Brown & Brown Insurance 2016 Annual Report

Results of Operations for the Years Ended December 31, 2016, 2015 and 2014
The following discussion and analysis regarding results of operations and liquidity and capital resources should be considered
in conjunction with the accompanying Consolidated Financial Statements and related Notes.
Financial information relating to our Consolidated Financial Results is as follows:
Percent
Percent
(in thousands, except percentages) 2016 Change 2015 Change 2014
REVENUES
Core commissions and fees $ 1,697,308 6.4 % $ 1,595,218 6.4 % $ 1,499,903
Profit-sharing contingent commissions 54,000 4.4 % 51,707 (10.4) % 57,706
Guaranteed supplemental commissions 11,479 14.5 % 10,026 1.8 % 9,851
Investment income 1,456 45.0 % 1,004 34.4 % 747
Other income, net 2,386 (6.6)% 2,554 (66.3) % 7,589
Total revenues 1,766,629 6.4 % 1,660,509 5.4 % 1,575,796
EXPENSES
Employee compensation and benefits 925,217 8.0 % 856,952 5.7 % 811,112
Other operating expenses 262,872 4.7 % 251,055 6.7 % 235,328
Loss/(gain) on disposal (1,291) 108.6 % (619) (101.3) % 47,425
Amortization 86,663 (0.9) % 87,421 5.5 % 82,941
Depreciation 21,003 0.5 % 20,890 — % 20,895
Interest 39,481 0.6 % 39,248 38.2 % 28,408
Change in estimated acquisition earn-out payables 9,185 NMF 3,003 (69.8) % 9,938
Total expenses 1,343,130 6.8 % 1,257,950 1.8 % 1,236,047
Income before income taxes 423,499 5.2 % 402,559 18.5 % 339,749
Income taxes 166,008 4.2 % 159,241 19.9 % 132,853
NET INCOME $ 257,491 5.7 % $ 243,318 17.6 % $ 206,896
Organic revenue growth rate (1) 3.0 % 2.6 % 2.0 %
Employee compensation and benefits
relative to total revenues 52.4 % 51.6 % 51.5 %
Other operating expenses relative
to total revenues 14.9 % 15.1 % 14.9 %
Capital expenditures $ 17,765 $ 18,375 $ 24,923
Total assets at December 31 $ 5,287,343 $ 5,004,479 $ 4,946,560
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2016 Annual Report
(1) A non-GAAP measure
NMF = Not a meaningful figure
Commissions and Fees
Commissions and fees, including profit-sharing contingent commissions and GSCs for 2016, increased $105.8 million to
$1,762.8 million, or 6.4% over 2015. Core commissions and fees revenue for 2016 increased $102.1 million, of which approximately
$61.7 million represented core commissions and fees from agencies acquired since 2015 that had no comparable
revenues. After accounting for divested business of $6.6 million, the remaining net increase of $47.0 million represented net
new business, which reflects a growth rate of 3.0% for core organic commissions and fees. Profit-sharing contingent commissions
and GSCs for 2016 increased by $3.7 million, or 6.1%, compared to the same period in 2015. The net increase of $3.7 million was
mainly driven by an increase in profit-sharing contingent commissions and GSCs in the Retail Segment, partially offset by a
decrease in profit-sharing contingent commissions in the Wholesale Brokerage Segment as a result of increased loss ratios.