Brown & Brown, Inc. · NYSE:BRO
Brown & Brown — Investor Presentation (March 2023)
63 slides from Brown & Brown's investor presentation, Mar 6, 2023
Slide 1: 2023 Company Overview Brown & Brown, Inc.
2023 Company Overview Brown & Brown, Inc.
Slide 2: Information Regarding Forward-Looking Statements
Information Regarding Forward-Looking Statements This presentation and the statements made during our presentation may contain certain statements relating to future results which are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the S
Slide 3: Information Regarding Non-GAAP Measures
Information Regarding Non-GAAP Measures This presentation contains references to "non-GAAP financial measures" as defined in Regulation G of the SEC rules, consisting of Organic Revenue, EBITDAC, EBITDAC Margin, EBITDAC - Adjusted Post FX, EBITDAC Margin - Adjusted Post FX and Diluted Net Income Per
Slide 4: Information Regarding Non-GAAP Measures - Continued
Information Regarding Non-GAAP Measures - Continued Non-GAAP Revenue Measures Organic Revenue is our core commissions and fees less: (i) the core commissions and fees earned for the first twelve months by newly acquired operations; (ii) divested business (core commissions and fees generated from off
Slide 5: Company Overview
Company Overview
Slide 6: Business Highlights
Business Highlights Experienced leadership team & strong performance-based culture Proven track record of profitable revenue growth – organic & via acquisitions Highly diversified revenue base and broad distribution network Operating model consistently generates industry-leading financial metrics Di
Slide 7: Brown & Brown at-a-Glance
2022 Revenue by Segment Historical Revenue & EBITDAC Margin - Adjusted Post FX Headquartered in Daytona Beach, Florida Founded in 1939 - 84 years of serving customers 15,000+ teammates as of December 31, 2022 Doing business in 50 states; 345 domestic and 150 international locations in Belgium, Bermu
Slide 8: The Power of Culture
The Power of Culture Customer Service Focused Deep & Meaningful Relationships Decentralized Sales & Service Accountable & Disciplined Common Goals High Integrity & Quality Talent Growth & Profit Oriented Lean & Highly Competitive Internal Ownership & Entrepreneurial
Slide 9: Four key operating philosophies and vision
We are in the people recruiting and enhancing business. We are in the money-making business. We are in the selling & servicing business. We are in the delivering innovative solutions business. Four key operating philosophies provide the foundation for our strategic plan Vision Be the leading insuran
Slide 10: Middle Market Profile
Middle Market1 Market Profile All customer segments offer attractive growth opportunities. 1 Middle-market defined as businesses with between 50 and 2,500 employees Small to Medium Enterprises & Personal Lines Large Accounts
Slide 11: Decentralized Sales & Service Model
Customer-Facing Functions Decentralized Sales & Service Model Driving operational efficiency by centralizing certain corporate functions, while allowing sales and service decisions to be made at the local/regional level. Branding & Communications Finance Legal HR & Talent Development Acquisitions In
Slide 12: Sustained Record of Strong Revenue Growth
Sustained Record of Strong Revenue Growth Total Revenues ($) in Millions Acquired first Canadian MGA 2020 Acquired The Hays Group $221M 2018 Acquired Arrowhead $108M 2012 Acquired Riedman Insurance Agency $54M 2001 2021 Acquired first retail Irish broker Acquired Hull & Co. $63M 2005 2022 Annual rev
Slide 13: Our Global Footprint
| Our Global Footprint Canada Q. ixcaons Continental United States 342 Beeston Bermuda Belgium United Kingdom 1 Location 1 Location Hawaii 3 Locations Cayman Islands Italy 132 cote Ireland 1 Location 1 Location 10 ixsions
Slide 14: Shareholder Value Creation
Increase capabilities, enhance talent and drive growth Investments in people, technology & innovation Acquisitions Internal Investments Returns to Shareholders Share repurchases to minimize dilution from equity plans & seize on opportunistic pricing Dividend Aristocrat1 29 years of dividend increase
Slide 15: Brown & Brown Financial Highlights
