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Today's Viewpoint: A MarshBerry Publication

Highlights from the BRO earnings release and analyst call.

Brown & Brown, Inc. (BRO) reported first quarter results in a press release issued the evening of April 26, 2021. Their call with the investment community the morning of April 27 answered questions and provided additional color.

BRO reported one of the best organic growth quarters in the history of the company. Total revenue for the quarter was $815.3M with total revenue growth of 16.7%.

  • BRO reported organic revenue growth of 9.8% in Q121, up from 4.7% in Q420. The Retail segment grew at a record 9.8% organically in the quarter, compared to just 1.5% in Q420 and 4.1% in Q320. The National Programs and Wholesale Brokerage grew at 13.0% and 6.8% organically, staying relatively consistent with Q420. Services (third party administration and Social Security and Medicare services) were up 5.7% organically – driven by claims from recent winter weather events.
  • The company noted strong retail growth due to client engagement with customers and building a strong new business pipeline. Wholesale program growth was driven by new business and rate increases, which offset continued headwinds within personal lines and binding authority. Management stated BRO wrote a significant amount of new business in the quarter and that customer retention was strong in all segments.
  • The company stated that premium rates for most lines continued to increase, with commercial auto up the most, but it is starting to see more competition from carriers on new business (willing to write at current rates). BRO expects rate increases for 2021 but cautioned that rates could moderate slightly in the second half.
  • BRO noted that the combined impact of vaccine deployment and states reopening will be key to influencing business confidence. BRO also stated that the large & middle markets have recovered much quicker, while small businesses are recovering at a much slower pace.
  • Management stated that the “choppiness” they referenced in Q420 is more industry-specific now. Service and hospitality businesses, such as theme parks and restaurants are having a harder time bringing people back, whereas the demand for contractors and homeowners is skyrocketing. Management believes that until business owners show that they are “all in,” (reinvest in their businesses and buying new equipment) things could stay “choppy” in certain industries.
  • Management stated they feel BRO is well positioned with its investments in technology. The continued leveraging of technology/data is allowing BRO to improve the customer experience, create new offerings, and streamline placement of coverage.
  • BRO completed two acquisitions in the first quarter with a total combined revenue of $33M. The company noted Mergers & Acquisition activity was slower for the industry in the quarter, but BRO believes the industry will remain very active and competitive. BRO feels the company is well positioned with a strong pipeline and active discussions with many firms.

Overall, CEO J. Powell Brown, summed it up as follows:

“Brown & Brown had a great quarter. The performance was driven by growth from all lines of business through a combination of improving new business, good retention and continued rate increases… The team continues to fire on all cylinders and is focused on executing every day.”

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This earnings summary has been prepared by Marsh, Berry & Co., Inc. and is not intended to provide investment recommendations on any company. It is not a research report, as such term is defined by applicable laws and regulations, and it does not contain sufficient information upon which to make an investment decision. It is not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any securities, financial instruments or to participate in any particular trading strategy. These materials are based solely on information contained in publicly available documents and Marsh, Berry & Co., Inc. has not independently attempted to investigate or to verify such information.

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