Today's Viewpoint: A MarshBerry Publication

BRP Announces 3Q20 Earnings

Highlights from the BRP earnings release and analyst call

BRP Group, Inc. (BRP) reported earnings after the close of the market yesterday. Adjusted earnings per share (EPS) was relatively in line with analyst expectations (reported EPS $0.11 vs. consensus estimate of $0.10), however revenue was more than 10% above analyst estimates. As a reminder, BRP is the entity that was formed as the vehicle for the public listing of Baldwin Risk Partners, LLC. Highlights from the company release and analyst call are below:

  • BRP generated organic revenue growth of 20% in the third quarter, with double-digit organic growth across all four of its divisions (Middle Market, Specialty, Main Street and Medicare). Total revenue growth including acquisitions was 72%. BRP believes the combination of rate and exposure (up or down) resulted in about 4% growth in its organic number, meaning new business activity drove the remaining 16% of its organic growth in the quarter.
  • Previously, management had expected third quarter organic growth to be lower than the reported 20%, but BRP was positively surprised by activity across the board being better than expected, particularly within the student housing market which underlies its MGA business. The company expects fourth quarter organic growth to be in the 10-15% range as it’s the lowest quarter seasonally for MGA activity (the fastest growing division) and additional uncertainties around COVID-19 economic impacts from a renewed round of shutdowns or if slowdowns persist.
  • As it relates to the balance sheet, the firm ended the quarter with a leverage ratio slightly greater than 2.4x. This was up from 1.0x the prior quarter after it added a term loan in order to fund recent and planned acquisitions. This leverage is still below the long-term target of 3.5-4.0x.
  • BRP continues to celebrate the success of its “MGA of the Future” platform consisting of a renter’s insurance product that is distributed through sub-agent partners and property management software providers. Organic growth in this line of business was 43% in the quarter.
  • BRP announced the planned acquisition of Business Insurance Top 100 broker Insgroup, Inc. last week, a transaction that will add nearly $40M in revenue to BRP’s annual run rate and brings its total acquired annual revenue to more than $120M year-to-date. BRP noted the acquisition pipeline remains strong and they expect to close a number of additional deals before year end.

BRP continues to report above average organic and inorganic growth, despite the economic headwinds facing the marketplace. There are some near-term uncertainties that are causing management to expect slightly lower organic growth in the fourth quarter. However, the company is confident in its overall trajectory and recent partnership and new business successes.

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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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