BROWN & BROWN, INC.
FORM 10-K ANNUAL REPORT
FOR THE YEAR ENDED DECEMBER 31, 1999
PART I
ITEM 1. BUSINESS
GENERAL
Brown & Brown, Inc. (the "Company") is a general insurance
agency headquartered in Daytona Beach and Tampa, Florida that
resulted from an April 28, 1993 business combination involving
Poe & Associates, Inc. ("Poe") and Brown & Brown, Inc. ("Brown").
Poe was incorporated in 1958 and Brown commenced business in
1939. The name of the Company following the 1993 combination
was Poe & Brown, Inc. and was changed to Brown & Brown, Inc. in
1999.
The Company is a diversified insurance brokerage and agency
that markets and sells primarily property and casualty insurance
products and services to its clients. Because the Company does
not engage in underwriting activities, it does not assume
underwriting risks. Instead, it acts in an agency capacity to
provide its customers with targeted, customized risk management
products.
The Company is compensated for its services by commissions
paid by insurance companies and fees for administration and
benefit consulting services. The commission is usually a
percentage of the premium paid by an insured. Commission rates
generally depend upon the type of insurance, the particular
insurance company, and the nature of the services provided by the
Company. In some cases, a commission is shared with other agents
or brokers who have acted jointly with the Company in a
transaction. The Company may also receive from an insurance
company a contingent commission that is generally based on the
profitability and volume of business placed with it by the
Company over a given period of time. Fees are principally
generated by the Company's Service Division, which offers
administration and benefit consulting services primarily in the
workers' compensation and employee benefit markets. The amount
of the Company's income from commissions and fees is a function
of, among other factors, continued new business production,
retention of existing customers, acquisitions, and fluctuations
in insurance premium rates and insurable exposure units.
Premium pricing within the property and casualty insurance
underwriting industry has been cyclical and has displayed a high
degree of volatility based on prevailing economic and competitive
conditions. Since the mid-1980s, the property and casualty
insurance industry has been in a "soft market" during which the
underwriting capacity of insurance companies expanded,
stimulating an increase in competition and a decrease in premium
rates and related commissions and fees. Significant reductions
in premium rates occurred during the years 1987 through 1989 and continue,
<PAGE 2>
although to a lesser degree, through the present. The
effect of this softness in rates on the Company's revenues has
been somewhat offset by the Company's acquisitions and new
business production. The Company cannot predict the timing or
extent of premium pricing changes as a result of market
fluctuations or their effect on the Company's operations in the
future.
The Company's activities are conducted in 20 locations
throughout Florida, three locations each in Arizona and New
Mexico and in eight additional locations in California, Georgia,
Indiana, New Jersey, Nevada, Ohio, Pennsylvania and Texas.
Because the Company's business is concentrated in Florida, the
occurrence of adverse economic conditions or an adverse
regulatory climate in Florida could have a materially adverse
effect on its business, although the Company has not encountered
such conditions in the past.
The Company's business is divided into four divisions: (i)
the Retail Division; (ii) the National Programs Division; (iii)
the Service Division; and (iv) the Brokerage Division. The
Retail Division is composed of Company employees who market and
sell a broad range of insurance products to insureds. The
National Programs Division works with underwriters to develop
proprietary insurance programs for specific niche markets. These
programs are marketed and sold primarily through independent
agencies and agents across the United States. The Company
receives an override on the commissions generated by these
independent agencies. The Service Division provides insurance-
related services such as third-party administration and
consultation for workers' compensation and employee benefit
markets. The Brokerage Division markets and sells excess and
surplus commercial insurance, as well as certain niche programs,
primarily through independent agents.
The following table sets forth a summary of (i) the
commission and fee revenues realized from each of the Company's
operating divisions for each of the three years in the period
ended December 31, 1999 (in thousands of dollars), and (ii) the
percentage of the Company's total commission and fee revenues
represented by each division for each of such periods:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1997 % 1998 % 1999 %
________ _____ ________ _____ ________ _____
Retail Division(1) $ 88,141 63.8% $103,516 66.5% $121,383 70.4%
National Programs Division 24,845 18.0 25,043 16.1 21,983 12.7
Service Division 12,150 8.8 13,818 8.9 14,716 8.5
Brokerage Division 12,976 9.4 13,200 8.5 14,464 8.4
________ _____ ________ _____ ________ _____
Total $138,112 100% $155,577 100% $172,546 100%
======== ===== ======== ===== ======== =====
</TABLE>
(1) Numbers and percentages for 1997 and 1998 have been restated
to give effect to the Company's acquisition of the
outstanding stock of the Daniel-James Insurance Agency in
1998, and the 1999 acquisition of the outstanding stock of
each of Ampher Insurance, Ross Insurance of Florida, and
Signature Insurance Group, as well as the outstanding
partnership interests of C,S & D Partnership.
RETAIL DIVISION
The Company's Retail Division operates in eleven states and
employs approximately 950 persons. The Company's retail
insurance agency business consists primarily of selling and
<PAGE 3>
marketing property and casualty insurance coverages to
commercial, professional and, to a limited extent, individual
customers. The categories of insurance principally sold by the
Company are: CASUALTY insurance relating to legal liabilities,
workers' compensation, commercial and private passenger
automobile coverages, and fidelity and surety insurance; and
PROPERTY insurance against physical damage to property and
resultant interruption of business or extra expense caused by
fire, windstorm or other perils. The Company also sells and
services all forms of group and individual life, accident,
health, hospitalization, medical and dental insurance programs.
Each category of insurance is serviced by insurance specialists
employed by the Company.
No material part of the Company's retail business depends
upon a single customer or a few customers. During 1999, fees and
commissions received from the Company's largest single Retail
Division customer represented less than one percent of the Retail
Division's total commission and fee revenues.
In connection with the selling and marketing of insurance
coverages, the Company provides a broad range of related services
to its customers, such as risk management surveys and analysis,
consultation in connection with placing insurance coverages, and
claims processing. The Company believes these services are
important factors in securing and retaining customers.
NATIONAL PROGRAMS DIVISION
The Company's National Programs Division tailors insurance
products to the needs of a particular professional or trade
group, negotiates policy forms, coverages and commission rates
with an insurance company and, in certain cases, secures the
formal or informal endorsement of the product by a professional
association or trade group. Programs are marketed and sold
primarily through a national network of independent agencies that
solicit customers through advertisements in association
publications, direct mailings and personal contact. The Company
also markets a variety of these products through certain of its
retail offices. Under agency agreements with the insurance
companies that underwrite these programs, the Company often has
authority to bind coverages, subject to established guidelines,
to bill and collect premiums and, in some cases, to process
claims.
The Company is committed to ongoing market research and
development of new proprietary programs. The Company employs a
variety of methods, including interviews with members of various
professional and trade groups to which the Company does not
presently offer insurance products, to assess the coverage needs
of such professional associations and trade groups. If the
initial market research is positive, the Company studies the
existing and potential competition and locates potential carriers
for the program. A proposal is then submitted to and negotiated
with a selected carrier and, in some instances, a professional or
trade association from which endorsement of the program is
sought. New programs are introduced through written
communications, personal visits with agents, placements of
advertising in trade publications and, where appropriate,
participation in trade shows and conventions.
<PAGE 4>
PROFESSIONAL GROUPS. The professional groups serviced by
the National Programs Division include dentists, lawyers,
physicians, optometrists and opticians, architects and engineers.
Set forth below is a brief description of the programs offered to
these major professional groups.
- DENTISTS: The largest program marketed by the National
Programs Division is a package insurance policy known as the
Professional Protector Plan(R), which provides comprehensive
coverage for dentists, including practice protection and
professional liability. This program, initiated in 1969, is
endorsed by a number of state and local dental societies, and is
offered nationally. The Company believes that this program
presently insures approximately 22% of the eligible practicing
dentists within the Company's marketing territories.
- LAWYERS: The Company began marketing lawyers'
professional liability insurance in 1973, and the national
Lawyer's Protector Plan(R) was introduced in 1983. The program is
presently offered in 35 states, the District of Columbia and
Puerto Rico.
- PHYSICIANS: The Company markets professional liability
insurance for physicians, surgeons, and other health care
providers through a program known as the Physicians Protector
Plan(R). The program, initiated in 1980, is currently offered in
nine states.
- OPTOMETRISTS AND OPTICIANS: The Optometric Protector
Plan(R) was created in 1973 to provide optometrists and opticians
with a package of practice and professional liability coverage.
This program insures optometrists and opticians in all 50 states,
the District of Columbia and Puerto Rico. The Company believes
that this program presently insures approximately 25% of the
eligible optometrists within the Company's marketing territories.
- ARCHITECTS AND ENGINEERS: The Architects & Engineers
Protector Plan(R) provides professional liability coverage for
landscape architects in all 50 states. The program also provides
coverage to other classes of architects and engineers in seven
states.
COMMERCIAL GROUPS. The commercial groups serviced by the
National Programs Division include a number of targeted
commercial industries and trade groups. Among the commercial
programs are the following:
- TOWING OPERATORS PROTECTOR PLAN.(R) Introduced in 1992, this
program provides specialized insurance products to towing and
recovery industry operators in 48 states.
- AUTOMOBILE DEALERS PROTECTOR PLAN.(R) This program insures
independent automobile dealers and is currently offered in 48
states. It originated in Florida over 25 years ago through a
program still endorsed by the Florida Independent Auto Dealers
Association.
- MANUFACTURERS PROTECTOR PLAN.(R) Introduced in 1997, this
program provides specialized coverages for manufacturers, with an
emphasis on selected niche markets.
<PAGE 5>
- WHOLESALERS & DISTRIBUTORS PREFERRED PROGRAM.(R) Introduced in
1997, this program provides stabilized property and casualty
protection for businesses principally engaged in the wholesale-
distribution industry. This program replaced the Company's prior
wholesaler-distributor program, which was terminated in 1997 when
the Company severed its relationship with the National
Association of Wholesaler-Distributors.
- RAILROAD PROTECTOR PLAN.(R) Also introduced in 1997, this
program is designed for contractors, manufacturers and other
entities that service the needs of the railroad industry.
- AUTOMOBILE TRANSPORTERS PROTECTOR PLAN.(R) Introduced in 1996,
this program is designed for automobile transporters engaged in
the transport of vehicles for automobile auctions, automobile
leasing concerns, and automobile and truck dealerships. It is
currently offered in all 50 states.
- RECYCLER'S COMPREHENSIVE PROTECTOR PLAN.SM This program,
introduced in 1998, provides specialized property, liability,
workers' compensation and pollution coverages for the recycling
industry. The program is currently offered in 48 states.
- ENVIRONMENTAL PROTECTOR PLAN. This program was introduced
in 1998 and is currently offered in 36 states. It provides a
variety of specialized environmental coverages, with an emphasis
on local Mosquito Control and Water Control Districts.
- FOOD PROCESSORS PREFERRED PROGRAM. This program, introduced
in 1998, provides property and casualty insurance protection for
businesses involved in the handling and processing of various
foods.
- AUCTION INSURANCE PROTECTOR PLAN. Also introduced in 1998,
this program is designed to meet the property and casualty
insurance needs of the wholesale automobile auction industry.
SERVICE DIVISION
The Service Division consists of two separate components:
(i) insurance and related services as a third-party administrator
("TPA") and consultant for employee health and welfare benefit
plans, and (ii) insurance and related services providing
comprehensive risk management and third-party administration to
self-funded workers' compensation plans.
In connection with its employee benefit plan administrative
services, the Service Division provides TPA services and
consulting related to benefit plan design and costing,
arrangement for the placement of stop-loss insurance and other
employee benefit coverages, and settlement of claims. The
Service Division provides utilization management services such as
pre-admission review, concurrent/retrospective review, pre-
treatment review of certain non-hospital treatment plans, and
medical and psychiatric case management. In addition to the
administration of self-
<PAGE 6>
funded health care plans, the Service Division offers administration
of flexible benefit plans,including plan design, employee communication,
enrollment and reporting.
The Service Division's workers' compensation TPA services
include risk management services such as loss control, claim
administration, access to major reinsurance markets, cost
containment consulting, and services for secondary disability and
subrogation recoveries.
The Service Division provides workers' compensation TPA
services for approximately 2,400 employers representing more than
$3.2 billion of employee payroll. The Company's largest workers'
compensation contract represents approximately 62% of the
Company's workers' compensation TPA revenues, or approximately
2.8% of the Company's total commission and fee revenues.
BROKERAGE DIVISION
The Brokerage Division markets excess and surplus lines and
specialty niche insurance products to the Company's Retail
Division, as well as to other retail agencies throughout Florida
and the southeastern United States. The Brokerage Division
represents various U.S. and U.K. surplus lines companies and is
also a Lloyd's of London correspondent. In addition to surplus
lines carriers, the Brokerage Division represents admitted
carriers for smaller agencies that do not have access to large
insurance carrier representation. Excess and surplus products
include commercial automobile, garage, restaurant, builder's risk
and inland marine lines. Difficult-to-insure general liability
and products liability coverages are a specialty, as is excess
workers' compensation. Retail agency business is solicited
through mailings and direct contact with retail agency
representatives.
The Company has a 75% ownership interest in Florida
Intracoastal Underwriters, Limited Company ("FIU") of Miami
Lakes, Florida. FIU is a managing general agency that
specializes in providing insurance coverages for coastal and
inland high-value condominiums and apartments. FIU has developed
a unique reinsurance facility to support the underwriting
activities associated with these risks. In 1999, the Company
established Champion Underwriters, a separate business division
based in Ft. Lauderdale, Florida, specializing in the marketing
and selling of excess and surplus commercial insurance. In
January of 2000, the Company formed Peachtree Special Risk
Brokers, an excess and surplus lines property insurance
subsidiary headquartered in Atlanta.
