Earnings call transcript: Brown & Brown beats Q3 2025 earnings expectations

Brown & Brown Inc. (BRO) reported its third-quarter 2025 earnings, surpassing analysts’ expectations with an adjusted earnings per share (EPS) of $1.05, compared to the forecasted $0.94. The company’s revenue reached $1.6 billion, exceeding the anticipated $1.55 billion. However, despite this strong performance, the stock experienced a slight dip in premarket trading, falling by 1.36% to $86.40.

Key Takeaways

• Brown & Brown’s Q3 EPS of $1.05 exceeded forecasts by 11.7%.
• Revenue grew by 35.4% year-over-year, reaching $1.6 billion.
• Premarket trading saw the stock price decrease by 1.36%.
• The company completed the acquisition of AssuredPartners, integrating over 5,000 new employees.
• Adjusted EBITDA margin improved by 170 basis points to 36.6%.

Company Performance

Brown & Brown demonstrated robust growth in Q3 2025, driven by strategic acquisitions and product innovation. The company’s total revenues soared to $1.6 billion, marking a 35.4% increase compared to the same period last year. This growth was supported by a 3.5% organic growth rate and significant contributions from the acquisition of AssuredPartners. The integration of more than 5,000 employees from the acquisition is expected to bolster the company’s retail operations.

Financial Highlights

• Revenue: $1.6 billion, up 35.4% year-over-year
• Earnings per share: $1.05, a 15.4% increase from the previous year
• Adjusted EBITDA margin: 36.6%, a 170 basis point improvement
• Cash flow from operations: $1 billion, a 24% growth

Earnings vs. Forecast

Brown & Brown’s Q3 2025 results exceeded expectations, with EPS beating forecasts by 11.7% and revenue surpassing predictions by 3.23%. This marks a continuation of the company’s trend of outperforming market expectations, driven by strategic growth initiatives and operational efficiencies.

Market Reaction

Despite the strong earnings report, Brown & Brown’s stock saw a decrease of 1.36% in premarket trading, settling at $86.40. This movement is notable given the company’s performance, suggesting that investors may be cautious due to broader market conditions or specific company factors. The stock’s current performance is near its 52-week low of $86.79, indicating potential volatility.

Outlook & Guidance

Looking ahead, Brown & Brown anticipates Q4 retail organic growth to mirror Q3’s performance. The company expects a mid-single-digit organic growth decline in its specialty distribution segment. Additionally, Brown & Brown aims to maintain its debt leverage within a 0-3x gross and 0-2.5x net range over the next 12 to 18 months. Full-year EBITDA margin expectations have been revised to show modest increases.

Executive Commentary

Powell Brown, the company’s CEO, expressed enthusiasm about the integration of AssuredPartners, stating, "We’re excited to be working together to grow our company." He also highlighted the company’s focus on evaluating the intrinsic value of its stock, emphasizing a strategic approach to capital allocation. Andy, another executive, mentioned the goal of completing the integration by the end of 2028.

Risks and Challenges

• Economic fluctuations could impact insurance pricing and demand.
• Rising medical costs, up 6-8%, may affect profitability.
• Potential challenges in integrating AssuredPartners’ operations and workforce.
• Market saturation in certain segments could limit growth opportunities.
• Regulatory changes in the insurance industry may pose compliance challenges.

Q&A

During the earnings call, analysts inquired about the company’s technology investment strategies and the dynamics of the flood insurance and lender-placed insurance markets. Executives addressed employee benefits challenges and clarified the company’s approach to capital allocation between mergers and acquisitions and share buybacks.

Full transcript - Brown & Brown Inc (BRO) Q3 2025:

Gigi, Conference Call Moderator, Brown & Brown: Good morning and welcome to the Brown & Brown, Inc. Third Quarter Earnings Call. Today’s call is being recorded. Please note that certain information discussed during this call, including information contained in the slide presentation posted in connection with this call and including answers given in response to your questions, may relate to future results and events or otherwise be forward-looking in nature. Such statements reflect our current views with respect to future events, including those relating to the company’s anticipated financial results for the third quarter and are intended to fall within the safe harbor provisions of the securities laws. Actual results or events in the future are subject to a number of risks and uncertainties and may differ materially from those currently anticipated or desired or referenced in any forward-looking statements made as a result of a number of factors.

Such factors include the company’s determination as it finalizes its financial results for the third quarter that its financial results differ from the current preliminary unaudited numbers set forth in the press release issued yesterday, other factors that the company may not have currently identified or quantified, and those risks and uncertainties identified from time to time in the company’s reports filed with the Securities and Exchange Commission. Additional discussion of these and other factors affecting the company’s businesses and prospects, as well as additional information regarding forward-looking statements, is contained in the slide presentation posted in connection with this call and in the company’s filings with the Securities and Exchange Commission. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. In addition, there are certain non-GAAP financial measures used in this conference call.

A reconciliation of any non-GAAP financial measures to the most comparable GAAP financial measure can be found in the company’s earnings press release or in the investor presentation for this call on the company’s website at www.bbrown.com by clicking on Investor Relations and then Calendar Events. With that said, I will now turn the call over to Powell Brown, President and Chief Executive Officer. You may begin.

Powell Brown, President and Chief Executive Officer, Brown & Brown: Thanks, Gigi. Good morning, everyone, and welcome to our third quarter earnings call. We’d like to first welcome our 5,000-plus new teammates from AssuredPartners that joined us on August 1. We’re excited to be working together to grow our company as these talented teammates bring new capabilities for our customers. I also wanted to talk about leadership changes we announced last Monday. Based on the evolving global breadth of our Retail segment and the importance of continuing our forward momentum, I’ve appointed Steve Hearn as the new Retail President on a go-forward basis. I’ve known Steve for over 20 years and have admired his leadership style. He brings more than 35 years of deep industry experience, acquisition integration, and a proven record of driving growth and innovation both in the U.S. and internationally.

