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Top insurance brokers, No. 6: Brown & Brown Inc.

J. Powell Brown

2020 brokerage revenue: $2.61B

Percent increase (decrease): 9.3%

Brown & Brown Inc. continued its long-time acquisition strategy in 2020, folding in 25 smaller brokers, and reported 3.8% organic revenue growth despite the challenges posed by the COVID-19 pandemic.

The brokerage’s pace of deals has slowed in 2021, but it saw nearly double-digit organic revenue growth in the first quarter as the economy rebounded.

Last year’s deals included a pair of international purchases and an insurtech firm. Internally, the brokerage reorganized its wholesale operations.

Daytona Beach, Florida-based Brown & Brown reported $2.61 billion in brokerage revenue in 2020, a 9.3% increase over 2019, and retained its No. 6 position in Business Insurance’s ranking of the world’s largest brokerages. 

In 2020, Brown & Brown beat the pre-COVID-19 consensus estimates of equity analysts for revenue and earnings, said C. Gregory Peters, St. Petersburg, Florida-based managing director, equity research, at Raymond James & Associates.

“They are a company that performed very well in the face of incredible headwinds over the past year,” he said.

The performance can in part be attributed to Brown & Brown’s decentralized structure, which empowers individual agencies to manage their own businesses, and rising commercial insurance rates, Mr. Peters said.

The 2020 growth was followed by 9.8% organic growth in the first quarter of this year. 

Exposure unit increases, new sales, good retention rates and higher insurance prices drove that growth, said J. Powell Brown, president and CEO of Brown & Brown.

While businesses such as restaurants and hotels were hit hard by the pandemic, construction contractors and some other businesses have seen substantial growth, he said. 

Brown & Brown did not significantly change its M&A protocols during the pandemic, Mr. Brown said.

“We were not buying businesses on the internet,” he said. 

For the deals it completed, Brown & Brown executives had either met with the companies prior to the outbreak or they met with them during the pandemic while taking appropriate precautions, he said.

Included in the deals were Special Risk Insurance Managers Ltd., a Langley, British Columbia-based managing general agent, and O’Leary Insurances Ltd., a Cork, Ireland-based brokerage. 

The international deals don’t signal a specific global growth plan, Mr. Brown said. “We are looking at opportunities, and we found two that fit culturally and made sense financially in Canada and Ireland, and we’d like to expand in those places. But we are looking at other places, too. It’s that simple,” he said.

Brown & Brown’s overseas expansion will likely be slow, said Meyer Shields, Baltimore-based managing director at Keefe, Bruyette & Woods Inc.

“Brown & Brown is, maybe more than any other broker, obsessive about culture, and I think they recognize that identifying culturally compatible companies is more difficult when you go to different countries,” he said.

The November purchase of CoverHound Inc., a San Francisco-based online insurance platform, expands Brown & Brown’s digital footprint and its technology could be used by several Brown & Brown divisions, Mr. Brown said.

The deal could lead to more efficiency and growth, said Mr. Shields of KBW.

“All of a sudden they’ve got this really, really respected tech mindset in the company’s employ,” he said. “I think we are going to see pretty impressive organic revenue growth as a consequence of them being able to act so much faster and so much more accurately than, not necessarily the big public brokers, but the tens of thousands of smaller guys.” 

Brown & Brown only completed two deals in this year’s first quarter, but the brokerage continues to look for acquisitions, Mr. Brown said.

Internally, Brown & Brown consolidated its 25 wholesale units under the umbrella of Bridge Specialty Group, which will enable the units to work more closely, Mr. Brown said.

“It also enables us to use data in our wholesale division to create additional new and different products,” he said.

With the economy reopening, about half of Brown & Brown’s employees are going into the office at least one day a week, Mr. Brown said. 

“We are not a work-from-home company, we are a work anywhere company, and I do believe there’s a distinction. I also believe that you cannot drive a culture virtually,” he said.