Brown & Brown profit drops on company's reinsurance exit

Brown & Brown Inc. reported fourth quarter 2014 net income of $24.6 million, down 47.9% as earnings were hit by a $47.4 million charge as the firm exits its reinsurance brokerage business, the Daytona Beach, Florida-based brokerage said Tuesday.

The large pre-tax charge was tied to the Dec. 31, 2014 sale of Axiom Re as Brown executes its plan to exit the reinsurance brokerage business, Brown & Brown said. In addition, Brown also signed a definitive agreement to sell certain assets of Acumen Re Management Corp., effective Feb. 15, completing Brown's “announced strategy to exit the reinsurance brokerage space,” the company said in a statement accompanying its earnings release.

Despite the drop in profits, fourth quarter revenues grew 14.6% to $393.1 million while commissions and fees rose 14.9% to $390.2 million. Investment income for the quarter doubled to $200,000 from $100,000 in the same period last year.

Expenses for the quarter grew 32.9% to $354.4 million, led by a 15.9% increase in employee compensation and benefits.

“Our fourth quarter was another solid quarter, delivering organic growth across all divisions and modest margin expansion. We are also pleased with our 3.5% adjusted organic growth for the full year,” Brown & Brown President and CEO J. Powell Brown said in the statement.

For the full year, earnings dropped 46.9% to $207.0 million as revenues grew 15.6% to $1.58 billion. Fees and commissions rose 15.6% to $1.57 billion as investment income rose 16.6% to $700,000.

Expenses for the year rose 22.9% to $1.2 billion, again hurting profits.

Brown & Brown is the nation's sixth-largest insurance broker, according to Business Insurance's latest ranking.