Brown & Brown, Inc. · NYSE:BRO
Brown & Brown — Investor Presentation (March 2022)
60 slides from Brown & Brown's investor presentation, Mar 21, 2022
Slide 1: 2022 Company Overview Brown & Brown, Inc.
2022 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 SEC Regulation G, including EBITDAC, EBITDAC Margin, Diluted Net Income Per Share – Adjusted, and Organic Revenue. We present these measures because we believe such informatio
Slide 4: Company Overview
Company Overview
Slide 5: 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 Platform operating model generating industry-leading financial metrics Disci
Slide 6: Brown & Brown at-a-Glance
2021 Revenue by Segment Historical Revenue & EBITDAC Margin Headquartered in Daytona Beach, Florida Founded in 1939 - 83 years of serving customers 12,000+ teammates as of December 31, 2021 Doing business in all 50 states; 331 domestic and 20 international locations (Bermuda, Canada, Cayman Islands,
Slide 7: 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 8: 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 9: Market Profile
Market Profile All customer segments offer attractive growth opportunities. 1 Middle-market defined as businesses with between 50 and 2,500 employees Large Accounts Middle Market1 Small to Medium Enterprises & Personal Lines
Slide 10: 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 11: Sustained Record of Profitable Growth
Annual revenue: $1B Acquired Arrowhead $108M Acquired Beecher Carlson $106M Acquired Wright $120M Acquired Riedman Insurance Agency $54M Acquired Hull & Co. $63M Total Revenues ($) in Millions Annual revenue $2.0B Acquired The Hays Group $221M Acquired first Canadian MGA Annual revenue $3.1B 2021 20
Slide 12: Highly Diversified Business Mix
Highly Diversified Business Mix Revenues by Segment ($M) 1993 $94 Retail Wholesale Brokerage National Programs Services 2000 $210 2021 $3,051 1 1 Includes Other revenue
Slide 13: Shareholder Value Creation
Deploy capital to 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 28 years of
Slide 14: Brown & Brown Financial Highlights
Brown & Brown Financial Highlights Free Cash Flow Conversion 26% 5 Yr. Avg. 25% 10 Yr. Avg. EBITDAC Margin 32% 5 Yr. Avg. 32% 10 Yr. Avg. Revenue Growth 12% 5 Yr. CAGR 12% 10 Yr. CAGR Free Cash Flow Growth 18% 5 Yr. CAGR 15% 10 Yr. CAGR Net Income Per Share - Adjusted Growth 19% 5 Yr. Avg. 14% 10 Yr
Slide 15: Total Shareholder Returns
Total Shareholder Returns1 2 Total Shareholder Returns 1 Yr. 3 Yr. 5 Yr. 10 Yr. 15 Yr. 20 Yr. BRO 49.3% 161.5% 228.9% 597.4% 499.9% 1185.1% Peers2 36.8% 111.7% 183.3% 483.4% 679.2% 708.0% S&P 500 26.9% 90.1% 112.9% 279.0% 236.0% 315.1% Source: FactSet as of 12/31/2021 1 Calculated as change in share
Slide 16: Retail Segment
Retail Segment
Slide 17: Retail Segment Overview
OVERVIEW Retail Segment Key Metrics 2021 Avg. 3 Yr. Avg. 5 Yr. Revenue Growth 20.0% 19.6% 14.4% Organic Revenue Growth 11.0% 6.0% 4.8% EBITDAC Margin 31.4% 29.7% 29.7% Drive a culture of accountability, innovation and entrepreneurial thinking. Offer a broad range of capabilities no matter where cust
Slide 18: 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 19: 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 20: 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 21: National Programs Segment
National Programs Segment
Slide 22: National Programs Segment Overview
OVERVIEW National Programs Segment Business Overview We are a leading program administrator (Managing General Agent / Managing General Underwriter). We partner with insurance companies to provide full turn-key services - holds minimal balance sheet risk. Capabilities include underwriting, distributi
Slide 23: Investing for the Future
Investing for the Future National Programs 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: Un
Slide 24: 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 North America retail distribution network