Brown & Brown Financial Highlights Free Cash Flow Conversion1 25% 5 Yr. Avg. 24% 10 Yr. Avg. EBITDAC Margin - Adjusted Post FX 31% 5 Yr. Avg. 32% 10 Yr. Avg. Revenue Growth 14% 5 Yr. CAGR 12% 10 Yr. CAGR Free Cash Flow Growth1 15% 5 Yr. CAGR 15% 10 Yr. CAGR Net Income Per Share - Adjusted Post FX Gr
Slide 16: Total Shareholder Returns
Source: CapIQ as of 12/31/2022 1 Calculated as change in share price plus total dividends paid Total Shareholder Returns 1 Yr. 3 Yr. 5 Yr. 10 Yr. 15 Yr. 20 Yr. BRO (18.4%) 47.5% 131.1% 399.3% 482.4% 780.6% S&P 500 (18.5%) 23.0% 52.8% 208.2% 223.6% 475.3% Total Shareholder Returns1
Slide 17: Retail Segment
Retail Segment
Slide 18: Retail Segment Overview
OVERVIEW Retail Segment Key Metrics 2022 Avg. 3 Yr. Avg. 5 Yr. Revenue Growth 17.9% 15.2% 17.4% Organic Revenue Growth 6.5% 6.7% 5.6% EBITDAC Margin - Adjusted Post FX 30.9% 30.4% 29.6% Drive a culture of accountability, innovation and entrepreneurial thinking. Offer a broad range of capabilities, f
Slide 19: Breadth & Depth of Capabilities
Breadth & Depth of Capabilities The Retail segment provides broad and deep specialization to our customers while maintaining close proximity to the communities in which our customers operate their businesses. Finance & Insurance Health Care Construction Educational Institutions Real Estate Retail Pu
Slide 20: Breadth & Depth of Capabilities
Breadth & Depth of Capabilities No matter where our customers are on their growth journey, we help deliver solutions to meet their ever-evolving insurance and risk management needs. < 25 50,000+ EMPLOYEES < $1M $5B+ REVENUE Alternative risk/captives Analytics & modeling Ancillary/non-medical Aviatio
Slide 21: Investing for the Future
Investing for the Future Our ability to collaborate across Retail and engage our full capabilities helps accelerate growth, allowing us to reinvest in additional tools, technologies, teammates and acquisitions to better serve our customers. Ownership opportunities Visible career paths Ongoing develo
Slide 22: Key Highlights
Key Highlights Profile Geographic Presence Founded in 2013, operating in the U.K., Northern Ireland and the Republic of Ireland Management team with over 200 years of combined operating experience and over 2,100 teammates Market leading U.K. and Irish diversified retail, wholesale, MGA/MGU and netwo
Slide 23: National Programs Segment
National Programs Segment
Slide 24: National Programs Segment Overview
OVERVIEW National Programs Segment Business Overview Leading program administrator (Managing General Agent / Managing General Underwriter). Partner with insurance companies to provide full turn-key services, which holds minimal balance sheet risk. Capabilities include underwriting, distribution mana
Slide 25: Broad & Diverse Capabilities
Public Entity Personal Lines Professional Liability Commercial Lines Broad & Diverse Capabilities Municipalities Not-For-Profit Schools Sovereign Nations Workers Compensation All Risk / Commercial Wind Automotive Aftermarket BOP / Commercial Package Commercial Earthquake Commercial Transportation Da
Slide 26: Breadth & Depth of Expertise
Breadth & Depth of Expertise National Programs delivers broad and deep expertise to its carrier partners and tailored solutions for distribution partners to drive efficient and effective placement of coverage. 100+ carrier relationships Robust marketing team Retail distribution network – 25K+ 40+ pr
Slide 27: Investing for the Future
Investing for the Future Provides carriers with the complete infrastructure to launch and manage broad or niche programs. Carriers Focus On: Capital investments Established program metrics Portfolio underwriting management Reinsurance Risk management Program Support & Servicing: Accounting & Finance
Slide 28: Captives Performance
Captives Performance – Delivering Organic Revenue Growth and Profits We participate in two captives One participates on primary quota share layer basis The other participates on a reinsurance/excess of loss basis Strategic rationale Provide additional capacity to drive Organic Revenue growth Gain di
Slide 29: Wholesale Brokerage Segment
Wholesale Brokerage Segment
Slide 30: Wholesale Brokerage Segment Overview
OVERVIEW Wholesale Brokerage Segment Key Metrics 2022 Avg. 3 Yr. Avg. 5 Yr. Revenue Growth 12.4% 13.5% 10.8% Organic Revenue Growth 7.6% 7.0% 6.8% EBITDAC Margin - Adjusted Post FX 32.1% 32.3% 32.1% Business Mix Binding Authority Brokerage See important disclosures regarding Non-GAAP measures on pag
