What happened

Brown & Brown (BRO 0.34%) saw its stock price drop significantly on Tuesday, as it fell as much as 12.6% by around 11 a.m. ET and was down 11% at 12:30 p.m. ET. The stock price is down about 20% year to date, trading at about $55 per share.

It was in stark contrast with what started out as a good day for the markets, as all of the major indexes were up on Tuesday, with the Nasdaq Composite leading the way, up about 2% at 12:30 p.m. ET.

So what

Brown & Brown, a leading insurance broker, released its third-quarter earnings on Monday after the market close, showing that it missed revenue and earnings estimates.

The company posted revenue of $928 million, which was up 20.4% year over year, while adjusted earnings per share (EPS) was $0.50, down from $0.58 in the prior year. Both of these numbers lagged estimates as analysts projected a consensus of $943 million in revenue and $0.60 EPS.

Organic revenue, which is core commissions and fees, was up 6.7% to $799 million, while earnings before interest, taxes, depreciation, amortization, and the change in estimated acquisition earn-out payables (EBITDAC) was $290 million, up 5.8% year over year.

High expenses, up 24% year over year to $710 million, offset the revenue gains, with the biggest jumps coming from employee compensation and benefits and operating expenses.

Now what

As a property and casualty insurance broker, Brown & Brown is an intermediary between insurance carriers and the individuals and businesses that buy it. The brokers seek to provide the right insurance products to their customers' business, using their leverage and purchasing power to get the best deals. They make money primarily on commissions and fees from selling policies.

Even with the earnings miss, Brown & Brown had a significant revenue increase. Expenses were higher from bringing in new team members from recent acquisitions, but expenses should moderate once the acquisitions of two United Kingdom-based insurers, which serve the U.K. and Europe, are integrated.

Analysts set a consensus $70 price target on shares, which would be a gain of about 25% from current levels. As a leading independent broker, and with an expanded reach selling an essential service without the risks that underwriters carry, Brown & Brown remains a pretty durable business.