Brown & Brown, Inc. BRO
Q3 2010 Earnings Call Transcript

Operator: Keith Walsh, Citi.

Keith Walsh - Citi: Powell, just for you, first question, I mean, the detail around organic revenues is extremely helpful as always, but I just want to make this more simple so I can understand it, specifically around exposures, maybe if you can walk us through, when we think about 2009 over '08 and how exposures really dropped down and then we're almost through 2010, so how have we moved 2010 relative to ’09? And then assuming we are at the trend that you are seeing now, how does '11 shape up relative to 2010? To follow-up on that we know that exposures is a much bigger driver for your organic revenues than pricing is these days, If 2011 is looking a little bit more of a steady state or not as much of a decline, how don’t you grow your revenues in that environment?

J. Powell Brown - President and CEO: One, you are correct in saying that exposure units have been under intense pressure in ’08 and ’09 and into ’10. I would say we get asked that question a lot and there is a couple of way to look at it. Number one; a number of companies continue to have shrinking exposure units, in some places in the country may not be shrinking as much, some may have a flattening. That’s a fair statement depending on where you are around the country. I think that the other thing that we’re seeing and ultimately it doesn’t pan itself out for may be 14 months from whatever renewal you’re talking about is you heard me allude to the return premium amounts. Return premiums have been when the insured anticipates their expected exposure units payroll, sales whatever their auditable amount is and actually that was not in line with what actually occurred and therefore they are getting a return premium from the insurance carrier. So with three years of very difficult operating environment, what you find is clients are conservative relative to their exposure estimates. Now, we won’t know if they’re conservative, truly conservative or they were actually really right on the button until probably 14 months from the date that they renew their coverage and you say well why 14 months, it’s a 12 month policy? And the answer is the way it works is if you have the payroll on a company and insure it and you estimate your payroll is going to be $10 million for the 12 months ending 10/ – 1 actually 10/1 of '10 to 9/30 of '11. The answer is the insurance company will audit that policy within the 60 days after the expiration and if in fact the payrolls were up to $11 million they'll have an additional premium based on that $1 million. If the payrolls were down to $9 million, they are going to give an additional – I mean they return premium back to the client. And so, having said that. and I am not trying to be flipping Keith, your guess relative to the economic improvement is as good as ours. Having said that, everything that you read and some of the things that you will see in the investment community would point towards very positive rebound across America. You have heard us say that in the middle market we have not yet seen that and we are not yet in a position to say categorically that we are seeing exposure increases across the board on our book of business. I hope that’s the case but that’s not the case and we're just trying to sell a lot of new business as much as we can and retain everything we can on our existing book of business. Does that answer your question?