Slide 31: Underwriting & Products Network
Underwriting & Products Network Data-driven insights and analysis across customer life cycle International via London brokerage and MGA platforms Market aggregator platforms National / regional-delegated underwriting capabilities Product development team Risk modeling 17,000+ independent retail agen
Slide 32: Investing for the Future
Investing for the Future Power of WE Collaboration with National Programs and Retail Talent Talent development and investments New Capabilities New products Practice group focus Coverage comparison (PL) New segments White papers Operational Technology, data and operational transformation Geo Expansi
Slide 33: Services Segment
Services Segment
Slide 34: Services Segment Overview
OVERVIEW Services Segment Business Overview Key Metrics 2022 Avg. 3 Yr. Avg. 5 Yr. Revenue Growth (3.9%) (3.8%) 1.1% Organic Revenue Growth (2.9%) (3.6%) (2.7%) EBITDAC Margin - Adjusted Post FX 19.1% 20.3% 21.0% Composed of claims advocacy, managed care, claims adjusting and claims processing busin
Slide 35: Services Capabilities
Claims TPA Medicare Set-aside/Social Security Services Capabilities Specialized claims services Compliance solutions Experience and scope Data and analytics Nationwide expert network Nationwide coverage Customer-centric service model Robust claims management Scalable & flexible technology Loss contr
Slide 36: Acquisitions
Acquisitions
Slide 37: Acquisition Strategy
Principles Rationale Acquisition Strategy Create long-term shareholder value Find high-quality businesses with capabilities that are additive or complementary to our operations Expand geographic presence or capabilities Identify teams that fit culturally and have ability to take on more responsibili
Slide 38: M&A Process
M&A Process OVERVIEW Acquisitions Typical M&A Structure Minimum and maximum purchase price Agreed-upon baseline and projected pro forma Earnout typically calculated based upon financial performance over a one- to three-year period Structured to retain and incentivize new teammates Leverage proven in
Slide 39: Technology & Innovation
Technology & Innovation
Slide 40: Technology Evolution
Data driven decisions are driving results and providing actionable insights to improve solutions Deliver solution recommendations in Teammates workflows to make it simple to recommend the best solution Actionable Analytics Continue to find ways for small innovations to impact the business and track
Slide 41: Financial Performance
Financial Performance
Slide 42: Strong Revenue Growth
Strong Revenue Growth 1 2 Source: FactSet as of 12/31/2022 1 Peers are Arthur J. Gallagher & Co, Aon plc, Marsh & McLennan Companies, and Willis Towers Watson Public Limited Company 2 S&P 500 revenue growth calculated as change in the sum of adjusted sales over the prior year’s adjusted sales (adjus
Slide 43: Consistently Strong Margins
Consistently Strong Margins EBITDAC Margin Source: FactSet as of 12/31/2022 See important disclosures regarding Non-GAAP measures on pages 2-3 and Non-GAAP reconciliations on pages 51-61
Slide 44: Industry-Leading Free Cash Flow Conversion
Industry-Leading Free Cash Flow Conversion Source: FactSet as of 12/31/2022 1 Peers are Arthur J. Gallagher & Co, Aon plc, Marsh & McLennan Companies, and Willis Towers Watson Public Limited Company See important disclosures regarding Non-GAAP measures on pages 2-3 and Non-GAAP reconciliations on pa
Slide 45: Cash Flow from Operations
Cash Flow from Operations1 ($) in Millions $4752 1 Defined as net cash provided by operating activities 2 Reflects acceleration of $50M in annual bonus payments from January 2013 into December 2012; bonuses are traditionally paid in January 3 Cash flow for years 2020 and 2021 have been restated unde
Slide 46: Diluted Net Income Per Share - Adjusted Post FX
Diluted Net Income Per Share - Adjusted Post FX See important disclosures regarding Non-GAAP measures on pages 2-3 and Non-GAAP reconciliations on pages 51-61 10-Year CAGR = 13.7%
Slide 47: Long-Term Capital Deployment
