10-QPeriod: Q2 FY2013

BROWN & BROWN, INC. Quarterly Report for Q2 Ended Jun 30, 2013

Filed August 2, 2013For Securities:BRO

Summary

Brown & Brown, Inc. (BRO) reported strong financial performance for the second quarter and the first half of 2013. Total revenues increased by 12.0% and 11.4% year-over-year for the respective periods, driven primarily by a significant rise in commissions and fees. Net income also saw robust growth, up 22.5% for the quarter and 22.0% for the first half. The company's organic growth, a key indicator of underlying business health, showed significant improvement. Core organic commissions and fees grew by 7.4% in the second quarter and 8.8% in the first half, demonstrating broad-based strength across its Retail, National Programs, Wholesale Brokerage, and Services divisions. This organic growth, coupled with strategic acquisitions, positions Brown & Brown for continued expansion. The company also made a significant acquisition, Beecher Carlson Holdings, Inc., on July 1, 2013, for $454.5 million, which is expected to further enhance its market position.

Financial Highlights

47 data points
Beta

Revenue

$290.92M

Net Income

$42.47M

14.6% Net Margin

EPS (Diluted)

$0.14

Total Assets

$3.10B

Cash & Equivalents

$193.71M

Free Cash Flow

$80.19M

Financial Statements
Beta
Revenue$290.92M
Operating Expenses$219.77M
Interest Expense$4.00M
Net Income$42.47M
EPS (Basic)$0.15
EPS (Diluted)$0.14
Shares Outstanding (Basic)278.17M
Shares Outstanding (Diluted)283.66M

Key Highlights

  • 1Total revenues increased by 12.0% to $325.8 million for the three months ended June 30, 2013, and by 11.4% to $660.8 million for the six months ended June 30, 2013.
  • 2Net income grew by 22.5% to $52.0 million for the quarter and 22.0% to $112.1 million for the first half.
  • 3Core organic commissions and fees, a measure of underlying business growth, increased by 7.4% for the quarter and 8.8% for the first half, indicating strong performance across all divisions.
  • 4The company completed a significant acquisition of Beecher Carlson Holdings, Inc. on July 1, 2013, for approximately $454.5 million, aimed at expanding its Retail and National Programs businesses.
  • 5Operating expenses grew at a slower pace than revenues, leading to improved operating leverage, with employee compensation and benefits as a percentage of total revenues decreasing in both periods.
  • 6The company maintained a strong liquidity position, with cash and cash equivalents increasing to $385.5 million as of June 30, 2013.
  • 7Profit-sharing contingent commissions and Guaranteed Supplemental Commissions (GSCs) saw a substantial increase, contributing positively to revenue growth.

Frequently Asked Questions

Revenue growth was primarily driven by an 11.8% increase in commissions and fees, which was $34.2 million higher compared to the same period in 2012. This growth was fueled by strong core organic commissions and fees, which increased by 7.4%, and a significant rise in profit-sharing contingent commissions and GSCs.

Acquisitions continue to be a key growth strategy. The company acquired two insurance intermediaries and a book of business during the first half of 2013, and notably, completed the acquisition of Beecher Carlson Holdings, Inc. on July 1, 2013, for $454.5 million. These acquisitions are integrated to expand core businesses and contribute to revenue and profit growth.

The company reported positive core organic commission and fee growth rates of 7.4% for the second quarter and 8.8% for the first half of 2013, broad-based across all four divisions. Management expects this positive trend to continue, contingent on stable insurance premium rates and insurable exposure units.

Brown & Brown demonstrated effective expense management, with employee compensation and benefits as a percentage of total revenues decreasing to 50.2% for the quarter and 48.9% for the first half, compared to 51.8% and 50.6% respectively in the prior year periods. Other operating expenses also showed improved efficiency relative to revenue growth.