Brown & Brown Chief Sees 5-Year Soft Market

The chief executive officer of Brown & Brown said the firm expects declining prices in the current soft market to last for as long as five years, but predicted the firm will do well despite the challenges ahead.

J. Hyatt Brown, chairman and chief executive officer of the firm, speaking during the Daytona Beach, Fla.-based broker's annual shareholders meeting this week, said the current soft market is expected to last for the next three to five years, but the dynamics of this market are different from the past.

He did not detail what the differences are, but did say they are having an effect on the company's earnings as it works to become a company with $1 billion in revenue.

In 2006, Brown & Brown reported revenues of $878 million.

Jim Henderson, vice chairman and chief operating officer, said the first quarter of this year was the first time the broker did not record negative organic growth, despite showing a profit. Much of this was the result of the challenges in its wholesale division, he explained.

The challenges are in two areas, he said. According to Mr. Henderson, Florida intercoastal and Florida wholesale business has moved to Citizens, the state's residual market insurer of last resort, resulting in commission losses. The other area is wholesale home builders business in the Southwest, where construction has slowed considerably.

J. Powell Brown, president of the firm, said rates in the wholesale area have been very competitive, down as much as 30 percent. Wholesale and public entity business represents about 25 percent of the Brown & Brown's revenues, he noted. He added that the firm is becoming a notable presence in the wholesale industry, and while there is room for growth, challenges remain.

Hyatt Brown said that in order for Brown & Brown to meet the $1 billion mark in 2007, it will have to strive hard to get there.

"The vagaries of the market will always be there," he said, "but this company has always been able to get through the peaks and valleys and keep going up, and up, and up."