The New York Stock Exchange (“NYSE”) listed company manual requires directors to satisfy certain criteria to be deemed “independent.” The Board applies these standards in determining whether any director has a material relationship with the Company that would impair his or her independence, as discussed below. As required by the NYSE listed company manual, the Board considers all material relevant facts and circumstances known to it in making an independence determination from the standpoints of both the director and persons or organizations with which the director has an affiliation. | | | | | The Board has considered the independence of our nominees in light of these NYSE standards and has affirmatively determined that the following 9 of the 12 director nominees have no material relationship with us other than service as a director, and are therefore independent: Hugh M. Brown; Lawrence L. Gellerstedt III; Theodore J. Hoepner; James S. Hunt; Toni Jennings; Timothy R.M. Main; Jaymin B. Patel; H. Palmer Proctor, Jr.; Wendell S. Reilly;Reilly and Chilton D. Varner. The following factors were relevant to the Board’s determination of independence: | |  |
9 of the 12 director nominees have no material relationship with us other than service as a director
● | The Board considered the relationships described below in “Relationships and Transactions with Affiliated Parties.” | | | ● | In each case, the Board considered the fact that from time to time, in the ordinary course of business and on usual commercial terms, we and our subsidiaries may provide services in our capacities as insurance intermediaries to various directors of the Company, and to entities in which various directors of the Company have direct or indirect interests. | | | ● | In the case of Mr. Main, the Board considered the fact that Mr. Main is Global Head of the Financial Institutions Group at Barclays Plc. The Board considered that (i) Mr. Main’s ownership interest in Barclays does not exceed ten percent, and he is not an executive officer of Barclays; (ii) there are no existing projects or transactions between Barclays’ investment banking division (i.e., the division in which Mr. Main holds his position) and the Company; (iii) in his role at Barclays, Mr. Main (a) is not permitted to cover the insurance brokerage sector, (b) is required to recuse himself from any conversations with clients or Barclays employees regarding the insurance business sector, (c) is prohibited from appearing as the coverage person for the Company on any Barclays books, records, or systems, and may not supervise any activity in relation to the Company or the insurance brokerage sector generally, and (d) is prohibited from selling the Company’s common stock while it is on Barclays’ “watch” or “restricted” list, except in accordance with Barclays’ personal investment policy; and (iv) during each year between 2016 and 2021, the interest amounts the Company paid to Barclays in connection with the Company’s borrowings from Barclays were less than one percent of the Company’s annual revenue, and less than one percent of Barclays’s annual revenue. | | | ● | In the case of Mr. Hoepner, the Board considered the fact that he is an investor in a bank holding company in which Messrs. Hyatt Brown and Powell Brown also are investors, in which the Company maintained a checking account with a balance of approximately $1.6 million in 2021 and for which a subsidiary of the Company provides insurance services and concluded that the investment, which in the aggregate comprised less than five percent of the outstanding stock of the bank holding company, was not material. | | | ● | In the case of Mr. Proctor, the Board considered the fact that the Company maintains a money market account with a balance of approximately $10.1 million with Ameris Bank, of which Mr. Proctor is Chief Executive Officer, as well as Chief Executive Officer and a director of its parent company, and to both of which a subsidiary of the Company provides insurance services, and concluded that the relationship was not material. | | |
| 2022 PROXY STATEMENT | | 15 | | 75% of Our Directors Are Independent |
The Board considered the relationships described below in “Relationships and Transactions with Affiliated Parties.” In each case, the Board considered the fact that from time to time, in the ordinary course of business and on usual commercial terms, we and our subsidiaries may provide services in our capacities as insurance intermediaries to various directors of the Company, and to entities in which various directors of the Company have direct or indirect interests. In the case of Mr. Main, the Board considered the fact that Mr. Main is Head of Investment Banking EMEA (UK, Europe, Middle East & Africa) at Barclays Plc. The Board considered that (i) Mr. Main’s ownership interest in Barclays does not exceed ten percent, and he is not an executive officer of Barclays; (ii) there are no existing projects or transactions between Barclays’ investment banking division (i.e., the division in which Mr. Main holds his position) and the Company; (iii) in his role at Barclays, Mr. Main (a) is not permitted to cover the insurance brokerage sector, (b) is required to recuse himself from any conversations with clients or Barclays employees