Top insurance brokers: Brown & Brown Inc.Reprints
Increased competition is making it more difficult for Brown & Brown Inc. to grow its business through acquisitions, but the brokerage continues to benefit from the deals it has already made.
Acquisitions are “crucial to their long-term growth outlook, but the market's not the right market for it now. There's a lot of competition from other brokers and private equity,” said Joshua Shanker, New York-based analyst at Deutsche Bank Securities Inc.
However, Brown & Brown has “demonstrated that they can grow the organization without making many mistakes, given the number of acquisitions they've done,” said John Wicher, principal at John Wicher & Associates Inc. in San Francisco. “There's a real opportunity for things to happen. They've demonstrated a consistent ability to attract good sellers.”
“We are continuing to actively look for acquisition candidates that fit culturally with Brown & Brown,” said brokerage President and CEO J. Powell Brown. “There seems to be a lot of competition in the space today, but we absolutely continue to look for people who would fit culturally, that we could consummate a transaction with.”
Despite the challenges, Brown & Brown increased its brokerage revenues 15.6% to $1.57 billion in 2014, making it No. 7 in the 2015 Business Insurance ranking of the world's largest brokers.
And it's still benefiting from past acquisitions, which Mr. Brown said achieved $160 million in annualized revenue last year, the largest since its founding in 1939.
The largest purchase in 2014 was the $602.5 million acquisition of Wright Insurance Group L.L.C. of Uniondale, New York, and Mr. Brown said all divisions will continue to seek acquisitions.
In June, for instance, Denver-based Brown & Brown of Colorado Inc. said it had acquired the assets of Englewood, Colorado-based Fitness Insurance L.L.C., which provides insurance for the health club and fitness industry.
Brown & Brown “prides itself on being a meritocracy, where individuals, many of whom come from outside the industry, have proven sales skill,” said Mr. Wicher. “They start with the principle of, "Bring me talent and motivations, and we'll teach you the business,' and as a result, they are very hard-driving.”
“Our biggest, our greatest asset and our greatest challenge is the same thing: It's people,” Mr. Brown said.
“We have roughly 7,800 people, and as we grow our business organically, or try to meet and exceed all the needs of our customers, we have got to hire more good people,” he said.
While the brokerage is slowly withdrawing from the reinsurance brokerage space, which demands scale to succeed, a new area for the company is a practice that will provide independent third-party guidance on private health insurance exchanges, Mr. Brown said, pointing to Pacific Resources Benefits Advisors L.L.C., a wholly owned Brown & Brown subsidiary.
“With some firms investing significantly in their own (private health insurance) exchanges, that has created an opportunity for us as an independent third party to advise on the benefits or the challenges” of the large private exchanges, he said.
“We're very pleased with our relationship with our carrier partners, and although we do lots of different things with many of them ... we're not doing something dramatically different this year than we were last year. But we think working relationships have just gotten even better,” Mr. Brown said.
Among challenges Brown & Brown faces are a New York jury awarding Starr Indemnity & Liability Co. $1.6 million in fees and reimbursements and $2.8 million in punitive damages in litigation the insurer filed against a Brown & Brown claims management unit related to nonstandard automobile insurance claims. Starr's initial complaint alleged that the unit deemed certain expenses to be allocated loss adjustment expenses, which Starr contended did not qualify as such, based on how that term was described in their claims service agreement.
Mr. Brown declined comment on the litigation, and the broker has not indicated whether it will appeal, according to the court website.
Among other developments at the brokerage, Brown & Brown's board approved a $200 million share purchase program last July, all but $25 million of which has been repurchased, Mr. Brown said.