A Sales Culture

A Sales Culture

INSURANCE by Davw Szymanski | Tamoa Bay Editor

Be aware, independent insurance firms: Brown & Brown Insurance plans to continue to acquire other insurance brokerages which fit its culture.

Powell Brown, 40, is president of Brown & Brown Insurance, the world's sixth-largest insurance brokerage. But besides running the Florida-based company, he still sells.

That's the Brown & Brown culture: Selling to grow the business.

"It is all about good people," Brown says. "It's the key to success in a very strong sales culture. We try to recruit talented people and build on our talent."

Brown & Brown has two headquarters, in Tampa and Daytona Beach. That's because executives live in both cities.

It began in 1939 as a small private insurance brokerage in Daytona. It started buying other brokerages and in 1993 did a reverse merger with Poe & Associates in Tampa. It is now international. It opened a London office in March. It is in 37 states and has 180 offices.

It has Gulf Coast offices in Naples, Port Charlotte, Fort Myers, Sarasota, Tampa, Clearwater, Brooksville.

It is still talking to companies about further growth.

Besides sales and acquisitions, what sets Brown & Brown apart are two other features:

One, while many other brokerages have consolidated, Brown & Brown is decentralized, with each branch office having the ability to grow and develop their business.

Second, each branch does a little something different. Some may specialize in health care insurance, others non-profits, others construction.

Why has Brown & Brown decentralized when the industry is doing the opposite? Because giving branch offices authority fosters an entrepreneurial spirit, which is good for business, Brown says.

"Centralization stifles entrepreneurial spirit," says Brown, the grandson of the firm's founder. "We want people to do good things for our clients and future clients. Leaders in our system run their own business."

Acquisition culture

Acquisitions are a part of company culture, too. Brown & Brown has bought 291 other insurance brokerages since 1993.

But the mergers aren't to grow market share. They are to grow sales, Brown says.

The acquisitions are also not done by geography. There is no plan to be in all 50 states or fill out regions. The acquisitions are done because of opportunity to acquire sales-oriented brokerages.

"We will continue to do acquisitions as we have in the past," Brown says. "Acquisitions will definitely be a part of our strategy."

Companies approach Brown & Brown as well as Brown & Brown approaching them.

The prospective merger candidates want to be part of a larger, stronger organization. Some want to liquidate assets or some executives want to retire.

Out of every 10 discussions, only four make it to the term-sheet stage. The other six are not a cultural fit. Of the four left, there's usually an acquisition.

"We talk all the time with acquisition candidates," Brown says. "It is one of the ways we grow our business' top line and bottom line."

Opportunities abound. There are more than 25,000 independent insurance agencies in the United States.

Brown personally gets involved in the merger talks, making sure there is a cultural fit.

"We are a sales and service organization and we work very diligently for customers to earn new business," Brown says. "In addition, we are very focused on new business generation. They may not be as focused on new business generation."

If a merger happens, Brown & Brown usually keeps the company's management intact.

"They are part of the team," Brown says.

Industry trends

One of the main industry trends driving Brown & Brown is competition. There are companies of differing sizes selling commercial property and casualty insurance. That means it is good for customers buying insurance. Property rates in Florida were up for two years and now they are coming down substantially. That helps the buyer.

It's also important to communicate new products and services. Although it's decentralized, Brown & Brown shares information across its system.

Another trend is holistic insurance. Instead of just getting quotes from carriers, brokerages are working with companies to address the root of higher insurance costs, such as better safety records.

"Every insured is a little different," Brown says. "A proactive safety program is a good way to address insurance costs. We think prevention is a good step in trying to manager your overall insurance costs."

Some companies want to self-insure so it is important to talk with them about all of their exposures. Every company is different on how they want to handle insurance, Brown says.

Brown & Brown is looking to invest in all of its divisions, including retail (61%) which deals directly with buyers of insurance, as well as wholesale operations and services operations, which deal with other insurance agents.

Tighter economy

Like other industries, Brown & Brown has been affected by the softer economy.

Executive promotion

Powell Brown, president of Brown & Brown Insurance, is scheduled to take over as chief executive officer of the company in 2009. That's when he is father, Hyatt Brown, will retire and become chairman of the board.

Powell Brown was born in Daytona Beach and has worked at Brown & Brown since 1995. He's been in the insurance industry the past 18 years.

He attended the University of Florida and then went to work for an insurance company in Atlanta.

After getting an MBA from Duke, he worked for a large wholesale operation in New York. He came home to Brown & Brown as a salesperson.

"I'm still a salesperson," Brown says. "We all sell."

He then became marketing manager in Daytona Beach, for three years. Brown ran the company's retail office in Orlando from 1998 to 2003. He soon started taking on offices in Florida, then around the country. He ran a regional operation and became president of the company in January 2007.

Brown & Brown Insurance

Founded in 1939 in Daytona Beach, and growing by acquisition nationally and internationally, Brown & Brown is the sixth-largest insurance brokerage in the world. It markets and insurance products and services, primarily in the property, casualty and employee benefits areas.

• Offices: 180 in 37 states and London.

• Acquisitions: 291 since 1993.

• One of the selected companies that comprise the Standard & Poor's Mid-Cap 400 Index.

• In 2007 Forbes.com ranked Brown & Brown No. 16 on its 2007 list of "The 100 Best Mid-Cap Stocks in America." Forbes magazine ranked Brown & Brown at No. 48 on its 2005 list of "America's Best Small Companies."

• Fortune magazine ranked Brown & Brown at No. 69 on its 2004 list of "America's 100 Fastest-Growing Companies."

BY THE NUMBERS

Brown & Brown ($ in thousands)

BALANCE SHEET

ASSETS 2006 2007 % Change

Current assets:

Cash and equivalents 88,490 38,234 -56.7%

Restricted cash and investments 242,187 254,404 5.04%

Short-term investments 2,909 2,892 -.58%

Premiums, commissions and fees receivable 282,440 240,680 -14.7%

Deferred income taxes - 17,208 0%

Other current assets 32,180 33,964 5.5%

Total current assets 648,206 587,382 -9.3%

Fixed assets, net 44,170 62,327 41.1

Total assets 1,807,952 1,960,659 8.4%

LIABILITIES & STOCKHOLDERS' EQUITY

Current liabilities:

Premiums payable to insurance companies 435,449 394,034 -9.5%

Premium deposits and credits due customers 33,273 41,211 23.8%

Accounts payable 17,854 18,760 5.07%

Total stockholders' equity 929,345 1,097,458 18.08%

Total liabilities and stockholders' equity 1,807,952 1,960,659 8.4%

INCOME STATEMENT FY ended 12/31/2006 FY ended 12/31/2007 % Change

Revenues:

Commissions and fees 864,663 914,650 5.7%

Investment income 11,479 30,494 165.6%

Other income 1,862 14,523 679.9%

Expenses:

Employee compensation 404,891 404,101 0.19%

Non-cash, stock-based compensation 5,416 5,667 4.6%

Other operating expenses 126,492 131,371 3.8%

Total expenses 597,963 648,140 8.3%

Income before income taxes 280,041 311,527 11.2%

Net income 172,350 190,959 10.7%

REVIEW SUMMARY

Business. Brown & Brown Insurance, Tampa and Daytona

Industry. Insurance brokerage

Key. Selecting the right people and business that fit the sales growth strategy