Brown & Brown, Inc. · NYSE:BRO
Brown & Brown — Investor Day (September 2018)
66 slides from Brown & Brown's investor day presentation, Sep 18, 2018
Slide 1: Brown & Brown, Inc. Investor Day
INSURANCE, A Brown & Brown, Inc. Investor Day \ September 18, 2018
Slide 2: Information Regarding Forward-Looking Statements
Information Regarding Forward-Looking Statements This presentation may contain certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934, which are intended to be covered by the safe harbors created by
Slide 3: Important Disclosures Regarding Non-GAAP Measures
Important Disclosures Regarding Non-GAAP Measures This presentation contains referencesto "non-GAAP financialmeasures” asdefined inSEC Regulation G, including ESITDAC, EBITDAC Margin, Diluted Net income Per Share—Adjusted, Free Cash Flow, Cash Flow Conversion, Cash Flow Yield, Net Debt Outstanding a
Slide 4: Company Overview
Company Overview
Slide 5: Investment Highlights
Investment Highlights Proven track record of growing revenue profitably both organically & through acquisitions & highly diversifi Platform operating model with broad distribution network that generates industry-leading financial metrics
Slide 6: Brown & Brown At A Glance
Brown & Brown At A Glance Headquartered in Daytona Beach, Florida ao en se, oarer a * Founded in 1939 - 79 years of serving customers 1,600 © 8,491 teammates as of December 31, 2017 V0 * Doing business in all 50 states, England, Bermuda, 1,000 Cayman Islands & Canada; 238 locations in 40 states 600
Slide 7: Power Of Our Culture
Power Of Our Culture © 2018 Browne Brown, Inc.All rights reserved. 6
Slide 8: Vision
Vision To be the leading insurance broker delivering innovative solutions to our customers 7S = moa People Money Selling & Innovative Recruiting & Making Servicing Solutions Enhancing Business Insurance Business Business Business © 2018 Browne Brown, Inc.All rights reserved. 7
Slide 9: Total Revenues
Total Revenues History Acquired wight : ($126m) (8) in millions: and issued public $2,000 bond of $500M $1,800 Acquired Arrowhead $1,600 ($105M) Annual avo revenue: $1.98 Closed $1,200 $1.35B Raised $200M credit facility $000) in debt for Acquired Acquired acquisitions Beecher Carlson Riedman Insura
Slide 10: Market Profile
Market Profile All Segments Offer Attractive Growth Opportun Source of Revenue Margin National Account Middle - Commissions Market Small Commercial 41,000 emplo
Slide 11: Shareholder Value Creation
Shareholder Value Creation Seek to deploy capital People, technology at rates exceeding & new program multiple hurdle investments must rates based upon exceed hurdle rates 7 Internal Acqui: strategic nature Investments Return to Shareholders Purchases to 24 years of consecutive dilution from equity
Slide 12: Decentralized Sales & Service Model
Decentralized Sales & Service Model [corporate riactorm | El 2 a Branding Communications HR/Payroll O ke fo IT Finance/Treasury Legal B Strategic Purchasing v Internal Audit/Compliance F National Wholesale Retail Programs Brokerage | Se smene Distennns | “7 of *% g Acquisitions Carrier Cross-Selling
Slide 13: Balanced & Diversified Business Mix
Balanced & Diversified Business Mix Revenues by Segment ($M) $94 $210 $1,881 $2 1993 2000 2017 @ Retail MH Wholesale Brokerage Ml NationalPrograms MM Services © 2018 Browns Brown, Inc.All rights reserved. 12
Slide 14: Total Shareholder Returns