With his leadership, we will further enhance our world-class solutions and value to our customers, carrier partners, shareholders, and teammates. Regarding my brother Barrett, I have a ton of respect for him as a leader and also I love him dearly. He’s taking a personal leave of absence. I ask that everyone respect his privacy. When he’s ready to return to the company, I look forward to welcoming him back. Last week, our Board of Directors raised our dividend by 10%, which represents an increase for the 32nd year in a row. In addition, our Board expanded our authorization to repurchase shares up to $1.5 billion. As we’ve done in the past, we’ll purchase shares when we believe the company is undervalued and to help manage dilution associated with our equity plans. Our goal is to help drive earnings per share growth and meaningful shareholder value.

Now, let’s transition to the results. I’ll provide some high-level comments regarding our performance, along with updates on the insurance market and the M&A landscape. Then Andy will discuss our financial performance in more detail. Lastly, I’ll wrap up with some closing thoughts before we open it up for Q&A. On slide number four. As you know, we focus on growth, both overall and organic. Margins, earnings per share, and cash flow as key metrics that should drive shareholder value creation. For the third quarter, we delivered revenues of $1.6 billion, growing 35.4% in total and 3.5% organically as compared to the same period in the prior year. Our adjusted EBITDA margin improved by 170 basis points to 36.6%, and our adjusted earnings per share grew over 15% to $1.05. On the M&A front, we completed seven acquisitions with estimated annual revenues of $1.7 billion, with the largest being AssuredPartners.

I’m on slide five. From an economic standpoint, growth remained relatively stable with the second quarter. We view this as positive since we continue to see businesses growing as consumers are still spending. From a hiring and capital investment perspective, it remained relatively modest for most companies. Depending on the industry, some companies are looking to hire, while others are relatively flat. This concept applies to capital investments as well. Generally, concerns over the impacts from tariffs seem to have dissipated for many industries, while business leaders continue to have a cautious bias. From a commercial insurance pricing standpoint, rates for most lines were similar to the second quarter. We continue to see CAT, property, and casualty as the outliers on both ends of the spectrum. Pricing for employee benefits was similar to prior quarters, with medical costs up 6% to 8% and pharmacy costs generally up over 10%.

We do not see any signs that this trend will slow over the coming quarters. Almost all companies are challenged to balance rising health care costs and the impact to their employees and their P&Ls. Management of high-cost claimants, specialty pharmacy, and population health continue to be key areas of our focus, which are driving more demand for our health care consulting businesses. Rates in the admitted P&C markets were substantially similar to the last quarter and were flat to up 5% versus the prior year. Workers’ compensation rates remained similar to prior quarters in most states and were flat to down 3%. For non-CAT property, overall rates were down 5% to up 5%, depending on the loss experience. For casualty, we’re seeing rate increases of 5% to 10% for primary layers and excess layers increasing even more. We believe this trend will continue over the coming quarters.

For professional liability, rates remain similar to Q2 and were down 5% to up 5%. Shifting to the E&S property market, rate changes for the third quarter were similar to the second quarter and were generally down 15% to 30%. Keep in mind that we placed the largest amount of CAT property in the second quarter and the least amount in the third quarter of each year. From a customer perspective, they’re managing their total insurance spend, both commercial as well as employee benefits. As rates move up and down for certain lines, this will influence customers’ buying behavior and corresponding premiums paid. On slide six, let’s transition to the performance of our two segments for the quarter. Retail delivered organic growth of 2.7%, which was impacted by approximately 1% due to the adjustments related to certain employee benefits incentives.

Isolating this impact, the organic growth was generally in line with our expectations as a result of good net new business performance. As a reminder, beginning this quarter, our previously reported programs and wholesale segments were combined into one segment, which is now referred to as specialty distribution. The go-to-market brand is Arrowhead Intermediaries, which is comprised of three distinct divisions: programs, wholesale, and specialty. This segment also includes the 180 division of a session. We believe that on a combined basis, Arrowhead Intermediaries is the largest global operator of over 100 MGA/MGUs and places approximately $20 billion of written premium. For the quarter, the specialty distribution team delivered good organic revenue growth of 4.6%. Organically, wholesale grew high single digits, driven by strong brokerage performance.

Programs grew low to mid-single digits, driven by good net new business, while being partially offset by our wind and quake programs due to the continued downward rate pressure for commercial CAT properties. Now, I’ll turn it over to Andy to get into more details of our financial results.

Andy, Chief Financial Officer, Brown & Brown: Great. Thank you, Powell. Good morning, everybody. Before we get into the details, we wanted to talk about the impact on our earnings related to the acquisition of AssuredPartners and our related debt and equity issuances. As previously discussed, transaction and integration costs related to our acquisition of AssuredPartners are excluded from our calculation of adjusted EBITDA and adjusted earnings per share. For this quarter, acquisition and integration costs were approximately $50 million. Additionally, beginning this quarter, we have a new line on the income statement called mark-to-market of escrow liability related to the acquisition of AssuredPartners. This account is also excluded from our calculation of adjusted EBITDA and adjusted EPS. For the third quarter, we recorded approximately $8 million of a non-cash charge related to the change in the fair value of our common stock held in escrow.

As our stock price changes over the coming quarters, we will have additional non-cash movements. For the stub period of August and September, AssuredPartners’ total revenue was approximately $285 million. The margins were in line with our expectations and were slightly below the full-year margin discussed during our announcement call. Due to the seasonality of revenue and profit for certain businesses, the margin will fluctuate by quarter. In addition, we recorded approximately $29 million of incremental investment income for the quarter as a result of the proceeds of our follow-on common stock offering and senior notes issued in June. Now, transitioning to our consolidated results. As a reminder, when we refer to EBITDA margin, income before income taxes, or diluted net income per share, we are referring to those measures on an adjusted basis.

