Brown & Brown, Inc. · NYSE:BRO
Brown & Brown — Investor Presentation (May 2020)
61 slides from Brown & Brown's investor presentation, May 19, 2020
Slide 1: Brown & Brown, Inc. Investor Presentation – 2020
Brown & Brown, Inc. Investor Presentation – 2020 May 2020 Exhibit 99.1
Slide 2: Information Regarding Forward-Looking Statements
Information Regarding Forward-Looking Statements This presentation and the statements made during our 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 intend
Slide 3: Non-GAAP Financial 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, Net Debt, Total Debt Outstanding to EBITDAC, Net Debt Outstanding to EBITDAC, Free Cash Flow, Free Cash Flow Conversion,
Slide 4: Company Overview
Company Overview
Slide 5: Investment Highlights
Investment Highlights Proven track record of profitable revenue growth – organic & acquired Experienced leadership team & strong performance-based culture Balanced & highly diversified revenue base Strong liquidity and cash flow conversion supported by disciplined capital strategy Platform operating
Slide 6: Brown & Brown At-A-Glance
Brown & Brown At-A-Glance Key Facts Historical Revenue & EBITDAC Margin Ownership 2019 Revenue by Segment Headquartered in Daytona Beach, Florida Founded in 1939 - 81 years of serving customers 10,000+ teammates as of December 31, 2019 Doing business in all 50 states, Bermuda, Canada, Cayman Islands
Slide 7: Power of Our Culture
Power of Our Culture Sales & Service Focused Ownership & Entrepreneur Decentralized Highly Competitive Common Goals Prideful Relationships Profit Oriented Lean High Quality & Integrity
Slide 8: Vision
Vision People Recruiting & Enhancing Business Money Making Business Selling & Servicing Insurance Business To Be the Leading Insurance Broker Delivering Innovative Solutions to Our Customers Innovative Solutions Business
Slide 9: Sustained Track Record of Profitable Growth & Integrating Acquisitions
Annual revenue: $2.4B Closed $1.35B credit facility Raised $150M of equity for acquisitions Raised $200M in debt for acquisitions Annual revenue: $1B Acquired Arrowhead ($108M) Acquired Beecher Carlson ($106M) Acquired Wright ($120M) and issued public bond of $500M Acquired Riedman Insurance Agency
Slide 10: Balanced & Diversified Business Mix
Balanced & Diversified Business Mix Revenues by Segment ($M) Retail Wholesale Brokerage National Programs Services 1993 2019 2000 $2,392 $210 $94
Slide 11: Market Profile
Market Profile National Account Middle - Market1 Small Commercial Low - Medium Medium Medium Margin Fees Commissions Commissions Source of Revenue 1 Middle-market defined as businesses with between 50 and 2,500 employees All Segments Offer Attractive Growth Opportunities
Slide 12: Shareholder Value Creation
Shareholder Value Creation People, technology & new program investments must exceed hurdle rates Purchases to minimize dilution from equity plans & opportunistic buys Internal Investments Acquisitions Return to Shareholders Seek to deploy capital at rates exceeding hurdle rates 26 years of consecuti
Slide 13: Decentralized Sales & Service Model
Decentralized Sales & Service Model Leverage National Scale – Sell & Service Locally Brand Finance/Treasury Legal HR/Payroll Strategic Purchasing Communications IT Internal Audit/Compliance Acquisitions Talent Development Carrier Relations Cross-Selling Knowledge Sharing Marketing Talent Development
Slide 14: Total Shareholder Returns
Total Shareholder Returns1 2 Source: FactSet as of 12/31/2019 ¹ Calculated as change in share price plus total dividends paid 2 Represents median total shareholder returns of Arthur J. Gallagher & Co, Aon plc, Marsh & McLennan Companies, and Willis Towers Watson Public Limited Company. Total Shareho
