Brown & Brown Plants Its Flag in the United Kingdom

1. Brown & Brown Plants Its Flag in the United Kingdom

2. 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

3. Industry Profile • Insurance Agency, Brokerage and Services (“Brokerage”) Industry • Intermediary – Not the Risk-Bearer (Insurer) • Paid Commissions (% of Premiums) and Fees • Insert total industry revenue.

4. Industry Profile

5. Industry Profile

6. Company Profile • Founded in 1939 in Daytona Beach, FL • Brown & Brown is currently ranked as the 6thlargest insurance broker in the U.S.  and 7th 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

7. Company Profile Brown & Owen founded in Daytona Beach, FL Raised $150 million of equity for acquisitions Acquired Hull & Co. with $63 million in revenue “1st Defining Moment” Focus on operating profits not revenues 1980 - $2mm @ 16% OP% 1982 - $4mm @ 8% OP% Changed name back to Brown & Brown 1939 1980-1982 1999 2002 2005 1955 2001 2004 1993 2008 Acquired Riedman Insurance agency with $54 million in revenue Raised 200M for new acquisitions 2008 Revenue of 977.6M “2nd Defining Moment” Becoming a public company. Merger with Poe & Assoc. to form Poe & Brown; revenue $86.1 million Brown & Owen

8. Company Profile • Intermediate Goal: “B-40” • $1 Billion in Revenues • 40% Margin (about twice industry average) • Should be reached in 2009-2010 • Next Goal: “DA” (Double Again) • $2 Billion in Revenues • Maintain 40% Margin

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

10. Company Profile

11. 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

12. Why Expand Internationally? Extra Piece of the PIE!

13. 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 localbrokers • UK, Bermuda, Ireland among top 3 Non-US markets

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

15. Ireland ADVANTAGES: DISADVANTAGES: 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 • 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

16. United Kingdom ADVANTAGES: • Politically Stable • Educated Workforce • Lloyd’s of London • Currently doing business in the market DISADVANTAGES: • EU Member

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

18. Lloyd’s of London • What is Lloyd's of London • An insurance Market • Reinsurance/Insurance for Large and Complex Risks • No Direct Link to Client • Who does Business with Lloyd's • 93% of Dow Jones Companies • 86% of Top 50 European Companies • Top 20 Banks • 2008 Global Written Premiums: $24.7 B

19. Lloyd’s of London • Society of Members • Capital Providers • Syndicates • Groups of Members • Pools Capital & Risk • Managing Agents • Oversee Syndicates • Employ Underwriters • Brokers • Gatekeepers • Negotiate Terms

20. Lloyd’s of London Why Be a Lloyd’s Broker? • Already Placing Business in Lloyd's Market • Vertical Integration • Second bite at the apple • Direct access to Managing Agents • Control the deal • Opportunity for new clients • New business entering Lloyd's Market

21. 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 • Professional Indemnity Insurance

22. 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

23. 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)

24. 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

25. UK Expansion Lloyd’s Members (Capital Providers) Companies/ Individuals Syndicate (Risk-Bearers) (Underwriters Price, Issue Policies) Syndicate No. 6106 Managing Agent (Manages Syndicate for Lloyds Members) Amlin Underwriting Ltd. LLOYDS BROKER (Keeps Commission % Remits Net Premium) Decus Insurance Brokers, Ltd. US Wholesale Broker (Keeps Commission % Remits Net Premium) Peachtree Special Risk Brokers, LLC US Retail Insurance Agent (Keeps Commission % Remits Net Premium) Brown & Brown of Florida, Inc. Insured (Pays Gross Premium) Condominium Owners Association

26. 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

27. 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

28. Finance • Cost of acquisition/startup : $1 MM  • Funded internally via capital raised in 2004 • Profitable in first and second year following startup

29. Finance

30. Impact Assessment Incremental Revenues/Operating Profits Following Decus Expansion

31. Questions? Comments?