The reconciliations of our GAAP to non-GAAP financial measures can be found either in the appendix of this presentation or in the press release we issued yesterday. Now, let’s get into more detail regarding our financial performance for the quarter. On a consolidated basis, we delivered total revenues of $1,606 million, growing 35.4% as compared to the third quarter of 2024. Contingent commissions grew by an impressive $46 million in total, with $12 million coming from AssuredPartners. Income before income taxes increased by 34% and EBITDA grew by 41.8%. Our EBITDA margin was 36.6%, expanding by 170 basis points over the third quarter of the prior year, driven by good underlying margin expansion together with increased contingents and investment income. For the quarter, our margin expansion was partially offset by the seasonality of revenue and profit associated with the acquisitions of AssuredPartners and Quintus.

Our effective tax rate for the quarter was 24.7%, substantially flat versus the prior year. Diluted net income per share increased 15.4% to $1.05. Our weighted average shares outstanding increased by approximately 48 million to 332 million, primarily due to the shares issued to AssuredPartners’ equity holders. Lastly, our dividends paid per share increased by 15.4% as compared to the third quarter of 2020. Overall, we are very pleased with our performance for the quarter, as well as our year-to-date results. We’re over on slide number eight. The Retail segment grew total revenues by 37.8%, with organic growth at 2.7%. The difference between total revenues and organic revenue was driven substantially by acquisition activity over the past year. As it relates to the fourth quarter, we anticipate our organic growth will be similar to the third quarter.

This is due to the previously mentioned employee benefits incentive adjustments and the relative impact of multi-year policies written in 2024 in the fourth quarter. At this point, we do not see the same potential revenue associated with multi-year policies in the fourth quarter of this year. Our EBITDA margin increased by 150 basis points to 28%, driven by the management of our expense base, along with the positive impact of AssuredPartners. This was partially offset by revenue seasonality for Quintus, which we acquired in the fourth quarter of 2022. We’re over on slide number nine. Specialty distribution grew total revenues by 30%, driven by the acquisition of AssuredPartners, contingent commissions, and organic revenue growth. Our organic growth was 4.6%, which was a strong performance considering the very tough comparison to the prior year.

Our EBITDA margin decreased by 110 basis points to 43.9% due to the impact of AssuredPartners having a lower overall margin as compared to our existing specialty distribution segment. This impact more than offsets the increase driven by higher contingent commissions, organic growth, and managing our expenses. Regarding the Q4 organic revenue growth outlook, we’re called to report approximately $28 million of non-recurring flood claims processing revenue in the fourth quarter of last year. Presuming there are no hurricanes through the end of this year, as well as the continued rate pressure on CAT property, and we are expecting slower growth in our lender-placed business, we anticipate the organic growth rate for our specialty distribution segment could decline in the range of mid-single digits. Taking this organic growth into consideration, it will also impact the margin for the fourth quarter this year.

As it relates to the fourth quarter outlook for contingent commissions, we anticipate them to be in the range of $30 to $40 million, depending on the outcome of storm season. This excludes any contingent commissions that may be recognized by AssuredPartners. We got a few other comments. First, from a cash perspective, in the first nine months of 2025, we generated $1 billion of cash flow from operations. This was an increase of over $190 million, but 24% growth for the first nine months of 2025 versus the same period in 2024. From a cash flow conversion perspective, our discipline remains strong and the ratio of cash flows from operations to total revenues was approximately 23.5% or 100 basis points higher than the prior year.

For the full year, we estimate our ratio of cash flow from operations to total revenues will be in the range of 23% to 25%. Before we wrap up, we wanted to provide guidance on a few items. As it relates to AssuredPartners, we anticipate Q4 revenues to be in the range of $430 to $450 million and the adjusted EBITDA margin to be slightly below the full-year margin discussed in our announcement call due to the seasonality of revenue and profit for certain businesses. Regarding amortization expense, we anticipate this to be in the range of $110 to $115 million for the fourth quarter. Interest expense, we anticipate it to be in the range of $95 to $100 million, and investment and other income to be in the range of $20 to $25 million for the fourth quarter.

As it relates to our full-year outlook for adjusted EBITDA margin, you may remember during our earnings call in January of this year that we anticipated our margins to be flat compared to 2024. Based on our strong year-to-date performance and incorporating the slightly lower margins due to the seasonality of AssuredPartners, we’re increasing our full-year margin expectations to be up modestly. With that, let me turn it back over to Powell for closing comments.

Powell Brown, President and Chief Executive Officer, Brown & Brown: Thanks, Andy, and good report. As we enter the fourth quarter, we believe economic growth will be relatively similar to the last couple of quarters. The uncertainty regarding tariffs appears to be lessening as time passes. Interest rates are starting to decrease, and our customer base is continuing to grow and invest. This does not apply to all customers. With our broad diversification across geographies, industries, lines of coverage, and customer segments, we will always have certain customer segments doing well and others working hard just to deliver growth. This diversification puts stability in our overall customer base and, consequently, in our key financial metrics. Overall, we feel the economies in which we operate are generally stable. From a pricing standpoint, we expect admitted rates to be fairly similar to what we experienced in the third quarter.

As of now, we’re not seeing any major disruptors that will cause admitted rates to materially change. We believe casualty and auto rates will continue to increase, which are the largest segment of the market, and that admitted property will continue to be very competitively priced. For the E&S space, we anticipate casualty lines will continue to be challenging to place. This includes both rate and available limits. Unless there’s meaningful tort reform across the country, we expect continued upward pressure on rates on casualty lines. Presuming we don’t have a meaningful late-season storm or storms, the capital deployment remains active. Pricing for CAT property will more than likely look similar to what we experienced in the third quarter. Once we clear hurricane season, we could see certain markets or carriers get very aggressive at the end of the year utilizing their remaining capacity. This would not surprise us.

