Brown & Brown Insurance 2016 Annual Report

Management’s Discussion and Analysis
of Financial Condition and Results of Operations
Off-Balance Sheet Arrangements
Neither we nor our subsidiaries have ever incurred off-balance sheet obligations through the use of, or investment in,
off-balance sheet derivative financial instruments or structured finance or special purpose entities organized as corporations,
partnerships or limited liability companies or trusts.
For further discussion of our cash management and risk management policies, see “Quantitative and Qualitative
Disclosures About Market Risk.”
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Brown & Brown, Inc.
Quantitative and Qualitative Disclosures About Market Risk
Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates, foreign
exchange rates and equity prices. We are exposed to market risk through our investments, revolving credit line, term loan
agreements and international operations.
Our invested assets are held primarily as cash and cash equivalents, restricted cash, available-for-sale marketable debt
securities, non-marketable debt securities, certificates of deposit, U.S. treasury securities, and professionally managed short
duration fixed income funds. These investments are subject to interest rate risk. The fair values of our invested assets at
December 31, 2016 and December 31, 2015, approximated their respective carrying values due to their short-term duration
and therefore, such market risk is not considered to be material.
We do not actively invest or trade in equity securities. In addition, we generally dispose of any significant equity
securities received in conjunction with an acquisition shortly after the acquisition date.
As of December 31, 2016 we had $481.3 million of borrowings outstanding under our term loan which bears interest on
a floating basis tied to the London Interbank Offered Rate (LIBOR) and therefore subject to changes in the associated interest
expense. The effect of an immediate hypothetical 10% change in interest rates would not have a material effect on our
Consolidated Financial Statements.
We are subject to exchange rate risk primarily in our U.K-based wholesale brokerage business that has a cost base
principally denominated in British pounds and a revenue base in several other currencies, but principally in U.S. dollars.
Based upon our foreign currency rate exposure as of December 31, 2016, an immediate 10% hypothetical changes of
foreign currency exchange rates would not have a material effect on our Consolidated Financial Statements.