EMPLOYEES
At December 31, 1999, the Company had 1,370 full-time
equivalent employees. The Company has contracts with its sales
employees that include provisions restricting their right to
solicit the Company's customers after termination of employment
with the Company. The enforceability of such contracts varies
from state to state depending upon state statutes, judicial
decisions and factual circumstances. The majority of these
contracts are terminable by either party; however, the agreements
not to solicit the Company's customers generally continue for a
period of two or three years after employment termination.
<PAGE 7>
None of the Company's employees is represented by a labor
union, and the Company considers its relations with its employees
to be satisfactory.
COMPETITION
The insurance agency business is highly competitive, and
numerous firms actively compete with the Company for customers
and insurance carriers. Although the Company is the largest
insurance agency headquartered in Florida, a number of firms with
substantially greater resources and market presence compete with
the Company in Florida and elsewhere. This situation is
particularly pronounced outside Florida. Competition in the
insurance business is largely based on innovation, quality of
service and price.
A number of insurance companies are engaged in the direct
sale of insurance, primarily to individuals, and do not pay
commissions to agents and brokers. In addition, the Internet has
become a source for direct placement of personal lines business.
To date, such direct writing has had relatively little effect on
the Company's operations, primarily because the Company's Retail
Division is commercially oriented.
REGULATION, LICENSING AND AGENCY CONTRACTS
The Company or its designated employees must be licensed to
act as agents by state regulatory authorities in the states in
which the Company conducts business. Regulations and licensing
laws vary in individual states and are often complex.
The applicable licensing laws and regulations in all states
are subject to amendment or reinterpretation by state regulatory
authorities, and such authorities are vested in most cases with
relatively broad discretion as to the granting, revocation,
suspension and renewal of licenses. The possibility exists that
the Company could be excluded or temporarily suspended from
carrying on some or all of its activities in, or otherwise
subjected to penalties by, a particular state.
ITEM 2. PROPERTIES
The Company leases its executive offices, which are located
at 220 South Ridgewood Avenue, Daytona Beach, Florida 32114, and
401 East Jackson Street, Suite 1700, Tampa, Florida 33602. The
Company also leases offices in the following cities: Phoenix,
Arizona; Prescott, Arizona; Tucson, Arizona; Oakland, California;
Brooksville, Florida; Ft. Lauderdale, Florida; Ft. Myers,
Florida; Jacksonville, Florida; Leesburg, Florida; Maitland,
Florida; Melbourne, Florida; Miami, Florida; Miami Lakes,
Florida; Monticello, Florida; Naples, Florida; Orlando,
Florida; Perry, Florida; St. Petersburg, Florida; Sarasota,
Florida; West Palm Beach, Florida; Winter Haven, Florida;
Atlanta, Georgia; Indianapolis, Indiana; Las Vegas, Nevada;
Clark, New Jersey; Albuquerque, New Mexico; Roswell, New Mexico;
Taos, New Mexico; Philadelphia, Pennsylvania; and Houston,
Texas.
The Company's operating leases expire on various dates.
These leases generally contain renewal options and escalation
clauses based on increases in the lessors' operating expenses and
<PAGE 8>
other charges. The Company expects that most leases will be
renewed or replaced upon expiration. See Note 12 of the "Notes
to Consolidated Financial Statements" in the Company's 1999
Annual Report to Shareholders for additional information on the
Company's lease commitments.
At December 31, 1999, the Company owned buildings located in
Ocala, Florida and Perrysburg, Ohio, having aggregate book values
of $724,000 and $479,000, respectively, including improvements.
There is an outstanding mortgage on the Ocala building of
$690,000. There are no outstanding mortgages on the Perrysburg
building.
ITEM 3. LEGAL PROCEEDINGS
On January 19, 2000, a complaint was filed in the Superior
Court of Henry County, Georgia captioned GRESHAM & ASSOCIATES,
INC. VS. ANTHONY T. STRIANESE, ET AL. The complaint names the
Company and certain of its subsidiaries and affiliates, and
certain of their employees, as defendants. The complaint alleges,
among other things, that the Company tortiously interfered with
the contractual relationship between the plaintiff and certain
of its employees. The plaintiff alleges that the Company hired
such persons and actively encouraged them to violate the restrictive
covenants contained in their employment agreements with plaintiff.
The complaint seeks compensatory damages from the Company with
respect to each of the two employees in amounts "not less than
$750,000," and seeks punitive damages for alleged intentional
wrongdoing in an amount "not less than $10,000,000." The
complaint also seeks a declaratory judgment regarding the
enforceability of the restrictive covenants in the
employment agreements and an injunction prohibiting the violation
of those agreements. The Company believes that it has
meritorious defenses to each of the claims asserted by the plaintiff
and is contesting this action vigorously.
The Company is involved in various other pending or
threatened proceedings by or against the Company or one or more
of its subsidiaries that involve routine litigation relating to
insurance risks placed by the Company and other contractual
matters. Management of the Company does not believe that any of
such pending or threatened proceedings will have a materially
adverse effect on the consolidated financial position or future
operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders
during the Company's fourth quarter ended December 31, 1999.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's common stock is traded on the New York Stock
Exchange under the symbol "BRO." The number of shareholders of
record as of March 3, 2000 was 716, and the closing price per
share on that date was $32.94.
<PAGE 9>
The table below sets forth information for each quarter in
the last two fiscal years concerning (i) the high and low sales
prices for the Company's common stock, and (ii) cash dividends
declared per share. The stock prices and dividend rates reflect
the three-for-two stock split effected by the Company on February
27, 1998.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
STOCK PRICE RANGE CASH
DIVIDENDS
HIGH - LOW PER SHARE
__________________ _________
1999
First quarter $38.44 $29.31 $0.11
Second quarter 38.00 30.38 0.11
Third quarter 39.44 33.19 0.11
Fourth quarter 40.63 30.75 0.13
1998
First quarter $38.50 $28.75 $0.10
Second quarter 39.38 32.00 0.10
Third quarter 42.50 35.00 0.10
Fourth quarter 39.00 32.63 0.11
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
Information under the caption "Financial Highlights" on the
inside front cover page of the Company's 1999 Annual Report to
Shareholders is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Information under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on
pages 18-21 of the Company's 1999 Annual Report to Shareholders
is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Market risk is the potential loss arising from adverse
changes in market rates and prices, such as interest, foreign
currency exchange rates, and equity prices. The Company is
exposed to market risk through its revolving credit line and some
of its investments; however, such risk is not considered to be
material as of December 31, 1999.
<PAGE 10>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of Brown & Brown, Inc.
and its subsidiaries, together with the report thereon of Arthur
Andersen LLP appearing on pages 22-38 of the Company's 1999
Annual Report to Shareholders, are incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information contained under the captions "Management" and
"Section 16(a) Beneficial Ownership Reporting Compliance" on
pages 4-6 of the Company's Proxy Statement for its 2000 Annual
Meeting of Shareholders is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information contained under the caption "Executive
Compensation" on pages 7-9 of the Company's Proxy Statement for
its 2000 Annual Meeting of Shareholders is incorporated herein by
reference; provided, however, that the report of the Compensation
Committee on executive compensation, which begins on page 10
thereof, shall not be deemed to be incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information contained under the caption "Security Ownership
of Management and Certain Beneficial Owners" on pages 2-3 of the
Company's Proxy Statement for its 2000 Annual Meeting of
Shareholders is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information contained under the caption "Executive
Compensation -- Compensation Committee Interlocks and Insider
Participation" on page 9 of the Company's Proxy Statement for its
2000 Annual Meeting of Shareholders is incorporated herein by
reference.
<PAGE 11>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a) The following documents are filed as part of this
report:
1. Consolidated Financial Statements of Brown &
Brown, Inc. (incorporated herein by reference from
pages 22-38 of the Company's 1999 Annual Report to
Shareholders) consisting of:
(a) Consolidated Statements of Income for each
of the three years in the period ended December
31, 1999.
(b) Consolidated Balance Sheets as of December
31, 1999 and 1998.
(c) Consolidated Statements of Shareholders'
Equity for each of the three years in the period
ended December 31, 1999.
(d) Consolidated Statements of Cash Flows for
each of the three years in the period ended
December 31, 1999.
(e) Notes to Consolidated Financial
Statements.
(f) Report of Independent Certified Public
Accountants.
2. Consolidated Financial Statement Schedules. The Consolidated
Financial Statement Schedules are omitted because they are not
applicable, not material, or not required, or because
the required information is included in the
Consolidated Financial Statements or the Notes thereto.
3. EXHIBITS
3a Amended and Restated Articles of
Incorporation of the Registrant (incorporated by
reference to Exhibit 3a to Form 10-Q for the
quarter ended September 30, 1998).
3b Amended and Restated Bylaws of the
Registrant (incorporated by reference to Exhibit
3b to Form 10-K for the year ended December 31,
1996).
4 Revolving Loan Agreement dated November 9,
1994, by and among the Registrant and SunTrust
Bank, Central Florida, N.A., f/k/a SunBank,
National Association (incorporated by reference
to Exhibit 4 to Form 10-K for the year ended
December 31, 1994).
<PAGE 12>
4a Second Amendment to Revolving Loan
Agreement, dated as of October 15, 1998, between
the Registrant and SunTrust Bank, Central
Florida, N.A. (incorporated by reference to
Exhibit 4a to Form 10-K for the year ended
December 31, 1998).
4b Rights Agreement, dated as of July 30,
1999, between the Company and First Union
National Bank, as Rights Agent (incorporated by
reference to Exhibit 4.1 to Form 8-K filed on
August 2, 1999).
10a(1) Lease of the Registrant for office
space at 220 South Ridgewood Avenue, Daytona
Beach, Florida dated August 15, 1987
(incorporated by reference to Exhibit 10a(3) to
Form 10-K for the year ended December 31, 1993).
10a(2) Lease Agreement for office space at
SunTrust Financial Centre, Tampa, Florida, dated
February 1995, between Southeast Financial Center
Associates, as landlord, and the Registrant, as
tenant (incorporated by reference to Exhibit
10a(4) to Form 10-K for the year ended
December 31, 1994).
10b(1) Loan Agreement between Continental
Casualty Company and the Registrant dated August
23, 1991 (incorporated by reference to Exhibit
10d to Form 10-K for the year ended December 31,
1991).
10b(2) Extension to Loan Agreement, dated
August 1, 1998, between the Registrant and
Continental Casualty Company (incorporated by
reference to Exhibit 10c(2) to Form 10-Q for the
quarter ended September 30, 1998).
10c Indemnity Agreement dated January 1, 1979,
among the Registrant, Whiting National
Management, Inc., and Pennsylvania Manufacturers'
Association Insurance Company (incorporated by
reference to Exhibit 10g to Registration
Statement No. 33-58090 on Form S-4).
10d Agency Agreement dated January 1, 1979
among the Registrant, Whiting National
Management, Inc., and Pennsylvania Manufacturers'
Association Insurance Company (incorporated by
reference to Exhibit 10h to Registration
Statement No. 33-58090 on Form S-4).
10e(1) Deferred Compensation Agreement, dated
May 6, 1998, between Brown & Brown, Inc. and
Kenneth E. Hill (incorporated by reference to
Exhibit 10l to Form 10-Q for the quarter ended
September 30, 1998).
10e(2) Letter Agreement, dated May 6, 1998,
between Brown & Brown, Inc. and Kenneth E. Hill
(incorporated by reference to Exhibit 10m to Form
10-Q for the quarter ended September 30, 1998).
<PAGE 13>
10f Employment Agreement, dated as of July 29,
1999, between the Registrant and J. Hyatt Brown
(filed herewith).
10g Portions of Employment Agreement, dated
April 28, 1993 between the Registrant and Jim W.
Henderson (incorporated by reference to Exhibit
10m to Form 10-K for the year ended December 31,
1993).
10h Employment Agreement, dated May 6, 1998
between the Registrant and Kenneth E. Hill
(incorporated by reference to Exhibit 10k to Form
10-Q for the quarter ended September 30, 1998).
10i Registrant's Stock Performance Plan
(incorporated by reference to Exhibit 4 to
Registration Statement No. 333-14925 on Form S-8).
10j Rights Agreement, dated as of July 30,
1999, between the Company and First Union
National Bank, as Rights Agent (incorporated by
reference to Exhibit 4.1 to Form 8-K filed on
August 2, 1999).
11 Statement Re: Computation of Basic and
Diluted Earnings Per Share.
13 Portions of Registrant's 1999 Annual Report
to Shareholders (not deemed "filed" under the
Securities Exchange Act of 1934, except for those
portions specifically incorporated by reference
herein).
22 Subsidiaries of the Registrant.
23 Consent of Arthur Andersen LLP.
24a Powers of Attorney pursuant to which this
Form 10-K has been signed on behalf of certain
directors and officers of the Registrant.
24b Resolutions of the Registrant's Board of
Directors, certified by the Secretary.
27 Financial Data Schedule.
(b) REPORTS ON FORM 8-K
None.
<PAGE 14>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
BROWN & BROWN, INC.
Registrant
By: *
__________________________________
J. Hyatt Brown
CHIEF EXECUTIVE OFFICER
Date: March 15, 2000
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed by the following persons on
behalf of the Registrant and in the capacities and on the date
indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
Signature Title Date
*
______________________ Chairman of the Board, President March 15, 2000
J. Hyatt Brown and Chief Executive Officer
(Principal Executive Officer)
*
_______________________ Director March 15, 2000
Samuel P. Bell, III
*
______________________ Director March 15, 2000
Bradley Currey, Jr.