On the M&A front, our pipeline looks good domestically and internationally. We continue to look to buy businesses that fit culturally and make sense financially. From an accession integration standpoint, things are progressing well. We’re focused on our customers and the solutions we can deliver for them. As we mentioned before, the strategic rationale for this acquisition is to bring together our organizations to add new capabilities and enhance existing resources. Our balance sheet remains strong, and we have outstanding cash flow conversion to help fuel our growth. There will be periods when M&A is higher or lower weighting on our total growth. In the past 10 years, our growth has been well balanced between organic and inorganic. We’ll remain disciplined in our capital deployment strategy so we can continue to drive long-term shareholder value. Our company is in a great place and we feel good about the economic outlook.

As I mentioned earlier, the third quarter was strong as we look at our key financial metrics, understanding the actual organic growth of retail was lower due to the change in employee benefits incentives for the quarter. Our teams are collaborating well and we’re working hard to leverage our capabilities for our customers and win more new business. We’re looking forward to delivering a solid fourth quarter that will be the capstone on a really good year for Brown & Brown. With that, we’ll turn it back over to Gigi and open the lines for Q&A.

Gigi, Conference Call Moderator, Brown & Brown: Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please limit yourselves to one question. You may re-enter the queue for follow-up questions. Please stand by while we compile the Q&A roster. Our first question comes from the line of Mike Zurimski from BMO.

Hey, great. Good morning. My first question is on the relationship of organic growth to EBITDA margins, not in any given quarter, but maybe over time. There’s some correlation to, in time frames when organic growth is well above historical, there’s more margin improvement and vice versa. I guess I’m trying to get at, I know you’re not going to provide a guidance for 2026, but to the extent we’re painting a picture of lower organic growth, especially versus recent years or maybe towards the low end of your historical range too, in the future, should we be thinking about kind of that margin correlation or are there just, there’s a lot of moving pieces with the acquisition and just other structural things going on in the company? Is there something different about their relationship today than in the past?

Powell Brown, President and Chief Executive Officer, Brown & Brown: Yeah. Good morning, Mike and Sandy. I think one of the things that is helpful when you look at at least our numbers and you think about our company, the organic is just a component of how we drive our margins, how we drive our cash flows. Important that you take into consideration contingent commissions inside of there. If you think about just this quarter, right, and you look at the amount of contingents that we grew, we were approximately $46 million of contingents this quarter. $12 million of that came from a session. Our organic growth was $40 million. The contingents are a material portion of the value that we deliver in the organization. We wouldn’t want you to do a direct correlation between organic and margins. It won’t actually work that way, at least for our business, okay?

Just kind of think about that as you work through calculations. We still continue to think about our business in that 30% to 35% range, and it’ll move around back and forth over time. We feel really, really good with the business, as we mentioned, on just how we’re growing this year on an underlying basis and how a session is performing.

Okay, that’s helpful. For my follow-up, I’m curious, I believe you have some businesses, I know this is maybe just hopefully short-term, but that are impacted by the government shutdown. Should we be, are you, should we be factoring in any implications of that in the, probably this your specialty segment for 4Q? Thanks.

Yeah. Hey, Mike, we’ve got a few businesses that are impacted, and it’s both in specialty as well as in retail. We’ve got a couple of businesses that are in the Medicare Social Security set aside, and those get impacted based upon the government. Generally, that revenue gets caught up over time and just gets backlogged in there. Yes, there could be some impacts in the fourth quarter or even into Q1 to just how long it takes to get everything resolved up there in Washington. The other piece is in our flood business. The way that works is we are able to actually do renewals. We just can’t, and nobody, it’s not just Brown & Brown, it’s anybody that’s part of the Write Your Own program, you can’t write new policies right now.

What you can do is once the government opens back up, you can do retro policies in there. We’re in good shape. We were able to front run all the renewals for the fourth quarter.

Thank you.

Gigi, Conference Call Moderator, Brown & Brown: Thank you. One moment for our next question. Our next question comes from the line of Alex Scott from Barclays.

Morning. This is Justin on for Alex. The first question I wanted to ask was on retail organic. I was wondering if you can provide a little bit more color as to the 1% impact that you had called out in your prepared remarks.

Powell Brown, President and Chief Executive Officer, Brown & Brown: Sure. Good morning, Justin. The comment we made inside of there is we had an adjustment for incentive commissions in employee benefits. The way those work is, again, we’re accruing throughout the year, and then ultimately we have to do adjustments at the end of the calculations again. We’ll always have positives and negatives. When you look at 2024, for that time period, it was actually a positive adjustment. For this year, it was actually a negative adjustment. Normally how those calculations work is dependent upon kind of where you get in, you know, an applicable year, the targets are moved in the next year. We overperformed in 2024, and we just didn’t get all the way to the targets, the increased targets in 2025. You have kind of a year over year and up and a down is what causes the spread in there.

That’s about 1% of the impact. That’ll continue. The other thing I just mentioned is, and we highlighted in our commentary, that will have some impact in the fourth quarter because we are still accruing at a higher rate in Q4 of last year.

Got it. Thank you. I guess just on a related.

Thank you.

Got it. Appreciate it. Just on a related note, as you guys are gearing up for planning and budgeting for the upcoming year, I wanted to bring us back to a comment you had mentioned earlier in terms of how I think a few quarters ago you mentioned you see this business as in the low single digit, like on a longer term through the cycle. I was just wondering whether or not the results in the recent quarters are indicative of whether that mean reversion is starting to happen at the present moment or how you see the trend for the organic as you guys are thinking about planning for next year.

