NU Online News Service, Dec. 16, 2:53 p.m.EST

Brown & Brown broke with its tradition of acquiring smallaccounts to announce it will purchase managing general agencyArrowhead General Insurance for $400 million.

The Daytona Beach, Fla.-based insurance broker made theannouncement early this morning after finalizing the dealyesterday.

Under terms of the agreement, Brown & Brown will pay theprivate equity owners, Spectrum Equity Investors V, L.P., $395million cash for the firm. An additional $5 million will be paidout over a three year period provided Arrowhead achieves certainfinancial targets.

Brown & Brown says it will finance the transaction with acombination of $195 million cash and $200 million in term loansthat it is in the process of securing.

Arrowhead is expected to generate $105 million in revenue by theend of this year, Brown & Brown says.

The firm is most noted as a profitable online insurance exchangethat allows retail agents with small volume business to place riskswith an MGA.

Chris Walker, CEO of Arrowhead, says the firm is a “very, veryefficient” organization dealing with around 3,100 retail agenciesin more than 5,900 locations nationwide and has over 250,000policies in force.

While the firm is national in scope, it does have aconcentration of business in the West, a geographic location thathas not been a strength for Brown & Brown, which does asignificant amount of its business in Florida.

J. Powell Brown, chief executive officer of Brown & Brown,says Arrowhead will not be folded into any other operations withinthe firm and will continue as a standalone operation, noting itssuccess in that capacity. He indicates that there were no plans forcuts as a result of the acquisition and “there is good opportunityto expand the business.” He added that he felt Brown & Brownwould be able to add products and services to Arrowhead'sbusiness.

On a conference call today, an analyst asked if this deal wouldaffect Brown & Brown's acquisition strategy in the future.Brown says it would not.

“Game on,” says Brown. “It will be business as usual.”

As for Arrowhead's executives, Brown & Brown says thefollowing moves will be made:

• Chris Walker will be named a regional executive vice presidentof Brown & Brown and will continue as CEO of Arrowhead.
• Mac Armstrong, Arrowhead's current chief financial officer andchief operating officer, will be promoted to president ofArrowhead.
• Steve Bouker will continue as president of the residentialearthquake program, which he created for Arrowhead.
• Lewis DeFuria will continue as president of special risk forArrowhead.
• Stephen Boyd will continue to serves as president ofArrowhead's commercial lines.
• Scott Marshall will continue to serve as president of AmericanClaims Management Inc., (ACM) a third-party claims administratorand subsidiary of Arrowhead.
• All of the executives will join Brown & Brown's leadershipcouncil.

Arrowhead and ACM will continue to operate from their currentlocations. Alexander Anthony Insurance, LLC, an Arrowheadsubsidiary, will continue to operate at its Salt Lake City, Utah,location.

Under terms of the deal, if the transaction is not completed byFeb. 13, 2012, either party could terminate the agreement. Therewas no mention in a filing with the Securities and ExchangeCommission of any penalty to be paid as aresult.

During the conference call, analysts appeared to be generallypleased with the transaction, some congratulating Brown.

In mid-morning trading, Brown & Brown's stock was up 10cents a share to $21.86.