Filed Under:Agent Broker, Agency Management

Brown & Brown’s New Regional President Assesses the Florida Insurance Market

In January, Charles H. “Charlie” Lydecker was named a regional president of Brown & Brown, Inc., taking over responsibility for operations in Florida and some retail operations in Arizona, New Jersey, New York, Texas, and Virginia. He has been with the company since 1990 and was named a regional executive vice president in 2002.

Brown & Brown originated in 1939 and is headquartered in Daytona Beach and Tampa. It is a publicly owned corporation with its stock traded on the New York Stock Exchange and is one of the select companies that comprise the Standard & Poor’s Mid-Cap 400 Index. The company operates more than 170 profit centers in 38 states. Its total revenue for the 12-month period that ended Dec. 31, 2010, was $973,492,000.

Lydecker spoke with Florida Underwriter about the Florida insurance market and his company’s plans for the future.

Q. In addition to your appointment, there were other recent changes in top management, specifically the naming of a new chief acquisitions officer. Brown & Brown has traditionally maintained an aggressive commitment to growth through acquisition. Do you anticipate changes in that philosophy?

A. I do not anticipate any changes in Brown & Brown’s acquisitions philosophy. We will continue to be an aggressive acquirer of high quality agencies that we think will fit nicely into the Brown & Brown culture. We’ll continue to focus on middle-market acquisitions, with a very disciplined approach.

Q. Linda S. Downs was also recently named a regional president, with oversight of certain operations in Michigan, New Jersey, New York, Ohio, Delaware, Georgia, Kentucky, Illinois, Minnesota, Pennsylvania, South Carolina, and Wisconsin. In addition, she is responsible for Halcyon Underwriters, a wholesale brokerage division operation in Orlando. What criteria does the company use to determine assignment of states among its regional presidents, and how do you interact?

A. Generally speaking, the assignment of states among regional presidents and executive vice presidents has not been focused on any particular geographical lines. Our retail operational responsibilities have really been driven by J. Powell Brown, and J. Hyatt Brown before him, trying to match our individual strengths with the various offices and keeping in mind the company’s overall needs. Individuals work with individuals, not necessarily a particular state. This has been Brown & Brown’s approach in acquisitions and in the assignment of responsibilities among regionals.

Q. In a conference call with financial analysts this time last year, your president and chief executive officer, J. Powell Brown, had to announce that retail in Florida was close to a negative 7 percent, down almost $3 million to $37 million. His observation at that time was: “We know Florida will come back, just like the rest of the country; it just might take a little longer.” Where is Florida’s “comeback” in relation to other states?

A. At the peak of the economic boom, Florida was flying higher than other states; not surprisingly, its recessionary low was lower than most other states. The states of Arizona and California are other examples, like Florida, that experienced the extremes of the economy. Similar to those states, Florida’s economy is showing signs of recovery, albeit slow, and perhaps a little slower than the states that didn’t experience the extreme swings we did. For sure the worst is behind us. Florida’s economy is starting to show signs of improvement. The “comeback” in Florida I think has begun.

Q. Some analysts say that a hard market is on its way and that declining reserve releases will lead to more realistic reporting of underwriting result deterioration, resulting in rate increases and the shedding of unprofitable businesses. Do you agree with this assessment, nationwide and for Florida?

A. My view is that we’re still in a soft market, nationwide and in Florida, and I don’t see much end in sight. Having said that, generally speaking, reductions in renewal pricing are definitely not as steep as they once were. The benefits marketplace continues to be flat or up and, depending on if there’s competition, the P&C Market will be flat to minus 15 percent.

Q. What can you share with us regarding acquisitions or new programs or coverage lines in Florida?

A. No specific plans. We’ll continue to do acquisitions in Florida where there is a good people fit and where it makes sense for both sides. We’ll also continue to stay focused on delivering the necessary pricing and coverage enhancements for our customers.

Q. Brown & Brown has a dedicated Programs Division. What are your criteria for developing a new program? The process for introducing it? Which programs have been most successful in Florida?

A. I don’t know much about the intricacies of the program division. Ken Masters is the regional executive vice president responsible for overseeing our programs division. In Florida, Brown & Brown is in the “solutions” business. The programs we have created for our clients typically have been as the result of our identifying a unique need and then developing a solution for that niche. This could mean developing a program in concert with a particular association or simply trying to solve availability, coverage, and/or pricing issues faced by our clients.

Q. Review 2010 for us. On a scale of 1 to 10, how did the insurance industry nationwide do in terms of profits, underwriting, growth?

A. Six. The economy continues to negatively impact the commercial exposure units, thereby reducing the overall industry premium volume. The insurance premium rates continue to be down 4-6 percent; therefore, profits and growth remain down.

Q. Provide a growth and financial snapshot of Brown & Brown in 2010, again couched in terms of profits, underwriting, and growth.

A. 2010 was another challenging year, mainly as a result of the continued economic slowdown. Even though we had a negative internal growth rate of 4.7 percent, that was an improvement over the 2008 and 2009 results.

Q. Closing thoughts?

A. We look forward to the economic headwinds slowing down a bit in 2011, which should allow our clients’ businesses to see a greater level of stability.

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