regarding the insurance business sector, (c) is prohibited from appearing as the coverage person for the Company on any Barclays books, records or systems, and may not supervise any activity in relation to the Company or the insurance brokerage sector generally and (d) is prohibited from selling the Company’s common stock while it is on Barclays’ “watch” or “restricted” list, except in accordance with Barclays’ personal investment policy and (iv) during each year between 2016 and 2022, the interest amounts the Company paid to Barclays in connection with the Company’s borrowings from Barclays were less than one percent of the Company’s annual revenue, and less than one percent of Barclays’s annual revenue. In the case of Mr. Hoepner, the Board considered the fact that he is an investor in a bank holding company in which Messrs. Hyatt Brown and Powell Brown also are investors, in which a bank account with a balance of approximately $1.6 million was maintained by the Company in 2022 and for which a subsidiary of the Company provides insurance services and concluded that the investment, which in the aggregate comprised less than five percent of the outstanding stock of the bank holding company, was not material. In the case of Mr. Proctor, the Board considered the fact that the Company maintains a money market account with a balance of approximately $10.2 million with Ameris Bank, of which Mr. Proctor is Chief Executive Officer, as well as Chief Executive Officer and a director of its parent company, and to both of which a subsidiary of the Company provides insurance services, and concluded that the relationship was not material. In the case of Messrs. Proctor and Gellerstedt, the Board considered the fact that Messrs. Hyatt Brown, Powell Brown and Proctor are investors in a fund managed by an entity in which Mr. Gellerstedt is a partner and concluded that the amounts invested were not material to Messrs. Hyatt Brown, Powell Brown or Proctor, or to the entity in which Mr. Gellerstedt is a partner. BROWN & BROWN, INC. | 11
Table of ContentsBOARD AND CORPORATE GOVERNANCE MATTERS
Board and Corporate Governance Matters
Director Nominee Selection Process The Nominating/Corporate Governance Committee is responsible for identifying and evaluating director nominees and for recommending to the Board a slate of nominees for election at each Annual Meeting of Shareholders. The Committee has not established “minimum qualifications” for director nominees because it believes that rigid “minimum qualifications” might preclude the consideration of otherwise desirable candidates for election to the Board. | | | | | 1 | | The Committeeevaluates director candidates basedon a number offactors, including: | | ●• the need or desirability of maintaining or expanding the size of the Board;
●
• independence; ●
• credentials, including, without limitation, business experience, technology acumen, experience within the insurance industry, educational background, professional training, designations and certifications; ●
• interest in, and willingness to serve on, the Board; ●
• ability to contribute by way of participation as a member of Board committees; ●
• financial expertise and sophistication; ●
• basic understanding of the Company’s principal operational and financial objectives, plans and strategies, results of operations and financial condition, and relative standing in relation to the Company’s competitors;competitors and ●
• willingness to commit requisite time and attention to Board service, including preparation for and attendance at regular quarterly meetings, special meetings, committee meetings and periodic Board “retreats” and director education programs. | | | | | | | | | | | 2 | | Board diversity | With respect to diversity, while no formal policy has been proposed | The Committee actively seeks diverse, highly qualified candidates for membership on the Board, including gender-diverse candidates and candidates that are racially or adopted, heterogeneity ofethnically diverse, as well as candidates with diverse backgrounds, points of view, background, experience credentials, gender and ethnicity are considered desirable and characterize the current composition of our Board.credentials. | | | | | | | | | | | 3 | | Sources foridentifyingpotential Boardmembers | | The Committee and the Board consider a variety of sources when identifying individuals as potential Board members, including other enterprises with which current Board members are or have previously been involved and through which they have become acquainted with qualified candidates. The Company does not pay any third party a fee to assist in identifyingthe identification or evaluatingevaluation of candidates. The Committee will consider director nominations that are submitted in writing by shareholders in accordance with our procedures for shareholder proposals. See “Proposals of Shareholders” below. Such proposals must contain all information with respect to a proposed candidate as required by the SEC’s proxy rules, of the Securities and Exchange Commission (SEC), must address the manner in which the proposed candidate meets the criteria described above, and must be accompanied by the consent of such proposed candidate to serve as a director, if elected. |