For the last 16 years, we’ve been saying that the retail business is a low to mid-single digit organic growth business in a steady state economy. We’re staying by that. We’re consistent, 16 years running. The answer is, as you know, we don’t give organic guidance for 2026, but you have gotten a sense of how the business is running right now, with a couple things that are headwinds. Actually, I’m not going to say they’re one-off adjustments, but we are not skirting the issue. The organic growth for retail is 2.7%. You can look inside of it and say, this could adjust it by one basis point, but we’re not skirting the issue that it was 2.7%. I hope that answers your question. Thank you.

Thank you.

Gigi, Conference Call Moderator, Brown & Brown: Thank you. One moment for our next question. Our next question comes from the line of Meyer Shields from Keefe, Bruyette & Woods.

Hi, good morning. This is Dean from Mayer. Thank you for taking my question. My first question is a follow-up to Justin on the retail segment incentive commission. I know you mentioned there’s some headwinds in Q4. I’m just wondering if that will continue in 2026 or are we expecting moderating from there?

Powell Brown, President and Chief Executive Officer, Brown & Brown: Good morning. At least as everything that we can see right now, we think this is more isolated to the fourth quarter and doesn’t carry over into 2026. Facts can always change, positive or negative, but at least what we can see right now appears to be isolated to the fourth quarter.

Got it. Thank you. My second question is on the admitted E&S. Last quarter, you mentioned seeing signs of business going from E&S back to the admitted market. I’m just curious, what are you seeing this quarter, and what do you expect going forward?

The short answer is there are admitted markets that are talking about it more and thinking about it as growth for admitted carriers becomes more challenging. I think that there will be a lot of talk about it, but I don’t think that the movement from non-admitted to admitted will offset the increase in the size of the E&S market, if that makes sense. Yes, I think there will be some movement back across, but the E&S market is continuing to grow at a pace that I think that it will not offset that. Thank you.

Thank you.

Gigi, Conference Call Moderator, Brown & Brown: Thank you. One moment for our next question. Our next question comes from the line of Mark Hughes from Truist.

Thank you. Good morning. You had suggested that with a clean CAT season, you might see extra capital being put to work. The carriers could be more aggressive at year-end. What do you think that means for rates if you do see that scenario?

Powell Brown, President and Chief Executive Officer, Brown & Brown: Good morning, Mark. Let me say that I am not a reinsurance expert. I want to preface my statement by that. I think that reinsurance rates are going to be under pressure, 5% to 15% down. That’s going to translate into admitted primary business in a similar or higher fashion, or E&S, maybe I should say. I think we could see an environment where it’s similar to this year, next year, in what we’re currently seeing. I do want to highlight something that we have seen before, and we haven’t seen it yet that I’m aware of, but you get into the last part of Q4 and you get into December and you get a couple of markets that basically decide to get really aggressive because they still have unutilized capacity. I think we could see more rate pressure at the end of Q4 than we currently see.

That’s not across the board. I’m not aware of any markets teeing up the blue light special yet, but I’m just telling you that is a possibility. As it relates to next year, again, I do not believe this is going to have an impact on the U.S. pricing, but you also have the events that are occurring in Jamaica, and that’s going to be on the news and the resulting damage and hopefully, not a lot of loss of life, but it could be. You’re going to have things that are out there, and yet the capital markets, as it relates to deploying capital in the U.S., are not thinking about that here. They’re thinking about that there. That’s my impression.

Andy, Chief Financial Officer, Brown & Brown: Mark, in our commentary, remember when we said it wouldn’t surprise us if it happened at the end of the year. Remember our commentary at the end of the second quarter, and we said what happened in June, right? Right before storm season, you can get really unusual pricing right at the end of a quarter or whatever. That’s why we said it wouldn’t surprise us.

Understood. Powell, anything on the construction front, particularly Florida construction? You gave us some good commentary about the overall business environment. How about the construction markets?

Powell Brown, President and Chief Executive Officer, Brown & Brown: It’s interesting. Construction costs continue to go up, but there’s a lot of building going on in Florida. As a countermeasure, I would tell you that in real estate, houses are not selling as quickly, so you see houses sitting on the market much longer today. This is not a Florida-specific thing, but there are some indications as such. You hear a lot about the impact of cost of living, meaning one, rents, so in apartments and condos, two, food, and three, the cost of insurance. You hear a lot of that as it relates to people that maybe own second homes here that are, you know, in the more modest size homes that are, you know, thinking about the cost to operate and cost to live. The overall expense, it’s becoming more expensive.

It’s still relatively affordable, don’t get me wrong, but it’s becoming more expensive in Florida for all the reasons I’ve just said.

Thank you very much.

Thanks, Mark.

Andy, Chief Financial Officer, Brown & Brown: Thanks, Mark.

Gigi, Conference Call Moderator, Brown & Brown: Thank you. One moment for our next question. Our next question comes from the line of Bob Gianquitti from Morgan Stanley.

Hey, this is Sid on for Bob. Thanks for taking my question. I wanted to ask about property renewal rates in the third quarter and how you guys are thinking about that in the fourth quarter, if it should be at a similar level or potentially worsening.

Powell Brown, President and Chief Executive Officer, Brown & Brown: As we said, Sid, it’s similar going into it, with the potential as we get into, let’s say, December, where there might be some outliers where you get a couple of markets or a market that becomes a little more aggressive. I would say similar to what we saw, with the caveat that in December, there might be some people that are getting a little aggressive, and we haven’t seen that yet. A little more aggressive.

Got it. Are you seeing a similar trend in the admitted and E&S property markets, or is there any kind of divergence going on?

The rate pressure obviously is much higher on E&S property, but I would tell you there is continued interest in the admitted market for good property, and I believe that will increase.

Got it. Okay, thank you so much.

Thanks, Sid. Yep.