Slide 25: Wholesale Brokerage Segment
Wholesale Brokerage Segment
Slide 26: Wholesale Brokerage Segment Overview
OVERVIEW Wholesale Brokerage Segment Key Metrics 2021 Avg. 3 Yr. Avg. 5 Yr. Revenue Growth 14.3% 12.0% 10.7% Organic Revenue Growth 8.1% 7.0% 6.7% EBITDAC Margin 32.2% 32.4% 32.2% Business Mix Binding Authority Brokerage See important disclosures regarding Non-GAAP measures on page 2 and Non-GAAP re
Slide 27: Underwriting & Products
Underwriting & Products Network National / regional-delegated underwriting capabilities Market aggregator platforms Data driven insights and analysis across customer life cycle Product development team Risk modeling International via London brokerage and MGA platforms 17,000+ independent retail agen
Slide 28: Services Segment
Services Segment
Slide 29: Services Segment Overview
OVERVIEW Services Segment Business Overview Key Metrics 2021 Avg. 3 Yr. Avg. 5 Yr. Revenue Growth 2.8% (1.7%) 3.0% Organic Revenue Growth 3.0% (4.7%) (1.1%) EBITDAC Margin 21.2% 21.3% 22.3% The Services Segment is composed of claims advocacy, claims adjusting and claims processing businesses, includ
Slide 30: 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 31: Acquisitions
Acquisitions
Slide 32: Acquisition Strategy
Principles Rationale Acquisition Strategy Create long-term shareholder value Find high-quality businesses and teams that fit culturally Expand geographic presence or capabilities Identify and involve senior operating leaders early in the process to make for a smooth transition Leverage carrier relat
Slide 33: M&A Process
M&A Process OVERVIEW Acquisitions Typical M&A Structure Minimum and maximum purchase price Agreed-upon baseline and projected pro forma Actual purchase price typically calculated based upon financial performance over a one- to three-year period Structured to retain and incentivize new teammates Leve
Slide 34: Technology & Innovation
Technology & Innovation
Slide 35: Technology Evolution
Technology Evolution Create roadmap for using data as key business differentiator Harness the power of our data - make it actionable Actionable Analytics Foster culture of innovation Idea incubation - identify disruptors & emerging technologies to meet customer needs and drive efficiencies Productio
Slide 36: Innovation Agenda
Innovation Agenda AI-Based Applications Chatbots, Policy Checking & Commercial Underwriting Predictive Analytics Claims, Marketing, Underwriting, Pricing & Operations Robotic Process Automation Claims Settlement Automation Prefill External, Third-Party Data Aggregation Solution Creation Curated Quot
Slide 37: Financial Performance
Financial Performance
Slide 38: Strong Revenue Growth
Strong Revenue Growth 1 2 Source: FactSet as of 12/31/2021 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 39: Consistently Strong Margins
Consistently Strong Margins EBITDAC Margin Source: FactSet as of 12/31/2021 See important disclosures regarding Non-GAAP measures on page 2 and Non-GAAP reconciliations on pages 48-58
Slide 40: Industry-Leading Free Cash Flow Conversion
Industry-Leading Free Cash Flow Conversion 1 Source: FactSet as of 12/31/2021 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 page 2 and Non-GAAP reconciliations on pag
Slide 41: Strong Free Cash Flow Yield
Strong Free Cash Flow Yield 1 Source: FactSet as of 12/31/2021 1 Peers are Arthur J. Gallagher & Co, Aon plc, Marsh & McLennan Companies, and Willis Towers Watson Public Limited Company 2 Represents average free cash flow yield for S&P 500 constituents as of the specified year end See important disc
Slide 42: Cash Flow from Operations
Cash Flow from Operations1 ($) in Millions $4752 $2542 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. 10-Year CAGR = 14.5%
Slide 43: Diluted Net Income Per Share – Adjusted
