SOURCE: Brown & Brown, Inc.

October 22, 2007 17:20 ET

Brown & Brown, Inc. Announces a 14.8% Increase in Third Quarter Net Income

DAYTONA BEACH, FL and TAMPA, FL--(Marketwire - October 22, 2007) - Brown & Brown, Inc. (NYSE: BRO) announced its net income for the third quarter of 2007 of $46,216,000, or $0.33 per share, an increase of 14.8% from the $40,270,000, or $0.29 per share, reported for the quarter ended September 30, 2006. Total revenue for the quarter ended September 30, 2007 was $237,284,000, compared with 2006 third-quarter revenue of $211,965,000, an increase of 11.9%.

Total revenue for the nine months ended September 30, 2007 was $742,441,000, compared with revenue of $663,354,000 for the corresponding period in 2006, up 11.9%. Net income for the first nine months of 2007 was $157,955,000, versus $134,727,000 during the comparable 2006 period, an increase of 17.2%. Net income per share for the nine months ended September 30, 2007 was $1.12, versus the $0.96 per share posted during the same period in 2006, an increase of 16.7%.

J. Hyatt Brown, Chairman and Chief Executive Officer, noted, "The third quarter was the 'best of times' for purchasers of property and casualty insurance across the nation. Risk-bearers continue to reduce prices while expanding the terms and conditions of insurance policies. This market creates substantial challenges for agents and brokers and Brown & Brown is responding as it has in the past by seeking the best prices, terms and conditions for its customers. We are pleased to report a net income per share increase of 13.8% for the quarter."

Jim W. Henderson, Vice Chairman and Chief Operating Officer, added, "In 2007, we have closed 20 acquisitions representing approximately $81.8 million in annualized revenues. This compares to 13 transactions representing $55.5 million in annualized revenues for the same period in 2006. We believe that the current soft market pricing is a factor in the growing number of agencies exploring alternatives to their perpetuation plans. Additionally, concerns about a possible future, politically driven, capital gains tax rate increase are also a factor in the timing of potential acquisition transactions. Our business model and track record continues to attract the highest quality entrepreneurial agents and brokers."

Brown & Brown, Inc. and its subsidiaries offer a broad range of insurance and reinsurance products and services, as well as risk management, third party administration, managed health care, and Medicare set-aside services and programs. Providing service to business, public entity, quasi-public entity, individual, trade and professional association clients nationwide, the Company is ranked by Business Insurance magazine as the United States' sixth largest independent insurance intermediary. The Company's Web address is www.bbinsurance.com.

This press release may contain certain statements relating to future results which are forward-looking statements, including those relating to continuing our revenue, earnings and operating growth, as well as identifying and consummating attractive acquisition opportunities. These statements are not historical facts, but instead represent only the Company's current belief regarding future events, many of which, by their nature, are inherently uncertain and outside of the Company's control. It is possible that the Company's actual results, financial condition and achievements may differ, possibly materially, from the anticipated results, financial condition and achievements contemplated by these forward-looking statements. Further information concerning the Company and its business, including factors that potentially could materially affect the Company's financial results and condition, as well as its other achievements, are contained in the Company's filings with the Securities and Exchange Commission. Some factors include: general economic conditions around the country; downward commercial property and casualty premium pressures; the effects of recent legislative and regulatory changes in Florida pertaining to the insurance industry, including those relating to coastal property coverages; the competitive environment; the integration of the Company's operations with those of businesses or assets the Company has acquired or may acquire in the future and the failure to realize the expected benefits of such integration; the potential occurrence of a disaster that affects certain areas of the States of California, Florida, Georgia, Michigan, New Jersey, New York, Pennsylvania and/or Washington, where significant portions of the Company's business are concentrated; and the cost and impact on the Company of previously disclosed litigation initiated against the Company and regulatory inquiries regarding industry and Company practices with respect to compensation received from insurance carriers. All forward-looking statements made herein are made only as of the date of this release, and the Company does not undertake any obligation to publicly update or correct any forward-looking statements to reflect events or circumstances that subsequently occur or of which the Company hereafter becomes aware.

                            Brown & Brown, Inc.
                    CONSOLIDATED STATEMENTS OF INCOME
                  (in thousands, except per share data)
                               (unaudited)


                                      For the               For the
                                    Three Months          Nine Months
                                       Ended                 Ended
                                    September 30,         September 30,
                                   2007       2006       2007       2006
                                ---------- ---------- ---------- ----------
REVENUES
Commissions and fees            $  225,421 $  208,558 $  701,456 $  653,900
Investment income                    3,286      3,218     27,855      8,383
Other income, net                    8,577        189     13,130      1,071
                                ---------- ---------- ---------- ----------
    Total revenues                 237,284    211,965    742,441    663,354
                                ---------- ---------- ---------- ----------

EXPENSES
Employee compensation and
 benefits                          110,491    100,821    333,937    304,731
Non-cash stock-based
 compensation                        1,491        837      4,327      4,601
Other operating expenses            32,928     29,502     96,409     90,605
Amortization                        10,331      9,089     29,798     27,067
Depreciation                         3,213      2,922      9,492      8,302
Interest                             3,395      3,229     10,445     10,080
                                ---------- ---------- ---------- ----------
     Total expenses                161,849    146,400    484,408    445,386
                                ---------- ---------- ---------- ----------

Income before income taxes          75,435     65,565    258,033    217,968

Income taxes                        29,219     25,295    100,078     83,241
                                ---------- ---------- ---------- ----------

