Insurance agency Brown & Brown saw revenues and net income increase in the first quarter, even after accounting for expected lower revenues on existing employee benefits and workers’ compensation policies and other potential effects from the coronavirus crisis.
Revenues increased 12.8%, or $79.2 million, in the first quarter to reach $698.5 million compared to the first quarter of last year. Commissions and fees increased by 12.8% and organic revenue by 5.6%.
Net income was $152.4 million, increasing $38.5 million, or 33.8%, compared to the first quarter of the prior year.
The company said it lowered its estimates for the revenues it expects to earn from existing employee benefits and workers’ compensation policies, resulting in a reduction to revenue of $10.5 million and a corresponding $5.8 million reduction to income before income taxes in the first quarter of 2020. These estimates were revised after assessing the projected impact of the COVID-19 pandemic on the future levels of employment of our customers during the remainder of their current policy periods.
In addition, Brown & Brown reported that the COVID-19 effect on the economy is expected to negatively impact the future performance of several businesses it acquired in the last three years. As a result, its estimated acquisition earn-out payables were decreased, which increased the income before income taxes for the first quarter of 2020 by $6.0 million.
However, the adjustments made to account for COVID-19 substantially offset each other and therefore had an immaterial impact for the first quarter of 2020.
In addition, the company said it anticipates borrowing approximately $250 million on its existing revolving line of credit by May 1, 2020, with the proceeds to be used in connection with the payment of the purchase price for the previously announced acquisition LP Insurance Services and for additional liquidity to further strengthen the company’s financial position and balance sheet in the event cash receipts from customers or carrier partners are delayed due to COVID-19
The company said it will continue to evaluate the impact of COVID-19 on its customers and operations over the coming quarters.
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