In this excerpt from a podcast conversation with Sica Fletcher co-founder Al Sica, Brown & Brown President and CEO Powell Brown discusses the broker’s success as a public company.
He attributes that success to a collaborative, team-forward culture and taking advantage of Brown & Brown’s unique ownership structure to pursue opportunities that may be beyond other companies seeking to monetize quickly.
Q
I think people would love to hear about the state of Brown & Brown today, the competition, and this influx of private equity capital into the industry.
A
A lot of people think that, in a public company, you are only quarterly focused, and there are lots of public companies that are like that. But Brown & Brown is not.
And so, you might say, “Well, why are you different?” And the answer is, that at Brown & Brown, we have teammates, we don’t have employees. Because if we don’t have the right teammates, we cannot actually get the customer, and then most importantly, keep the customer.
Number two, we have leaders, not managers. Leaders are proactive, as opposed to reactive, when we’re trying to do what’s in the best interest of the customer each and every time.
The third and most important thing is that we have an ownership culture, which aligns us with the long term, a trait that very few public companies can say. Sixteen percent of our company is owned by teammates, and what that means is, we don’t manage quarter to quarter. We think in terms of one year, three years, five years, and 10 years out. And when you do that, you’re not starving the business to monetize it in three to seven years.
What is the future of private equity? Number one, private equity is going to continue to have a presence in our industry for a long time. Number two, I believe that there are certain [PE-backed] firms that have gotten too big. So, they have a couple of options. They could go public, which is a three-year slog that requires a Big Four accounting firm signing off on your financials. [The other option is a private equity to private equity trade.]
[Lastly, the recent transactions where the PE-backed broker sold to a public are a new phenomenon (i.e., Risk Strategies to Brown & Brown, Assured to AJG, NFP to Aon.)] Because leading a larger organization, a dynamic one, is different from when it has 500 people or 1,000 people. And so, the capabilities to lead a business that’s $2 billion, $3 billion, $4 billion in revenue as a private company are different. We believe it creates a lot of interesting opportunities for us.
Q
Where do you see Brown & Brown going from here?
A
If you go back to 2012, we made our first large acquisition, which was then Arrowhead General Insurance Agency. And as you remember, MGAs in 2012 were a little bit of a dirty word. And so there were people who looked at us like, “Are you crazy or not?” And the answer was no, we’re not, because they have such a rigorous underwriting discipline and a very thoughtful marketing and growth strategy.
We believe that, as a retailer, we have an obligation to act in the best interest of our customers. That doesn’t mean that we have the capability to do everything. What we have done is continue to look for businesses that fit culturally and make sense financially. We have built over time a business that we can supply and/or [that can] provide certain capabilities to Brown & Brown Retail. The majority of those businesses, interestingly enough, have customers outside of Brown & Brown. And in some instances, competitors of ours trade with us because we have a unique [insurance] product, and we may trade with them because they have a unique [insurance] product [to make sure the customer gets the best insurance product].
It’s a very interesting time. If you go to London, there’s a feeling that there are ultimately going to be 15 global brokers. And if you’re not part of one of those brokers, you’re going to be on the outside looking in. I don’t necessarily agree with that, because I think there’s always a place for specialists. But in order to be dynamic as you continue to grow, you have to enable individualism and that entrepreneurial spirit. And so we’re going to continue to look for firms like that to acquire that will expand and enhance our capabilities.
To hear more from Powell Brown about the brokerage landscape and Brown & Brown’s path to building out its insurance brokerage platform, listen to the full episode here.
