Brown & Brown Inc. (NYSE:BRO) Q4 2014 Earnings Conference Call - Final Transcript

Jan 27, 2015 • 08:00 am ET


Brown & Brown Inc. (NYSE:BRO) Q4 2014 Earnings Conference Call - Final Transcript


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Good morning and welcome Brown & Brown Inc. 2014 Fourth Quarter Earnings Call. Today's call is being recorded.

(Forward-looking Cautionary Statements)

With that said, I would now turn the call over to Powell Brown, President and Chief Executive Officer. You may begin.

Powell Brown

Thank you (inaudible). Good morning everybody and thanks for joining us for the fourth quarter earnings call. It is another positive quarter for Brown & Brown, as we delivered solid financial results on both the top and bottom line, so let's get right into it. We delivered $393 million of revenue for the quarter, and growth of 14.6%, with revenues growing 3.3% organically.

We also delivered organic growth in each of our four divisions. As part of our business strategy to exit the reinsurance brokerage space, we completed the sale of certain assets of Axiom Re

Powell Brown

business on December 31, with the associated loss having a $0.21 impact on earnings per share this quarter. Yesterday, we completed the sale of Acumen Re business. Later, Andy will talk about the full year impact of these sales. The loss on the acumen sale with less than $500,000.

In addition to the loss on the Axiom sale, we had an adjustment for this quarter for a non-cash stock compensation. Due to the materiality of the loss on the sale of Axiom and the adjustment to the non-cash stock compensation, we will primarily focus our discussions on adjusted earnings. As we believe that provides a more meaningful comparison as a result of our operations to the prior year.

We grew our adjusted earnings per share by 9.1% to $0.36, and we expanded our adjusted EBITDAC margin by 50 bps. Our GAAP reported earnings per share was $0.17. Andy will walk you through in more detail on the financials, and these adjustments later in our discussion. As a reminder, we completed a $50 million accelerated share repurchase program that was initiated in Q3, which was part of a $200 million plan, approved by our Board of Directors in the second quarter of 2014.

Lastly, during the course of 2014, we acquired businesses with annualized revenues of $160 million, which is record year for Brown & Brown. In summary, we're pleased to deliver another quarter of growth both organically and through acquisitions with modest margin expansion and solid earnings per share growth.

So, now let's get a little deeper into our results. At first, retail delivered 2.3% total revenue growth and 1.5% organic growth. Couple observations about the middle market. Middle market America is improving, and we're seeing pockets of expansion in the form of construction and some hiring.

However, what we are not seeing yet is consistent growth throughout all of the United States. Property renewal rates continue to be under pressure, the most pronounced are in coastal areas with E&S rate, they can be down 5% to 20%. We expect property rates for both the admitted an E&S market to continue to be under pressure in 2015. Employee benefits especially for large groups