Slide 15: Reasons to Invest in Brown & Brown
Reasons to Invest in Brown & Brown Revenue Growth 9% 5 Yr. CAGR 9% 10 Yr. CAGR Free Cash Flow Yield 8% 5 Yr. Avg. 8% 10 Yr. Avg. Free Cash Flow Conversion 24% 5 Yr. Avg. 24% 10 Yr. Avg. EBITDAC Margin 32% 5 Yr. Avg. 33% 10 Yr. Avg. Net Income Per Share Growth1 11% 5 Yr. CAGR 10% 10 Yr. CAGR Total Sh
Slide 16: Retail Segment
Retail Segment
Slide 17: Segment Overview - Retail
Segment Overview - Retail Key Metrics Business Mix Differentiation Market Profile Culture of ownership and entrepreneurial thinking Breadth and depth of capabilities available to customers from small businesses to large multi-national entities Delivering solutions across all lines of business for ou
Slide 18: Breadth & Depth of Expertise
Breadth & Depth of Expertise INDUSTRY Customers span hundreds of industry classifications with more than 14 industries MARKETS Placing coverage for 1,000+ carrier partners and with 50 significant carriers COVERAGE Coverage placed for almost every line, with more than 15 lines The Retail Segment prov
Slide 19: Capabilities
Capabilities Property Casualty Workers’ Compensation Professional / Cyber Liability Captive Management & Actuarial Services Environmental Liability Claims & Loss Control Consulting / Analytics Group Medical, Benefits, Retirement & Savings Ancillary / Non-Medical Benefits F&I Dealership Services Reve
Slide 20: Investing for the Future
Investing for the Future TEAMMATES Ownership Producer incentives Brown & Brown University CAPABILITIES Tailored risk management solutions Customer experience National breadth and acquisitions TECHNOLOGY Data, analytics and modeling capabilities Employee benefits technology & compliance tools Standar
Slide 21: National Programs Segment
National Programs Segment
Slide 22: Segment Overview – National Programs
Segment Overview – National Programs Business Overview Programs Brown & Brown National Programs is a leading program administrator (Managing General Agent / Managing General Underwriter). Our National Programs team partners with insurance companies and provides services such as underwriting, distrib
Slide 23: Breadth & Depth of Expertise
Breadth & Depth of Expertise CAPABILITIES Turnkey and bespoke solutions Underwriting expertise Product development Technology, data and analytics MARKETS 100+ carrier relationships Robust marketing team Nationwide retail distribution network INDUSTRY 40+ programs $3.1B+ in written premium Management
Slide 24: Solutions
Solutions 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 Technology Underwriting Billing & collection C
Slide 25: Wholesale Brokerage Segment
Wholesale Brokerage Segment
Slide 26: Segment Overview – Wholesale Brokerage
Segment Overview – Wholesale Brokerage Key Metrics Business Mix Business Overview Key Go-to-Market Brands 2019 Avg. 3 Yr. Avg. 5 Yr. Revenue Growth 8.0% 8.5% 8.0% Organic Revenue Growth 7.4% 6.5% 6.0% EBITDAC Margin 32.4% 32.1% 32.9% Revs/Teammate (in thousands)1 $239 $233 $228 The Wholesale Brokera
Slide 27: Breadth & Depth of Expertise
Breadth & Depth of Expertise Areas of Expertise Open market brokerage and full underwriting binding authority Product-specific expertise Layering expertise Modeling expertise Product development team Policy forms Underwriting & Products High-risk property/casualty exposures Transportation, auto, gar
Slide 28: Services Segment
Services Segment
Slide 29: Segment Overview - Services
