Brown & Brown Plants Its Flag in the United Kingdom

Presentation Agenda Industry Profile Company Profile Why Expand Internationally? – Bermuda – Ireland – United Kingdom Lloyd’s of London UK Expansion Mode of Entry Finance Impact Assessment

Industry Profile Diversified Insurance Agency, Brokerage and Services Organization (“Broker”) Intermediary – Not the Risk-Bearer (Insurer) Paid Commissions (% of Premiums) and Fees

Industry Profile

RankCompany2008 Brokerage Revenues % Change2008 Employees 2008 Offices 1Marsh and Mclennan Co’s Inc. 11,516,000, %54, Aon Corp.7,310,000, %37, Willis Group Holding’s Ltd. 3,362,000, %17, Wells Fargo Insurance Services Inc. 1,743,062, %7, Arthur J. Gallagher and Co. 1,611,302, %9, Jardine Lloyd Thompson Group P.L.C. 992,843, %5, Brown &Brown Inc.965,982, %5, BB&T Insurance Services 962,134, %4, Gras Savoye & Cie786,368, %3, Lockton Co’s LLC778,345, %3,84048

Company Profile Founded in 1939 in Daytona Beach, FL Brown & Brown is currently ranked as the 6 th largest insurance broker in the U.S. and 7 th largest in the world (based on the July 2009 ranking by Business Insurance magazine) 170+ Offices, in 40 States and (now) UK $977.6 Million in Revenues in 2008

Company Profile Brown & Owen Changed name back to Brown & Brown 1993 Acquired Riedman Insurance agency with $54 million in revenue Brown & Owen founded in Daytona Beach, FL Raised $150 million of equity for acquisitions Acquired Hull & Co. with $63 million in revenue Revenue-$45,821 OP $-$6,511 OP %-14.2% “2nd Defining Moment” Becoming a public company. Merger with Poe & Assoc. to form Poe & Brown; revenue $86.1 million 2008 Revenue of 977.6M Raised 200M for new acquisitions “1 st Defining Moment” Focus on operating profits not revenues % OP% % OP%

Company Profile 4 Business Segments:

Company Profile Intermediate Goal: “B-40” – $1 Billion in Revenues – 40% Margin (about twice industry average) – Should be reached in Next Goal: “DA” (Double Again) – $2 Billion in Revenues – Maintain 40% Margin

Company Profile Long-Term Strategy - FOUR PILLARS: We’re in the Money-Making Business We’re in the Recruiting and Enhancing of People Business We’re in the Selling and Servicing of Insurance Business We’re in the Make-No-BIG-Mistakes Business

Company Profile 4 Business Segments: Retail (60.4% of 2008 Revenues) – Property/Casualty – Employee Benefits – Sold directly to firms, public entities and individuals

Company Profile Wholesale Brokerage (17.5% of 2008 Revenues) – Property/Casualty mainly Unusual/Difficult to Place Coverages Direct “Client” is retail agent (inside and outside of B&B) or broker placing coverage for insured – Reinsurance for Insurance Companies

Company Profile National Programs (23.2% of 2008 Revenues) – Third-Party Administration (TPA) Services – Medicare Secondary Payer Statute compliance services – Fees rather than commissions

Company Profile Services (3.5% of 2008 Revenues) – Administer/Manage more than 50 Programs – Professional Programs: professional liability and related packages for professional groups – Special Programs: packages for niche industries, public entities or risks

Why Expand Internationally? 4 GENERAL OBJECTIVES: Acquire Resources from foreign countries Minimize Competitive Risk – counter advantages competitors might gain in foreign markets that could hurt you domestically Expand Sales to foreign markets Diversify Sources of Sales and Supplies – take advantage of business cycle differences among countries B&B OBJECTIVES: Key Consideration: access to global insurance market Secondary Consideration: establish presence in global brokerage industry, divert business from competitors Not an objective - US markets provide best laws, taxes, margins Not a consideration

Why Expand Internationally? SHOW ME THE MONEY!

Why Expand Internationally? Insurance Brokers place risks with insurers located inside and outside U.S. Difficult/unusual coverages Reinsurance Captive insurance companies Usually placed through local brokers UK, Bermuda, Ireland top 3 non-US markets

Bermuda ADVANTAGES:DISADVANTAGES: Proximity to US Politically Stable Educated Workforce Cooperative Regulatory Environment 1 of Top 3 Reinsurance Jurisdictions Efficient, Innovative No Income Tax US targeting “tax havens” Protective labor laws Current business inflow from B&B lower than to Lloyd’s

Ireland ADVANTAGES:DISADVANTAGES: EU Member Politically Stable Educated Workforce Tax Benefits for Brokers – 5% on Foreign Dividends (vs. 30% for Bermuda) – Tax Treaties with Other Countries Growing Insurance Center EU Member – More Pro-Employee Labor Laws than US, UK Still relatively small market for US risks Current business inflow from B&B lower than to Lloyd’s

United Kingdom ADVANTAGES: Politically Stable Educated Workforce Lloyd’s of London Currently doing business in the market DISADVANTAGES: May Join EU

Lloyd's of London One of World’s Largest Insurance & Reinsurance Markets

Lloyd’s of London What is Lloyd's of London An insurance Market – not an insurance company Deals in Reinsurance and Insurance for large and complex risks Spreads Risk to limit liability to single entity Increases capacity of direct insurer Contract between insurer and reinsurer  No direct link to client