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Table of ContentsBOARD AND CORPORATE GOVERNANCE MATTERS
Board and Corporate Governance Matters
The Board’s Role and Responsibilities Overview The role of the Board of Directors is to oversee the affairs of the Company for the benefit of our shareholders and other constituencies, including our teammates, customers, suppliers, carrier partners and the communities in which we do business. The Board strives to propel the success and continuity of the Company’s business through the selection of qualified management and through ongoing monitoring designed to assure the Company’s activities are conducted in a legal, responsible and ethical manner. Risk Oversight The Board and its committees actively oversee the management of the Company’s risks. They receive regular reports from senior management on areas of material risk to the Company, including operational, financial, strategic, acquisition-related, technological, competitive, reputational, legal and regulatory risks. The Board believes risk oversight is a responsibility of the entire Board, and it does not look to any individual director or committee to lead it in discharging this responsibility. However, our Board committees have specific oversight responsibilities relating to certain aspects of risk management: |
The Board believes risk oversight is a responsibility of the entire Board, and it does not look to any individual director or committee to lead it in discharging this responsibility. However, our Board committees have specific oversight responsibilities relating to certain aspects of risk management: | | | | | | | | | | | | | | Our Audit Committee Regularly reviews our financial statements, certain financial disclosures, our financial and other internal controls, and regularly receives reports from management, including the Company’s Chief Information Officer and the Company’s Chief Information Security Officer, on the Company’s cybersecurity risks. Additionally, our Internal Audit Team and independent registered public accountants regularly identify and discuss with the Committee risks and related mitigation measures that may arise during their regular reviews of the Company’s financial statements and audit work, as applicable. | | | | Our Compensation Committee Regularly reviews our executive compensation policies and practices, and other related employee benefits, and the risks associated with each. We believe our compensation policies and principles, in conjunction with our internal oversight of those policies and principles, reduce the possibility of imprudent risk-taking. We do not believe our compensation policies and principles are reasonably likely to have a material adverse effect on the Company. | | | | Our Nominating/Corporate Governance Committee Considers issues associated with the independence of our Board, corporate governance and potential conflicts of interest. Additionally, the Committee oversees our environmental, social and governance (ESG) policies and initiatives. |
While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board of Directors is regularly informed through attendance at committee meetings or through committee reports about such risks. We believe the Board’s approach to risk oversight, as described above, helps assess various risks, make informed decisions and proactively evaluate emerging risks for the Company. Further, our Financial Internal Audit Team is responsible for the performance of the internal audit function and for testing compliance with policies and procedures relating to our financial reporting and control environment. Our Information Technology Audit Team is responsible for testing our systems and data security, as well as information technology controls. Our Insurance Operations Audit Team is responsible for the testing of our operational internal controls. Our Team Resources Audit Team tests compliance with internal guidelines and state and federalapplicable employment law requirements relating to compensation and human resources and regularly
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assesses risks and potential risks associated with our operations. These teams evaluate and support the due diligence and integration of our acquisitions and report, through our Director of Internal Audit, to our Audit Committee quarterly, unless more frequent reports are necessary. Our Director of Internal Audit regularly reports directly to the Audit Committee and regularly reviews the audits of our businesses and related control environment. Our General Counsel is primarily responsible for enterprise risk management for the Company. On a quarterly basis, our General Counsel presents an enterprise risk management analysis to our Audit Committee, which includes an assessment of overall risk, risk mitigation and elimination priorities, anonymous ethics hotline reports and claims liabilities. Also, our Chief Executive Officer and BROWN & BROWN, INC. | 13
