10-QPeriod: Q1 FY2013

BROWN & BROWN, INC. Quarterly Report for Q1 Ended Mar 31, 2013

Filed May 9, 2013For Securities:BRO

Summary

Brown & Brown, Inc. reported a strong first quarter for 2013, demonstrating significant growth in revenues and net income compared to the prior year. Total revenues increased by 10.8% to $335.0 million, driven by robust growth in commissions and fees, which rose 12.6% to $333.8 million. This revenue surge was primarily fueled by a 10.2% increase in core organic commissions and fees, indicating healthy net new business and favorable market conditions. Net income saw a substantial jump of 21.6% to $60.1 million, translating to diluted earnings per share of $0.41, up from $0.34 in the same period last year. The company's diverse business segments, particularly the Services Division, contributed significantly to this growth, with the Services Division experiencing a remarkable 65.1% revenue increase. The company maintains a solid financial position with a healthy current ratio and sufficient liquidity to meet its obligations.

Financial Highlights

47 data points
Beta

Revenue

$302.49M

Net Income

$49.43M

16.3% Net Margin

EPS (Diluted)

$0.17

Total Assets

$3.02B

Cash & Equivalents

$155.71M

Free Cash Flow

$19.88M

Financial Statements
Beta
Revenue$302.49M
Operating Expenses$219.70M
Interest Expense$4.09M
Net Income$49.43M
EPS (Basic)$0.17
EPS (Diluted)$0.17
Shares Outstanding (Basic)278.00M
Shares Outstanding (Diluted)283.00M

Key Highlights

  • 1Total revenues increased by 10.8% to $335.0 million for the first quarter of 2013.
  • 2Net income grew by 21.6% to $60.1 million, with diluted EPS rising to $0.41 from $0.34 year-over-year.
  • 3Commissions and fees revenue experienced robust growth of 12.6%, driven by a 10.2% increase in core organic commissions and fees.
  • 4The Services Division showed exceptional performance with a 65.1% increase in total revenues, largely due to claims activity related to Superstorm Sandy.
  • 5Employee compensation and benefits as a percentage of total revenues decreased to 47.6% from 49.5% in the prior year's first quarter, indicating improved operational efficiency.
  • 6The company maintained compliance with all debt covenants as of March 31, 2013.
  • 7Cash and cash equivalents significantly increased by $120.4 million to $340.2 million by the end of the quarter, indicating strong operating cash flow generation.

Frequently Asked Questions

The primary driver of revenue growth was the increase in commissions and fees, which rose by 12.6%. This was largely attributable to a 10.2% increase in core organic commissions and fees, reflecting strong net new business and a favorable market environment for insurance premiums and insurable exposure units. The Services Division, in particular, saw exceptional growth driven by claims activity from Superstorm Sandy.

Profitability significantly improved. Net income increased by 21.6% to $60.1 million, and diluted earnings per share rose to $0.41 from $0.34 in the first quarter of 2012. This improvement was supported by revenue growth and a reduction in employee compensation and benefits as a percentage of total revenues.

Brown & Brown reported a strong liquidity position with cash and cash equivalents increasing by $120.4 million to $340.2 million. The company generated $137.0 million in cash from operating activities during the quarter. Management believes its existing cash, cash equivalents, investment portfolio, and operational cash flow are sufficient to meet liquidity needs through at least the end of 2013.

No, Brown & Brown did not acquire any insurance intermediaries during the three months ended March 31, 2013. However, there were miscellaneous adjustments to the purchase price allocation of certain prior acquisitions completed within the last twelve months.