Brown & Brown Insurance 2016 Annual Report

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(Unaudited) For the Year Ended December 31, (in thousands, except per share data) 2014 2013 Total revenues $ 1,630,162 $ 1,520,858 Income before income taxes $ 358,229 $ 409,522 Net income $ 218,150 $ 248,628 Net income per share: Basic $ 1.51 $ 1.72 Diluted $ 1.49 $ 1.70 Weighted-average number of shares outstanding: Basic 140,944 141,033 Diluted 142,891 142,624 As of December 31, 2016, the maximum future contingency payments related to all acquisitions totaled $117.2 million, all of which relates to acquisitions consummated subsequent to January 1, 2009. ASC Topic 805 — Business Combinations is the authoritative guidance requiring an acquirer to recognize 100% of the fair values of acquired assets, including goodwill, and assumed liabilities (with only limited exceptions) upon initially obtaining control of an acquired entity. Additionally, the fair value of contingent consideration arrangements (such as earn-out purchase arrangements) at the acquisition date must be included in the purchase price consideration. As a result, the recorded purchase prices for all acquisitions consummated after January 1, 2009 include an estimation of the fair value of liabilities associated with any potential earn-out provisions. Subsequent changes in these earn-out obligations will be recorded in the Consolidated Statement of Income when incurred. Potential earn-out obligations are typically based upon future earnings of the acquired entities, usually between one and three years. As of December 31, 2016, the fair values of the estimated acquisition earn-out payables were re-evaluated and measured at fair value on a recurring basis using unobservable inputs (Level 3) as defined in ASC 820 — Fair Value Measurement. The resulting additions, payments, and net changes, as well as the interest expense accretion on the estimated acquisition earn-out payables, for the years ended December 31, 2016, 2015 and 2014 were as follows: (Unaudited) For the Year Ended December 31, (in thousands) 2016 2015 2014 Balance as of the beginning of the period $ 78,387 $ 75,283 $ 43,058 Additions to estimated acquisition earn-out payables 4,462 36,899 34,356 Payments for estimated acquisition earn-out payables (28,213) (36,798) (12,069) Subtotal 54,636 75,384 65,345 Net change in earnings from estimated acquisition earn-out payables: Change in fair value on estimated acquisition earn-out payables 6,338 13 7,375 Interest expense accretion 2,847 2,990 2,563 Net change in earnings from estimated acquisition earn-out payables 9,185 3,003 9,938 Balance as of December 31, $ 63,821 $ 78,387 $ 75,283 59 2016 Annual Report Of the $63.8 million estimated acquisition earn-out payables as of December 31, 2016, $31.8 million was recorded as accounts payable and $32.0 million was recorded as other non-current liabilities. Included within additions to estimated acquisition earn-out payables are any adjustments to opening balance sheet items prior to the one-year anniversary date and may therefore differ from previously reported amounts. Of the $78.4 million estimated acquisition earn-out payables as of December 31, 2015, $25.3 million was recorded as accounts payable and $53.1 million was recorded as other noncurrent liabilities. Of the $75.3 million estimated acquisition earn-out payables as of December 31, 2014, $26.0 million was recorded as accounts payable and $49.3 million was recorded as an other non-current liability.
Notes to Consolidated Financial Statements NOTE 3 Goodwill The changes in the carrying value of goodwill by reportable segment for the years ended December 31, are as follows: National Wholesale (in thousands) Retail Programs Brokerage Services Total Balance as of January 1, 2015 $ 1,231,869 $ 886,095 $ 222,356 $ 120,291 $ 2,460,611 Goodwill of acquired businesses 113,767 18,009 4,605 — 136,381 Goodwill disposed of relating to sales of businesses — (2,238) — (8,071) (10,309) Balance as of December 31, 2015 $ 1,345,636 $ 901,866 $ 226,961 $ 112,220 $ 2,586,683 Goodwill of acquired businesses 13,117 (1) 57,908 22,352 93,376 Goodwill of transferred businesses 571 (571) — — — Goodwill disposed of relating to sales of businesses (4,657) — — — (4,657) Balance as of December 31, 2016 $ 1,354,667 $ 901,294 $ 284,869 $ 134,572 $ 2,675,402 NOTE 4 Amortizable Intangible Assets Amortizable intangible assets at December 31, 2016 and 2015 consisted of the following: 60 Brown & Brown, Inc. December 31, 2016 December 31, 2015 Weighted- Weighted- Gross Net Average Gross Net Average Carrying Accumulated Carrying Life Carrying Accumulated Carrying Life (in thousands) Value Amortization Value (in years) (1) Value Amortization Value (in years) (1) Purchased customer accounts $ 1,447,680 $ (741,770) $ 705,910 15.0 $ 1,398,986 $ (656,799) $ 742,187 15.0 Non-compete agreements 29,668 (28,124) 1,544 6.8 29,440 (26,947) 2,493 6.8 Total $1,477,348 $ (769,894) $ 707,454 $ 1,428,426 $ (683,746) $ 744,680 (1) Weighted-average life calculated as of the date of acquisition. Amortization expense for amortizable intangible assets for the years ending December 31, 2017, 2018, 2019, 2020 and 2021 is estimated to be $84.9 million, $79.6 million, $75.1 million, $67.8 million, and $64.5 million, respectively. NOTE 5 Investments At December 31, 2016, the Company’s amortized cost and fair values of fixed maturity securities are summarized as follows: Gross Gross Unrealized Unrealized (in thousands) Cost Gains Losses Fair Value U.S. Treasury securities, obligations of U.S. Government agencies and Municipals $ 26,280 $ 11 $ (59) $ 26,232 Corporate debt 2,358 13 (1) 2,370 Total $ 28,638 $ 24 $ (60) $ 28,602
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Always in Pursuit 2016 Annual Repor
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Total Revenues IN MILLIONS OF DOLLA
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Page 21 and 22: Board of Directors Left to right: S
Page 23 and 24: Management’s Discussion and Analy
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Page 89: 220 South Ridgewood Avenue Daytona
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Brown & Brown Insurance 2016 Annual Report

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