Brown & Brown, Inc.
Brown & Brown, Inc.
Incorporated: 1958 as Poe & Associates
Sales: $209.7 million (2000)
Stock Exchanges: New York
Ticker Symbol: BRO
NAIC: 524210 Insurance Agencies and Brokerages
With offices in 24 states, Brown & Brown, Inc. is the ninth largest insurance brokerage in America. Although its agents also sell property/casualty, life, and health insurance to its mostly commercial clients, the company is best known for its customized package of insurance policies designed for proprietors of specific small businesses, such as dentists, architects, lawyers, funeral-home directors, and auto dealers. Brown & Brown maintains dual corporate headquarters in Tampa, Florida, and Daytona Beach, Florida—the result of a 1993 merger between Poe and Associates and Brown & Brown. That merger initiated a period of rapid growth, which was later fueled by a spate of acquisitions. Brown & Brown has a distinct corporate culture, and employs the cheetah as an unofficial mascot to emphasize a sense of urgency and the need to adapt to fast-changing business conditions.
Two Companies’ Beginnings: 1939–93
The original Brown & Brown was started in Daytona Beach in 1939 by J. Adrian Brown, the father of the man who assumed control of the family business as chief executive in 1961. The younger Brown was also involved in Florida politics. He was elected to the Florida State House of Representatives in 1972, and served as speaker of the house in 1978–1980 before retiring from public service to concentrate solely on his insurance business. In those 12 years before merging with Poe & Associates in 1993, he increased Brown & Brown’s annual revenues from less than $2 million to more than $33 million.
Poe & Associates, Inc. was founded by William F. Poe in 1956 as a one-man operation in Tampa, Florida. With $6,000 of his own money and $14,000 from his family, Poe teamed up with V.C. Jordan to form Poe & Associates. In 1969, Jordan created the company’s first standardized policy for small businessmen. Designed for dentists, it packaged malpractice insurance along with other necessary office coverage. Poe and Jordan soon applied the package concept to a number of other businesses, and quickly developed a thriving business of their own. The company made an initial public offering of stock in 1973 and began branching outside of Florida. By the time it merged with Brown & Brown in 1993, Poe & Associates was selling its policies through a network of 130 independent insurance agents and was generating $50 million in annual revenues. The company also had grown to include 26 agencies in nine states: Florida, Georgia, Texas, Arizona, California, North Carolina, Pennsylvania, New Jersey, and Connecticut.
Poe & Brown is Formed Through Merger in 1993
Although they had been competitors for years, Poe and Brown had much in common. Although Poe was several years ahead of Brown, both men had graduated from the University of Florida and had been members of the same fraternity. Poe had also become involved in politics, leaving his business from 1974 to 1979 to serve as the mayor of Tampa, Florida. It was Poe who approached Brown about a possible merger in September 1992. Both he and his partner, Jordan, were looking to cut down on their responsibilities in order to spend more time with their families. For Brown, whose business was limited almost entirely to retail insurance in Florida, the merger was an opportunity to expand his product offerings and extend his reach to new regions. Taking advantage of being a public company he would also have greater potential for making acquisitions by issuing stock.
Poe and Brown met secretly in a small hotel between Tampa and Daytona to work out the details of what would become Poe & Brown. They agreed that Brown would serve as president and CEO and make the day-to-day business decisions. Poe would serve as chairman and Jordan as vice-chairman of the new company, and both would report to Brown. When the merger was finalized in 1993, Poe & Brown, Inc. became the largest insurance brokerage firm based in the Southeast.
William Poe Leaves Company in 1994
Although Poe and Brown had much in common, and expressed great respect for each other’s abilities and accomplishments, they differed greatly in leadership style. “He’s a de-centralist and I’m a centralist,” Poe told the St. Petersburg Times in the paper’s August 4, 1994 edition. “He’s more of a bottom-line-oriented manager, I’m more of a people-oriented manager. He’s the hardest worker you’ve ever seen. He works about 70 hours a week.” After the first year under Brown’s leadership, however, Poe was pleased with the company’s results. Revenues had jumped from $83 million combined for the two separate companies in 1992 to $95.6 million after the merger, making Poe & Brown the 19th largest insurance broker in the world. Nevertheless, Poe was unhappy in his new role. By August 1994 he decided to resign as chairman of the board, explaining that he wasn’t comfortable serving in a subordinate position to Brown. “I’ve always been the one who called the shots,” he said. “I asked him to do it, so it’s only reasonable that he do it. I’m not sure that I like not doing it, but that decision is a little late.”
Poe & Brown’s results were even more impressive when compared to the rest of the insurance industry. With a soft economy in the early 1990s, brokers were unable to raise rates, resulting in sluggish growth. But by 1995, unlike other brokers, Poe & Brown was poised to expand. In that year, the company acquired six other insurance agencies, adding to its Arizona and Pennsylvania subsidiaries as well as its Florida operations. The business climate was becoming so difficult for smaller insurance agencies and brokers that many actually approached Poe & Brown about being acquired.