Long-Term Capital Deployment $4752 1 2 10-Year ($ in Billions) Acquisitions $6.0 Dividends $0.8 Share Repurchases $0.7 CapEx $0.4 Total Cash Deployed $8.0 Total Cash Generated2 $5.7 1 Includes original purchase price plus subsequent earnout payments 2 Defined as net cash provided by operating activi
Slide 48: Liquidity Profile
Liquidity Profile Maintain low leverage, industry- leading margins, high cash flow conversion, and investment grade ratings Optimize financial flexibility in line with growth objectives Target Net Debt Outstanding to EBITDAC ratio of 0 – 2.5x and Total Debt Outstanding to EBITDAC ratio of 0 – 3.0x B
Slide 49: Leverage and Maturity Profile
Leverage and Maturity Profile Debt & Leverage Debt Maturity Profile ($M) 1 Debt outstanding ($M) Debt to EBITDAC Ratio *All amounts presented on this slide are calculated as of 12/31/2022 1 Net Debt Outstanding to EBITDAC shown as 0x in instances where it is below 0x See important disclosures regard
Slide 50: Closing Comments
Closing Comments Expect economic improvement to moderate to more normal levels and premium rate increases to remain relatively consistent Business well positioned to continue delivering profitable growth into the future Strong balance sheet and cash generation as well as access to capital enable lon
Slide 51: GAAP to Non-GAAP Reconciliation Appendix
GAAP to Non-GAAP Reconciliation Appendix
Slide 52: Reconciliation Income Before Income Taxes to EBITDAC
Reconciliation Income Before Income Taxes to EBITDAC and EBITDAC - Adjusted Post FX and Income Before Income Taxes Margin to EBITDAC Margin and EBITDAC Margin - Adjusted Post FX 1 “Income Before Income Taxes Margin” is defined as income before income taxes divided by total revenues See important dis
Slide 53: Reconciliation Income Before Income Taxes to EBITDAC
See important disclosures regarding Non-GAAP measures on pages 2-3 Reconciliation Income Before Income Taxes to EBITDAC and EBITDAC - Adjusted Post FX and Income Before Income Taxes Margin to EBITDAC Margin and EBITDAC Margin - Adjusted Post FX
Slide 54: Reconciliation Income Before Income Taxes to EBITDAC
See important disclosures regarding Non-GAAP measures on pages 2-3 Reconciliation Income Before Income Taxes to EBITDAC and EBITDAC - Adjusted Post FX and Income Before Income Taxes Margin to EBITDAC Margin and EBITDAC Margin - Adjusted Post FX
Slide 55: Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow
1 Cash flow for years 2020 and 2021 have been restated under the fiduciary model. Legacy method of cash flows is used for year prior to 2020 2 Reflects acceleration of $50M in annual bonus payments from January 2013 into December 2012; bonuses are traditionally paid in January See important disclosu
Slide 56: Reconciliation of Diluted Net Income Per Share
See important disclosures regarding Non-GAAP measures on pages 2-3 Reconciliation of Diluted Net Income Per Share to Diluted Net Income Per Share - Adjusted Post FX
Slide 57: Reconciliation of Commissions & Fees to Organic Revenue
Reconciliation of Commissions & Fees to Organic Revenue See important disclosures regarding Non-GAAP measures on pages 2-3
Slide 58: Reconciliation of Commissions & Fees to Organic Revenue
Reconciliation of Commissions & Fees to Organic Revenue See important disclosures regarding Non-GAAP measures on pages 2-3
Slide 59: Reconciliation of Commissions & Fees to Organic Revenue
Reconciliation of Commissions & Fees to Organic Revenue See important disclosures regarding Non-GAAP measures on pages 2-3
Slide 60: Reconciliation of Commissions & Fees to Organic Revenue
Reconciliation of Commissions & Fees to Organic Revenue See important disclosures regarding Non-GAAP measures on pages 2-3
Slide 61: Reconciliation of Commissions & Fees to Organic Revenue
Reconciliation of Commissions & Fees to Organic Revenue See important disclosures regarding Non-GAAP measures on pages 2-3
Slide 62: Reconciliation of Long-Term Total Debt to Net Debt Outstanding
Reconciliation of Long-Term Total Debt to Net Debt Outstanding See important disclosures regarding Non-GAAP measures on pages 2-3
Slide 63: The Cheetah
The Cheetah: Since our beginning, we have known that doing what is best for our customers requires constant persistence and vision. The cheetah, which represents vision, swiftness, strength, and agility, embodies our company culture and has served as a symbol for Brown & Brown since the 1980s. For a