10-QPeriod: Q1 FY2009

BROWN & BROWN, INC. Quarterly Report for Q1 Ended Mar 31, 2009

Filed May 11, 2009For Securities:BRO

Summary

Brown & Brown, Inc. (BRO) reported a decrease in net income for the first quarter of 2009 to $48.0 million, or $0.34 per diluted share, compared to $51.8 million, or $0.37 per diluted share, in the prior year's quarter. This decline was driven by several factors, including a significant drop in investment income and a decrease in profit-sharing contingent commissions, which were partially offset by an increase in core commissions and fees due to strategic acquisitions. Despite the net income decrease, total revenues saw a modest increase of 2.7% to $263.6 million. The company continued its acquisition strategy, integrating new entities and customer books of business, which contributed positively to revenue growth. However, the underlying organic growth for core commissions and fees remained negative at (2.2)%, reflecting ongoing challenges in the insurance market characterized by soft premium rates and economic weakness impacting insurable exposure units. The company maintains a strong balance sheet with substantial cash and cash equivalents, supporting its continued growth initiatives and operational needs.

Key Highlights

  • 1Net income decreased by 7.2% to $48.0 million ($0.34/share) for Q1 2009 from $51.8 million ($0.37/share) in Q1 2008.
  • 2Total revenues increased by 2.7% to $263.6 million in Q1 2009, primarily driven by an increase in commissions and fees.
  • 3Core commissions and fees revenue saw a negative internal growth rate of (2.2)% due to market conditions, although acquisitions contributed positively.
  • 4Investment income significantly declined by 84.5% to $0.3 million in Q1 2009 compared to $2.0 million in Q1 2008.
  • 5Profit-sharing contingent commissions decreased by 17.7% to $29.9 million in Q1 2009, reflecting lower insurance carrier profitability.
  • 6The company completed acquisitions totaling $29.3 million in Q1 2009, adding $11.4 million in annualized revenues.
  • 7Cash and cash equivalents increased by $47.9 million to $126.4 million as of March 31, 2009, reflecting strong operating cash flow.

Frequently Asked Questions

The decrease in net income was primarily due to a significant drop in investment income and a reduction in profit-sharing contingent commissions. These factors were partially offset by growth in core commissions and fees, largely attributable to recent acquisitions.

The company experienced a negative internal growth rate of (2.2)% for core commissions and fees in the first quarter of 2009. This reflects ongoing challenges in the insurance market, including soft premium rates and a general economic slowdown impacting insurable exposure units.

Brown & Brown continues to pursue a growth strategy through acquisitions. In the first quarter of 2009, the company acquired two insurance intermediary operations and a book of business for $29.3 million, which contributed positively to overall revenue growth. Acquisitions are crucial for offsetting negative organic growth trends.

The company's liquidity remains strong. Cash and cash equivalents increased by $47.9 million to $126.4 million as of March 31, 2009. This increase was driven by robust operating cash flows, supporting ongoing operations, debt obligations, dividend payments, and strategic acquisitions.