Gigi, Conference Call Moderator, Brown & Brown: Thank you. One moment for our next question. Our next question comes from the line of Matthew Heimerman from Citi.

Andy, Chief Financial Officer, Brown & Brown: Hey, good morning, everybody. It’s actually me. Just a couple of questions. One, just on Wright Flood, you had rolled out or started to roll out private flood products on that platform. I’m just curious how the initial uptake is going on that. I’m assuming it’s not at a development stage in terms of geographic coverage and the likes that it could make up for any demand that can’t be fulfilled through the Write Your Own right now, but any color there would be great. Sorry for talking over you.

Powell Brown, President and Chief Executive Officer, Brown & Brown: Yeah. Glad you are who you say you are, Matthew. That’s good. A couple of things. Number one, yes, we have historically written private flood in our business. As you know, we’ve just announced the close effective 11/1 Poulton, which is a private flood business, which we’re very pleased about them joining us and very additive. Private flood, we believe, can be a very good, is a very good product. I want to caution you by saying that private flood is not the answer for all flood policies. Please note. Maybe different than some might say, not every policy in every flood zone can be written in private flood or maybe shouldn’t be written in private flood, depending on who’s underwriting it. We do think that there’s an opportunity for us. As Andy alluded to, we believe in our flood business through most of the fourth quarter.

We feel pretty good about the renewal streams. Obviously, it depends on when the party in power will make the decisions, do some sort of compromises with all parties in Washington to figure out how to get the thing back open. We believe that the pressure there will continue to go up. We’d like to think, hope is not a good business strategy, but that they’ll come to some sort of conclusion in the near to intermediate term.

Andy, Chief Financial Officer, Brown & Brown: Matt, I want to clarify one thing that you had mentioned at the beginning of your question. You said that we write private flood on our Wright Flood platform. We do not write on the Wright Flood platform. That is part of the NFIP program. Our private flood business that we had before is written underneath a separate carrier in there, so separate technology, everything else.

Yeah, I was aware you had two platforms, but I thought I saw a press release that Wright was rolling out, and maybe it’s just a distribution thing, not an actual insurance paper thing, private, but maybe I could be mistaken. You would know better than I.

Powell Brown, President and Chief Executive Officer, Brown & Brown: Yeah, that’s just around for claims management and everything else. The actual technology and everything else in the paper, etc., is not on Wright Flood.

Yeah, appreciate the clarification. One follow-up on employee benefits is I feel like there’s a number of cross currents affecting the business. I’d just be curious on your perspective, right? On one hand, it feels like you’ve got the dynamics of cost push, which drive a rate need. On the flip side, you’ve got what feels like a labor market that’s growing less quickly than it had been. You also have just that cost push naturally results in companies wanting to manage costs to some extent. I’m curious from a subject premium standpoint or what have you, how those dynamics all intersect.

All right. Matt, a couple of things just to reiterate. Remember that smaller group, so let’s call it under 100 lives, just roughly, it might be under 50. In many states, you are paid a per head per month compensation. If you don’t add heads, you don’t make any more commission dollars. If people are holding the line on their employment, regardless of increase in cost of health insurance, that’s the first thing. The second thing is as people are those groups that are not in that area, but even across the board, and Andy has talked about this, and I have too in the past, people are very focused on trying to contain the spend. What that means is they actually are modifying the plans that they offer. Let me give you an example.

An example might be a regional manufacturing company, and they have several hundred lives anywhere in the United States. Historically, meaning the last year or two, they have paid for GLP-1s, so weight loss drugs. I’m not talking about to deal with diabetes. I’m talking about actually for the cause of weight. That has spiked their spend in that particular area. They make the determination in order to keep the program in a similar structure, they have to basically either place limitations on that or eliminate that for the sole use of weight loss. That would be an example of somebody making a change because of the projected spend, because that in and of itself in a self-insured program can drive the cost through the roof. It very much depends, but I think the important thing is people are trying to maintain quality coverage for their employees.

That said, they can only bear a certain amount of increase. We are constantly and consistently talking with our customers and prospects about creative ways to deliver value to their employees, but to help manage their cost. It’s not a one-year plan. If somebody thinks about healthcare in one year, that’s transactional. If you’re thinking about it multi-year, that’s a strategic thought about managing cost over a long period of time. That’s different. I would tell you it’s very important and something that we obviously try to convey to our customers.

Andy, Chief Financial Officer, Brown & Brown: Matt, thank you.

Powell Brown, President and Chief Executive Officer, Brown & Brown: Matt, it’s these trends, yeah, it’s these trends here that we started talking about on the back end of ACA that we believe that we’re going to happen for an extended period of time. There’s even new things that have occurred. That’s why we’ve made significant investments in our employee benefits business. We can handle customers if they have five employees, if they have 50,000 plus, anywhere in that range. We have those capabilities. We do believe that it’s a good market backdrop. Yeah, there can be some crosswinds here and there on things, but we think we’re in a really, really good place to help customers of any size, how they manage their healthcare pharmacy and also their workforce.

Andy, Chief Financial Officer, Brown & Brown: Thanks, Matt.

Yep, appreciate it.

Gigi, Conference Call Moderator, Brown & Brown: Thank you. One moment for our next question. Our next question comes from the line of Elise Greenspan from Wells Fargo.

Hi, thanks. Good morning. My first question is on the risk dissection deal. I just wanted to confirm, since the deal’s closed, just relative to the revenue and synergies and accretion that you guys had outlined, that it’s all in line with prior expectations. I think the plan was to start to see the synergies come online, I think, starting next year. Is that all still the base case expectations?

