10-QPeriod: Q3 FY2012

BROWN & BROWN, INC. Quarterly Report for Q3 Ended Sep 30, 2012

Filed November 9, 2012For Securities:BRO

Summary

Brown & Brown, Inc. (BRO) reported solid financial performance for the nine months ended September 30, 2012, demonstrating revenue growth driven by both organic expansion and strategic acquisitions. Total revenues increased by 16.6% year-over-year to $897.2 million, with commissions and fees, the primary revenue driver, showing a similar 17.8% increase. This growth was supported by a positive core organic commission and fees growth rate of 1.7% for the nine-month period, indicating stabilizing market conditions and effective sales strategies. The company also saw a significant increase in total assets, reaching $3.13 billion, largely due to substantial investments in business combinations, notably the acquisition of Arrowhead General Insurance Agency Superholding Corporation. Profitability remained strong, with net income for the nine months rising to $141.4 million, a 10.9% increase from the prior year, leading to diluted earnings per share of $0.97. While employee compensation and benefits expenses saw an increase, partly due to integration costs from acquisitions, the company managed these effectively, with the expense ratio remaining relatively stable. The company's liquidity position is robust, supported by significant cash flows from operations and a well-managed debt structure, positioning Brown & Brown for continued growth and strategic initiatives.

Financial Highlights

48 data points
Beta

Revenue

$260.40M

Net Income

$44.17M

17.0% Net Margin

EPS (Diluted)

$0.15

Total Assets

$2.56B

Cash & Equivalents

$334.50M

Free Cash Flow

$74.63M

Financial Statements
Beta
Revenue$260.40M
Operating Expenses$187.71M
Interest Expense$3.56M
Net Income$44.17M
EPS (Basic)$0.15
EPS (Diluted)$0.15
Shares Outstanding (Basic)277.38M
Shares Outstanding (Diluted)280.89M

Key Highlights

  • 1Total revenues increased by 16.6% to $897.2 million for the first nine months of 2012 compared to the same period in 2011.
  • 2Net income grew by 10.9% to $141.4 million for the first nine months of 2012.
  • 3Diluted earnings per share were $0.97 for the nine months ended September 30, 2012, up from $0.88 in the prior year.
  • 4The company completed significant acquisitions in 2012, with aggregate purchase prices of $620.1 million, including the major acquisition of Arrowhead General Insurance Agency Superholding Corporation.
  • 5Core organic commission and fees revenue showed positive growth of 1.7% for the nine months ended September 30, 2012, indicating stabilization and improvement in underlying business performance.
  • 6Total assets increased to $3.13 billion as of September 30, 2012, reflecting growth in goodwill and other intangible assets from acquisitions.
  • 7The company maintained a strong cash flow from operations of $189.0 million for the nine months ended September 30, 2012.

Frequently Asked Questions

Revenue growth was driven by a combination of core organic growth in commissions and fees (1.7%) and significant contributions from acquisitions, notably the Arrowhead acquisition. Stabilizing exposure units and slight increases in insurance premium rates also contributed to the positive trend in core organic revenue.

Acquisitions significantly boosted total revenues and assets. In the nine months of 2012, Brown & Brown acquired 11 insurance intermediaries and one stock of an insurance intermediary for $620.1 million. These acquisitions contributed substantially to revenue growth, although they also increased expenses related to employee compensation and benefits, and amortization of acquired intangibles.

As of September 30, 2012, Brown & Brown had $244.6 million in cash and cash equivalents. The company's long-term debt stood at $450.0 million, primarily consisting of unsecured senior notes. The company reported sufficient liquidity from operations and existing credit facilities to meet its obligations for at least the next 12 months.

The company is involved in various legal proceedings in the ordinary course of business. However, management believes that the ultimate outcome of these matters will not have a material adverse effect on the company's consolidated financial position. Insurance coverage is in place, but there is a possibility that future results could be materially affected by unfavorable resolutions.