*
______________________ Director March 15, 2000
Jim W. Henderson
*
______________________ Director March 15, 2000
David H. Hughes
*
______________________ Director March 15, 2000
Theodore J. Hoepner
*
______________________ Director March 15, 2000
Toni Jennings
*
_____________________ Director March 15, 2000
Jan E. Smith
*
_____________________ Vice President, Treasurer and March 15, 2000
Cory T. Walker Chief Financial Officer (Principal
Financial and Accounting Officer)
*By: /S/ LAUREL L. GRAMMIG
______________________________
Laurel L. Grammig
Attorney-in-Fact
</TABLE>
EXHIBIT 10f
BROWN & BROWN, INC.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into by and between
BROWN & BROWN, INC., hereinafter called the "Company," and J.
HYATT BROWN, hereinafter called "Employee," effective July 29,
1999.
BACKGROUND
Employee is the Chairman, President and Chief Executive
Officer of the Company. The Company desires to continue to
obtain the benefit of services by the Employee, and the Employee
desires to continue to render services to the Company.
The Compensation Committee of the Board of Directors (the
"Compensation Committee") and the Board of Directors (the
"Board") of the Company have determined that it is in the best
interests of the Company and its shareholders to recognize the
substantial contribution that the Employee has made and is
expected to make in the future to the Company's business and to
continue to retain his services in the future. The Compensation
Committee and the Board recognize that the possibility of a
Change in Control (as hereinafter defined) exists and that the
threat of or the occurrence of a Change in Control can result in
significant distractions of its Chairman, President and Chief
Executive Officer because of the uncertainties inherent in such a
situation. The Compensation Committee and the Board have
determined that it is essential and in the best interest of the
Company and its shareholders to retain the services of Employee
in the event of a threat or occurrence of a Change in Control and
thereafter, without alteration or diminution of his continuing
leadership role in determining and implementing the strategic
objectives of the Company. Moreover, the Compensation Committee
and the Board recognize that unlike other key personnel
throughout the Company who participate in the Company's Stock
Performance Plan and, therefore, would have the benefit of the
immediate vesting of stock interests granted to them pursuant to
that Plan in the event of a Change in Control, Employee is not a
participant in that Plan.
In order to induce Employee to remain in the employ of the
Company, and to continue providing the leadership that has
defined the unique sales-driven culture of the Company, and
consistently improved the quality and financial performance of
the Company, Company and Employee desire to replace the
Employment Agreement entered into in April of 1993 with this
Agreement, and desire to set forth in this Agreement the terms
and conditions of the Employee's employment with the Company, and
to provide the Employee with certain benefits and assurances in
the event of a Change in Control (as defined below).
Accordingly, in consideration of the mutual covenants and
representations set forth below, the Company and Employee agree
as follows:
<PAGE 2>
TERMS
1. DEFINITIONS. "Company" means Brown & Brown, Inc. and
with respect to paragraph 9, hereof, also means its subsidiaries,
affiliated companies and any company operated or supervised by
the Company, as well as any successor entity formed by merger or
acquisition, including any company that may acquire a majority of
the stock of Brown & Brown, Inc. "Employee" means J. Hyatt Brown
and with respect to paragraph 10 hereof also means any company or
business in which Employee has a controlling or managing
interest.
2. EMPLOYMENT. The Company hereby employs or continues to
employ Employee upon the terms and conditions set forth in this
Agreement.
3. TERM. The term of the Agreement shall be continuous
until terminated by either party as provided herein. This
Agreement supersedes all prior employment agreements or
arrangements existing as between the Company and the Employee.
4. EXTENT OF DUTIES. At the time of execution of this
Agreement, Employee shall be employed as Chairman of the Board,
President and Chief Executive Officer of the Company. Employee
shall perform the duties associated with such positions and shall
commit such of his time and effort required in completing and
fulfilling those duties and responsibilities commensurate with
and like in amount to the time committed by the Employee in
fulfilling the same as of the execution hereof. During the term
of his employment under this Agreement, Employee shall not
directly or indirectly engage in the insurance business in any of
its phases, either as a broker, agent, solicitor, consultant or
participant, in any manner or in any firm or corporation engaged
in the business of insurance or re-insurance, except for account
of the Company or as directed by the Company.
5. COMPENSATION. During the term of this Agreement, Employee
shall be compensated as follows:
(a) The Company shall pay to the Employee an annual
base salary payable in bi-weekly installments.
(b) The Company shall pay to the Employee an annual
cash bonus payable by February 15 following the calendar year in
which earned.
(c) If the Employee's employment is terminated as of a
date other than the end of the Company's fiscal year end, the
bonus amount shall be calculated to the end of the calendar
quarter in which the termination occurs and annualized through
the end of the then fiscal year of the Company, and paid to the
Employee, or his written designated beneficiary or estate, as the
case may be.
<PAGE 3>
(d) The Employee shall participate in and receive
comparable benefits as are provided by the Company to its other
personnel from time to time except as modified or amplified by
this Agreement.
6. CHANGE IN CONTROL. For purposes of this Agreement, a
"Change in Control" shall mean any of the following events:
(a) An acquisition (other than directly from the
Company) of any voting securities of the Company (the "Voting
Securities") by any "Person" (as the term person is used for
purposes of Section 13(d) or 14(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")), immediately after
which such Person has "Beneficial Ownership" (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of thirty
percent (30%) or more of the combined voting power of the
Company's then outstanding Voting Securities; provided, however,
in determining whether a Change in Control has occurred, Voting
Securities which are acquired in a "Non-Control Acquisition" (as
hereinafter defined) shall not constitute an acquisition which
would cause a Change in Control. A "Non-Control Acquisition"
shall mean an acquisition by (i) an employee benefit plan (or a
trust forming a part thereof) maintained by (A) the Company or
(B) any corporation or other Person of which a majority of its
voting power or its voting equity securities or equity interest
is owned, directly or indirectly, by the Company (for purposes of
this definition, a "Subsidiary") (ii) the Company or its
Subsidiaries; (iii) any Person in connection with a "Non-Control
Transaction" (as hereinafter defined); or (iv) Employee or his
family members.
(b) The individuals who, as of July 29, 1999, are
members of the Board (the "Incumbent Board"), cease for any
reason to constitute at least two-thirds of the members of the
Board; provided, however, that if the election, or nomination for
election by the Company's common stockholders, of any new
director was approved by a vote of at least two-thirds of the
Incumbent Board, such new director shall, for purposes of this
Plan, be considered as a member of the Incumbent Board; provided
further, however, that no individual shall be considered a member
of the Incumbent Board if such individual initially assumed
office as a result of either an actual or threatened "Election
Contest" (as described in Rule 14a-11 promulgated under the
Exchange Act) or other actual threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board (a
"Proxy Contest") including by reason of any agreement intended to
avoid or settle any Election Contest or Proxy Contest; or
(c) Approval by stockholders of the Company of:
(i) a merger, consolidation or reorganization
involving the Company, unless such merger consolidation or
reorganization is a "Non-Control Transaction." A "Non-Control
Transaction" shall mean a merger, consolidation or reorganization
of the Company where:
(A) the stockholders of the company,
immediately before such merger, consolidation or reorganization,
own directly or indirectly immediately following such merger,
consolidation or reorganization, at least seventy percent (70%)
of the combined voting power of the outstanding voting securities
of the corporation resulting from such merger or consolidation or
reorganization (the "Surviving Corporation") in substantially the
same proportion
<PAGE 4>
as their ownership of the Voting Securities
immediately before such merger, consolidation or reorganization,
(B) the individuals who were members of the
Incumbent Board immediately prior to the execution of the
agreement providing for such merger, consolidation or
reorganization constitute at least two-thirds of the members of
the board of directors of the Surviving Corporation, or a
corporation beneficially directly or indirectly owning a majority
of the Voting Securities of the Surviving Corporation, and
(C) no Person other than (i) the Company,
(ii) any Subsidiary, (iii) any employee benefit plan (or any
trust forming a part thereof) maintained by the Company, the
Surviving Corporation, or any Subsidiary, or (iv) any Person who,
immediately prior to such merger, consolidation or reorganization
had Beneficial Ownership of thirty percent (30%) or more of the
then outstanding Voting Securities), has Beneficial Ownership of
thirty percent (30%) or more of the combined voting power of the
Surviving Corporation's then outstanding voting securities.
(ii) A complete liquidation or dissolution of the
company; or
(iii) An agreement for the sale or other
disposition of all or substantially all of the assets of the
Company to any Person (other than a transfer to a Subsidiary).
(d) Notwithstanding the foregoing, a Change in Control
shall not be deemed to occur solely because any Person (the
"Subject Person") acquired "Beneficial Ownership of more than the
permitted amount of the then outstanding Voting Securities as a
result of the acquisition of Voting Securities by the Company
which, by reducing the number of Voting Securities then
outstanding, increases the proportional number of shares
Beneficially Owned by the Subject Persons, provided that if a
Change in Control would occur (but for the operation of this
sentence) as a result of the acquisition of Voting Securities by
the Company, and after such share acquisition by the Company, the
Subject Person becomes the Beneficial Owner of any additional
Voting Securities which increases the percentage of the then
outstanding Voting Securities Beneficially Owned by the Subject
Person, then a Change in Control shall occur.
7. TERMINATION. Subject to the provisions of Section 8,
this Agreement may be terminated:
(a) by mutual consent of the Company and
Employee;
(b) by Employee upon thirty (30) days
written notice to the Company; or
(c) by the Company upon thirty (30) days
written notice to Employee.
Termination of Employee's employment under this Agreement
shall not release either Employee or the Company from obligations
hereunder arising or accruing through the date of such
termination nor from the post-termination provisions of this
Agreement. Termination may be
<PAGE 5>
without cause and no cause need be
stated in notice of termination. On notice of termination of or
by the Employee, the Company has the power to suspend the
Employee from all duties on the date notice is given, and to
immediately require return of all Confidential Information as
described in the Agreement.
8. PROVISIONS APPLICABLE TO EMPLOYMENT IN THE EVENT OF A
CHANGE IN CONTROL.
(a) If a Change in Control shall occur and if, prior
to the third anniversary of the Change in Control, (i) the
Employee is terminated, or (ii) the Employee resigns due to the
occurrence of any Adverse Consequences, as defined below, then
the Employee shall be entitled to receive as severance pay, in
lieu of any further salary subsequent to the date of termination,
an amount in cash equal to 2 times the following: 3 times the
sum of Employee's annual base salary and Employee's most recent
annual bonus as of the effective date of the Change in Control, ,
multiplied by a factor of 1 plus the percentage representing the
percentage increase, if any, in the price of the common stock of
the Company between the date of execution of this Agreement and
the close of business on the first business day following the
date upon which public announcement of the Change in Control is
made. All benefits enjoyed by the Employee prior to the Change
in Control shall continue for a period of 3 years after the date
of termination. The severance sum shall be paid by the Company
to SunTrust Bank in Daytona Beach, Florida ("SunTrust"), as
Escrow Agent, prior to the effective date of the Change in
Control, for deposit into an interest-bearing account pursuant to
an escrow agreement acceptable to Employee, Company and SunTrust
which provides that upon Employee's delivery of written
confirmation of his termination, or his resignation due to the
occurrence of an Adverse Consequence, the Escrow Agent shall
immediately, without delay, pay the severance sum, in its
totality, to Employee, plus interest accruing from the date of
termination or occurrence of an Adverse Consequence, and which
further provides that, absent receipt of such notice from
Employee, the funds held in escrow will revert to the Company on
the on the first business day following the third anniversary of
the Change in Control date. If the continuation of any benefit
provided to the Employee violates any law or statute the Employer
shall pay to the Employee the cash equivalent of any benefit lost
by the Employee.
(b) "Adverse Consequences" is defined to mean any of
the following that the Employee, in good faith, believes to have
occurred:
(i) any material breach of this Agreement by the
Company;
(ii) the assignment to the Employee of any duties
inconsistent with, or any diminution in, the Employee's status or
responsibilities presently in effect;
(iii) the failure of the Company to follow
Employee's recommendations concerning operations and management
of the Company, dividend policy of the Company, and strategic
direction of the Company;
<PAGE 6>
(iv) the failure by the Company to provide the
Employee with suitable office space and adequate and appropriate
support staff and secretarial assistance and other administrative
support;
(v) a reduction by the Company in the Employee's
salary or bonus, or a failure by the Company, without good
reason, to increase Employee's salary and bonus in accordance
with past practice from year to year;
(vi) the reduction or cessation of quarterly
dividend payments to shareholders of the Company equaling at
least 25% of earnings of the Company without delivery of money,
stock or other consideration with value that equals or exceeds
the income that shareholders would otherwise derive from such
quarterly dividend payments;
(vii) a change in the principal place of the
Employee's employment to a location outside of Daytona Beach,
Florida;
(viii) the failure by the Company to provide
the Employee with insurance and other benefits that are, in the
judgment of Employee, commensurate with those benefits currently
supplied by Company;
(ix) the failure of any successor to the Company
to assume and agree to perform this Agreement; or
(x) the taking of any other action by the Company
where the intent or likely result of the action is to cause the
Employee to resign or be terminated.
9. CONFIDENTIAL INFORMATION; NON-PIRACY COVENANTS. (a)
Employee recognizes and acknowledges that the Confidential
Information (as hereafter defined) constitutes valuable, secret,
special, and unique assets of Company. Employee covenants and
agrees that, during the term of this Agreement and following
termination (whether voluntary or involuntary), he or she will
not disclose the Confidential Information to any person, firm,
corporation, association, or other entity for any reason or
purpose without the express written approval of Company and will
not use the Confidential Information except in Company's
business. It is expressly understood and agreed that the
Confidential Information is the property of Company and must be
immediately returned to Company upon demand therefor. The term
Confidential Information includes each, every, and all written
documentation related to Company or its business that is not
public information, whether furnished by Company or compiled by
Employee, including but not limited to: (1) lists of the
Company's customers, companies, accounts and records pertaining
thereto; (2) customer lists, prospect lists, policy forms,
and/or rating information, expiration dates, information on risk
characteristics, information concerning insurance markets for
large or unusual risks, and all types of written information
customarily used by Company or available to the Employee; (3)
information related to any of Company's programs and marketing
strategies; (4) information known to Employee but not reduced to
written or recorded form; (5) underwriting information received
from customers; and (6) Employee's recollection of Confidential
Information.