Interestingly, during that time the price of the company’s stock, although not depressed, did not really reflect the potential of Poe & Brown, due in great part to the limited number of shares available on the market. The company was reluctant to issue new shares because Poe was considering selling his 13 percent stake in the company, which amounted to more than one million shares. Eventually Poe did cash in his stock to start a new venture. His son, who had continued to work for Poe & Brown up to that point, joined him, thus cutting most of the family’s ties to the company.
Growth and Expansion in the Late 1990s
What Poe did leave behind was the standardized policy business, which Brown continued to expand upon. In 1997 Poe & Brown introduced a liability package for small to medium-sized architectural and engineering firms, rolling it out initially in Illinois, Massachusetts, New Jersey, Ohio, and Texas. The following year, the company joined forces with the Hartford Financial Services Group to offer the Manufacturers Protector Plan (MPP), which included coverage for workers’ compensation, property, crime, and general liability. For industrial manufacturers the package also provided coverage on worldwide product liability, product recall expense, and design errors and omissions.
With future plans to expand MPP to cover a number of niche manufacturing industries, the program initially targeted makers of all sizes of metalworking machinery, textile machinery, printing trade machinery, and food products machinery. Other than Hawaii and Alaska, MPP was available in every state. Later in 1998, Hartford and Poe & Brown introduced the Short Line Railroad Protector Plan, offering package coverage for rail lines designated as Class III. These so-called “short lines”—ranging in length from 25 to 300 miles—included tourist, excursion, and dinner trains. With short lines growing, research indicated that the niche held great potential for Poe & Brown.
Most of Poe & Brown’s growth was internal in 1996 and 1997, with the company acquiring just four independent insurance agencies in that period. Revenues reached $118.7 million in 1996, with a net income of $16.5 million. The following year, revenues exceeded $129 million, generating a 17.5 percent increase in net income, totaling $19.4 million.
The company’s shareholders then approved an increase of the amount of company stock from 18 million shares to 70 million shares, and Poe & Brown was ready in 1998 to make a concerted push for more external growth. Unlike its larger publicly traded competitors, Poe & Brown targeted firms that serviced small and midsize businesses, which on average paid less than $50,000 in yearly premiums. In 1998 the company brought 26 agencies and three new product lines into its fold. One of the largest acquisitions that year, of the Daniel James Insurance Group, significantly enhanced Poe & Brown’s Midwest presence—adding offices in Toledo, Ohio, and Indianapolis, Indiana. Bolstered by contributions from its acquisitions, Poe & Brown saw its revenues increase to $153.8 million in 1998 and its profits soar by 23.5 percent, reaching $23.1 million.
1999: A Return to the Brown & Brown Name
In April 1999, the company’s shareholders voted to return to the “Brown & Brown” name. Although Poe & Associates had provided major assets in the 1993 merger, the Poe family now had no direct connection to Poe & Brown, and given J. Hyatt Brown’s success at the helm, it seemed appropriate to revert to the corporate name that he felt paid tribute to his father and brother.
Brown & Brown is a lean, decentralized, highly competitive, profit-oriented sales and service organization comprised of people of the highest integrity and quality, bound together by clearly defined goals and prideful relationships.
The new Brown & Brown continued its aggressive expansion program in 1999, acquiring 10 more independent insurance agencies and brokerages. For the seventh consecutive year the company posted record results: net income increased 16.4 percent to $27.2 million, and revenues rose 11 percent to $176.4 million. For 28 consecutive quarters, Brown & Brown achieved a 15 percent increase in earnings over the same period in the previous year. The number that Brown focused on, however, was pre-tax profit margin. He instituted what he called “Project 28”, an effort to boost Brown & Brown’s pre-tax profit margin to 28 percent within three years, and an eventual goal of 30 percent. To foster a sense of competition within the company, the results of each profit center in each office were published in a book, with the office producing the highest profit margin ranked first. For 1999 Brown & Brown saw it pre-tax margin increase from 24 percent to 25.1 percent. Its top competitors, meanwhile, languished in the 15 percent range.
Dawn of the 21st Century
Brown & Brown continued to offer new products and make further acquisitions in the year 2000. The company teamed with Atlantic Mutual to offer an insurance package for the food processing industry called the Food Processors Preferred Program. It provided coverage for loss of income caused by adulteration and spoilage, transit mishap, equipment breakdown, and product recall. Brown & Brown also introduced insurance coverage for the fast-growing technology business segment. The High-Tech Target Program, with the appropriate acronym of HTTP, targeted a wide range of businesses, from hardware manufacturers to web site developers. Standard HTTP coverage included property, business income, general liability, crime, and workers’ compensation. Customized packages could also be designed to include international coverage, media and internet liability, and network security coverage.
