10-QPeriod: Q3 FY2010

BROWN & BROWN, INC. Quarterly Report for Q3 Ended Sep 30, 2010

Filed November 5, 2010For Securities:BRO

Summary

Brown & Brown, Inc. reported mixed results for the nine months ended September 30, 2010, compared to the same period in 2009. While total revenues saw a slight decrease of 1.3% to $743.6 million, net income remained flat at $129.6 million. The company continued to face challenges with negative internal revenue growth in its core commissions and fees, primarily due to a soft insurance market and economic weakness, resulting in a (5.1)% decline for the nine-month period. However, the company demonstrated strong execution in managing expenses, with total expenses decreasing by 2.0% and strategic cost reductions evident across multiple operating segments. Acquisition activity remains a key growth driver, with 18 new acquisitions contributing $51.5 million in estimated annual revenues during the first nine months of 2010, representing a significant increase in acquisition spend compared to the prior year. The company's balance sheet remains solid, with total assets growing to $2.4 billion and shareholders' equity increasing to $1.5 billion. Management expressed confidence in the company's liquidity and ability to meet its obligations, supported by operating cash flows and existing credit facilities.

Financial Highlights

26 data points
Beta

Revenue

$243.77M

Net Income

$40.96M

16.8% Net Margin

EPS (Diluted)

$0.14

Cash & Equivalents

$186.25M

Free Cash Flow

$1.80M

Financial Statements
Beta
Revenue$243.77M
Operating Expenses$176.28M
Interest Expense$3.62M
Net Income$40.96M
EPS (Basic)$0.14
EPS (Diluted)$0.14
Shares Outstanding (Basic)274.56M
Shares Outstanding (Diluted)275.34M

Key Highlights

  • 1Net income remained flat year-over-year at $129.6 million for the nine months ended September 30, 2010.
  • 2Total revenues decreased slightly by 1.3% to $743.6 million for the nine months ended September 30, 2010.
  • 3Core commissions and fees revenue declined by 5.1% for the nine months ended September 30, 2010, reflecting ongoing market challenges.
  • 4The company significantly increased its acquisition activity in 2010, with 18 acquisitions closed for the nine-month period, totaling $142.3 million in aggregate purchase price.
  • 5Employee compensation and benefits expenses were managed effectively, decreasing by 1.1% for the nine months, demonstrating cost control efforts.
  • 6Other operating expenses saw a reduction of 5.4% for the nine months, further highlighting expense management initiatives.
  • 7Total assets grew to $2.39 billion and total shareholders' equity increased to $1.48 billion as of September 30, 2010.

Frequently Asked Questions

For the nine months ended September 30, 2010, Brown & Brown reported total revenues of $743.6 million, a slight decrease of 1.3% compared to the same period in 2009. Net income remained stable at $129.6 million. The company experienced a decline in core commissions and fees revenue due to a soft insurance market and economic conditions, but managed expenses effectively, leading to flat net income.

Acquisition activity increased significantly in 2010. The company completed 18 acquisitions for an aggregate purchase price of $142.3 million in the first nine months of 2010, compared to 8 acquisitions for $47.0 million in the same period of 2009. These acquisitions contributed to revenue and are a key part of the company's growth strategy.

The primary challenges impacting revenue growth are a sustained 'soft market' with declining insurance premium rates, the competitiveness of the state-backed Citizens Property Insurance Corporation in Florida, and the general weakness of the U.S. economy since late 2008. These factors have led to negative internal revenue growth in core commissions and fees for several consecutive quarters.

Brown & Brown has demonstrated effective expense management. For the nine months ended September 30, 2010, total expenses decreased by 2.0% compared to the prior year. Specifically, employee compensation and benefits decreased by 1.1%, and other operating expenses decreased by 5.4%. These reductions, despite the inclusion of costs from new acquisitions, indicate strong cost control measures.