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Today's Viewpoint: A MarshBerry Publication

Brown & Brown, Inc. (NYSE: BRO) reported second quarter 2021 earnings results in a press release issued the evening of July 26, 2021. BRO delivered the best quarterly organic growth in the history of the company – driven by strong results across all business segments. BRO reported 2Q21 adjusted Earnings Per Share (EPS) of $0.49 (vs. consensus $0.40) on total revenue of $727.3M (vs. consensus estimates of $679.5M). This compares to 1Q21’s EPS of $0.70 on $815.3M total revenue.

Below showcases key figures highlighted during the call:

  • Total revenue growth was 21.5% in 2Q21, up from 16.7% in 1Q21.
  • Organic revenue growth in 2Q21 was 14.7%, up from 9.8% in 1Q21.
  • The Retail segment grew at a record 17.6% organically in 2Q21, up from 9.8% organically in 1Q21.
  • The National Programs and Wholesale Brokerage grew at 13.3% (vs. 13.0% in 1Q21) and 12.3% (vs. 6.8% in 1Q21) organically.
  • Services (third party administration and Social Security and Medicare services) were up 4.6% organically, slightly down from 1Q21’s 5.7% – driven by claims processing revenue, partly offset by challenges in the advocacy businesses.

Below are other notable takeaways from the second quarter:

  • BRO noted strong retail growth due to solid new business, good retention, rate increases, and higher exposure units due to the economic recovery. Wholesale program growth was driven by new business and rate increases.
  • The company stated that premium rate increases for most lines stayed in line with what was experienced in the first quarter, but there was moderation in the level of increases in some admitted and non-admitted lines. CEO J. Brown noted on the 2Q21 earnings call: “We continue to see carriers seeking higher rate increases on renewal business while quoting at or below expiring rates for a new business of a similar risk profile.” BRO expects similar rate increases for the rest of 2021 but sees some potential moderation.
  • BRO saw continued economic improvement as companies continue to reopen and strengthen but noted that not all companies are back 100%. CEO J. Brown also discussed certain customer segments are having challenges around hiring. He noted that the restaurant industry is one example that is not coming back online as quickly vs. other business segments.
  • Management stated that they continue to be confident about BRO’s technology initiatives and plan to make additional investments. The continued leveraging of technology/data is allowing BRO to become more efficient, as well as improving its customer experience, create new offerings, and streamline placement of coverage.
  • BRO completed two acquisitions in the second quarter. The company noted that it would continue to invest in companies that fit culturally and “make sense financially.” BRO noted that there is a continuation in strong demand for M&A in the insurance brokerage space from the prior quarter. CEO J. Brown stated that there is concern around tax structures changing next year, which is having an impact on merger & acquisition discussions.

In sum, BRO’s quarterly results benefited from strong growth from all lines of business through a combination of improving new business, good retention and continued rate increases. Looking forward, there is the likelihood that comparables are going to be more challenging in the second half of the year, and potential moderation in rate increases.

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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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