Brown and Brown 2Q14 Earnings Call Notes

posted in: Notes | 0

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Not seeing consistent hiring among client base

“Work comp rates continue to climb as the industry experiences consolidating and divestitures. And we’re seeing payrolls flat to up slightly. We’re not seeing consistent hiring across our client base, which is comprised of over 300,000 customers.”

When we look around at the M&A environment, we’d rather just buy our own shares

“When evaluating our current value along with the current multiples being paid for larger M&A deals, we believe the timing is appropriate to allocate some of our capital to share buybacks.”

Miami is booming right now

“in certain pockets of the country, there’re areas where the economy is zooming. And let me give you an example. Miami is booming right now. There’s all kinds of construction. There’s no glut of condos anymore. All of that has been absorbed and there’s 50 condo towers being built in Miami alone. That said, that’s not indicative of every place.”

Seeing a pickup in construction

“Andy referred to the pickup in construction activity. So we’re seeing lots of builders’ risk policies on new projects and liability on smaller or new contractors in terms of liability to work on these projects.”

We’re looking at lots of deal opportunities, but not going to do it at prices that don’t make sense

“And so like I said, we continue to evaluate all kinds of interesting opportunities out there and are excited to continue to do so. But if in fact purchase price multiples go up further or if on an individual deal that we think fits culturally if someone else puts a number out there that doesn’t seem to make sense financially to us, we’re not going to do it.”

Competing bidders have changed over the years

“prior to 2000, the big acquirers were really publicly-traded brokers typically. From 2000 to 2007, it was banks. And now, many of those banks are reevaluating their position and/or figuring out if they want to continue to hold that asset. The final in 2007 and forward as a result of the very low interest rate, you have the significant participation of private equity, which is the three to seven year typically participation in that space.”

We’re going to look more at internal investments too

“Internal investments prior to this call have been just not talked about that much and assumed and basic. And we, Andy and I, are now going to talk a little bit more about them, because it’s an integral part of our strategy to grow the business. And that growth is both internal and external. And so we will make investments at times where we believe that there’re a great good opportunities to grow organically and expand businesses that are already having success.”

When we acquire, we make sure we have a sponsor

“it’s very important when we have an acquisition that there is a person in the organization who is responsible for kind of ushering them into the system. And so you could use the term sponsor. You could use whatever term you want to use. But that person helps share additional parts of our culture and talking with people internally and encouraging them to come to the right events where they would be exposed to other people, like-mind, to share ideas and learn additional things. So at the present time, no, we don’t believe so. But as we continue to get larger, we’re going to continue to evolve. But we want to maintain the culture that we have, which as you referred to is a decentralized entrepreneurial culture, which puts a premium on performance.”