Total Shareholder Returns? 1400% 1200% 1000% 800% 600% 400% 200% oc Ss = — cman Bo tyr. 10 Yr. 20 Yr. BRO m Peers’ MS&P 500 Total ShareholderReturns = +" Sie. at. a0K 20K ERE 36.9% 95.2% 103.7% 220.2% 1313.6% peers 8.0% 62.8% 106.3% 212.1% 333.1% SEP: 17.4% ATA% 77.7% 126.2% 203.1% Source: FactSetaz
Slide 15: Retail Segment
Retail Segment
Slide 16: Segment Overview - Retail
Segment Overview - Retail 2017 Avg.3Yr. Avg. 5 Yr. | Business Mix | Revenue Growth 2.8% 4.6% 7.7% Organic Revenue 2.9% 2.1% 1.9% Growth EBITDAC Margin 30.0% 31.0% 31.4% Rews/Teammate: Ga’ ($2855 $231.8 $228.0 m™ Commercial Lines m Employee Benefits m Personal Lines thousands) Differentiation | Marke
Slide 17: Breadth & Depth Of Expertise
Breadth & Depth Of Expertise Customers span hundreds of industry classifications with 14 primary industries INDUSTRY Coverage placed for almost every line, COMERAGE with 15 primary lines Placing coverage for 1,000+ carrier partners & with 50 significant carriers MARKETS The Retail Segment provides b
Slide 18: Capabilities
Capabilities <s ad im a & @& EDUCATIONAL CONSTRUCTION MANUFACTURING RETAIL FINANCE& PUBLICENTITIES REALESTATE HEALTHCARE NON-PROFITS NSTITUTIONS NSURANCE Environmental Liability Group Retirement & Savings 1 Brown® Brown, Inc.All righ
Slide 19: Investing For The Future
Investing For The Future « Employee benefits technology & compliance tools Customer experience * Acquisitions CAPABILITIES * Data & analytics TECHNOLOGY * Standardized agency management platform * Operational efficiency * Ownership Producer incentives * Brown & Brown University TEAMMATES The Retail
Slide 20: National Programs Segment
National Programs Segment
Slide 21: Segment Overview - National Programs
Segment Overview — National Programs 2017 Avg.3Yr. Avg. 5 Yr. Revenue Growth 7.0% 5.9% 13.5% Organic Revenue 6.1% 4.0% 5.6% Growth EBITDAC Margin 37.5% 37.8% 37.3% Revs/Teammate(in $249.1 $244.3 $241.3 thousands) usiness Overview * Brown & Brown National Programsis a leading program administrator in
Slide 22: Breadth & Depth Of Expertise & Capabilities
Breadth & Depth Of Expertise & Capabilities * 60+ programs $2.8B+ in written premium * Managementteam INDUSTRY * Turnkey & bespoke solutions * Underwriting expertise * Product development * Technology, data & analytics ¢ 40+ carrier relationships AR * Robust marketing team * Nationwide distribution
Slide 23: Solutions
Solutions Technology, Data & Analytics . Technology Underwriting & management Carriers Focus On: Capital investments Established program metrics Portfolio underwriting management Reinsurance Risk management Daily Program Support & Servicing: * Operations & mailroom * Policy administration Billing &
Slide 24: Arrowhead Core Commercial
Arrowhead Core Commercial * Program launched in July 2017 * QBE signed a multi-year commitment for underwriting authority in North America * Target market is standard commercial business with premiums generally under $100K * Core commercial program consists of business owner and commercial package p
Slide 25: Wholesale Brokerage Segment
Wholesale Brokerage Segment
Slide 26: Segment Overview - Wholesale Brokerage
Segment Overview — Wholesale Brokerage | Key Metrics | 2017 Avg.3Yr. Avg. 5 Yr. Revenue Growth 11.8% 8.6% 10.1% Organic Revenue 6.6% 5.6% 7.9% Growth EBITDAC Margin 32.7% 33.8% 29.4% Revs/Teammate(in $233.3 $225.3 $215.9 thousands)? l EE l * The Wholesale Brokerage Segment primarily distributes exce
Slide 27: Product & Underwriting Expertise
