Brown & Brown: Decentralized Model & Profitability
Former Executive at Brown & Brown
inpractise.com/articles/brown-and-brown-decentralized-model-and-profitability-in-middle-market-insurance-brokerage
Brown & Brown Inc
Why is this company interesting?
Brown & Brown is a family-owned insurance broker catering to middle market customers. The business has increased revenue every year since 1993 (the year it went public) with the exception of 2009 when revenues fell 1%. Brown & Brown uses its free cash to acquire new agencies, and its success in reinvesting nearly all of its free cash flow in this manner has led to a consistent market-beating compounder.
About 35% of the stock is in the hands of the Brown family, management and employees providing strong alignment with shareholders. The firm also boasts an industry leading cash flow conversion ratio, converting ~25% of revenue to free cash flow.
Brown & Brown: Decentralized Model & Profitability(March 19, 2025)
Former Executive at Brown & Brown
Interview Transcript
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But as an investor, there's always a fear of buying into a roll-up, and sometimes it just doesn't work anymore because you have so many small parts. You always run the risk of needing to centralize a bit. That's why we are considering both AJ Gallagher and Brown & Brown.
Speaking of cycles in the business, you asked how brokerages' earnings are correlated to insurance companies. Brown & Brown and Gallagher have so much business with the carriers that, regardless of whether it's a hard or soft market, they will still perform very well. If you're looking to invest, you want a good return on your investments. Those relationships are solid and won't change based on market conditions.
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