BBInsurance-2017-Annual-Report

Management’s Discussion and Analysis
of Financial Condition and Results of Operations
26
Brown & Brown, Inc.
Non-Cash Stock-Based Compensation
We grant non-vested stock awards and, to a lesser extent, stock options to our employees, with the related compensation
expense recognized in the financial statements over the associated service period based upon the grant-date fair value of
those awards.
During the first quarter of 2016, the performance conditions for approximately 1.4 million shares of the Company’s
common stock granted under the Company’s Stock Incentive Plan were determined by the Compensation Committee to have
been satisfied relative to performance-based grants issued in 2011. These grants had a performance measurement period that
concluded on December 31, 2015. The vesting condition for these grants requires continuous employment for a period of up
to ten years from the January 2011 grant date in order for the awarded shares to become fully vested and nonforfeitable. As
a result of the awarding of these shares, the grantees became eligible to receive payments of dividends and exercise voting
privileges after the awarding date.
During the first quarter of 2017, the performance conditions for approximately 169,000 shares of the Company’s common
stock granted under the Company’s Stock Incentive Plan were determined by the Compensation Committee to have been
satisfied relative to performance-based grants issued in 2012. These grants had a performance measurement period that
concluded on December 31, 2016. The vesting condition for these grants requires continuous employment for a period of up
to ten years from the January 2012 grant date in order for the awarded shares to become fully vested and nonforfeitable. As
a result of the awarding of these shares, the grantees will be eligible to receive payments of dividends and exercise voting
privileges after the awarding date, and the awarded shares will be included as issued and outstanding common stock shares
and included in the calculation of basic and diluted EPS.
During the first quarter of 2018, the performance conditions for 130,172 shares of the Company’s common stock granted
under the Company’s Stock Incentive Plan were determined by the Compensation Committee to have been satisfied relative
to performance-based grants issued in 2013. These grants had a performance measurement period that concluded on
December 31, 2017. The vesting condition for these grants requires continuous employment for a period of up to ten years
from the January 2013 grant date in order for the awarded shares to become fully vested and nonforfeitable. As a result of the
awarding of these shares, the grantees will be eligible to receive payments of dividends and exercise voting privileges after the
awarding date, and the awarded shares will be included as issued and outstanding common stock shares and included in the
calculation of basic and diluted EPS.
Litigation and Claims
We are subject to numerous litigation claims that arise in the ordinary course of business. If it is probable that a liability has
been incurred at the date of the financial statements and the amount of the loss is estimable, an accrual for the costs to resolve
these claims is recorded in accrued expenses in the accompanying Consolidated Financial Statements. Professional fees related
to these claims are included in other operating expenses in the accompanying Consolidated Statement of Income as incurred.
Management, with the assistance of in-house and outside counsel, determines whether it is probable that a liability has been
incurred and estimates the amount of loss based upon analysis of individual issues. New developments or changes in settlement
strategy in dealing with these matters may significantly affect the required reserves and affect our net income.