<PAGE 7>
(b) For a period of three (3) years following
termination of Employment (whether voluntary or involuntary),
Employee specifically agrees not to solicit, accept, nor service,
directly or indirectly, as insurance solicitor, insurance agent,
insurance broker, insurance wholesaler, managing general agent,
consultant, or otherwise, for Employee's accounts or the accounts
of any other agent, or broker, or insurer, either as officer,
director, stockholder, owner, partner, employee, promoter,
consultant, manager, or otherwise, any insurance or bond business
of any kind or character from any person, firm, corporation, or
other entity, that is a customer or account of the Company during
the term of this Agreement or from any prospective customer or
account to whom the Company made proposals while Employee was
employed by Company. Should a court of competent jurisdiction
declare any of the covenants set forth in this paragraph
unenforceable due to an unreasonable restriction of duration,
geographical area or otherwise, each of the parties hereto agrees
that such court shall be empowered to rewrite or reform any such
covenant and shall grant Company injunctive relief reasonably
necessary to protect its interest.
(c) Employee agrees that Company shall have the right
to communicate the terms of this Agreement to any third parties,
including but not limited to, any past, present or prospective
employer of Employee. Employee waives any right to assert any
claim for damages against Company or any officer, employee or
agent of Company arising from disclosure of the terms of this
paragraph.
(d) In the event of the breach or threatened breach of
the provisions of this paragraph, Company shall be entitled to
injunctive relief as well as any other applicable remedies at law
or in equity.
10. ORGANIZING COMPETITIVE BUSINESSES; SOLICITING COMPANY EMPLOYEES.
Employee agrees that so long as he is working for
Company he will not undertake the planning or organizing of any
business activity competitive with the work he performs.
Employee acknowledges that the Company has made a significant
investment in developing and training a competent work force.
Employee agrees that he will not, for a period of two (2) years
following termination of employment with Company, directly or
indirectly, solicit any of the Company's employees to work for
Employee or any other competitive company.
11. PROTECTION OF COMPANY PROPERTY. All records, files
manuals, lists of customers, blanks, forms, materials, supplies,
computer programs and other materials furnished to the Employee
by the Company, used by him on its behalf, or generated or
obtained by him during the course of his employment, shall be and
remain the property of Company. Employee shall be deemed the
bailee thereof for the use and benefit of Company and shall
safely keep and preserve such property, except as consumed in the
normal business operations of Company. Employee acknowledges
that this property is confidential and is not readily accessible
to Company's competitors. Upon termination of employment
hereunder, the Employee shall immediately deliver to Company or
its authorized representative all such property, including all
copies, remaining in the Employee's possession or control.
12. ATTORNEY FEES AND EXPENSES. The Company shall pay all
legal fees and related expenses (including the costs of experts,
evidence and counsel) incurred by the Employee as they
<PAGE 8>
become due as a result of the Employee seeking to obtain or enforce any
right or benefit provided by this Agreement or by any other plan
or arrangement maintained by the Company under which the Employee
is or may be entitled to receive benefits.
13. SUCCESSORS AND ASSIGNS.
(a) This Agreement shall be binding upon and shall
inure to the benefit of the Company, its successors and assigns
and the Company shall require any successor or assign to
expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required
to perform it if no such succession or assignment had taken
place. The term "Company" as used herein shall include such
successors and assigns. The term "successors and assigns" as
used herein shall mean a corporation or other entity acquiring
all or substantially all the assets and business of the Company
(including this Agreement) whether by operation of law or
otherwise.
(b) Neither this Agreement nor any right or interest
hereunder shall be assignable or transferable by the Employee,
his beneficiaries or legal representatives, except by will or by
the laws of descent and distribution. This Agreement shall inure
to the benefit of and be enforceable by the Employee's legal
personal representative.
14. NOTICES. Any notices required or permitted to be given
under this Agreement shall be sufficient in writing and if sent
by Certified Mail to:
Employee at:
220 South Ridgewood Avenue
Daytona Beach, Florida 32115
and to the Company at:
401 East Jackson Street, Suite 1700
Tampa, Florida 33602
Attn: General Counsel
or such other address as either shall give to the other in
writing for this purpose.
15. WAIVER OF BREACH. The waiver of either party of a
breach of any provision of the Agreement shall not operate or be
construed as a waiver of any subsequent breach by the other
party.
16. ENTIRE AGREEMENT. This instrument contains the entire
Agreement of the parties. All contracts entered into which are
dated prior to this Agreement are considered null and void.
Employee agrees that no verbal or other statement; inducement or
representation relied upon by Employee for the execution of this
Agreement has been made to Employee which is not contained in
this Agreement. This Agreement may not be changed orally but
only by an agreement in writing
<PAGE 9>
signed by the party against whom
enforcement of any waiver, change, modification, extension or
discharge is south. A waiver by Company of any condition or term
in this Agreement shall not be construed to have any effect on
the remaining terms and conditions nor shall said waiver, if any,
be construed as permanent or binding for the future.
17. SETTLEMENT OF CLAIMS. The Company's obligation to make
the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any
circumstances, including, without limitation, any set-off,
counterclaim, defense, recoupment, or other right which the
Company may have against the Employee or others.
18. FLORIDA LAW TO GOVERN; VENUE. This Agreement shall be
governed by and construed according to the laws of the State of
Florida without giving effect to the conflict of law principles
thereof. Any action brought by any party relating to this
Agreement shall be brought and maintained in a court of competent
jurisdiction in Volusia County, Florida.
IN WITNESS WHEREOF, the parties have executed this Agreement
effective as of the date first set forth above.
WITNESSES:
/S/ LARAINE SPINA /S/ J. HYATT BROWN
- ------------------ ___________________________________
J. HYATT BROWN
/S/ LAUREL L. GRAMMIG
_____________________
as to Employee
WITNESSES: BROWN & BROWN, INC.
/S/ JEFFREY PARO By: /S/ JIM HENDERSON
____________________ ___________________________
Jim Henderson
Executive Vice President
/S/ LAUREL L. GRAMMIG
_______________________
as to Brown & Brown
EXHIBIT 11
<TABLE>
<CAPTION>
Statement Re: Computation of Basic and Diluted Earnings Per
Share (Unaudited)
<S> <C> <C> <C> <C>
Three Months Year Ended
(In thousands, except per Ended December 31, December 31
share data)
1999 1998 1999 1998
____ ____ ____ ____
BASIC EARNINGS PER SHARE
Net Income $ 7,084 $ 6,130 $27,172 $23,349
======= ======= ======= =======
Weighted average shares 13,708 13,770 13,732 13,703
outstanding ======= ======= ======= =======
Basic earnings per share $ .52 $ .45 $ 1.98 $ 1.70
======= ======= ======= ========
DILUTED EARNINGS PER SHARE
Weighted average number of 13,708 13,770 13,732 13,703
shares outstanding
Net effect of dilutive
stock options, based on the
treasury stock method 4 1 4 1
_______ _______ _______ ______
Total diluted shares used
in computation 13,712 13,771 13,736 13,704
======= ======= ======= =======
Diluted earnings per share $ .52 $ .44 $ 1.98 $ 1.70
======= ======= ======= ========
</TABLE>
<PAGE 1>
EXHIBIT 13
PORTIONS OF BROWN & BROWN, INC.'S 1999 ANNUAL REPORT TO SHAREHOLDERS
Financial Highlights
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31,
(in thousands, except Percent
per share data)(1) 1999 Change 1998 1997 1996 1995
Commissions and fees(2) $172,546 10.9 $155,577 $138,112 $128,147 $115,046
Total revenues $176,413 11.0 $158,947 $143,501 $132,807 $119,789
Total expenses $132,205 9.3 $120,978 $112,517 $104,741 $ 95,817
Income before taxes $ 44,208 16.4 $ 37,969 $ 30,984 $ 28,066 $ 23,972
Net income(3) $ 27,172 16.4 $ 23,349 $ 18,988 $ 17,391 $ 15,402
Net income per share $ 1.98 16.5 $ 1.70 $ 1.39 $ 1.28 $ 1.13
Weighted average number
of shares outstanding 13,736 13,704 13,639 13,576 13,600
Dividends declared per
share $ 0.4600 $ 0.4100 $ 0.3533 $ 0.3267 $ 0.3200
Total assets $235,163 $232,129 $206,101 $189,646 $161,747
Long-term debt $ 3,909 $ 17,378 $ 6,452 $ 5,485 $ 7,615
Shareholders' equity(4) $103,026 $ 83,680 $ 76,240 $ 67,378 $ 54,604
</TABLE>
(1) All share and per-share information has been restated to give
effect to the three-for-two stock split, which became effective
February 27, 1998. Prior years' results have been restated to
reflect the stock acquisitions of Insurance West in 1995, Daniel-
James in 1998 and Ampher-Ross and Signature Insurance Group in
1999.
(2) See Notes 2 and 3 to consolidated financial statements for information
regarding business purchase transactions which impact the comparability
of this information.
(3) During 1995, the Company reduced its general tax reserved by $451,000,
or $0.0333 per share, respectively, as a result of reaching a
settlement with the Internal Revenue Service on certain examination
issues.
(4) Shareholders' equity as of December 31, 1999, 1998, 1997, 1996 and 1995
included net increases of $4,922,000, $5,540,000, $6,511,000 and
$4,836,000, respectively, as a result of the Company's application of
SFAS 15, "Accounting for Certain Investments in Debt and Equity
Securities."
Restatement of Financial Information
On July 20, 1999, Brown & Brown (the Company) acquired Ampher
Insurance, Inc. and Ross Insurance of Florida, Inc. through an
exchange of shares. Additionally, on November 10, 1999, the
Company acquired Signature Insurance Group, Inc. also through an
exchange of shares.
These transactions were both accounted for utilizing the
pooling-of-interests method of accounting and, accordingly, the
Company was required to restate its consolidated financial
statements for all years presented in this Annual Report. The
purpose of a restatement is to present as one combined entity the
historical financial data of two (or more) previously separate and
distinct legal entities. The financial data that is contained in
the Management's Discussion and Analysis, the Consolidated
Financial Statements and Notes to Consolidated Financial
Statements reflect this restatement.
Consistent with last year's presentation, as a means of
comparison, the tables below depict the Company's revenues, pre-
tax margins and earnings per share for 1994-1999 both before and
after the restatement.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
REVENUE (in thousands) PRE-TAX MARGIN EARNINGS PER SHARE
Original Restated Original Restated Original Restated
1994 $101,580 $114,525 20.3 % 18.7 % $ 1.04 $ 1.06
1995 106,365 119,789 21.9 % 20.0 % 1.13 1.13
1996 118,680 132,807 22.8 % 21.1 % 1.27 1.28
1997 129,191 143,501 24.5 % 21.6 % 1.48 1.39
1998 153,791 158,947 24.4 % 23.9 % 1.72 1.70
1999 $176,413 $176,413 25.1 % 25.1 % $ 1.98 $ 1.98
</TABLE>
<PAGE 2>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
In April of 1993, Poe & Associates, Inc., headquartered in Tampa,
Florida, merged with Brown & Brown, Inc., headquartered in Daytona
Beach, Florida, forming Poe & Brown, Inc. In April of 1999, the
shareholders voted to change the name to Brown & Brown, Inc. (the
"Company"). Since that merger, the Company's operating results
have steadily improved. The Company achieved pre-tax income from
operations of $44,208,000 in 1999, compared to $37,969,000 in 1998
and $30,984,000 in 1997. Pre-tax income as a percentage of total
revenues was 25.1% in 1999, 23.9% in 1998 and 21.6% in 1997. This
upward trend is primarily the result of the Company's achievement
of revenue growth and operating efficiency improvements.
The Company's revenues are comprised principally of
commissions paid by insurance companies, fees paid directly by
clients and investment income. Commission revenues generally
represent a percentage of the premium paid by the insured and are
materially affected by fluctuations in both premium rate levels
charged by insurance underwriters and the volume of premiums
written by such underwriters. These premium rates are established
by insurance companies based upon many factors, none of which is
controlled by the Company. Beginning in 1986 and continuing
through 1999, revenues have been adversely influenced by a
consistent decline in premium rates resulting from intense
competition among property and casualty insurers for expanding
market share. Among other factors, this condition of prevailing
decline in premium rates, commonly referred to as a "soft market,"
has generally resulted in flat to reduced commissions on renewal
business. The possibility of rate increases in 2000 is
unpredictable.
The development of new and existing proprietary programs,
fluctuations in insurable exposure units and the volume of
business from new and existing clients, and changes in general
economic and competitive conditions further impact revenues. For
example, stagnant rates of inflation in recent years have
generally limited the increases in insurable exposure units such
as property values, sales and payroll levels. Conversely, the
increasing trend in litigation settlements and awards has caused
some clients to seek higher levels of insurance coverage. Still,
the Company's revenues continue to grow through quality
acquisitions, intense initiatives for new business and development
of new products, markets and services. The Company anticipates
that results of operations for 2000 will continue to be influenced
by these competitive and economic conditions.
On July 20, 1999, the Company acquired Ampher Insurance, Inc.
and Ross Insurance of Florida, Inc. through an exchange of shares.