Segment Overview - Services Key Metrics Business Mix Business Overview Businesses The Services Segment is composed of claims advocacy businesses, claims adjusting, and claims processing, including property, auto, and workers compensation. These businesses work on behalf of our carrier partners, publ
Slide 30: Services Capabilities
Services Capabilities Specialized claims services Compliance solutions Experience and scope Data and analytics Nationwide expert network Medicare Set-Aside / Social Security Nationwide coverage Customer-centric service model Robust claims management Scalable and flexible technology Loss control/safe
Slide 31: Acquisitions
Acquisitions
Slide 32: Disciplined M&A Strategy
Disciplined M&A Strategy Consistent due diligence process and price accordingly Corporate and segment teams involved Sponsor responsible post acquisition Integrate Finance, IT, and HR Create long-term shareholder value Find high-quality businesses and teams that fit culturally Identify and involve s
Slide 33: Technology & Innovation
Technology & Innovation
Slide 34: Technology Evolution
Technology Evolution Standardize Optimize Innovate Business Value Maturity Value Impact Information Technology Maturity Operational Excellence Service Excellence
Slide 35: Information Technology Update
Information Technology Update Program Objectives Actual & Projected EBITDAC Margin Effect Upgrade core financial and management reporting systems Streamline and simplify core architecture Upgrade and enhance strategic agency/policy management systems Enhance data capture and analytics Reduce ineffic
Slide 36: Innovation Agenda
Innovation Agenda Prefill External, Third Party Data Aggregation New Product Development Robotic Process Automation Predictive Analytics Claims, Marketing, Underwriting, Pricing & Operations Claims Settlement Automation AI-Based Applications Chatbots, Policy Checking & Commercial Underwriting
Slide 37: InsurTech Engagement
InsurTech Engagement Tracking & Monitoring Demos & Introductions Proof of Concept In Production NDA - Deeper Evaluation
Slide 38: Financial Performance
Financial Performance
Slide 39: Performance vs. Peers & Market
Performance vs. Peers & Market Source: FactSet as of 12/31/2019 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 pages 48-60 1
Slide 40: Strong & Consistent Free Cash Flow Conversion
Strong & Consistent Free Cash Flow Conversion Source: FactSet as of 12/31/2019, SNL Financial 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 reconc
Slide 41: Industry-Leading Free Cash Flow Yield
Industry-Leading Free Cash Flow Yield Source: FactSet as of 12/31/2019 1 Peers are Aon plc, Arthur J. Gallagher & Co, Marsh & McLennan Companies, and Willis Towers Watson Public Limited Company. 2 Represents median free cash flow yield for S&P 500 constituents as of the specified year end. Based on
Slide 42: Strong Cash Generation
Strong Cash Generation¹ 10-Year CAGR = 11.3% ($) in Millions $4752 $2542 1 Defined as net cash provided by operating activities. 2 Reflects acceleration of $50M in annual bonus payments from January 2013 to December 2012; bonuses are traditionally paid in January.
Slide 43: Diluted Net Income Per Share
Diluted Net Income Per Share 10-Year CAGR = 10.0%
Slide 44: Diluted Net Income Per Share – Adjusted
Diluted Net Income Per Share – Adjusted 10-Year CAGR = 10.0% See important disclosures regarding Non-GAAP measures on page 2 and Non-GAAP reconciliations on pages 48-60
Slide 45: Balanced Long-Term Capital Deployment
Balanced Long-Term Capital Deployment ($) in Millions 1 Defined as net cash provided by operating activities.