The most important of the several firms that Brown & Brown acquired in 2000 was the Reidman Corporation, based in Rochester, New York. Run by three generations of the Reidman family since 1938, the company was the 26th largest insurance broker in the country in 1999, and the ninth largest privately held firm, generating some $50 million in annual revenues. Reidman operated more than 60 offices in thirteen states, and other than its offices in Florida, Reidman’s territory did not overlap with Brown & Brown. This allowed Brown & Brown to double the number of states in which it had offices to 24, and greatly widen the market for its products. Investors reacted positively to the news, bidding up the price of Brown & Brown stock. Despite the size of the Reidman deal, Brown & Brown continued to acquire other independents during the rest of 2000 as well, picking up new offices in California and Georgia.
Brown & Brown’s acquisition spree continued into 2001, as Brown & Brown added to its already dominant presence in Florida, as well as buying The Harris Agency of Manassas, Virginia, which added the Washington, D.C., metropolitan area. The company announced its 2000 financial numbers, which again reflected record results. Revenues increased 11.3 percent to nearly $210 million, and net income jumped 23.9 percent to $33.2 million. With the addition of the Reidman offices, Brown & Brown was poised for even greater growth. Its size allowed it to negotiate exclusive contracts to sell a number of policies from the major insurers, thus making it tougher for independents to survive and making it more likely that Brown & Brown would continue to find agencies eager to be acquired.
Furthermore, the company’s decentralized organization—which granted sales managers a great deal of power in running their offices—allowed Brown & Brown to recruit entrepreneurs as aggressive as its chief executive. J. Hyatt Brown was a man who expected results, and who made it clear that only employees who could thrive would survive at Brown & Brown. At annual sales meetings, each of the company’s sales managers were made to stand before an audience in excess of 1,000 and detail their results for the year. The lowest earners were spotlighted by going first, accompanied by somber music. The top performers were given the coveted final slots in the program, where they are rewarded with applause and gifts, as well as cold hard cash. The fittest of the fit received Hawaiian leis made of $100 bills instead of flowers. Brown was unapologetic about what he expected from his people. As one executive vice president told the Orlando Sentinel in April 2001, “You are either producing revenue for the company or you are overhead. It’s that simple.” In a business world that J. Hyatt Brown likened to a jungle, Brown & Brown was structured to flourish under any conditions, ready to adapt and survive if necessary, but more likely to thrive in the foreseeable future.
Retail; National Programs; Service; Brokerage.
Acordia Inc.; Arthur J. Gallagher & Co.; Marsh & McLennan Companies Inc.; Hilb, Rogai and Hamilton Company.
- Brown & Brown is established.
- Poe & Associates is established.
- Poe & Associates create first standardized policy for small businessmen.
- Poe & Associates makes its first public offering of stock.
- Poe & Associates and Brown & Brown merge, forming Poe & Brown, Inc.
- William Poe resigns as chairman of the board.
- Company name changed from Poe & Brown to Brown & Brown.
- The acquisition of Reidman Corporation greatly extends the company’s reach.
Bowers, Barbara, “The M&A Way,” Best’s Review, April 1999, p. 81.
Brown, Thomas S., “Poe & Brown Grows Into Old Name, Brown & Brown,” Daytona Beach News-Journal, April 29, 1999, p. 13A.
Geer, Carolyn T., “One-Stop Policy Shopping,” Forbes, May 25, 1992, p. 94.
Goch, Lynna, “Q&A: On the Prowl,” Best’s Review, September 2000, pp. 37–38.
Groeller, Greg, “Eat or be Eaten Ethic Boosts Bottom Line,” Orlando Sentinel April 30, 2001.
Harrington, Jeff, “Buyout Expands Brown’s Reach,” St. Petersburg Times, September 12, 2000, p. IE.
Huntley, Helen, “Founder of Agency Bows Out,” St. Petersburg Times, August 4, 1994, p. IE.
Ibold, Ken, “Survival of the Fittest: An Insurance Company Hunts New Business,” Florida Trend, May 1999, p. 28.
Johnson, Robert, “Poe & Brown Stock May Finally Stir if Former Chairman Sells His Stake,” Wall Street Journal, April 19, 1995, p. F2.
Roberts, Sally, “Acquisitions Changing Face of Brokerage Industry,” Business Insurance, February 17, 1997, pp. 2, 69.
Souter, Gavin, “Spotlight Report: Poe & Brown Inc.,” Business Insurance, July 18, 1994, p. 54.
Stengle, Bernice, “Insurance Firms Merge,” St. Petersburg Times, December 1, 1992, p. IE.
Tippett, Karen L., “Poe & Brown’s Acquisitions Put Analysts in a ’Buy’ Mood, as Well,” Wall Street Journal, April 22, 1998, p. F2.