Additionally, on November 10, 1999, the Company acquired Signature
Insurance Group, Inc. and C, S & D, a Florida general partnership,
also through an exchange of shares. On April 14, 1998 the Company
acquired Daniel-James Insurance Agency, Inc. and Becky-Lou Realty
Limited, through an exchange of shares. Each of these transactions
has been accounted for as a pooling-of-interests and, accordingly,
the Company's consolidated financial statements have been restated
for all periods prior to the acquisitions to include the results
of operations, financial positions and cash flows of the acquired
entities.
During 1999, the Company acquired the assets of six general
insurance agencies, several books of business (customer accounts)
and the outstanding shares of two general insurance agencies. Each
of these transactions was accounted for as a purchase. On December
30, 1999, the Company acquired all of the outstanding stock of
Roswell Insurance & Surety Agency, Inc. This transaction was
accounted for as a pooling-of-interests; however, the financial
statements for all prior periods were not restated due to the
immaterial nature of the transaction.
<PAGE 3>
During 1998, the Company acquired the assets of nineteen
general insurance agencies, several books of business and the
outstanding shares of one general insurance agency. Each of these
transactions was accounted for as a purchase.
During 1997, the Company acquired three general insurance
agencies and several books of business, all of which were
accounted for as purchases. On August 1, 1997, the Company
acquired all of the outstanding stock of Shanahan, McGrath &
Bradley, Inc. This transaction was accounted for as a pooling-of-
interests; however, the financial statements for all prior periods
were not restated due to the immaterial nature of the transaction.
Contingent commissions may be paid to the Company by
insurance carriers based upon the volume, growth and/or
profitability of the business placed with such carriers by the
Company and are primarily received in the first quarter of each
year. In the last three years, contingent commissions have
averaged approximately 4.7% of
total revenues.
Fee revenues are generated principally by the Service
Division of the Company, which offers administration and benefit
consulting services primarily in the workers' compensation and
employee benefit self-insurance markets. For the past three years,
service fee revenues have generated an average of 8.7% of total
commissions
and fees.
Investment income consists primarily of interest earnings on
premiums and advance premiums collected and not immediately
remitted to insurance carriers, with such funds being held in a
fiduciary capacity. The Company's policy is to invest its
available funds in high-quality, short-term fixed income
investment securities. Investment income also includes gains and
losses realized from the sale of investments. In 1999, investment
income included a gain of approximately $140,000 resulting from
the Company's disposition of its investment in the 37th Street
Properties partnership. For 1998, investment income included a
$165,000 realized gain from the sale of the Company's investments
in AmSouth Bancorporation and United States Filter Corporation. in
1997, investment income included a $303,000 realized gain from the
sale of the Company's investment in Fort Brooke Bank.
The following discussion and analysis regarding results of
operations and liquidity and capital resources should be
considered in conjunction with the accompanying consolidated
financial statements and related notes.
Results of Operations for the Years Ended
December 31, 1999, 1998 and 1997
Commissions and Fees
Commissions and fees increased 11% in 1999, 13% in 1998 and 8% in
1997. Excluding the effect of acquisitions, commissions and fees
increased 2% in 1999, 2% in 1998 and 6% in 1997. The 1999 results
reflect an increase in commissions for three of the four operating
divisions. The National Programs division posted a decrease in
commissions for 1999. In general, property and casualty insurance
premium prices continued to decline in 1999, which was primarily
responsible for the slower growth rate; however, certain segments
and industries had some increases in insurable exposure units
during the year.
Investment Income
Investment income decreased to $2,560,000 in 1999 compared to
$3,325,000 in 1998 and $4,241,000 in 1997. This decrease is
primarily due to lower levels of invested cash precipitated by the
Company's ongoing acquisition strategy in both 1999 and 1998.
Additionally, the 1997 results included a $303,000 gain from the
sale of the Company's investment in Fort Brooke Bank.
Other Income
<PAGE 4>
Other income consists primarily of gains and losses from the sale
and disposition of assets. During 1999, gains from the sale of
customer accounts were $1,162,000 compared to losses of $115,000
in 1998 and gains of $646,000 in 1997. The gain in 1999 was
primarily attributable to the disposition of certain accounts in
the Lawyer's Protector Plan(r) of the Company's National Programs
Division. The loss in 1998 was due primarily to the disposition of
the Company's Charlotte, North Carolina operation.
Employee Compensation & Benefits
Employee compensation and benefits increased approximately 10% in
1999, 9% in 1998 and 8% in 1997. Employee compensation and
benefits as a percentage of total revenue was 51% in 1999, down
from 52% in both 1998 and 1997. The Company had 1,370 full-time
employees at December 31, 1999, compared to 1,417 at the beginning
of the year. The decrease in personnel during 1999 is primarily
attributable to the restructuring of the National Programs
Division. The 1999 increase in compensation and employee benefits
of $8,436,000 is attributable to several factors, including higher
levels of both producer commissions and profit center bonuses
resulting from the Company's proportionate increases in revenue
and profitability.
Other Operating Expenses
Other operating expenses increased 3% in 1999, 5% in 1998 and 6%
in 1997. Other operating expenses as a percentage of total
revenues decreased to 19% in 1999 from 20% in 1998 and 22% in
1997. The continuing decline in operating expenses, expressed as a
percentage of total revenues, is primarily attributable to the
effective cost containment measures brought about by the Company's
"Project 28" initiative, designed to identify areas of excess
expense.
Interest and Amortization
Interest expense increased $115,000, or 20%, in 1999, and
decreased $405,000, or 42%, in 1998. Interest expense decreased
$2,000 in 1997. The increase in 1999 is due to higher levels of
debt during the first quarter of 1999 and the assumption of debt
in certain pooling acquisitions.
Amortization expense increased $1,804,000, or 31%, in 1999,
$213,000, or 4%, in 1998, and $434,000, or 8%, in 1997. The
increase in 1999 is due to the additional amortization of
intangibles as a result of both 1999 and 1998 acquisitions. The
increase in 1997 is due primarily to the $670,000 write-off of the
remaining intangible assets related to a terminated purchase
contract agreement.
Income Taxes
The effective tax rate on income from operations was 38.5% in both
1999 and 1998, and 38.7% in 1997.
Liquidity and Capital Resources
The Company's cash and cash equivalents of $37,459,000 at December
31, 1999 decreased by $5,366,000 from $42,825,000 at December 31,
1998. During 1999, $39,728,000 of cash was provided from operating
activities. From this amount and existing cash balances,
$18,154,000 was used to acquire businesses, $17,106,000 was used
to repay long-term debt, $6,237,000 was used for payment of
dividends, $4,936,000 was used for additions to fixed assets and
$1,152,000 was used for purchases of the Company's stock.
The Company's cash and cash equivalents of $42,825,000 at
December 31, 1998, decreased $6,623,000 from the December 31, 1997
balance of $49,448,000. During 1998, cash of $37,833,000 was
provided from operating activities and $12,000,000 was received
from long-term debt financing. From these amounts and existing
cash balances, $29,608,000 was used to acquire businesses,
$9,233,000 was used for purchases of the Company's stock,
$7,835,000 was used to repay
<PAGE 5>
long-term debt, $5,494,000 was used
for payment of dividends, $4,560,000 was used for fixed asset
additions and $1,184,000 was used for purchases of investments.
The Company's cash and cash equivalents of $49,448,000 at
December 31, 1997 increased $15,428,000 from the December 31, 1996
balance of $34,020,000. During 1997, cash of $31,507,000 was
provided from operating activities. From this amount, $5,860,000
was used for purchases of the Company's stock, $4,636,000 was used
for payment of dividends, $3,072,000 was used to acquire
businesses, $2,915,000 was used for fixed asset additions and
$2,824,000 was used for payments on long-term debt.
The Company's current ratio was .95, 1.02 and 1.11 at
December 31, 1999, 1998 and 1997, respectively. The decrease in
the current ratio in 1999 is primarily attributable to the
repayment of long-term debt during 1999.
The Company continues to maintain its credit agreement with
a major insurance company under which $4 million (the maximum
amount available for borrowing) was outstanding at December 31,
1999. The available amount will decrease by $1 million each August
beginning in 2000. The credit agreement requires the Company to
maintain certain financial ratios and comply with certain other
covenants.
The Company also has a revolving credit facility with a
national banking institution that provides for available
borrowings of up to $50 million, with a maturity date of October
2000. On borrowings of up to $8 million, the outstanding balance
is adjusted daily based upon cash flows from operations. The
interest rate on this portion of the facility is equal to the
prime rate less 1% (7.50% at December 31, 1999). On borrowings in
excess of $8 million, the interest rate on this portion of the
facility is LIBOR plus 0.45% to 1.25%, depending on certain
financial ratios that are calculated on a quarterly basis. A
commitment fee of 0.125% per annum is assessed on the unused
balance. At December 31, 1999, there were no borrowings against
the facility; at December 31, 1998, $12 million was outstanding.
The Company believes that its existing cash, cash
equivalents, short-term investment portfolio, funds generated from
operations and the availability of the bank line of credit will be
sufficient to satisfy its normal financial needs through at least
the end of 2000. Additionally, the Company believes that funds
generated from future operations will be sufficient to satisfy its
normal financial needs, including the required annual principal
payments of its long-term debt and any potential future tax
liability.
Year 2000 Data Conversion
The Company has not experienced any material disruption as a
result of Year 2000 issues and does not anticipate any material
problems in the future. The costs incurred in remediating
potential Year 2000 problems did not differ materially from the
Company's prior estimates.
Forward-Looking Statements
From time to time, the Company may publish "forward-looking
statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, or make verbal statements that
constitute forward-looking statements. These forward-looking
statements may relate to such matters as anticipated financial
performance of future revenues or earnings, business prospects,
projected acquisitions or ventures, new products or services,
anticipated market performance, compliance costs, and similar
matters. The Private Securities Litigation Reform Act of 1995
provides a safe harbor for forward-looking statements. In order to
comply with the terms of the safe harbor, the Company cautions
readers that a variety of factors could cause the Company's actual
results to differ materially from the anticipated results or other
expectations expressed in the Company's forward-looking
statements. These risks and uncertainties, many of which are
<PAGE 6>
beyond the Company's control, include, but are not limited to: (i)
competition from existing insurance agencies and new participants
and their effect on pricing of premiums; (ii) changes in
regulatory requirements that could affect the cost of doing
business; (iii) legal developments affecting the litigation
experience of the insurance industry; (iv) the volatility of the
securities markets; (v) the potential occurrence of a major
natural disaster in certain areas of the State of Florida, where
the Company's business is concentrated, and (vi) general economic
conditions. The Company does not undertake any obligation to
publicly update or revise any forward-looking statements.
