10-QPeriod: Q1 FY2010

BROWN & BROWN, INC. Quarterly Report for Q1 Ended Mar 31, 2010

Filed May 6, 2010For Securities:BRO

Summary

Brown & Brown, Inc. reported a decrease in total revenues for the first quarter of 2010 compared to the same period in 2009, primarily driven by a decline in core commissions and fees. This decline is attributed to the ongoing "soft market" for insurance, reduced insurable exposure units due to economic weakness, and continued competition from state-run insurance programs like Florida's Citizens Property Insurance Corporation. Despite revenue challenges, the company managed to decrease overall expenses, leading to a slight reduction in net income. The company continues its strategy of growth through acquisitions, completing five in the first quarter of 2010, and maintains a strong liquidity position with an increase in cash and cash equivalents.

Key Highlights

  • 1Total revenues decreased by 4.3% to $252.3 million for Q1 2010 compared to Q1 2009.
  • 2Net income decreased by 8.0% to $44.1 million ($0.31 per diluted share) for Q1 2010 compared to Q1 2009.
  • 3Core commissions and fees revenue saw a significant decline of 8.6% due to market conditions and client losses, particularly impacting the Proctor Financial subsidiary.
  • 4Employee compensation and benefits expenses decreased by 4.1% due to cost-saving measures, contributing to a reduction in overall expenses.
  • 5The company completed five acquisitions in Q1 2010, with an aggregate purchase price of $25.6 million, indicating continued strategic growth efforts.
  • 6Cash and cash equivalents increased by $31.7 million to $228.8 million at the end of Q1 2010, demonstrating strong liquidity.

Frequently Asked Questions

The primary drivers for the revenue decline were a persistent "soft market" in the insurance industry, a decrease in insurable exposure units due to the weak economy, and increased competition from state-sponsored insurers like Florida's Citizens Property Insurance Corporation. These factors led to a significant 8.6% decrease in core commissions and fees.

Brown & Brown successfully reduced overall expenses by 2.8% through decreases in employee compensation and benefits (down 4.1%) and other operating expenses. These reductions were achieved through salary and bonus adjustments, lower health insurance costs, and decreased travel and occupancy expenses, partially offset by increased legal fees.

Brown & Brown continues to pursue growth through strategic acquisitions. In the first quarter of 2010, the company acquired five new operations, signaling an ongoing commitment to expanding its business lines. Despite the challenging market, the company aims for long-term growth through acquisitions and its decentralized sales culture.

While the company does not anticipate significant additional declines in exposure units or pricing in 2010, it currently sees no indications of improvement in these areas. Management is focused on managing costs and pursuing strategic acquisitions. The company's financial position remains strong with a healthy cash balance.