significant concentration of business remains in nine key states, representing 74.3% of total revenues in 2009, posing regional risk.
- The company noted ongoing governmental investigations into industry compensation practices, which represent a potential risk.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2009filed March 1, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $967.88M$977.55M | −1.0% |
| Operating Expenses | $713.12M$705.06M | +1.1% |
| Interest Expense | $14.60M$14.69M | −0.6% |
| Net Income | $153.29M$166.12M | −7.7% |
| EPS (Basic) | $0.54$0.59 | −8.5% |
| EPS (Diluted) | $0.54$0.58 | −7.7% |
| Shares Outstanding (Basic) | 274.35M272.64M | +0.6% |
| Shares Outstanding (Diluted) | 275.01M273.77M | +0.5% |
05—Questions
Frequently Asked Questions
What was Brown & Brown's revenue performance in 2009?
Brown & Brown's total revenues decreased by 0.1% to $967.9 million in 2009. This was the first year-over-year revenue decline since 1993, primarily attributed to a soft insurance market and reduced insurable exposure units due to the economic downturn.
How did the company's profitability fare in 2009?
Net income declined to $153.3 million in 2009, down from $166.1 million in 2008. This decrease was influenced by the revenue decline and increased operating expenses, partly offset by cost management efforts.
Did Brown & Brown engage in acquisitions in 2009?
Yes, Brown & Brown continued its acquisition strategy, acquiring 11 insurance intermediaries and several books of business during 2009. These acquisitions are part of the company's ongoing growth strategy.
What are the main risks highlighted by the company in its 2009 filing?
Key risks include the dependence on premium rates and insurable exposure units, the impact of current economic conditions, potential losses from financial institutions holding cash balances, disruption in credit markets, reliance on a limited number of insurance companies, concentration of business in specific states, and the uncertainty surrounding governmental investigations into compensation practices.
06—Continue