<TABLE>
<CAPTION>
Consolidated Statements of Income
<S> <C> <C> <C>
Year Ended December 31,
(in thousands, except per share data) 1999 1998 1997
REVENUES
Commissions and fees $172,546 $155,577 $138,112
Investment income 2,560 3,325 4,241
Other income 1,307 45 1,148
Total revenues 176,413 158,947 143,501
EXPENSES
Employee compensation and benefits 90,440 82,004 74,931
Other operating expenses 33,424 32,552 30,972
Amortization 7,657 5,853 5,640
Interest 684 569 974
Total expenses 132,205 120,978 112,517
Income before income taxes 44,208 37,969 30,984
Income taxes 17,036 14,620 11,996
Net income $ 27,172 $ 23,349 $ 18,988
Other comprehensive income,
net of tax:
Unrealized holding (loss) gain,
net of tax benefit (expense) of
$395 in 1999, $770 in 1998 and
($149) in 1997 on securities (618) (1,204) 233
COMPREHENSIVE INCOME $ 26,554 $ 22,145 $ 19,221
Basic and diluted earnings per share $ 1.98 $ 1.70 $ 1.39
Weighted average number of shares
outstanding 13,736 13,704 13,639
See notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets
<S> <C> <C>
Year Ended December 31,
(in thousands, except per share data) 1999 1998
ASSETS
Cash and cash equivalents $ 37,459 $ 42,825
Short-term investments 481 805
Premiums, commissions and fees receivable 67,783 69,736
Other current assets 7,214 9,873
Total current assets 112,937 123,239
Fixed assets, net 14,337 13,777
Intangibles, net 91,813 79,704
Investments 9,449 10,503
Other assets 6,627 4,906
Total assets $235,163 $232,129
LIABILITIES
Premiums payable to insurance companies $ 87,737 $ 90,346
Premium deposits and credits due customers 7,771 8,379
Accounts payable and accrued expenses 20,458 17,154
Current portion of long-term debt 3,548 4,960
Total current liabilities 119,514 120,839
Long-term debt 3,909 17,378
Deferred income taxes 1,578 2,403
<PAGE 7>
Other liabilities 7,136 7,829
Total liabilities 132,137 148,449
SHAREHOLDERS' EQUITY
Common stock, par value $.10 per share;
authorized 70,000 shares; issued 13,720
shares at 1999 and 13,770 shares at 1998 1,372 1,377
Retained earnings 96,732 76,763
Accumulated other comprehensive income,
net of tax effect of $3,147 at 1999 and
$3,542 at 1998 4,922 5,540
Total shareholders' equity 103,026 83,680
Total liabilities and shareholders' equity $235,163 $232,129
See notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
Consolidated Statements of Shareholders' Equity
<S> <C> <C> <C> <C> <C> <C>
Common Stock Accumulated
Other
Additional Compre-
Paid-in Retained hensive
(in thousands, Shares Amount Capital Earnings Income Total
except per share
data)
BALANCE, JANUARY 1,
1997 13,535 $ 1,354 $ 1,211 $ 58,302 $ 6,511 $ 67,378
Net income 18,988 18,988
Acquired and issued
for employee stock
benefit plans and
stock acquisitions 123 12 (1,211) (3,925) (5,124)
Net increase in
unrealized appre-
ciation of
available-for-
sale securities 233 233
Shareholder
distributions
from pooled
entities (600) (600)
Cash dividends paid
($.3533 per share) (4,636) (4,636)
BALANCE,
DECEMBER 31,
1997 13,658 1,366 - 68,129 6,744 76,239
Net income 23,349 23,349
Acquired and
issued for
employee
stock benefit
plans and stock
acquisitions 112 11 - (8,388) (8,377)
Net decrease in
unrealized
appreciation of
available-for-
sale securities (1,204) (1,204)
Shareholder
distributions
from pooled
entities (833) (833)
Cash dividends paid
($.4100 per share) (5,494) (5,494)
BALANCE,
DECEMBER 31,
1998 13,770 1,377 - 76,763 5,540 83,680
Net income 27,172 27,172
Acquired and
issued for
employee stock
benefit plans
and stock
acquisitions (50) (5) - 95 90
Net decrease in
unrealized
appreciation
of available-
for-sale
securities (618) (618)
Shareholder
distributions
from pooled
entities (1,061) (1,061)
Cash dividends
paid
($.4600 per share) (6,237) (6,237)
BALANCE,
DECEMBER 31,
1999 13,720 $ 1,372 $ - $ 96,732 $ 4,922 $103,026
See notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
<S> <C> <C> <C>
Year Ended December 31,
(in thousands) 1999 1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
<PAGE 8>
Net income $ 27,172 $ 23,349 $ 18,988
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 4,152 3,565 3,190
Amortization 7,657 5,853 5,640
Compensation expense under
performance stock plan 1,263 732 176
Provision for doubtful accounts - - 250
Deferred income taxes (430) 271 (94)
Net (gains) losses on sales of
investments, fixed assets
and customer accounts (452) 406 (933)
Premiums, commissions and fees
receivable decrease (increase) 1,953 (2,525) (545)
Other assets increase (851) (1,432) (1,294)
Premiums payable to insurance
companies (decrease) increase (2,608) 6,837 1,236
Premium deposits and credits due
customers (decrease) increase (608) 1,344 (294)
Accounts payable and accrued
expenses increase (decrease) 3,303 (1,814) 4,848
Other liabilities (decrease) increase (823) 1,247 339
Net cash provided by operating
activities 39,728 37,833 31,507
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to fixed assets (4,936) (4,560) (2,915)
Payments for businesses acquired,
net of cash acquired (18,154) (29,608) (3,072)
Proceeds from sales of fixed
assets and customer accounts 647 148 597
Purchases of investments (124) (1,184) (262)
Proceeds from sales of investments 627 1,030 557
Net cash used in investing activities (21,940) (34,174) (5,095)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term debt (17,106) (7,835) (2,824)
Proceeds from long-term debt 738 12,000 2,068
Exercise of stock options and
issuances of stock 1,664 1,113 868
Purchases of stock (1,152) (9,233) (5,860)
Shareholder distributions from pooled
entities (1,061) (833) (600)
Cash dividends paid (6,237) (5,494) (4,636)
Net cash used in financing activities (23,154) (10,282) (10,984)
Net (decrease) increase in cash and
cash equivalents (5,366) (6,623) 15,428
Cash and cash equivalents at beginning
of year 42,825 49,448 34,020
Cash and cash equivalents at end of
year $ 37,459 $ 42,825 $ 49,448
See notes to consolidated financial statements.
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Summary of Significant Accounting Policies
Nature of Operations
Brown & Brown, Inc. (formerly Poe & Brown, Inc.) and subsidiaries
(the "Company") is a diversified insurance brokerage and agency
that markets and sells primarily property and casualty insurance
products and services to its clients. The Company's business is
divided into four divisions: the Retail Division, which markets
and sells a broad range of insurance products to commercial,
professional and individual clients; the National Programs
Division, which develops and administers property and casualty
insurance and employee benefits coverage for professional and
commercial groups nationwide; the Service Division, which provides
insurance-related services such as third-
<PAGE 9>
party administration and
consultation for workers' compensation and employee benefit self-
insurance markets; and the Brokerage Division, which markets and
sells excess and surplus commercial insurance primarily through
non-affiliated independent agents and brokers.
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of Brown & Brown, Inc. and its subsidiaries. All
significant intercompany account balances and transactions have
been eliminated in consolidation.
As more fully described in Note 2 - Mergers, the accompanying
consolidated financial statements for all periods presented have
been restated to show the effect of the acquisitions of Ampher
Insurance, Inc., Ross Insurance of Florida, Inc., Signature
Insurance Group, Inc. and C,S&D, a Florida general partnership,
during 1999, and Daniel-James Insurance Agency, Inc. during 1998.
Revenue Recognition
Commissions relating to the brokerage and agency activity whereby
the Company has primary responsibility for the collection of
premiums from insureds are generally recognized as of the latter
of the effective date of the insurance policy or the date billed
to the customer. Commissions to be received directly from
insurance companies are generally recognized when the amounts are
determined. Subsequent commission adjustments, such as policy
endorsements, are recognized upon notification from the insurance
companies. Commission revenues are reported net of sub-broker
commissions. Contingent commissions from insurance companies are
recognized when received. Fee income is recognized as services are
rendered.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents principally consist of demand deposits
with financial institutions and highly liquid investments having
maturities of three months or less when purchased. Premiums
received from insureds but not yet remitted to insurance carriers
are held in cash and cash equivalents in a fiduciary capacity.
Premiums, Commissions and Fees Receivable
In its capacity as an insurance broker or agent, the Company
typically collects premiums from insureds and, after deducting its
authorized commission, remits the premiums to the appropriate
insurance companies. In other circumstances, the insurance
companies collect the premiums directly from the insureds and
remit the applicable commissions to the Company. Accordingly, as
reported in the Consolidated Balance Sheets, "premiums" are
receivable from insureds and "commissions" are receivable from
insurance companies. "Fees" are receivable from customers
pertaining to the Company's Service Division.
Investments
The Company's marketable equity securities have been classified as
"available-for-sale" and are reported at estimated fair value,
with the accumulated other comprehensive income (unrealized gains
and losses), net of tax, reported as a separate component of
shareholders' equity. Realized gains and losses and
<PAGE 10>
declines in value judged to be other-than-temporary on available-for-sale
securities are included in investment income. The cost of
securities sold is based on the specific identification method.
Interest and dividends on securities classified as available-for-
sale are included in investment income.
Nonmarketable equity securities and certificates of deposit
having maturities of more than three months when purchased are
reported at cost, adjusted for other-than-temporary market value
declines.
Accumulated other comprehensive income reported in
shareholders' equity was $4,922,000 at December 31, 1999 and
$5,540,000 at December 31, 1998, net of deferred income taxes of
$3,147,000 and $3,542,000, respectively. The Company owned 559,970
shares of Rock-Tenn Company common stock at December 31, 1999 and
1998 which have been classified as non-current, available-for-sale
securities. The Company has no current plans to sell these shares.
Fixed Assets
Fixed assets are stated at cost. Expenditures for improvements are
capitalized and expenditures for maintenance and repairs are
charged to operations as incurred. Upon sale or retirement, the
cost and related accumulated depreciation and amortization are
removed from the accounts and the resulting gain or loss, if any,
is reflected in income. Depreciation has been provided using
principally the straight-line method over the estimated useful
lives of the related assets, which range from three to ten years.
Leasehold improvements are amortized on the straight-line method
over the term of the related leases.
Intangibles
Intangible assets are stated at cost less accumulated amortization
and principally represent purchased customer accounts, non-compete
agreements, acquisition costs, purchased contract agreements and
the excess of costs over the fair value of identifiable net assets
acquired (goodwill). Purchased customer accounts, non-compete
agreements, acquisition costs, and purchased contract agreements
are being amortized on a straight-line basis over the related
estimated lives and contract periods, which range from five to 15
years. The excess of costs over the fair value of identifiable net
assets acquired is being amortized on a straight-line basis over
15 to 40 years. Purchased customer accounts are records and files
obtained from acquired businesses that contain information on
insurance policies and the related insured parties that is
essential to policy renewals.
The carrying value of intangibles, corresponding with each
agency division comprising the Company, is periodically reviewed
by management to determine if the facts and circumstances suggest
that they may be impaired. In the insurance brokerage and agency
industry, it is common for agencies or customer accounts to be
acquired at a price determined as a multiple of the corresponding
revenues. Accordingly, the Company assesses the carrying value of
its intangibles by comparison to a reasonable multiple applied to
corresponding revenues, as well as considering the operating cash
flow generated by the corresponding agency division. Any
impairment identified through this assessment may require that the
carrying value of related intangibles be adjusted; however, no
impairments have been recorded for the years ended December 31,
1999, 1998 and 1997.
Income Taxes
The Company files a consolidated federal income tax return.
Deferred income taxes are provided for in the consolidated
financial statements and relate principally to expenses charged to
income for financial reporting purposes in one period and deducted
for income tax purposes in other periods, unrealized appreciation
of available-for-sale securities and basis differences of
intangible assets.
Earnings Per Share
<PAGE 11>
Basic earnings per share (EPS) is computed by dividing income
available to common shareholders by the weighted-average number of
common shares outstanding for the period. Basic EPS excludes
dilution and Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock
were exercised or converted to common stock.
Accounting Standards
On January 1, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income" (SFAS 130). SFAS 130 establishes new standards for the
reporting and display of comprehensive income and its components.
Comprehensive income, as defined, includes all changes in equity
(net assets) during a period from non-owner sources. Adoption of
this Statement had no impact on the Company's consolidated
financial position, results of operations or cash flows.
On January 1, 1998, the Company adopted SFAS No. 131,
"Disclosure About Segments of an Enterprise and Related
Information" (SFAS 131). SFAS 131 requires the Company to report
summarized financial information concerning the Company's
reportable segments, as disclosed in Note 14. Adoption of this
Statement had no impact on the Company's consolidated financial
position, results of operations or cash flows.
Note 2 Mergers
On July 20, 1999, the Company issued 167,328 shares of its common
stock in exchange for all of the outstanding stock of Ampher
Insurance, Inc. and Ross Insurance of Florida, Inc. (collectively
referred to as "Ampher-Ross"), both Florida corporations with an
office in Ft. Lauderdale, Florida.
On November 10, 1999, the Company issued 105,385 shares of
its common stock in exchange for all of the outstanding stock of
Signature Insurance Group, Inc. ("Signature"), a Florida
corporation with an office in Ocala, Florida, and for all of the
outstanding membership interests of C,S&D, a Florida general
partnership established in January 1999.
These transactions have been accounted for under the pooling-
of-interests method of accounting, and accordingly, the Company's
consolidated financial statements and related notes have been
restated for all periods prior to the acquisitions to include the
results of operations, financial positions and cash flows of
Ampher-Ross, Signature and C,S&D.
The following table reflects the 1998 and 1997 individual and
combined operating results of the Company, Ampher-Ross, Signature
and C,S&D.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Audited Unaudited
Brown & Ampher-
(in thousands of Brown Ross Signature C,S&D Combined
dollars,except
per share data)
1998
Revenues $153,791 $ 2,994 $ 2,162 $ - $158,947
Net Income 23,053 86 210 - 23,349
1997
Revenues $138,607 $ 2,761 $ 2,133 $ - $143,501
Net Income 18,666 64 258 - 18,988
1998 1997
NET INCOME PER SHARE
As previously recorded $ 1.72 $ 1.40
As combined $ 1.70 $ 1.39
</TABLE>
On April 14, 1998, the Company issued 278,765 shares of
its common stock in exchange for all of the outstanding stock of
Daniel-James Insurance
<PAGE 12>
Agency, Inc. ("Daniel-James"), an Ohio
corporation with offices in Toledo, Ohio and Indianapolis,
Indiana, and for all of the outstanding membership interests of
Becky-Lou Realty Limited ("Becky-Lou"), an Ohio limited liability
company. This transaction has been accounted for as a pooling-of-
interests and, accordingly, the Company's consolidated financial
statements and related notes to the consolidated financial
statements have been restated for all periods prior to the
acquisition to include the results of operations, financial
positions and cash flows of Daniel-James and Becky-Lou.
The following table reflects the 1997 individual and combined
operating results of the Company, Daniel-James and Becky-Lou.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Audited Unaudited
Brown & Daniel-
(in thousands of dollars, Brown James Becky-Lou Combined
except per share data)
1997
Revenues $129,190 $ 9,215 $ 202 $138,607
Net Income 19,386 (774) 54 18,666
1997
NET INCOME PER SHARE
As previously recorded $ 1.48
As combined $ 1.40
</TABLE>
Note 3 Acquisitions
During 1999, the Company acquired the assets of six general
insurance agencies, several books of business (customer accounts)
and the outstanding stock of two general insurance agencies at an
aggregate cost of $19,612,000, including $18,154,000 of net cash
payments and the issuance of notes payable in the amount of
$1,458,000. Each of these acquisitions was accounted for as a
purchase, and substantially the entire cost was assigned to
purchased customer accounts, non-compete agreements and goodwill.
The results of operations for the acquired companies have been
combined with those of the Company since their respective
acquisition dates. Due to the aggregate immaterial nature of these
transactions, 1999 pro forma disclosure is not presented.
During 1998, the Company acquired the assets of 19 general
insurance agencies, several books of business and the outstanding
shares of one general insurance agency at an aggregate cost of
$34,599,000, including $29,608,000 of net cash payments and the
issuance of notes payable in the aggregate amount of $4,991,000.
These acquisitions were accounted for as purchases and
substantially the entire cost was assigned to purchased customer
accounts, non-compete agreements and goodwill.
The results of operations for the acquisitions completed
during 1998 have been combined with those of the Company since
their respective acquisition dates. If the acquisitions had
occurred at the beginning of the years presented, the Company's
results of operations would be as shown in the following table.