Lloyd’s of London Who does Business with Lloyd's – 93% of Dow Jones Industrial Average Companies – 92% of FTSE 100 Companies – 86% of Fortune Top 50 European Companies – 81% of Fortune 500 US Companies – Top 7 Pharmaceutical Companies – Top 20 Banks – Insurance/Reinsurance Solutions in over 200 Territories worldwide; US is largest market – 2008 Global Written Premiums: £16.9BN (US$24.7BN)

Lloyd’s of London How Lloyd's is Organized – The Society of Lloyd’s Made up of Members – Syndicates – Managing Agents – Brokers

Lloyd’s of London Society of Members  Capital Providers  Not Owners/Shareholders of Lloyd's  Underwrite in Syndicates  Compete for business within Lloyd's market  Offers choice  Controls pricing  Professional Underwriters accept risk on behalf of Syndicates  Members are not responsible for each others losses

Lloyd’s of London Syndicates Groups of Society Members Pools capital of members Assumes the risk of underwritting Spreads risk among members in group

Lloyd’s of London Managing Agents Companies established specifically to oversee Syndicates Sponsor and Manage Syndicates on members behalf Determine Members capacity for commitments Employ Underwriters to write contracts Communicate directly with Brokers Can rapidly assume or decline contracts

Lloyd’s of London Brokers – act as gatekeepers – Intermediary between clients and Syndicates – Negotiate competitive terms – Get immediate access to decision makers – Accredited by Lloyd's – Retain part of commissions for placing business into Lloyd’s market

Lloyd’s of London Why Be a Lloyd’s Broker? Vertical Integration: Direct access to Managing Agents Obtain brokerage commissions paid to current (non-B&B) Lloyd’s Brokers B&B currently does business with (“Second (third?) bite at the apple”)

Lloyd’s of London How to become a Lloyd's Broker Regulatory Approval from Appropriate body Support from at least one Managing Agent Terms of Business Agreement Adequate knowledge and systems to conduct business at Lloyd's Professional Indemnity Insurance

UK Expansion DECUS INSURANCE BROKERS, LTD.: Organized as England & Wales company September 2007 Indirect Subsidiary of Brown & Brown, Inc. Created to place specialty lines of insurance business including Property, Professional Liability and Binding Authority programs Authorized with FSA February 2008 Appointed as Lloyd’s Broker February 2008

UK Expansion Insured (Pays Gross Premium) ↑ US Retail Insurance Agent (Keeps Commission %, Remits Net Premium) ↑ US Wholesale Broker (Keeps Commission %, Remits Net Premium) ↑ LLOYD’S BROKER (Keeps Commission %, Remits Net Premium) ↑ Managing Agent (Manages Syndicate for Lloyd’s Members) Syndicate (Risk-Bearers) (Underwriters Price, Issue Policies) ↓ Lloyd’s Members (Capital Providers) Companies/ Individuals Syndicate No Amlin Underwriting Ltd. Decus Insurance Brokers, Ltd. Peachtree Special Risk Brokers, LLC Brown & Brown of Florida, Inc. Condominium Owners Association

UK Expansion Decus Market Strategy: Capture Commissions currently being retained by Lloyd’s brokers for little/no actual work (2 -3 bites at apple) Beachhead: Start with B&B-placed business – E.g., Move Force-Placed Hazard Insurance Program previously placed with Lloyd’s Broker owned by US competitor Arthur J. Gallagher Extend to other agents/brokers placing business into Lloyd’s market

UK Expansion What does “Decus” mean anyway? Latin inscription on British coins: “Decus Et Tutamen” (“An Ornament and a Safeguard”) – Refers to milling/lettering on coin, and to Monarch depicted on coin

Mode of Entry Modes of Entry – Acquisition No asset acquisitions in UK; only stock – taking the good, the bad and the ugly Tried – and (luckily) failed – in 2006; “winning” bidder took huge loss due to overpayment for business and employee benefit plan wind-down costs Will still (carefully) consider acquisition opportunities; more one-off hires – Joint Venture JV = partnership between two entities Joint control Split profits Shared legal liability

Mode of Entry – Foreign Subsidiary (Foreign Direct Investment) - Advantages = –Control –100% ownership of Profits Challenges = –Establishing UK subsidiary – process more complex than in US –Regulatory approval from Financial Services Authority – more involved than State insurance departments in US –Broker Appointment from Lloyd’s – greater scrutiny for foreign-owned brokers; local direct management required (in reading, a “multidomestic” or “locally responsive” company approach) –Higher Operating Costs, Operating Complexity »Rents, salaries, taxes higher than in US »Establish, administer separate UK benefit plans »Tax repatriation Labor laws more pro-employee (e.g., no at-will employment; restrictive covenants more difficult to enforce )

Finance COST OF ACQUISITION / START UP : $1 MM FUNDED INTERNALLY VIA CAPITAL RAISED IN 2004 PROFITABLE IN FIRST AND SECOND YEAR FOLLOWING START UP.

Finance 2009 Through Sep 30BudgetActualTotal 09 Revenues$19.5M$20.4M$26M Operating Profits$100K$900K$1.2M

Impact Assessment

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