Brown & Brown Stock

Brown & Brown, Inc. (Brown & Brown) operates as a diversified insurance agency, wholesale brokerage, insurance programs and service company.

The company markets and sells insurance products and services, primarily in the property, casualty and employee benefits areas. The company provides its customers with quality, non-investment insurance contracts, as well as other targeted, customized risk management products and services. The company primarily operates as an agent or broker and therefore, with limited exceptions, do not assume underwriting risks. Within The Wright Insurance Group, LLC (Wright), the company operates a write-your-own flood insurance carrier, Wright National Flood Insurance Company (WNFIC). WNFIC's underwriting business consists of policies written pursuant to the National Flood Insurance Program (NFIP), the program administered by the Federal Emergency Management Agency (FEMA).

The company also sells excess flood policies which are fully reinsured, thereby substantially eliminating WNFIC's exposure to underwriting risk, as these policies are backed by either FEMA. The company also participates in capitalized captive insurance facilities (the Captives) for the purpose of providing additional capacity to place coverage, deliver revenues, and participate in underwriting results. The company has traditionally participated in underwriting profits through profit-sharing contingent commissions. The Captives give the company another way to continue to participate in underwriting results, while limiting exposure to underwriting claim costs. The Captives focus on property insurance for earthquake and wind exposed properties underwritten by certain of the company's managing general underwriters (MGUs).

The company is compensated for its services primarily by commissions paid by insurance companies, and to a lesser extent, by fees paid directly by customers for certain services. Commission revenues are generally a percentage of the premium paid by the insured and typically depend upon the type of insurance, the particular insurance company and the nature of the services provided by it. In some limited cases, the company shares commissions with other agents or brokers who have acted jointly with it in a transaction and it recognizes commissions net of any commissions paid to other intermediaries. The company may also receive from an insurance company a profit-sharing contingent commission, which is a supplemental commission based primarily on underwriting results. Fee revenues are generated by the company's Services segment, which provides insurance-related services, including comprehensive medical utilization management services in both the workers' compensation and all-lines liability arenas, as well as Medicare Set-aside services, Social Security disability and Medicare benefits advocacy services, and other claims adjusting services, its National Programs and Wholesale Brokerage segments, which earn fees primarily for the issuing of insurance policies on behalf of insurance carriers, and its Retail segment for fees received in lieu of commissions or for other services provided. The amount of the company's revenues from commissions and fees is a function of several factors, including continued new business production, retention of existing customers, acquisitions and fluctuations in insurance premium rates and insurable exposure units, which are units that insurance companies use to measure or express insurance exposed to risk (such as property values, sales and payroll levels) to determine what premium to charge the insured.

As of December 31, 2023, the company's activities were conducted in 322 domestic locations in 46 states, and 177 international locations in Belgium, Bermuda, Canada, Cayman Islands, France, Germany, Hong Kong Special Administrative Region of the People's Republic of China (Hong Kong), Republic of Ireland, Italy, Malaysia, the Netherlands, United Arab Emirates and the United Kingdom.

Segments

The company operates through four segments: the Retail, the National Programs, the Wholesale Brokerage and the Services.

The Retail segment provides a broad range of insurance products and services to commercial, public and quasi-public entities, and to professional and individual customers, as well as non-insurance warranty services and products through its F&I businesses.

The National Programs segment, which acts as an MGU, provides professional liability and related package products for certain professionals, a range of insurance products for individuals, flood coverage, and targeted products and services designated for specific industries, trade groups, governmental entities and market niches, all of which are delivered through a nationwide network of independent agents, including Brown & Brown retail agents, as well as affinity groups, wholesale entities and sold direct to consumers.

The Wholesale Brokerage segment markets and sells excess and surplus commercial and personal lines insurance, primarily through a nationwide network of independent agents and brokers, including Brown & Brown retail agents.

The Services segment provides insurance-related services, including comprehensive medical utilization management services in both the workers' compensation and all-lines liability arenas, as well as Medicare Set-aside services and Social Security disability benefits advocacy services.

As announced on October 31, 2023, and completed in the fourth quarter of 2023, the company sold certain third-party claims administration and adjusting services businesses representing approximately 50% of the total revenues of the Services segment to Davies Group Ltd. As a result, beginning in fiscal year 2024 the company will operate three segments: Retail, Programs, and Wholesale.

The majority of the company's operations are in the United States. Outside of the United States the company has retail operations based in Bermuda, Canada, Cayman Islands, Republic of Ireland and the United Kingdom, managing general underwriter operations in Canada, France, Germany, Hong Kong, Italy, Malaysia, the Netherlands, United Arab Emirates and the United Kingdom; and wholesale brokerage operations based in Belgium, Hong Kong, Italy and the United Kingdom.

Retail segment

The Retail segment provides a broad range of insurance products and services to commercial, public and quasi-public, professional and individual insured customers, and non-insurance services and products through the company's automobile dealer services F&I businesses. Significant lines of coverage and capabilities are:

Property & Casualty: Property, Casualty, Workers' Compensation, Surety, Aviation, Private Equity/Mergers & Acquisitions, Executive Liability, Cyber Risk, and Multinational.

Employee Benefits: Group Health, Voluntary Benefits, Pharmacy Benefits, Independent Retirement, International Benefits, Employer Stop Loss, and Long Term Care.

Personal Insurance: Homeowners, Automobile, Personal Excess Liability, Flood and Excess Liability, Flood and Excess Flood, Specialized Coverages, and Group Excess.

Property & Casualty - Capabilities: Analytics, Modeling, Risk Services, Alternative Risk/Captives, and Specialty Risk Solutions.

Employee Benefits - Capabilities; Benefit Design & Delivery, Financial Strategy & Analytics, Regulatory & Legislative Strategy, Technology Services, Population Health & Well-Being, Strategic Non-Medical Solutions, and Private Equity/Mergers & Acquisitions.