These unaudited pro forma results are not necessarily indicative
of the actual results of operations that would have occurred had
the acquisitions actually been made at the beginning of the
respective periods.
<TABLE>
<CAPTION>
<S> <C> <C>
Unaudited
(in thousands, except per share data) Year Ended December 31,
1998 1997
Total revenues $167,700 $166,577
Income before taxes 38,832 33,192
Net income 23,876 20,335
Earnings per share $ 1.74 $ 1.49
</TABLE>
During 1997, the Company acquired four general insurance
agencies and several books of business, all of which were
accounted for as purchases. The
<PAGE 13>
total cost of these acquisitions
was $5,439,000, including $3,072,000 of cash payments and notes
payable of $2,367,000. The total purchase price was assigned to
purchased customer accounts, non-compete agreements and goodwill.
The results of operations for the acquired companies have been
combined with those of the Company since their respective
acquisition dates.
Additional or return consideration resulting from acquisition
contingency provisions is recorded as an adjustment to intangibles
when the contingency is settled. Payments of this nature totaling
$1,611,000, $1,536,000 and $154,000 were made in 1999, 1998 and
1997, respectively. As of December 31, 1999, the maximum future
contingency payments related to acquisitions totaled $4,977,000.
Note 4 Investments
Investments at December 31 consisted of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
1999
Carrying Value
Non-
(in thousands) Current Current
Available-for-sale marketable equity securities $ 197 $ 9,449
Nonmarketable equity securities and certificates
of deposit 284 -
Total investments $ 481 $ 9,449
1998
Carrying Value
Non-
(in thousands) Current Current
Available-for-sale marketable equity securities $ 235 $ 10,503
Nonmarketable equity securities and certificates
of deposit 570 -
Total investments $ 805 $ 10,503
</TABLE>
The following summarizes available-for-sale securities at
December 31:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Gross Gross
Unrealized Unrealized Estimated
(in thousands) Cost Gains Losses Fair Value
Marketable Equity Securities:
1999 $ 1,576 $ 8,095 $ 25 $ 9,646
1998 $ 1,655 $ 9,093 $ 10 $10,738
</TABLE>
In 1999, proceeds from sales of available-for-sale securities
totaled $627,000, resulting in gross realized gains of
approximately $138,000. Proceeds from sales of available-for-sale
securities totaled $1,030,000 in 1998, resulting in gross realized
gains of approximately $165,000. In 1997, proceeds from sales of
available-for-sale securities totaled $557,000, resulting in gross
realized gains and losses of approximately $349,000 and ($23,000),
respectively.
Cash and cash equivalents, investments, premiums and
commissions receivable, premiums payable to insurance companies,
premium deposits and credits due customers, accounts payable and
accrued expenses, and current and long-term debt are considered
financial instruments. The carrying amount for each of these items
at both December 31, 1999 and 1998 approximates its fair value.
Note 5 Fixed Assets
Fixed assets at December 31 consisted of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
(in thousands) 1999 1998
<PAGE 14>
Furniture, fixtures and equipment $ 32,661 $ 31,003
Land, buildings and improvements 2,092 1,361
Leasehold improvements 1,755 1,418
$ 36,508 $ 33,782
Less accumulated depreciation and
amortization 22,171 20,005
$ 14,337 $ 13,777
</TABLE>
Depreciation expense amounted to $4,152,000 in 1999,
$3,565,000 in 1998 and $3,190,000 in 1997.
Note 6 Intangibles
Intangibles at December 31 consisted of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
(in thousands) 1999 1998
Purchased customer accounts $ 87,955 $ 74,620
Non-compete agreements 21,653 19,111
Goodwill 32,312 28,577
Acquisition costs 1,705 1,552
143,625 123,860
Less accumulated amortization 51,812 44,156
$ 91,813 $ 79,704
</TABLE>
Amortization expense amounted to $7,657,000 in 1999,
$5,853,000 in 1998 and $5,640,000 in 1997.
Note 7 Long-Term Debt
Long-term debt at December 31 consisted of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
(in thousands) 1999 1998
Long-term credit agreement $ 4,000 $ 4,000
Revolving credit facility - 12,000
Notes payable from treasury stock purchases 395 647
Acquisition notes payable 2,372 5,520
Other notes payable 690 171
7,457 22,338
Less current portion 3,548 4,960
Long-term debt $ 3,909 $ 17,378
</TABLE>
In 1991, the Company entered into a long-term credit
agreement with a major insurance company that provided for
borrowings at an interest rate equal to the prime rate plus 1%
(9.50% at December 31, 1999). At December 31, 1999, $4 million
(the maximum amount currently available for borrowings) was
outstanding. In accordance with an August 1, 1998 amendment to the
loan agreement, the outstanding balance will be repaid in annual
installments of $1 million each August beginning in 2000. This
credit agreement requires the Company to maintain certain
financial ratios and comply with certain other covenants.
The Company also has a revolving credit facility with a
national banking institution that provides for available
borrowings of up to $50 million, with a maturity date of October
2000. On borrowings of up to $8 million, the outstanding balance
is adjusted daily based upon cash flows from operations. The
interest rate on this portion of the facility is equal to the
prime rate
<PAGE 15>
less 1% (7.50% at December 31, 1999). On borrowings in
excess of $8 million, the interest rate on this portion of the
facility is LIBOR plus 0.45% to 1.25%, depending on certain
financial ratios that are calculated on a quarterly basis. A
commitment fee of 0.125% per annum is assessed on the unused
balance. At December 31, 1999, there were no borrowings against
the facility; at December 31, 1998, $12 million was outstanding.
Treasury stock notes payable are due to various individuals
for the redemption of Brown & Brown, Inc. stock. These notes bear
no interest and have maturities ranging from calendar years ending
2000 and 2001. These notes have been discounted at an effective
yield of 8.50% for presentation in the consolidated financial
statements.
Acquisition notes payable represent debt incurred to former
owners of certain agencies acquired in 1999, 1998 and 1997. These
notes, including future contingent payments, are payable in
monthly and annual installments through 2002, including interest
of 6%.
Maturities of long-term debt for succeeding years are
$3,548,000 in 2000, $1,283,000 in 2001, $1,049,000 in 2002,
$1,053,000 in 2003 and $524,000 in 2004 and beyond.
Note 8 Income Taxes
At December 31, 1999, the Company had a net operating loss
carryforward of $302,000 for income tax reporting purposes,
portions of which expire in the years 2000 through 2013. This
carryforward was derived from an agency acquired by the Company in
1998. For financial reporting purposes, a valuation allowance of
$38,000 has been recognized to offset the deferred tax asset
related to this carryforward.
Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the corresponding
amounts used for income tax reporting purposes. Significant
components of the Company's deferred tax liabilities and assets as
of December 31 are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
(in thousands) 1999 1998
Deferred tax liabilities:
Fixed assets $ 1,087 $ 1,228
Net unrealized appreciation of
available-for-sale securities 3,147 3,542
Installment sales - 2
Prepaid insurance and pension 721 771
Intangible assets 237 208
Total deferred tax liabilities $ 5,192 $ 5,751
Deferred tax assets:
Deferred compensation $ 2,249 $ 1,926
Accruals and reserves 954 1,010
Net operating loss carryforwards 179 179
Other 270 271
Valuation allowance for deferred
tax assets (38) (38)
Total deferred tax assets $ 3,614 $ 3,348
Net deferred tax liabilities $ 1,578 $ 2,403
</TABLE>
Significant components of the provision (benefit) for income
taxes are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(in thousands) 1999 1998 1997
Current:
Federal $ 15,015 $ 12,367 $ 10,534
State 2,451 1,955 1,730
Total current provision $ 17,466 $ 14,322 $ 12,264
Deferred:
Federal (386) 267 (228)
State (44) 31 (40)
Total deferred (benefit)
<PAGE 16>
provision (430) 298 (268)
Total tax provision $ 17,036 $ 14,620 $ 11,996
</TABLE>
A reconciliation of the differences between the effective tax
rate and the federal statutory tax rate is as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1999 1998 1997
Federal statutory tax rate 35.0 % 35.0 % 35.0 %
State income taxes, net of
federal income tax benefit 3.6 3.4 3.7
Interest exempt from taxation
and dividend exclusion (0.3) (0.2) (0.8)
Non-deductible goodwill
amortization 0.4 0.4 0.4
Other, net (0.2) (0.1) 0.4
Effective tax rate 38.5 % 38.5 % 38.7 %
</TABLE>
Income taxes payable were $2,464,000 and $1,463,000 at
December 31, 1999 and December 31, 1998, respectively, and are
reported as a component of accounts payable and accrued expenses.
Note 9 Employee Benefit Plan
The Company has an Employee Savings Plan (401(k)) under which
substantially all employees with more than 30 days of service are
eligible to participate. Under this plan, the Company makes
matching contributions, subject to a maximum of 2.5% of each
participant's salary. Further, the Company provides for a
discretionary profit sharing contribution for all eligible
employees. The Company's contributions to the plan totaled
$2,400,000 in 1999, $2,174,000 in 1998 and $1,876,000 in 1997.
Note 10 Stock-Based Compensation and Incentive Plans
Employee Stock Purchase Plan
The Company has adopted an employee stock purchase plan ("the
Stock Purchase Plan"), which allows for substantially all
employees to subscribe to purchase shares of the Company's
stock at 85% of the lesser of the market value of such shares
at the beginning or end of each annual subscription period. Of the
750,000 shares authorized for issuance under the Stock Purchase
Plan as of December 31, 1999, 332,606 shares remained available
and reserved for future issuance.
The Company accounts for the Stock Purchase Plan under
Accounting principles Board (APB) No. 25, "Accounting for Stocks
Issued to Employees," under which no compensation expense has been
recognized. Had compensation expense for the Stock Purchase Plan
been determined consistent with SFAS 123, "Accounting for Stock-
Based Compensation," it would have had an immaterial effect on the
Company's net income and earnings per share for the years ended
December 31, 1999, 1998 and 1997.
Stock Performance Plan
The Company has adopted a stock performance plan, under which up
to 900,000 shares of the Company's stock ("Performance Stock") may
be granted to key employees contingent on the employees' years of
service with the Company and other criteria established by the
Company's Compensation Committee. Shares must be vested before
participants take full title to Performance Stock. Of the grants
currently outstanding, specified portions will satisfy the first
condition for vesting based on increases in the market value of
the Company's common stock from the initial price specified by the
Company. Awards satisfy the second condition for vesting on the
earlier of: (i) 15 years of continuous employment with the Company
from the date shares are granted to the participant; (ii)
attainment of age 64; or (iii) death or disability of the
participant. Dividends are paid on unvested Performance Stock that
has satisfied the first vesting condition, and participants may
exercise voting privileges on such shares. At December 31, 1999,
596,482 shares had been granted under the plan at initial stock
prices ranging from $15.17 to $34.00.
<PAGE 17>
As of December 31, 1999,
331,050 shares had met the first condition for vesting; 4,800
shares had satisfied both conditions for vesting and were
subsequently distributed to the participants.
The compensation element for Performance Stock is equal to
the fair market value of the shares at the date the first vesting
condition is satisfied and is expensed over the remaining vesting
period. Compensation expense related to this Plan totaled
$1,263,000 in 1999, $732,000 in 1998 and $175,000 in 1997.
Note 11 Supplemental Disclosures of Cash Flow Information
The Company's significant non-cash investing and financing
activities and cash payments for interest and income taxes are as
follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Year Ended December 31,
(in thousands) 1999 1998 1997
Unrealized (depreciation)
appreciation of available-
for-sale securities net of
tax benefit (expense) of $395
for 1999,$770 for 1998 and
($149) for 1997 $ (618) $ (1,204) $ 233
Notes payable issued for purchased
customer accounts 1,458 4,991 2,367
Notes received on the sale of fixed
assets and customer accounts 1,305 1,249 187
Cash paid during the year for:
Interest 730 863 738
Income taxes 16,535 14,112 11,211
</TABLE>
Note 12 Commitments and Contingencies
The Company leases facilities and certain items of office
equipment under noncancelable operating lease arrangements
expiring on various dates through 2009. The facility leases
generally contain renewal options and escalation clauses based on
increases in the lessors' operating expenses and other charges.
The Company anticipates that most of these leases will be renewed
or replaced upon expiration. At December 31, 1999, the aggregate
future minimum lease payments under all noncancelable lease
agreements were as follows:
<TABLE>
<CAPTION>
<S> <C>
Year Ending December 31, (in thousands)
2000 $ 6,128
2001 5,661
2002 5,662
2003 5,028
2004 3,556
Thereafter 4,544
Total minimum future lease payments $ 30,579
</TABLE>
Rental expense in 1999, 1998 and 1997 for operating leases
totaled $6,314,000, $5,705,000 and $5,449,000, respectively.
The Company is not a party to any legal proceedings other
than various claims and lawsuits arising in the normal course of
business. Management of the Company does not believe that any such
claims or lawsuits will have a material effect on the Company's
financial condition or results of operations.
Note 13 Business Concentrations
Substantially all of the Company's premiums receivable from
customers and premiums payable to insurance companies arise from
policies sold on behalf of insurance companies. The Company, as
broker and agent, typically collects premiums, retains its
commission and remits the balance to the insurance companies. A
significant portion of business written by the Company is for
<PAGE 18>
customers located in Florida. Accordingly, the occurrence of
adverse economic conditions or an adverse regulatory climate in
Florida could have a material adverse effect on the Company's
business, although no such conditions have been encountered in the
past.
For the years ended December 31, 1999, 1998 and 1997,
approximately 14%, 17% and 20%, respectively, of the Company's
revenues were from insurance policies underwritten by one
insurance company. Should this carrier seek to terminate its
arrangement with the Company, the Company believes other insurance
companies are available to underwrite the business, although some
additional expense and loss of market share could possibly result.
