Brown & Brown Inc.
) reported an operating net income of 38 cents per share for
second-quarter 2014, thereby missing estimates for the fourth time
in a row. Results fell short of the Zacks Consensus Estimate
by 7.3%. However, the figure marked a year-over-year improvement of
8.6% based on higher revenues.
Including a 4 cents per share positive impact from Beecher
Carlson large accounts and Wright Insurance Group, net income came
in at 42 cents per share.
Behind the Headlines
Total revenue increased 22.1% to $397.8 million year over year,
driven by rise in commissions and fees as well as other income. The
results outperformed Zacks Consensus Estimate of $390 million.
Organic revenue growth was 3.8% in the reported quarter.
Commissions and Fees increased driven by organic growth as well
as in higher Profit-Sharing Contingent Commissions and Guaranteed
Among the four business divisions of Brown & Brown,
Wholesale Brokerage and Services witnessed high organic revenue
growth rate of 8.1% and 2.3%, respectively. While Retail Divisions
recorded a 2.0% increase, organic revenue growth at National
Programs climbed 2.2% year over year.
Investment income for the reported quarter remained unchanged
from the year-ago quarter.
Total expense increased 23.5% year over year to $296 million,
attributable to higher employee compensation and benefits expense,
operating expenses as well as interest expense.
A higher magnitude of revenue increase compensated for higher
expenses leading to an 18.2% improvement in pretax
Net income before interest, income taxes, depreciation,
amortization and the change in estimated acquisition earn-out
payables (EBITDAC) margins increased year over year by 40 basis
points (bps) to 34.2%.
During the quarter, Brown & Brown completed five
acquisitions with revenues of $157 million.
Brown & Brown exited the second quarter of 2014 with cash
and investments of $609.5 million, improving 34.5% from
During the second quarter of 2014, the company funded the new
Credit Facility associated with the Wright acquisition and repaid
$230 million of the existing term loan debt. The Credit Facility
included a Term A Loan of $550 million and Revolving Loan Facility
of $800 million.
After withdrawal of Revolving Loan of $375 million, the total
debt outstanding reported was $1175 million as of Jun 30,
Long-term debt of the company was $1168.1 million at the
quarter-end, up significantly from $380 million as of 2013-end
Share Repurchase Update
The company's board of directors approved an additional $200
million stock buyback, apart from the $25 million stock buyback,
which was completed in the reported quarter.
Brown & Brown's board of directors declared a quarterly cash
dividend of 10 cents per share. The dividend will be paid on Aug
13, 2014 to shareholders of record on Aug 8, 2014.
Performance of Other Property & Casualty
Platinum Underwriters Holdings Ltd
) reported second-quarter 2014 operating earnings of $1.34 per
share, missing the Zacks Consensus Estimate by a couple of cents.
Earnings declined 16% year over year due to lower premiums.
) posted second-quarter operating earnings of 45 cents per share,
falling short of the Zacks Consensus Estimate by a couple of cents.
However, earnings improved 10% year over year.
) reported second-quarter operating income of 66 cents per share,
in line with the Zacks Consensus Estimate. The figure also marked a
4.8% year-over-year increase.
Brown & Brown presently carries Zacks Rank #3 (Hold).
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