Sep. 6 at 2:40 PM
Brown & Brown is becoming a compelling opportunity.
Unlike traditional insurers that take on risk,
$BRO acts as a middleman.
$BRO connects customers with the right insurance carriers and earns commissions and fees.
There are 2 main sources of revenue:
1. Commissions (70% of revenue)
BRO earns a commission (typically 10–15% of the annual premium) every time they place a customer with an insurance carrier.
2. Fees (30% of revenue)
BRO charges fees directly to customers for specialized services like risk management, employee benefits consulting or claims administration.
This capital-light model avoids the balance sheet risk of underwriting, while still benefiting from rising premiums over time. (See pic 1)
Today, more than 90% of revenues are generated in the U.S., across four business segments:
- Retail (58%)
- National Programs (24%)
- Wholesale Brokerage (13%)
- Services (5%)
$BRO recently completed their largest acquisition ever buying Accession Risk Management Group in a
$9.8 billion cash-and-stock deal.
This acquisition grows BRO’s ‘specialty distribution’ segment of the business, which typically has higher margins.
This should also add around
$1.7 billion in revenue.
Assuming 11% free cash flow growth moving forward (which is in line with estimates)-
BRO has 20% upside at its current prices.