No other insurance company accounts for as much as five percent of
the Company's revenues.
Note 14 Segment Information
The Company's business is divided into four divisions: the Retail
Division, which markets and sells a broad range of insurance
products to commercial, professional and individual clients; the
National Programs Division, which develops and administers
property and casualty insurance and employee benefits coverage
solutions for both professional and commercial groups and trade
associations nationwide; the Service Division, which provides
insurance-related services such as third-party administration and
consultation for workers' compensation and employee benefit self-
insurance markets; and the Brokerage Division, which markets and
sells excess and surplus commercial insurance primarily through
non-affiliated independent agents and brokers. The Company
conducts all of its operations in the United States of America.
The accounting policies of the reportable segments are the
same as those described in Note 1 of Notes to Consolidated
Financial Statements. The Company evaluates the performance of its
segments based upon revenues and income before income taxes.
Intersegment revenues are not significant.
Summarized financial information concerning the Company's
reportable segments is shown in the following table. The "Other"
column includes corporate-related items and, as it relates to
segment profit, income and expense not allocated to reportable
segments.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
(in thousands) Retail Programs Service Brokerage Other Total
Year Ended
December 31, 1999:
Total Revenues $123,527 $ 23,822 $ 14,936 $ 15,231 $ (1,103) $176,413
Investment income 1,856 1,187 221 355 (1,059) 2,560
Interest expense 1,136 - - - (452) 684
Depreciation and
amortization 8,686 1,518 384 966 255 11,809
Income (loss) before
income taxes 26,478 7,493 2,475 5,533 2,229 44,208
Total assets 151,226 56,908 6,172 32,362 (11,505) 235,163
Capital expenditures 2,799 504 346 193 1,094 4,936
Year Ended
December 31, 1998:
Total Revenues $105,504 $ 26,737 $ 14,025 $ 13,611 $ (930) $158,947
Investment income 1,689 1,684 207 358 (613) 3,325
Interest expense 844 - - 12 (287) 569
Depreciation and
amortization 6,512 1,452 319 925 210 9,418
Income (loss) before
income taxes 21,795 9,515 2,496 4,888 (725) 37,969
Total assets 127,532 59,686 5,421 29,850 9,640 232,129
Capital expenditures 3,227 666 383 223 61 4,560
Year Ended
December 31, 1997:
Total Revenues $ 89,929 $ 26,821 $ 12,333 $ 13,440 $ 978 $143,501
Investment income 1,293 1,904 183 421 440 4,241
Interest expense 124 - - 313 537 974
Depreciation and
amortization 5,632 1,203 335 783 877 8,830
Income (loss) before
income taxes 15,523 9,657 1,964 4,783 (943) 30,984
<PAGE 19>
Total assets 113,883 58,505 4,178 29,470 65 206,101
Capital expenditures 1,789 563 259 283 21 2,915
</TABLE>
Revenue from insurance policies underwritten by one insurance
company represents approximately $24 million of the Company's
consolidated revenues. All of the reported segments derive revenue
from this insurance company.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Brown & Brown, Inc.
We have audited the accompanying consolidated balance sheets of
Brown & Brown, Inc. and subsidiaries as of December 31, 1999 and
1998, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years in
the period ended December 31, 1999. These financial statements are
the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Brown & Brown, Inc. and subsidiaries as of December 31, 1999
and 1998, and the results of their operations and their cash flows
for each of the three years in the period ended December 31, 1999,
in conformity with generally accepted accounting principles.
/S/ ARTHUR ANDERSEN, LLP
Orlando, Florida
January 19, 2000
EXHIBIT 22
BROWN & BROWN, INC. SUBSIDIARIES
FLORIDA CORPORATIONS:
Ampher Insurance, Inc.
Bill Williams Agency, Inc.
Boulton Agency, Inc.
B & B Insurance Services, Inc.
C. D. Petrie, Inc.
Champion Underwriters, Inc.
Lawyer's Protector Plan Risk Purchasing Group, Inc.
Madoline Corporation
Mann & Wise, Inc.
Physician Protector Plan Risk Purchasing Group, Inc.
Ross Insurance of Florida, Inc.
Signature Insurance Group, Inc.
Underwriters Services, Inc.
FOREIGN CORPORATIONS:
A.G. General Agency, Inc. (TX)
Azure IV Acquisition Corporation (AZ)
P & O of Texas, Inc. (TX)
Poe & Associates of Illinois, Inc. (IL) - d/b/a Insurance
Administration Center
Brown & Brown Insurance of Arizona, Inc. (AZ) - d/b/a Brown
& Brown of Prescott, Brown & Brown of Tucson
Brown & Brown of California, Inc. (CA)
Poe & Brown of Connecticut, Inc. (CT)
Brown & Brown Insurance of Georgia, Inc. (GA)
Brown & Brown Insurance Benefits, Inc. (TX)
Brown & Brown Metro, Inc. (NJ)
Poe & Brown of North Carolina, Inc. (NC)
Brown & Brown of Ohio, Inc. (OH)
Brown & Brown Insurance of Pennsylvania, Inc. (PA)
Brown & Brown Insurance Services of Texas, Inc. (TX) - d/b/a
Brown & Brown of Texas
Peachtree Special Risk Brokers, LLC (GA) (limited company)
Unified Seniors Association, Inc. (GA) (non-profit)
INDIRECT SUBSIDIARIES:
America Underwriting Management, Inc. (FL)
DSD Insurance Agency, Inc. (AZ)
Ernest Smith Insurance Agency, Inc. (FL)
Florida Intracoastal Underwriters, Limited Co. (FL) (limited
company)
Halcyon Underwriters, Inc. (FL)
The Homeowner Association Risk Purchasing Group, Inc. (AZ)
Hotel-Motel Insurance Group, Inc. (FL)
MacDuff America, Inc. (FL)
MacDuff Pinellas Underwriters, Inc. (FL)
MacDuff Underwriters, Inc. (FL) - d/b/a Roehrig & MacDuff
Nevada Apartment Insurance (NV)
Brown & Brown of Indiana, Inc. (IN)
Brown & Brown of Nevada, Inc. (NV)
Brown & Brown of New Mexico, Inc. (NM)
Roswell Insurance &Surety Agency, Inc. (NM)
Shanahan, McGrath & Bradley, Inc. (AZ)
Thim Insurance Agency, Inc. (AZ)
Exhibit 23
[ARTHUR ANDERSEN LOGO]
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby
consent to the incorporation of our report dated January 19,
2000, incorporated by reference in this Form 10-K, into the
Company's previously filed Registration Statements (File
Nos. 33-1900, 33-41204 and 333-14925).
/S/ ARTHUR ANDERSEN LLP
Orlando, Florida
March 15, 2000
Exhibit 24a
POWER OF ATTORNEY
The undersigned constitutes and appoints Laurel L.
Grammig and James L. Olivier, or either of them, as his true
and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign the 1999
Annual Report on Form 10-K for Brown & Brown, Inc., and to
file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact
and agents full power and authority to do and perform each
and every act and thing requisite and necessary to be done
in and about the premises as fully to all intents and
purposes as he might or could in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents,
or their substitutes, may lawfully do or cause to be done by
virtue hereof.
/S/ BRADLEY CURREY
______________________________
Brad Currey
Dated: January 26, 2000
<PAGE 2>
POWER OF ATTORNEY
The undersigned constitutes and appoints Laurel L. Grammig
and James L. Olivier, or either of them, as his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any
and all capacities, to sign the 1999 Annual Report on Form 10-K
for Brown & Brown, Inc., and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to
be done in and about the premises as fully to all intents and
purposes as he might or could in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their
substitutes, may lawfully do or cause to be done by virtue
hereof.
/S/ J. HYATT BROWN
__________________________
J. Hyatt Brown
Dated: January 26, 2000
<PAGE 3>
POWER OF ATTORNEY
The undersigned constitutes and appoints Laurel L. Grammig
and James L. Olivier, or either of them, as her true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for her and in her name, place and stead, in any
and all capacities, to sign the 1999 Annual Report on Form 10-K
for Brown & Brown, Inc., and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to
be done in and about the premises as fully to all intents and
purposes as she might or could in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their
substitutes, may lawfully do or cause to be done by virtue
hereof.
/S/ TONI JENNINGS
__________________________
Toni Jennings
Dated: January 26, 2000
<PAGE 4>
POWER OF ATTORNEY
The undersigned constitutes and appoints Laurel L. Grammig
and James L. Olivier, or either of them, as his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any
and all capacities, to sign the 1999 Annual Report on Form 10-K
for Brown & Brown, Inc., and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to
be done in and about the premises as fully to all intents and
purposes as he might or could in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their
substitutes, may lawfully do or cause to be done by virtue
hereof.
/S/ DAVID H. HUGHES
____________________________
David H. Hughes
Dated: January 26, 2000
<PAGE 5>
POWER OF ATTORNEY
The undersigned constitutes and appoints Laurel L. Grammig
and James L. Olivier, or either of them, as his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any
and all capacities, to sign the 1999 Annual Report on Form 10-K
for Brown & Brown, Inc., and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to
be done in and about the premises as fully to all intents and
purposes as he might or could in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their
substitutes, may lawfully do or cause to be done by virtue
hereof.
/S/ JAN E. SMITH
________________________
Jan E. Smith
Dated: January 26, 2000
<PAGE 6>
POWER OF ATTORNEY
The undersigned constitutes and appoints Laurel L. Grammig
and James L. Olivier, or either of them, as his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any
and all capacities, to sign the 1999 Annual Report on Form 10-K
for Brown & Brown, Inc., and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to
be done in and about the premises as fully to all intents and
purposes as he might or could in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their
substitutes, may lawfully do or cause to be done by virtue
hereof.
/S/ THEODORE J. HOEPNER
_____________________________
Theodore Hoepner
Dated: January 26, 2000
<PAGE 7>
POWER OF ATTORNEY
The undersigned constitutes and appoints Laurel L. Grammig
and James L. Olivier, or either of them, as his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any
and all capacities, to sign the 1999 Annual Report on Form 10-K
for Brown & Brown, Inc., and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to
be done in and about the premises as fully to all intents and
purposes as he might or could in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their
substitutes, may lawfully do or cause to be done by virtue
hereof.
/S/ SAMUEL P. BELL
___________________________
Sam Bell
Dated: January 26, 2000
<PAGE 8>
POWER OF ATTORNEY
The undersigned constitutes and appoints Laurel L. Grammig
and James L. Olivier, or either of them, as his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any
and all capacities, to sign the 1999 Annual Report on Form 10-K
for Brown & Brown, Inc., and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to
be done in and about the premises as fully to all intents and
purposes as he might or could in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their
substitutes, may lawfully do or cause to be done by virtue
hereof.
/S/ JIM HENDERSON
___________________________
Jim Henderson
Dated: January 26, 2000
<PAGE 9>
POWER OF ATTORNEY
The undersigned constitutes and appoints Laurel L.
Grammig and James L. Olivier, or either of them, as his true
and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign the 1999
Annual Report on Form 10-K for Brown & Brown, Inc., and to
file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact
and agents full power and authority to do and perform each
and every act and thing requisite and necessary to be done
in and about the premises as fully to all intents and
purposes as he might or could in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents,
or their substitutes, may lawfully do or cause to be done by
virtue hereof.
/S/ CORY T. WALKER
__________________________
Cory Walker
Dated: February 9, 2000
EXHIBIT 24b
CERTIFIED RESOLUTIONS OF THE BOARD OF DIRECTORS
The undersigned, Laurel L. Grammig, hereby certifies
that she is the duly elected, qualified and acting Secretary
of Brown & Brown, Inc., a Florida corporation (the
"Company"), and that the following resolutions were adopted
by the Board of Directors of the Company by unanimous
written consent dated as of February 28, 2000:
RESOLVED, that the February 23, 2000 draft of
the Company's 1999 Annual Report on Form 10-K
submitted to the Directors is hereby approved in
form and substance, subject to any revisions,
additions, deletions or insertions deemed
necessary or appropriate by Laurel L. Grammig, the
Company's Vice President, Secretary and General
Counsel, and that the Chief Executive Officer and
the Chief Financial Officer are hereby authorized
to sign the Form 10-K on behalf of the Company,
either personally or through a power of attorney,
and to cause the Form 10-K to be filed with the
Securities and Exchange Commission in accordance
with the rules promulgated by the Commission;
FURTHER RESOLVED, that the appropriate
officers of the Company are hereby authorized and
directed to take all actions they deem necessary
or appropriate, including the payment of any
necessary filing fees, to carry out the intent of
the foregoing resolution.
IN WITNESS WHEREOF, the undersigned Secretary of the
Company has executed this Certificate this 15th day of
March, 2000.
/S/ LAUREL L. GRAMMIG
_______________________________
Laurel L. Grammig
Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
financial statements of Brown & Brown, Inc. for the year ended December 31,
1999, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 37,459
<SECURITIES> 9,930
<RECEIVABLES> 67,783
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 112,937
<PP&E> 36,508
<DEPRECIATION> 22,171
<TOTAL-ASSETS> 235,163
<CURRENT-LIABILITIES> 119,514
<BONDS> 0
0
0
<COMMON> 1,372
<OTHER-SE> 101,654
<TOTAL-LIABILITY-AND-EQUITY> 235,163
<SALES> 0
<TOTAL-REVENUES> 176,413
<CGS> 0
<TOTAL-COSTS> 132,205
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 684
<INCOME-PRETAX> 44,208
<INCOME-TAX> 17,036
<INCOME-CONTINUING> 27,172
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,172
<EPS-BASIC> 1.98
<EPS-DILUTED> 1.98
</TABLE>
