Brown & Brown Inc. reported third-quarter revenue of $1.07 billion, a 15.1% increase compared with the same period last year, with organic revenue rising by 9.6%.
The jump in revenue was driven by strong new business, good retention and continued rate increases, J. Powell Brown, chairman, president and CEO of the Daytona Beach, Florida-based brokerage, said on an earnings call with analysts Tuesday. The brokerage posted its quarterly results late Monday after markets closed.
“A lot of buyers are exhausted due to the level of rate increases, mainly in property, that have occurred over multiple years,” and they are focused on managing their insurance spending, Mr. Brown said.
Many customers have already increased their deductibles and reduced their limits, he said.
Rate increases will remain relatively consistent through the end of the year, Mr. Brown said.
Brown & Brown’s third-quarter profit increased 9.2% to $175.9 million.
Across the brokerage’s four business sectors, retail grew organically by 8%, national programs by 12.1%, wholesale by 13.4%, and services, which includes claims services, by 3.2%.
Brown & Brown completed seven acquisitions in the third quarter with total annual revenue of $14 million. Year-to-date, Brown & Brown has closed 20 deals.
The level of deals primarily from financial backers continues to slow, Mr. Brown said. “We generally saw fewer bidders for businesses,” he said.
Valuations have come down slightly, but “good businesses still trade at premium multiples,” Mr. Brown said.
Insurance market conditions remain challenging for customers with their focus on overall spending, he said.
“Across most lines of coverage rate increases were fairly consistent with the first half of the year, with mid-market up 5% to 10% and the excess and surplus lines market up 10% to 25%,” Mr. Brown said.
There were exceptions outside these ranges, and two lines of coverage where rates continue to decline are workers compensation and professional liability for larger customers, Mr. Brown said.
Workers comp rates declined less than in previous quarters in the range of flat to down 5%, Mr. Brown said. Professional liability rates including public company D&O and cyber were flat to down 15% and down even further in some instances, he said.
“Property remained the most challenging line of business, and carriers are generally not increasing their capacity. We’re also seeing underwriters continue to push for higher insured values due to inflation and increased replacement costs,” Mr. Brown said.
Insurers remain focused on diversifying their portfolios and reducing volatility in their earnings by managing their catastrophe capacity, he said.
“We view it as a positive if we can maintain our capacity that we currently have,” and if insurers want to modify their participation on certain accounts, “we feel good about replacing that,” Mr. Brown told analysts.