Andy, Chief Financial Officer, Brown & Brown: Yeah. Good morning, Elise. Andy here. I think everything right now is still in line with what we had communicated back at the time of the announcements. The revenues are right in line. The margins are in line with our expectations. Again, knowing there’s some seasonality in the business, generally, has a higher margin in the first half of the year versus the second half, not unlike our legacy Brown & Brown businesses there. Teams are working through all the integration plans right now and getting all of those in place as we communicated on the call. You know, we’re going to recognize and realize the synergies over a three-year period. Our goal is to be done by the end of 2028.

We still feel like we’re on track for all of that process and all the hard work that’s got to get done in there, but all the teams are leaning in and working through it.

Thanks. Just a clarification on the retail guide for the fourth quarter. You said that would be stable with Q3. Is that stable with the reported 2.7% or the adjusted 3.7% adjusting for the incentive comp impact?

No, on the as reported. Just so as reported, probably be pretty similar, or at least in the same ballpark in Q4 also, knowing that we’ve got the headwinds on carryover effect of accruing at a higher rate for the incentives and EV that still impacts part of Q4. The multi-year policies that were written last year, as of right now, we don’t see that same volume of activity in the fourth quarter. Things could always change that’s out there.

Thank you.

Thank you.

Gigi, Conference Call Moderator, Brown & Brown: Thank you. One moment for our next question. Our next question comes from the line of Gregory Peters from Raymond James.

Hey, good morning, guys. This is Mitch on behalf of Greg. Thanks for taking my call. I wanted to ask about your investments in technology during the quarter. I was hoping you could touch on the areas of focus and the run rate directionally in 2026. Thanks.

Powell Brown, President and Chief Executive Officer, Brown & Brown: Hi. Good morning, Mitch. This must be the morning for everybody else stepping in than the original. I think we, you know, we’ve talked about technology for a number of years. This started all the way back in 2016 when we made our large investment in infrastructure, and we kind of got all behind us. We said our next, you know, two horizons we’re looking at, how do we leverage our data analytics and improve the overall experience for our customers and our teammates? We’re on that journey right now. We feel really good about the amount of capital that we’re investing in that area. It’s probably a journey, not sure that we ever quote "arrive at a destination" because you’re always evolving in there. We’ve got a lot of really good things going on across the organization, especially in distribution and retail at the enterprise level.

Everything from how we ingest data, how we analyze it, underwriting capabilities. We’re focused on administrative tasks, making some really good progress. Probably like most companies, it’s still early days of really getting all of the benefits. We feel good. We’ve got an innovation council that’s set up across the organization, making sure that we’re sharing best practices in each of the areas. We’ll continue to work on it, but we’re seeing some early benefits from it.

Great. That’s helpful. Thank you. For my follow-up, I just wanted to ask on your outlook for your debt leverage target range going forward after the close of the AssuredPartners deal. Thanks.

Sure. As we’ve stated publicly, our gross debt leverage to EBITDA is 0 to 3 times. On a net basis, it is 0 to 2.5. We have every intention of being right back down in those ranges in about 12 to 18 months with the scheduled paydowns that we’re committed to. If you look at our 10-year average, we’re right at about a 2.2, 2.3 on a gross leverage ratio. The organization delivers about a quarter to half a turn each year just naturally. With some incremental payments that we’re anticipating, that’ll pull that down even quicker. We’re not overleveraged right now anyway, but that’s kind of the trajectory of what we’re looking at. That’s consistent with what we’ve done over multiple cycles.

Thank you.

Gigi, Conference Call Moderator, Brown & Brown: Thank you. One moment for our next question. Our next question comes from the line of Brian Meredith from UBS.

Good morning. This is actually Leandro on behalf of Brian. Thanks for the opportunity. On the retail businesses, did new businesses in retail return to normalized levels after issues in the second quarter, or is there still room to rebound?

Powell Brown, President and Chief Executive Officer, Brown & Brown: Hey, Andrew, you were kind of hard for us to hear. Would you mind repeating that one more time, please?

Sorry. Sure. Did new businesses in Retail return to normalized levels already after the issues in the second quarter, or is there still room to rebound?

When you say rebound, what’s your expectation when you say rebound? Are you thinking of just trying to acclimate? Are you thinking rebounding back up to retail businesses growing 6%, 7%, 8% organically, or how are you thinking about it?

Accelerating from the second-quarter levels, I would say.

The second quarter or third quarter?

It’s in the fourth Q. We can see an acceleration of new businesses from the bottom of the second quarter, I would say.

Yeah, I don’t think we called out any issues regarding new business in the third quarter. We know we had some of that in the second quarter, but didn’t see any issues there in the third quarter. What we had highlighted for the fourth quarter is just based upon what we can see today in inventory regardless of multi-year policies and the volume that we wrote in Q4 of last year. We don’t see the same volume in Q4 of this year. That can kind of just move around by quarters. Underlying activity on everything else we feel good with.

That’s helpful. Thank you.

Thank you.

Gigi, Conference Call Moderator, Brown & Brown: Thank you. One moment for our next question. Our next question comes from the line of Rob Cox from Goldman Sachs.

Hey, thanks. This is indeed Rob. I just wanted to ask and make sure I understand on the retail segments, there’s two comments in the presentation on the margin: one was leveraging the expense base, and two, quarterly profitability associated with recent acquisitions. Was there a benefit in the quarter from the seasonality of the AssuredPartners acquisition?

Powell Brown, President and Chief Executive Officer, Brown & Brown: Yeah, hey, good morning, Rob. Yes, there was. We had a benefit from a cession and a headwind from Quintus, which, again, we’ve kind of talked about Quintus for a few quarters just to help everybody out with that. You kind of got three pieces to it: a positive on a cession, a negative on Quintus, and then a positive on just underlying, you know, management of the business.

Okay, perfect. Thank you.

Yeah.

I just wanted to follow up on the international businesses and particularly the UK. How is the performance there relative to the U.S., and can you share any color on the market factors?

