Letter (continued)
The rapid geographic spread of our company has affected mostly retail – however, we have opened two de novo brokerage offices – Peachtree Special Risk in Atlanta and RMA/PMSI in San Antonio, Texas. Peachtree is a pure excess and surplus lines brokerage, while RMA/PMSI is a specialist in small and middle-sized governmental risks. There is synergism between brokerage and our retail offices, which is now producing incremental profits. We would expect that our National Programs Divisions (both Professional and Commercial) as well as our Service Division (USIS and B&B Benefits) will also benefit from the additional owned distribution sources created by our geographic expansion.

“The only constant is change” is part of our corporate culture. To this end, we are regionalizing our July and October Executive Committee Meetings. For those who are not familiar with our leadership structure, the Executive Committee is made up of all Profit Center Managers with $1,000,000 or more in revenue plus myself, our CFO, General Counsel, and selected others. The information gathered from the quarterly Executive Committee meetings is very important relative to Brown & Brown’s ability to respond immediately to changing local market conditions. The effective use of early knowledge means our offices will continue to be on the cutting edge regarding those changes in pricing, underwriting appetite, attitude and availability – or lack thereof – of underwriting capacity. As a result, our clients will continue to receive the best pricing and coverage available.

And now to one of my favorite subjects, pre-tax profit margins. Project 28 continues to produce increasing profitability. Last year our pre-tax profit margin was 25.1%. Year 2000 was 26.3%, excluding the three poolings done during the last quarter. As restated, the margin was 25.7%. As our company culture and operating model are adopted and used by our new partners, it is my opinion that the goal of 28% pre-tax is still accomplishable by year-end 2002 – barring another major business combination.

The stock market during the year 2000 was not kind to most companies. Not so for Brown & Brown. Our shares opened on January 1, 2000 at $19.16 and rose steadily during the year closing at $35.00 on December 31, even after consideration of our 2-for-1 stock split in August. We achieved an 82.7% increase in shareholder value for the 12 months ending December 31, 2000. Simply stated, total shareholder value increased by $454 million!!! Hooray for the Brown & Brown team!!! It is of great importance that Brown & Brown employee stockholders enjoyed substantial personal gain as a result of a great team effort. Our “hunter-gatherer” culture attracts aggressive entrepreneurial people who are turned on by asset accumulation. Brown & Brown is 97% people and 3% capital. In other words, our success as a sales and service organization is dependent in very great part on the attitudes, every day, of all of our people. People are not a balance sheet asset.