Product & Underwriting Expertise peas G0 Expentias | Uniden nicinskeebediucrs + Open market brokerage & full underwriting binding authority + Product-specific expertise + Layering expertise + Modeling expertise + Product development team * Policy forms ® High-risk property/casualty exposures Transpo
Slide 28: Services Segment
Services Segment
Slide 29: Segment Overview - Services
Segment Overview - Services Key Metrics | | i RECTrTerres Tr 2017 Avg.3Yr. Avg. 5 Yr. Revenue Growth 5.8% 6.6% 7.1% 38% Organic Revenue 5.1% 5.2% 4.0% Cs Growth EBITDAC Margin 28.3% 22.8% 28.5% Revs/Teammate(in $179.7 $175.3 $172.9 @ Claims Third-Party Administrators (TPAs) thousands)? 1 Medicare Se
Slide 30: Services Capabilities
Services Capabilities [Medicare Set-Aside / Social Security | | Claims TPA | @ e * Specialized claims services * Nationwide coverage * Compliance solutions * Customer-centric service model * Experience and scope Robust claims management + Data and analytics Scalable & flexible technology + Nationwid
Slide 31: Acquisitions
Acquisitions
Slide 32: Disciplined M&A Strategy
Disciplined M&A Strategy I Strategic Rationale | | 10-Year Total Acquired Revenue - $888M* | Create long-term shareholder value ($) in millions Find high-quality businesses & teams that fit culturally $62 $58 Target strategic stand-alone and fold-in opportunities Evaluate each opportunity in a consi
Slide 33: Acquired Revenue By Year
Acquired Revenue! By Year ($) in millions $120 % 9 * Represents the approximate annual revenue of businesses and books of business acquired between 2008 and 2018t0-03. B ©2018 own own nc Al ihsresved, 32
Slide 34: Closed Transactions - 2018
Closed Transactions - 2018 cAraciic §=E&I INSURANCE RESOURCES HSR INSURANGE AGENCY ING Health Special Risk, Inc. 16 Transactions / $95M Annual Revenue
Slide 35: Technology & Innovation
Technology & Innovation
Slide 36: Business Value Maturity
Business Value Maturity Impact Value Technology Evolution Innovate Operational Excellence Service Excellence Information Technology Maturity © 2018 Browns Brown, Inc.All rights reserved 35
Slide 37: Connected Teammate
Connected Teammate és se ae gg ee Eas) ou 3% 2ua8yjaqu1 aouew® © 2018 Browns Brown, Ine Allrightsreserved. 36
Slide 38: Information Technology Update
Information Technology Update | penncnn Oiioeumias | Original Updated Estimate Estimate * Upgrade core financial and management reporting systems * Streamline and simplify core architecture Potential $30-$40M — $30-$40M investment) © Upatade’ and eaniancs agency [pokey Timehorizonof 2-3years 3-4year
Slide 39: Innovation Agenda
Innovation Agenda > & Al Based Driven New Product Robotic Process Applications Development Automation Chatbots, Policy Checking, & Commercial Underwriting 20x, (ON Ato ates Predictive Analytics Claims Settlement Prefill Claims, Marketing, Automation External, Third Party Underwriting, Pricing & Data
Slide 40: InsurTech Engagement
InsurTech Engagement O Tracking & Monitoring Demos & Introductions Oo NDA - Deeper Evaluation Proof of Concept © 2018 Browns Brown, Inc.All rights reserved. 39
Slide 41: Financial Performance
Financial Performance
Slide 42: Outperforming Peers & Market
Outperforming Peers: & Market Revenue Growth on Th 6x 6% 6%" 6%" | a” tt 10-Year Average 5-Year Average 2017 MBRO MPeers MS&P 500 EBITDAC Margin 34% 33% 3296 22% 24% 19% 19% 20% 19% 21% 1995 il 183% 19% 19% BRO AIG AON MMC WLTW §10-Year average EBITDAC Margin 5-Year average EBITDAC Margin 2017 EBITD
Slide 43: Strong & Consistent Financial Performance