What I would tell you is the performance is not too dissimilar to the United States. Remember, the GDP over there is growing more slowly. That’s number one. They have actually rate decrease pressure as well. At present, and I’m just talking about England, but since you asked about it, remember the liability rates are not nearly as high because the plaintiff’s bar has not gotten as active yet. They’re starting, but the answer is they have some continued rate pressure there as well. You have a slower economy and you have rate decreases as well. That’s how I would describe it.

Okay, great. Thank you.

Thank you.

Gigi, Conference Call Moderator, Brown & Brown: Thank you. One moment for our next question. Our next question comes from the line of Mark Hughes from Truist.

Yeah, thank you. Just wanted to make sure I understood the specialty distribution outlook for 4Q. I think you had said looking for a decline in the mid-single digits. You got $28 million in non-recurring, which looks like it’s about 5%. I think you also mentioned lender-placed and then wind and quake programs under a little bit of pressure. Anything else we should think about for the specialty distribution? Does that kind of summarize what you’ve described?

Powell Brown, President and Chief Executive Officer, Brown & Brown: Hey, good morning, Brian.

Mark.

No, I think that is fine. Those are probably the three big pieces, Mark, that we are concerned about. There are some other moving parts, but those are the biggies.

Okay, great. Thank you.

Gigi, Conference Call Moderator, Brown & Brown: Thank you. One moment for our next question. Our next question comes from the line of Mike Zurimski from BMO.

Hey, thanks for taking the follow-up. I’m going to try to ask a lender-placed question to the extent you’re able to add some color. I think over the years, it’s been a fantastic business. It appears it’s grown much faster, your business much faster than the marketplace. Just given it’s highlighted as being a tough comp in the near term, 4Q, is there just a trend we should just keep in the back of our heads as we think past 4Q about the lender-placed business just flowing or somehow maybe giving back some market share? Thanks.

Powell Brown, President and Chief Executive Officer, Brown & Brown: Mike, you’re right in saying it’s a great business, and we have had a lot of very nice organic growth in the last couple of years. What we’re saying carefully is we’re still growing, but it’s just not growing as quickly. Part of that is just because we have had a lot of good growth. Number two, we have competition on our customers, and your sense of it is correct.

Andy, Chief Financial Officer, Brown & Brown: Mike, keep in mind with that business that it’s not that we’re seeing the actual lender-placed ratio go up. That’s not what’s driving the growth, which is at least an indicator of the health of the overall economy and everything. That business, we’ve won a lot of accounts over the years. The sales cycle there is pretty long, though. You could be 12 to 36 months on a sales cycle. When the accounts come on, as we’ve talked about in the past, you’ll get a bunch of revenue all at once, and it kind of works itself out, okay?

Powell Brown, President and Chief Executive Officer, Brown & Brown: We’ll take one more question, Gigi. Thanks, Mike.

Gigi, Conference Call Moderator, Brown & Brown: Thank you. One moment. Our next question comes from the line of Josh Schenker from Bank of America.

Thank you for fitting me in at the end. Good morning, everybody. Obviously, no one likes to see their share price going down. You have a $1.5 billion buyback authorization and their decision to whether to put capital to work and buy back your own stock or to, obviously, and there’s an arbitrage there. By authorizing the buyback, are you saying that you think that the value of Brown & Brown shares right now is more attractive than doing the Tuckins? It seems like it should be one or the other. Doing both may not be the best use of capital. How should we think about that?

Powell Brown, President and Chief Executive Officer, Brown & Brown: The answer to the question is this: we constantly and consistently evaluate the intrinsic value of our stock, and we look at what we believe is the best value overall long-term for all parties involved. We will continue to evaluate that. If we see or feel that there’s an appropriate point at which we think we should buy shares, then we’ll consider that. The board has given us the ability to invest as we see fit, and we feel good about that.

Is there a math that works that makes both buybacks and M&A equally attractive simultaneously, or is there one that’s preferred over the other depending on valuation?

Let me put it this way. I’m not trying to be evasive, Josh, but if we told you that, then we would be releasing our secret. The answer is we will continue to evaluate both. If we think both work at the time, we will do that, or if one is better than the other, we will do that. Please, let’s make sure that we don’t lose sight of the fact that when we buy businesses, it’s about cultural fit and making sense financially. Having said that, we understand the math between share repurchases and businesses that are ongoing revenue streams with earnings. We look at all of that.

Andy, Chief Financial Officer, Brown & Brown: Yeah, Josh, as we talked about, we have a very, very rigorous and disciplined approach on how we allocate capital. We don’t share all the details of how we do it, but we get into a lot of detail when we look at all of the potential deployment options.

Powell Brown, President and Chief Executive Officer, Brown & Brown: We like to have options. Yeah.

Okay, thank you very much.

Thanks, Josh.

Thank you. Appreciate it.

Okay.

All right.

Gigi, Conference Call Moderator, Brown & Brown: Thank you. At this time, I would now like to turn the conference back over to Powell Brown for closing remarks.

Powell Brown, President and Chief Executive Officer, Brown & Brown: Thanks, Gigi, and thanks for joining us today. A couple of final comments. I think that we had a really good quarter, albeit we had retail in terms of with the modification that we outlined, where top-line numbers, our contingents were good, our margins were great, our cash flow conversion was very good. Most importantly, in all of that, the integration is going really well. I can’t stress enough the importance of the cultural fit with the teammates that have joined. We are excited with 23,000-plus teammates now globally, and the capabilities and the resources that we can bring to our current customers,

Gigi, Conference Call Moderator, Brown & Brown: Hope you all have a wonderful day, and we look forward to talking to you after the next quarter. Good day and good luck. Goodbye.

Powell Brown, President and Chief Executive Officer, Brown & Brown: Thank you. This concludes today’s conference call. Thank you for participating. You may now disconnect.

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