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Brown & Brown revenue up in fourth quarter

Brown & Brown revenue up in fourth quarter

Brown & Brown Inc. reported fourth-quarter 2017 revenue of $474.3 million, up 9.4% from the fourth quarter of 2016, the company said in a statement late Monday.

But on Tuesday morning’s earnings call with analysts, J. Powell Brown, president and CEO of the Daytona Beach, Florida-based brokerage, spoke about how early enthusiasm for double-digit insurance and reinsurance rate increases at Jan. 1 renewals was ultimately tempered by mainly single-digit increases.

Commissions and fees increased 9.3% for Brown & Brown in the fourth quarter to $473.4 million, and the company saw organic revenue growth of 9.3%.

Net income for the fourth quarter was $187.5 million, up 225.0% from the prior-year quarter, as $120.9 million of the increase “was driven by the impact of the Tax Cut and Jobs Act of 2017,” Brown & Brown said in its earnings statement.

Speaking to analysts on Tuesday morning’s call, Mr. Brown addressed what he called “the big question.”

“When the quarter started, there was a tremendous amount of optimism around possible material rate increases, with many thinking catastrophe property rates would increase 10% to 20% plus,” Mr. Brown said.

Ample capacity, however, blunted rate increases, he said.

“During the fourth quarter, we did see a number of risk bearers attempt to increase rates in the range of 10% to 20% on coastal property, but in most cases, these rates did not stick as there is still an abundance of capital in the marketplace,” Mr. Brown said.

“As the quarter continued on and including January 1st renewals, the proposed rate increases moderated downward and we experienced general rate increases of flat to 5%, depending on loss experience,” Mr. Brown said.

Reinsurance was also kept in check by abundant capital.

“The impact on the reinsurance markets has not been significant enough to increase property rates like some had thought,” Mr. Brown said. “After the storms, there’s still capital coming into the marketplace. As a result, property rate increases will more than likely be moderate in 2018, from our perspective.”

Commercial and personal auto continue to get the most rate, mainly up 5% to 10% range depending on loss experience, Mr. Brown told analysts. Professional liability and general liability are flat to up slightly.

Rate increases for employee benefits continue to rise, Mr. Brown said, with small groups of under 50 seeing the highest rate increases of generally 5% to 10%, with rate increases moderating as group size increases.

The brokerage’s revenue for the 12 months ended Dec. 31 was $1.88 billion, up 6.5% from fourth quarter of 2016.

Full-year commissions and fees increased 5.4% to $1.86 billion and organic growth was 4.4%.

Net income for the year increased by 55.2% to $399.6 million, and again benefited from the impact of the Tax Reform Act, the company said in its statement.


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