Strong & Consistent Financial Performance a | | Brown & Brown Cash Flow Conversion Compa MBRO Mi Peers* m S&P 500 25% 20% 10-year Average S-year Average 2017 Source: FactSet, SNL Financial, Note: Wills Towers Watson Public Limited Company numbers represent legacy Wilisbusinss and donotinclude amount
Slide 44: Industry-Leading Cash Flow Yield
10% Industry-Leading Cash Flow Yield BRO 10-year average: 8.3% S&P 500 10-year average: 6.7% Peer 10-year average: 5.5% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 MBrown & Brown mPeerAverage mS&P 500 Source: FactSet Peers areArthur 1. Gallagher8: Co, Aon pl, Marsh & McLennan Companies, and Wi
Slide 45: Strong Cash Generation
Strong Cash Generation’ ($)in millions 2008 2010 2011 2012 2013 2014 2015 2016 2017
Slide 46: Diluted Net Income Per Share Growth
$3.20 $270 $2.20 $170 $1.20 $070 Diluted Net Income Per Share Growth $2.81 $1.82 $1.70 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 © 2018 Browns Brown, Inc.All rights reserved 45
Slide 47: Growth Of Diluted Net Income Per Share - Adjusted
Growth Of Diluted Net Income Per Share - Adjusted $2.10 $1.90 $170 $1.50 $1.30 $1.10 $0.90 $070 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 B See importanisesiesreprding Non GAAP mesures onpage 20nd NonGAAP recon on pops33-64 ©2018 own. own Inc A iehsresved, 46
Slide 48: Balanced Long-Term Capital Deployment
Balanced Long-Term Capital Deployment ($) in millions $801 $601 $401 $201 $ B 0 0 0 0 3 salllin 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 mDividends mEarnouts mCapEx mAcquisitions mShare Repurchases Defined asnet cash provided by operating activities. Ten Year Cash Generated?: $3.3B Cash Dep
Slide 49: Debt Outstanding To EBITDAC
Debt Outstanding To EBITDAC Debt outstanding ($) Debt to in ions EBITDAC Ratio. Mim Gross Debt Outstanding ——Gross Debt Outstanding to EBITDAC ——Net Debt Outstanding to EBITDAC $1,400 3.0 $1,200 25 $1,000 20 $800 15 $600 10 $400 05 $200 0.0 $0 05 2008 2009 «2010S 2011 «2 2012-2013 «2014S «2015 2016
Slide 50: Balanced Leverage To Support Growth
Balanced Leverage To Support Growth Maturity Profile Bank debt (floating rate) ™ Private placement debt (fixed rate) ™ Bonds 4 Revolvers ‘$600 Private caso ‘$800 Placement 00 ws Bonds $300 0 Bank Debt $100 $150 I. | 535 $40 $40 aa s = = $0 + s 2018 = 20192020» 2021 20220232024 nae ‘eatebde Outstandi
Slide 51: Outlook
Outlook Technology investments & core commercial Acquisition impact
Slide 52: Closing Comments
Closing Comments
Slide 53: Closing Comments
Closing Comments Business well positioned to capture future growth opportunities Balanced capital strategy & liquidity to deliver long-term shareholder value Investing in technology to improve customer & teammate ta analytics & workflow efficiency
Slide 54: GAAP To Non-GAAP Reconciliation
GAAP To Non-GAAP Reconciliation APPENDIX 53
Slide 55: Reconciliation Of Net Income To EBITDAC & EBITDAC Margin
Reconciliation Of Net Income & Net Income Margin To EBITDAC' & EBITDAC Margin? ($ millions, except per share data; unaudited) 00g = 2009S «2010S «2011S 2012,S*««2018.=S (Csi 20S—(ti2NGSCt«( Net income $1661 $1533 $1618 $1640 $1840 $217.1 $206.9 $243.3 $2575 $399.6 Net Income Margin? 17% 16% 17% 16%
Slide 56: Reconciliation Of Net Income To EBITDAC & EBITDAC Margin
Reconciliation Of Net Income & Net Income Margin To EBITDAC' & EBITDAC Margin? ($ millions, except per share data; unaudited) Retail National Programs 2013 «2014 2015.20 «= 2017:'| «2018 20120152020. Incomebeforeincometaxes $1618 $1575 $1819 $1880 $1966 | $612 $732 $677 $918 $1100 Income Before Inco