Diluted Net Income Per Share – Adjusted $4752 $2542 See important disclosures regarding Non-GAAP measures on page 2 and Non-GAAP reconciliations on pages 48-58 10-Year CAGR = 14.4%
Slide 44: Long-Term Capital Deployment
Long-Term Capital Deployment $4752 1 2 10-Year ($ in Billions) Acquisitions $4.4 Dividends $0.8 Share Repurchases $0.7 CapEx $0.4 Total Cash Deployed $6.2 Total Cash Generated2 $5.1 1 Includes original purchase price plus subsequent earnout payments 2 Defined as net cash provided by operating activi
Slide 45: Liquidity Profile
Liquidity Profile Committed to maintaining low leverage, industry- leading margins, high cash flow conversion, and investment grade ratings Optimize financial flexibility in line with growth objectives Target Net Debt Outstanding to EBITDAC ratio of 0 – 2.5x and Total Debt Outstanding to EBITDAC rat
Slide 46: Leverage and Maturity Profile
Leverage and Maturity Profile Debt & Leverage Debt Maturity Profile ($M) 1 Debt outstanding ($M) Debt to EBITDAC Ratio *All amounts presented on this slide are calculated as of 12/31/2021 1 Net Debt Outstanding to EBITDAC shown as 0x in instances where it is below 0x See important disclosures regard
Slide 47: Closing Comments
Closing Comments Expect modest economic improvement to continue driving exposure unit expansion and premium rate increases to moderate Business well positioned to continue delivering profitable growth into the future Strong balance sheet, available cash and access to capital enable long-term shareho
Slide 48: GAAP to Non-GAAP Reconciliation Appendix
GAAP to Non-GAAP Reconciliation Appendix
Slide 49: Income Before Income Taxes Margin definition and reconciliation
1 “Income Before Income Taxes Margin” is defined as income before income taxes divided by total revenues See important disclosures regarding Non-GAAP measures on page 2 Reconciliation of Income Before Income Taxes to EBITDAC and Income Before Income Taxes Margin to EBITDAC Margin
Slide 50: Reconciliation of Income Before Income Taxes to EBITDAC
See important disclosures regarding Non-GAAP measures on page 2 Reconciliation of Income Before Income Taxes to EBITDAC and Income Before Income Taxes Margin to EBITDAC Margin
Slide 51: Reconciliation of Income Before Income Taxes to EBITDAC
Reconciliation of Income Before Income Taxes to EBITDAC and Income Before Income Taxes Margin to EBITDAC Margin See important disclosures regarding Non-GAAP measures on page 2
Slide 52: Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow
See important disclosures regarding Non-GAAP measures on page 2 Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow, Free Cash Flow Conversion and Free Cash Flow Yield
Slide 53: Reconciliation of Diluted Net Income Per Share to Adjusted
See important disclosures regarding Non-GAAP measures on page 2 Reconciliation of Diluted Net Income Per Share to Diluted Net Income Per Share - Adjusted
Slide 54: Reconciliation of Commissions & Fees to Organic Revenue
Reconciliation of Commissions & Fees to Organic Revenue See important disclosures regarding Non-GAAP measures on page 2
Slide 55: Reconciliation of Commissions & Fees to Organic Revenue
Reconciliation of Commissions & Fees to Organic Revenue See important disclosures regarding Non-GAAP measures on page 2
Slide 56: Reconciliation of Commissions & Fees to Organic Revenue
Reconciliation of Commissions & Fees to Organic Revenue See important disclosures regarding Non-GAAP measures on page 2
Slide 57: Reconciliation of Commissions & Fees to Organic Revenue
Reconciliation of Commissions & Fees to Organic Revenue See important disclosures regarding Non-GAAP measures on page 2
Slide 58: Reconciliation of Commissions & Fees to Organic Revenue
Reconciliation of Commissions & Fees to Organic Revenue See important disclosures regarding Non-GAAP measures on page 2
Slide 59: 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 page 2
Slide 60: 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