In its concerted effort to enhance shareholder value, the board of directors of Brown & Brown, Inc. (BRO) authorized the company to repurchase upto $25 million worth of shares.
The company can buy back the shares over the next two years.
The new authorization by Brown & Brown is duly supported by the company’s solid financial position, with cash and cash equivalents of $203 million as of the end of 2013. Retained earnings at year end also stood solid at $1.6 billion (up 11% year over year). A sustained solid operational performance continues to cushion Brown & Brown’s sturdy financial position. Share repurchases are broadly intended to lower dilution from the employee equity incentive plans.
Besides the share buyback authorization, in Oct 2013, the board of directors also approved an 11.1% increase in its quarterly dividend, in a bid to share more profits with BRO’s shareholders.
Several insurers are in the news presently for their efforts to enhance shareholder value. Recently, the board of Arthur J Gallagher & Co. (AJG) approved a 2.9% increase in its quarterly cash dividend to 36 cents per share. The board of directors of Erie Indemnity Co. (ERIE) also approved a dividend hike on both Class A and Class B shares. While a 7.2% dividend hike was approved for Class A shares, a 3.2% hike was approved for Class B shares.
Last month, Brown & Brown reported operating net income of 32 cents per share for the fourth quarter of 2013, improving 10.3% year over year, driven by solid performance across three business divisions. However, results missed the Zacks Consensus Estimate by 3 cents.
Brown & Brown presently carries a Zacks Rank #3 (Hold). With the news of the share buyback authorization poised to boost investor confidence in the stock as well as add to the bottom line, we expect analysts to raise their estimates and exert upward pressure on the Zacks Rank. A better-ranked stock worth considering is Hannover R (HVRRY) with a Zacks Rank #2 (Buy).
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