Brown & Brown, Inc. (BRO) has recently sold some assets from its North Carolina-based subsidiary, Axiom Re, LP (“Axiom Re”) to Beach Re Limited (“Beach”).
Axiom Re will become a part of Beach’s North American operations. The divestiture is expected to lead to a decline in one-time after-tax earnings by 22 cents per share in 2014. However, the sale reflects Brown & Brown’s intention to stop operating directly in the reinsurance brokerage marketplace, so that it can focus on its core operations.
Nevertheless, to continue to utilize Axiom Re for modeling services, Brown & Brown has entered into a contract with Beach. As per this contract, Beach will provide reinsurance solutions to the existing and prospective customers of Brown & Brown.
As part of the divestiture agreement, Brown & Brown’s other two subsidiaries, Evergreen Re and Beecher Carlson’s managed care operations will unite to form an entity that would boast a broad and strong managed care capacity. This entity will operate under the name of Beecher Evergreen Managed Care.
With the rising demand for products in the managed care space, the aforementioned divestiture and the consequent strengthening of the managed care operations is expected to help Brown & Brown realize long-term growth.
Brown & Brown currently carries a Zacks Rank #4 (Sell). Better-ranked stocks in the insurance space include Aon plc (AON), Marsh & McLennan Companies, Inc. (MMC) and AmTrust Financial Services, Inc. (AFSI). While AmTrust sports a Zacks Rank #1 (Strong Buy), Aon and Marsh & McLennan hold a Zacks Rank #2 (Buy).
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