Slide 46: Conservative Financial Policy & Liquidity Profile
Conservative Financial Policy & Liquidity Profile 1 Total debt outstanding is defined as current portion of long-term debt plus long-term debt less unamortized discount and debt issuance costs 2 Net Debt Outstanding to EBITDAC shown as 0x in instances where it is below 0x See important disclosures r
Slide 47: Closing Comments
Closing Comments
Slide 48: Closing Comments
Closing Comments Business well positioned to capture future opportunities Premium rates continue to increase slightly, and exposure units impacted by economic growth Balanced capital strategy and liquidity to deliver long-term shareholder value Investing in technology to improve customer and teammat
Slide 49: GAAP to Non-GAAP Reconciliation Appendix
GAAP to Non-GAAP Reconciliation Appendix
Slide 50: EBITDAC Reconciliation
($ Millions, Except Per Share Data; Unaudited) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Net income $161.8 $164.0 $184.0 $217.1 $206.9 $243.3 $257.5 $399.6 $344.3 $398.5 Net Income Margin 17% 16% 15% 16% 13% 15% 15% 21% 17% 17% Income taxes $104.3 $106.5 $120.8 $140.5 $132.8 $159.3 $166.0 $5
Slide 51: Retail and National Programs Reconciliation
($ Millions, Except Per Share Data; Unaudited) Retail National Programs 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Income before income taxes $181.9 $188.0 $196.6 $217.8 $222.9 $67.7 $91.8 $110.0 $117.4 $143.7 Income Before Income Taxes Margin 21% 20% 21% 21% 16% 16% 20% 23% 24% 28% Interest
Slide 52: Wholesale Brokerage and Services Reconciliation
($ Millions, Except Per Share Data; Unaudited) Wholesale Brokerage Services 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Income before income taxes $64.7 $62.6 $68.8 $70.2 $82.7 $19.7 $24.3 $30.5 $34.5 $40.3 Income Before Income Taxes Margin 30% 26% 25% 24% 27% 14% 16% 18% 18% 21% Interest $0.9
Slide 53: Free Cash Flow Reconciliation
($ Millions, Except Per Share Data; Unaudited) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Stock Price, as of the 10th day of the fiscal year $9.88 $11.32 $12.73 $15.70 $16.46 $16.05 $18.21 $22.67 $26.11 $27.99 Total Shares 278,636 280,528 284,020 285,248 285,782 280,224 275,608 277,586 275,52
Slide 54: Diluted Net Income per Share – Adjusted
($ Millions, Except Per Share Data; Unaudited) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Diluted Net income per share $0.56 $0.57 $0.63 $0.74 $0.71 $0.85 $0.91 $1.40 $1.22 $1.40 Change in estimated acquisition earn-out payable - - - 0.01 0.02 0.01 0.02 0.02 0.01 - Loss on disposal - Axiom -
Slide 55: Reconciliation of Commissions & Fees to Organic Revenue 2019
See important disclosures regarding Non-GAAP measures on page 2. Reconciliation of Commissions & Fees to Organic Revenue Reconciliation of Commissions & Fees to Organic Revenue ($ Millions; Unaudited) 2019 Retail Programs Wholesale Services Total 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 Com
Slide 56: Reconciliation of Commissions & Fees to Organic Revenue 2018
See important disclosures regarding Non-GAAP measures on page 2. Reconciliation of Commissions & Fees to Organic Revenue Reconciliation of Commissions & Fees to Organic Revenue ($ Millions; Unaudited) 2018 Retail Programs Wholesale Services Total 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 Com
Slide 57: Reconciliation of Commissions & Fees to Organic Revenue 2017
See important disclosures regarding Non-GAAP measures on page 2. 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 2016 2017 2016 2017 2016 Com
Slide 58: Reconciliation of Commissions & Fees to Organic Revenue 2016
See important disclosures regarding Non-GAAP measures on page 2. Reconciliation of Commissions & Fees to Organic Revenue Reconciliation of Commissions & Fees to Organic Revenue ($ Millions; Unaudited) 2016 Retail Programs Wholesale Services Total 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 Com
Slide 59: Reconciliation of Commissions & Fees to Organic Revenue 2015
Reconciliation of Commissions & Fees to Organic Revenue See important disclosures regarding Non-GAAP measures on page 2. Reconciliation of Commissions & Fees to Organic Revenue ($ Millions; Unaudited) 2015 Retail Programs Wholesale Services Total 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 Com
Slide 60: Debt and Leverage Reconciliation
See important disclosures regarding Non-GAAP measures on page 2. ($ Millions; Unaudited) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Current portion of long-term debt $1.7 $1.2 $0.1 $100.0 $45.6 $73.1 $55.5 $120.0 $50.0 $55.0 Long-term debt less unamortized discount and debt issuance costs 250
Slide 61: The Cheetah
The Cheetah: Since our beginning, we have known that doing the 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 addit