On Jun 10, 2016, we issued an updated research report on Brown & Brown Inc.BRO .
The insurance broker's first-quarter 2016 earnings outperformed the Zacks Consensus Estimate and also increased year over year on higher revenues. Moreover, the company estimates EBITDAC margins between 33% and 35% over the long term.
Brown & Brown's performance remains impressive both in terms of organic and inorganic growth across all its segments. Also, strategic acquisitions and mergers help the company expand its operations. In the first quarter, the insurance broker acquired three companies with annualized revenues of $14.5 million.
Further, a strong capital and liquidity position enables the insurer to enhance shareholder value through dividend increases and share buybacks. Also, the $75 million accelerated share repurchase (ASR) program that commenced in the fourth quarter of 2015 was completed in January. Post completion of the ASR, the company has $375 million remaining under its authorization.
However, the company has been witnessing escalating expenses over the past few quarter due to higher employee compensation and other operating expenses. This has, in turn, adversely affected the company's margins.
In addition, Brown & Brown generates a major portion of its commission revenues from a limited number of insurance companies. Failure to retain any of these clients might hurt the company's top line, and result in lower market share and higher expenses.
Zacks Rank and Stocks to Consider
Currently, Brown & Brown carries a Zacks Rank #3 (Hold). Some better-ranked stocks from the insurance industry are Hannover Rück SE HVRRY , Marsh & McLennan Companies, Inc. MMC and Markel Corp. MKL . While both Hannover Rück and Marsh & McLennan hold a Zacks Rank #2 (Buy), Markel Corp. sports a Zacks Rank #1 (Strong Buy).
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