Brown & Brown 1Q17 Earnings Call Notes

Powell Brown – President and Chief Executive Officer

Optimism has slowed, companies are more skeptical

“I am now on Slide 5. The first quarter was an interesting one, as we entered it with a lot of optimism about what the new administration might do to further improve the economy. As the quarter continued, some of this optimism has slowed and now companies are more cautious or skeptical about what shape some of the programs, including tax reform, infrastructure projects and ACA reform will take and when they might actually take effect, if at all. With that said, we did see the economy continue to expand across most communities in the past quarter. There are number of geographies that are doing well as evidenced by construction starts, while communities that are tied to oil and gas have leveled out”

Biggest topic has been ACA reform

“One of the biggest – or one of the bigger topics during the quarter was what the impacts would be if there was any reform of the Affordable Care Act. This was in addition to the continual topic of cost containment for healthcare plans. With the material increases to premium rates for most state exchanges or decreases in the number of providers or both, we did see customers continue to manage plan design. Creativity around plan options is at the forefront. We continue to believe that this uncertainty and need for creativity is a positive for Brown & Brown as it positions us well as a trusted advisor to bring alternative options to customers that best address the needs of their company and their employee base.”

If we don’t find opportunities then we’ll stockpile cash

“I have been asked that what happens if in fact acquisitions were very, very expensive going forward for a protracted period of time and if we evaluated our stock price and we thought the stock price was fully valued at the time. And the answer to the question is that we are going to stockpile cash on our balance sheet. And so if anybody wants to criticize somebody at Brown & Brown, you can criticize me. But we are not going – we do not have a whole burning in our pocket and I know you know that and we look very, very closely at our acquisitions and how we deploy that capital and we will continue to do so. It’s interesting, because as I alluded to in my prepared remarks, some of the acquisitions that we see out there, we know that the numbers don’t make sense, but we are a forever company and those companies are going to be flipped in 3 to 5 to 7 years and they don’t build cultures in that period of time. We have only been doing this for 77 years and we think we really have a strong culture and we will continue to maintain that. So, I anticipate that we will have opportunities to deploy our capital fine over the intermediate to longer term, but it’s very possible we could continue to stockpile cash on the balance sheet.”