     Net income                 $   46,216 $   40,270 $  157,955 $  134,727
                                ========== ========== ========== ==========

Net income per share:
  Basic                         $     0.33 $     0.29 $     1.13 $     0.97
                                ========== ========== ========== ==========
  Diluted                       $     0.33 $     0.29 $     1.12 $     0.96
                                ========== ========== ========== ==========

Weighted average number of
 shares outstanding:
  Basic                            140,593    139,668    140,401    139,522
                                ========== ========== ========== ==========
  Diluted                          141,288    141,027    141,209    140,949
                                ========== ========== ========== ==========

Dividends declared per share    $     0.06 $     0.05 $     0.18 $     0.15
                                ========== ========== ========== ==========



                            Brown & Brown, Inc.
                         INTERNAL GROWTH SCHEDULE
                       Core Commissions and Fees(1)
                   Three Months Ended September 30, 2007
                               (in thousands)
                                (unaudited)


                    Quarter Quarter  Total    Total       Less    Internal
                     Ended   Ended    Net      Net     Acquisition   Net
                    9/30/07 9/30/06  Change   Growth %  Revenues   Growth %
                   -------- -------- -------- ------   ----------- ------

Florida Retail     $ 39,286 $ 43,871 $ (4,585) (10.5)% $       797 (12.3)%
National Retail      62,237   51,948   10,289   19.8 %      10,685  (0.8)%
Western Retail       24,668   26,139   (1,471)  (5.6)%          75  (5.9)%
                   -------- -------- --------           ----------
     Total Retail   126,191  121,958    4,233    3.5 %      11,557  (6.0)%
                   -------- -------- --------           ----------

Professional
 Programs            11,200   10,696      504    4.7 %         119   3.6 %
Special Programs     30,411   26,736    3,675   13.7 %       2,029   6.2 %
                   -------- -------- --------           ----------
     Total Programs  41,611   37,432    4,179   11.2 %       2,148   5.4 %
                   -------- -------- --------           ----------

Wholesale Brokerage  39,354   36,017    3,337    9.3 %       4,400  (3.0)%

TPA Services          9,390    9,164      226    2.5 %           -   2.5 %
                   -------- -------- --------           ----------

Total Core
 Commissions
  and Fees (1)     $216,546 $204,571 $ 11,975    5.9 %  $    18,105  (3.0)%
                   ======== ======== ========           ===========



                 Reconciliation of Internal Growth Schedule
                      to Total Commissions and Fees
            Included in the Consolidated Statements of Income
          for the Three Months Ended September 30, 2007 and 2006
                              (in thousands)
                                (unaudited)


                                        Quarter         Quarter
                                         Ended           Ended
                                        9/30/07         9/30/06
                                     --------------  --------------
 Total core commissions and fees(1)  $      216,546  $      204,571
 Contingent commissions                       8,875           2,092
 Divested business                                -           1,895
                                     --------------  --------------

 Total commission & fees             $      225,421  $      208,558
                                     ==============  ==============



(1) Total core commissions and fees are our total commissions and fees
    less (i) profit-sharing contingent commissions (revenue derived from
    special revenue-sharing commissions from insurance companies based
    upon the volume and the growth and/or profitability of the business
    placed with such companies during the prior year), and (ii) divested
    business (commissions and fees generated from offices, books of
    business or niches sold by the Company or terminated).


                           Brown & Brown, Inc.
                        CONSOLIDATED BALANCE SHEETS
                  (in thousands, except per share data)
                                (unaudited)


                                                 September 30, December 31,
                                                       2007        2006
                                                    ----------- -----------
ASSETS
Current assets:
  Cash and cash equivalents                         $    74,025 $    88,490
  Restricted cash and investments                       227,146     242,187
  Short-term investments                                  3,021       2,909
  Premiums, commissions and fees receivable             271,606     282,440
  Other current assets                                   35,217      32,180
                                                    ----------- -----------
    Total current assets                                611,015     648,206

Fixed assets, net                                        58,322      44,170
Goodwill                                                803,330     684,521
Amortizable intangible assets, net                      421,209     396,069
Investments                                                 652      15,826
Other assets                                             20,831      19,160
                                                    ----------- -----------
    Total assets                                    $ 1,915,359 $ 1,807,952
                                                    =========== ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Premiums payable to insurance companies           $   399,331 $   435,449
  Premium deposits and credits due customers             38,900      33,273
  Accounts payable                                       21,127      17,854
  Accrued expenses                                       72,883      86,009
  Current portion of long-term debt                      11,574      18,082
                                                    ----------- -----------
    Total current liabilities                           543,815     590,667

Long-term debt                                          225,403     226,252

Deferred income taxes, net                               60,596      49,721

Other liabilities                                        12,560      11,967

Shareholders' equity:
  Common stock, par value $0.10 per share;
   authorized 280,000 shares; issued and
   outstanding 140,709 at 2007 and 140,016
   at 2006                                               14,071      14,002
  Additional paid-in capital                            230,520     210,543
  Retained earnings                                     828,336     695,656
  Accumulated other comprehensive income                     58       9,144
                                                    ----------- -----------

    Total shareholders' equity                        1,072,985     929,345
                                                    ----------- -----------

    Total liabilities and shareholders' equity      $ 1,915,359 $ 1,807,952
                                                    =========== ===========

Contact Information

  • Contact:
    Cory T. Walker
    Chief Financial Officer
    (386) 239-7250