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Brown & Brown Q4 revenue, profit up sharply

J. Powell Brown

Brown & Brown Inc. posted fourth-quarter revenue of $901.4 million, up 22.1% from the same period in 2021, with organic revenue increasing 7.8%.

Fourth-quarter net income rose 42.8% to $145.2 million, and commissions and fees increased by 21.3%, the Daytona Beach, Florida-based broker reported late Monday.

The broker also continued to grow through acquisitions. It completed nine deals in the fourth quarter, adding combined annual revenue of $17 million.

Catastrophe property rates are expected to be up 10% to 40% for at least the first half of this year and capacity constrained as the market fully digests the impact of Hurricane Ian and other losses, Brown & Brown President and CEO J. Powell Brown said during the broker’s Tuesday morning earnings call.

Brown & Brown is seeing downward pressure on commissions on some placements, with commissions cut by one or two points, Mr. Brown said in response to questions from analysts.

Placements of catastrophe property in January and in the fourth quarter of last year were “some of the most difficult placements we’ve experienced in decades, with rates increasing 20% to 40% or more,” Mr. Brown said.

For properties of lesser construction quality or that have experienced losses, rate increases could be much higher, “and I mean much higher than this range,” Mr. Brown said.

As a result, some customers were unable to afford full limit and ended up increasing their deductibles or purchasing less limits in order to manage their cost of insurance, he said.

Admitted market rate increases were up 3% to 7%, similar to prior quarters, with workers compensation the outlier with rates down 1% to 3%.

Professional liability and excess liability remain competitive, with rates ranging from down 5% to up 5%. Public company directors and officers liability rates are down 5% to 20% or more.

Cyber rates and deductibles continue to increase, though there were “some slight moderations during the quarter,” Mr. Brown said.

Brown & Brown’s retail segment had organic growth of 2.7% in the fourth quarter; national programs 21.9%; wholesale 8.1%; and services 0.2%.

In retail, solid new business across most lines was moderated by a decline in specialty, the brokerage said.

The economic outlook remains uncertain, but the brokerage continues to see expansion of many businesses that are still hiring, albeit at a slower pace than previous quarters, Mr. Brown said.

“While interest rates have increased materially over the past year, we’re not seeing broad-based impact on our customers or the economy yet,” he said.

For the full year, Brown & Brown reported record revenue of $3.573 billion, up 17.1% from 2021, with commissions and fees rising 16.9%. Organic growth for 2022 was 8.1%.

Net income for the year was $671.8 million, up 14.4%.

The retail segment had full-year organic growth of 6.5%, national programs 15.7%,  and wholesale brokerage 7.6%. The services segment declined 2.9% on an organic basis.

Brown & Brown completed 30 acquisitions in 2022, representing combined annual revenue of $435 million.

The broker had a record year for acquisitions and expanded its footprint and capabilities in the U.K. market, Mr. Brown said. It acquired London-based brokerage Global Risk Partners Ltd. and Lloyd’s of London wholesale broker BDB Ltd. last year.

From an overall industry M&A perspective, the number of transactions slowed materially in the fourth quarter compared with previous quarters, but if a business is considered to be a must-have the market is “still aggressive on pricing,” Mr. Brown said.