Specialties: Dealer Services, Specialty Risk Solutions, Tribal Nations, and Total Rewards & Compensation.

The company's Retail segment has physical locations in 42 states plus Bermuda, Canada, Cayman Islands, Republic of Ireland and the United Kingdom. In connection with selling and marketing of insurance coverages, it provides a broad range of related services to its customers, such as risk management strategies, loss control surveys and analysis, consultation in connection with placing insurance coverages and claims processing.

National Programs segment

National Programs segment has physical locations in 20 states plus Canada, France, Germany, Hong Kong, Italy, Malaysia, the Netherlands, the United Arab Emirates and the United Kingdom. The National Programs segment specializes in the development, underwriting and management of insurance program business, often designed for niche, underserved markets and distributes these coverages to retail agencies (including Brown & Brown retail offices), as well as affinity groups, wholesale entities and sold direct to consumers. The company's largest National Programs segment customer represented approximately 8.1% of the segment's total commissions and fees. The company offers program management expertise for insurance carrier partners across numerous lines of business, which can be grouped into five broad categories as detailed below:

Professional Programs: Professional liability and related package insurance products are tailored to the needs of professionals in the following areas: dentistry, legal, eyecare, insurance, financial, physicians and real estate title professionals. Professional liability programs also offer supplementary insurance-related products to include weddings, events, medical facilities and cyber liability.

Personal Lines Programs: Personal lines programs offer a variety of insurance products to personal lines consumers including homeowners and personal property policies; residential earthquake; private passenger automobile and motorcycle coverage, which is in run-off.

Commercial Lines Programs: Specific industries and market niches are served by the company's commercial programs, including automotive aftermarket, professional and amateur sports, special events and the entertainment industry; commercial transportation and trucking; forestry; manufactured housing; and workers' compensation. The Arrowhead Core Commercial program which covered a broad segment of industries is currently in run-off.

Public Entity Programs: Public entity programs range from providing fully insured programs to establishing risk retention insurance pools, and excess and facultative specific coverages, including administration of various insurance trusts for cities, counties, municipalities, school boards, special taxing districts and quasi-governmental agencies.

Specialty Programs: Specialty programs include flood insurance, commercial difference-in-conditions (earthquake), all-risk commercial property, limited exposure captives, coastal property programs, including wind, lender-placed solutions, sovereign native-American nations and parcel insurance.

Wholesale Brokerage segment

Wholesale Brokerage segment has physical locations in 22 states plus Belgium, Hong Kong, Italy and the United Kingdom. The company's Wholesale Brokerage segment markets and sells excess and surplus commercial insurance products and services to retail insurance agencies (including Brown & Brown retail offices). The Wholesale Brokerage segment represents various U.S., U.K., and European surplus lines insurance companies. Additionally, certain offices are also Lloyd's of London correspondents. The Wholesale Brokerage segment also represents admitted insurance companies for purposes of affording access to such companies for smaller agencies that otherwise do not have access to large insurance company representation. Excess and surplus insurance products encompass many insurance coverages, including personal lines, homeowners, yachts, jewelry, commercial property and casualty, commercial automobile, garage, restaurant, builder's risk and inland marine lines. Difficult-to-insure general liability and products liability coverages are a specialty, as is excess workers' compensation coverage. During 2023, commissions and fees from the company's largest Wholesale Brokerage segment customer represented approximately 1.3% of the Wholesale Brokerage segment's total commissions and fees.

Services segment

This segment provides a variety of insurance-related services.

The two businesses listed below were not part of the sale of certain businesses to Davies Group Ltd. in the fourth quarter of 2023. In 2024, the financial results of these businesses, along with their historical financial results, will be included in the Retail segment.

Social Security Advocacy and Advisory: Social Security advocacy assists individuals throughout the United States who are seeking to establish eligibility for coverage under the federal Social Security Disability program and provides health plan selection and enrollment assistance for Medicare beneficiaries. The company works closely with employer sponsored group life, disability and health plan participants to assist disabled individuals in receiving the education, advocacy and benefit coordination assistance necessary to achieve the fastest possible benefit approvals. In addition, the company provides second injury fund recovery services to the workers' compensation insurance market.

Medicare Secondary Payer compliance and Medicare Set-Aside: Medicare secondary payer compliance and Medicare Set-aside provides statutory compliance services, conditional payment negotiation and resolution, structured settlements/annuity funding, professional administration and a post-settlement durable medical equipment and pharmacy program administration.

The following businesses were sold to Davies Group Ltd. in the fourth quarter of 2023. In 2024 the historical results associated with these businesses will be included within the Programs segment.

Claims Administration: Claims administration provides third-party administration (TPA) services for commercial and personal property and casualty, medical, vocational, and professional liability insurance markets on a nationwide basis, providing claims adjusting, administration, subrogation, litigation and data management, claims investigations services, claim investigations, and audit services to insurance companies, self-insureds, public municipalities, insurance brokers and corporate entities. The company sources claims activity from various Arrowhead programs in its National Programs segment, as well as from third parties.

Self-Insured Trust Administration: Self-insured trust administration provides TPA services for government entities and self-funded or fully-insured workers' compensation and liability plans and trusts, including claims administration and a dedicated subrogation recovery department.

Workers' Compensation and Liability Plan Administration: Workers' compensation and liability plan administration provides claims administration, cost containment consulting services for secondary disability and subrogation recoveries, certified and non-certified medical management programs, access to medical networks, case management, utilization review services and risk management services, such as loss control.

In 2023, the company's five largest contracts represented approximately 38.8% of fee revenues in its Services segment.

History

Brown & Brown, Inc. was founded in 1939. The company was incorporated in 1959.