Slide 57: Reconciliation Of Net Income To EBITDAC & EBITDAC Margin
Reconciliation Of Net Income & Net Income Margin to EBITDAC' & EBITDAC Margin? ($ millions, except per share data; unaudited) Income before income taxes Income Before Income Taxes Margin? Interest Depreciation Amortization Change in estimated acquisition earn-out payables EBITDAC EBITDAC Margin Tota
Slide 58: Reconciliation Of Net Cash Provided By Operating Activities to Free Cash Flow
Reconciliation Of Net Cash Provided By Operating Activities to Free Cash Flow!, Cash Flow Conversion? and Cash Flow Yield? ($ millions, except per share data; unaudited) 2008 2009 2010-2011 2012 2013 2014 2015 2016 2017 ‘Stock Price, as of the 10% day of Heneelyens giss2 $18.81 $19.75. $22.63 $25.46
Slide 59: Reconciliation Of Diluted Net Income Per Share To Adjusted
Reconciliation Of Diluted Net Income Per Share To Diluted Net Income Per Share - Adjusted ($ millions, except per share data; unaudited) Diluted Netincome pershare Changein estimated acquisition earn-out payable Losson disposal- Axiom Legal Settlement Tax Reform Act Diluted Net Income perShare - Adj
Slide 60: Reconciliation of Commissions & Fees To Organic Revenue
Reconciliation of Commissions & Fees To Organic Revenue ($ millions; Unaudited) 2017 Retail Programs Wholesale Services Total 2017 2016 2017-2016 2017_—S 2016 =. 2017 — 2016 = 2017 2016 Commissions and fees $942.1 $916.1 $479.0 $447.8 $271.1 $242.8 $165.1 $156.1 $1857.3 $1,762.8 Total Change 26.0 31
Slide 61: Reconciliation of Commissions & Fees To Organic Revenue
Reconciliation of Commissions & Fees To Organic Revenue (6 millions; Unaudited) 2016 Retail Programs Wholesale Services Total 2016 201520162015 2016 +2015 2016 ©2015-2016 2015 Commissions and fees $916.1 $866.5 $447.8 $4285 $242.8 $216.6 $156.1 $145.4 $1,762.8 $1,657.0 Total Change 49.6 19.3 26.2 10
Slide 62: Reconciliation of Commissions & Fees To Organic Revenue
Reconciliation of Commissions & Fees To Organic (6 millions; Unaudited) Commissions and fees Total Change Total Growth % Contingent Commissions Guaranteed Supplemental Commissions Core commissions and fees Acquisition revenues Divested business Organic Revenue Organic Revenue growth “Organic Revenue
Slide 63: Reconciliation of Commissions & Fees To Organic Revenue
Reconciliation of Commissions & Fees To Organic Revenue (6 millions; Unaudited) 2014 Retail Programs Wholesale Services Total 2014 201320142013 2014-2013 2014 2013 20142013 ‘Commissions and fees $822.1 $730.9 $397.3 $300.3 $211.5 $193.3 $136.5 $131.0 $1,567.4 $1,355.5 Total Change 91.2 97.0 18.2 5.5
Slide 64: Reconciliation of Commissions & Fees To Organic Revenue
Reconciliation of Commissions & Fees To Organic Revenue (6 millions; Unaudited) 2013 Retail Programs Wholesale Services Total 2013 2012 2013-2012 2013 2012 2013 2012 2013 2012 ‘Commissions and fees $730.9 $646.0 $300.3 $259.4 $193.3 $167.5 $131.0 $116.2 $1,3555 $1,189.1 Total Change 84.9 40.9 25.8 1
Slide 65: Reconciliation of Current and Long-Term Debt to Net Debt Outstanding
Reconciliation of Current and Long-Term Debt to Net Debt Outstanding! (§ Millions, except per share data; unaudited) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Currentportionoflong-term $6.2 gu. S47 $12 $o1 $1000 45.6 $78.1 $555 $1200 debt Long-term debt less unamortized discountand $253.6 $2
Slide 66: For additional information
rown & Town INSURANCE, For additional information: Andrew Watts| Executive Vice President & Chief Financial Officer | 386-239-5770 | awatts@bbins.com