Today's Viewpoint: A MarshBerry Publication

BRP Announces 1Q20 Earnings

Highlights from the BRP earnings release and analyst call

BRP Group, Inc. (“BRP”) reported earnings after the close of the market yesterday (May 13, 2020). As a reminder, BRP Group is the entity that was formed as the vehicle for the public listing of Baldwin Risk Partners, LLC (#44 on Business Insurance’s 2019 top 100). Highlights from the company release and analyst call are below:

  • The company reported 5% organic growth in 1Q20, which included a 5% impact from lower contingent income and a 1% impact from a COVID-19 reserve charge. BRP noted it essentially doubled its typical cancellation reserve at the end of 1Q20 for revenue already booked in light of the current economic climate.
  • BRP noted its lowest new business days were at the end of March and into early April, but that new business came back later in April, with new business written in its two largest segments in April 2020 exceeding April 2019. Similar to other brokers that have reported, BRP indicated client retention is trending positive when compared to historical attrition rates.
  • Despite the improving new business activity and strong retention, BRP noted there are still likely to be significant headwinds in 2Q20 from reduction in exposure units. In April, the total middle market segment saw a net 1% negative effect from combined rate and exposure base impacts. However, this turned to a positive 5.4% in May so far. The company cautioned that this metric is constantly changing, however this recent inflection is a positive sign.
  • BRP reported it closed four acquisitions in 1Q20 (annualized revenue of $30M combined) and had closed an additional three acquisitions during 2Q20 (annualized revenue of $11M combined).
  • BRP noted its merger & acquisition (“M&A”) pipeline and flow are still strong but did not comment on specific expectations for M&A activity in the next few months or quarters. The company did suggest that deal structure is likely to change, especially for those sellers particularly exposed to the hardest hit sectors.
  • Somewhat in contrast to other public brokers, BRP indicated it is moving forward with targeted investments (some taking on new direction during the pandemic), which will weigh on near term margins but could create an opportunity where other brokers are pulling back.

Overall, BRP was cautiously optimistic given internal data that seems to indicate the worst of the sales cycle is behind them.

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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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