BOARD AND CORPORATE GOVERNANCE MATTERS General Counsel annually deliver a detailed presentation to our Board of Directors about risks associated with our business. This presentation includes extensive discussion, analysis and categorization of risks with respect to the likelihood of occurrence, severity and frequency, as well as consideration of mitigating factors that contribute to lessening the potential adverse consequences associated with such risks (which can never, in any business, be fully eliminated). This presentation is prepared with input from the Company’s senior leaders, as well as our Chief Information Security Officer. Talent Management and Succession Planning The Chairman of the Board, as well as our Chief Executive Officer, routinely discuss with the Board, generally in executive sessions, the Company’s management development and succession activities. Communication with Directors Interested parties, including shareholders, may communicate with our Board of Directors, with specified members or committees of our Board, with non-management directors as a group or with the Lead Independent Director, H. Palmer Proctor, Jr., by sending correspondence to our Corporate Secretary at 300 North Beach St., Daytona Beach, Florida 32114, and specifying in such correspondence that the message is for our Board or one or more of its members or committees. Communications will be relayed to directors no later than the next regularly scheduled quarterly meeting of the Board and Board Committees. Corporate Governance Principles; Code of Business Conduct and Ethics; Code of Ethics for Chief Executive Officer and Senior Financial Officers The Board of Directors has adopted Corporate Governance Principles, a Code of Business Conduct and Ethics and a Code of Ethics for Chief Executive Officer and Senior Financial Officers, the full text of each of which can be found in the “Corporate Governance” section of the “Investor Relations” tab, under “Key Documents” on our website (www.bbinsurance.com), and each of which is available in print to any shareholder who requests a copy by writing to our Corporate Secretary at 300 North Beach St., Daytona Beach, Florida 32114. Related Party Transactions Policy Under our written Related Party Transactions Policy, our General Counsel (or our Chief Executive Officer if the related party is our General Counsel or an immediate family member of our General Counsel) will review any potential Related Party Transaction to determine if it is subject to the Policy. If so, the transaction will be referred to the Nominating/Corporate Governance Committee for approval or ratification. If, however, the General Counsel determines that it is not practical to wait until the next meeting of the Nominating/Corporate Governance Committee, the Chair of the Nominating/Corporate Governance Committee shall have the authority to act on behalf of the Nominating/Corporate Governance Committee on whether to approve or ratify a Related Party Transaction (unless the Chair of the Nominating/Corporate Governance Committee is a Related Party in the Related Party Transaction). In determining whether to approve or ratify a Related Party Transaction, the Nominating/Corporate Governance Committee (or, as applicable, the Chair of the Nominating/Corporate Governance Committee) will consider, among other things, the benefits of the transaction to the Company, the potential effect of entering into the transaction on a director’s independence, the availability of other sources 18 | | | | | |
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for the products or services, the terms of the transaction and the terms available to unrelated third parties generally. The Nominating/Corporate Governance Committee has authority to administer the Policy and to amend it as appropriate from time to time. For purposes of our Policy, “Related Party Transactions” are transactions in which the Company is a participant, the amount involved exceeds $120,000 when all such transactions are aggregated with respect to an individual, and a “related party” had, has or will have a direct or indirect material interest. “Related parties” are our directors (including any nominees for election as directors), our executive officers, any shareholder who beneficially owns more than five percent (5%) of our outstanding common stock, and any firm, corporation, charitable organization or other entity in which any of the persons listed above is an officer, general partner or principal or in a similar position or in which the person has a beneficial ownership interest of ten percent (10%) or more. Relationships and Transactions with Affiliated Parties Carrie Brown, who is married to P. Barrett Brown, was employed by the Company as Corporate Counsel until February 2016. Effective February 1, 2016, Ms. Brown entered into a Consulting Agreement (the “Consulting Agreement”) with the Company to provide legal services as an independent contractor. In 2021, Ms. Brown received $131,110 for services rendered pursuant to the Consulting Agreement.
Zambezi, LLC (“Zambezi”), a Florida limited liability company whose Members and Managers are J. Hyatt Brown and his wife, Cici Brown, owns a Cessna Citation Sovereign aircraft (the “Aircraft”), which the Company leases pursuant to an Aircraft Dry Lease Agreement (the “Agreement”) with Zambezi. In 2021,2022, the Company paid Zambezi $107,137$157,865 under the Agreement to lease the Aircraft. Pursuant to the Agreement, subject to availability of the Aircraft and other specified conditions, Mr. Hyatt Brown has the right to use the Aircraft for personal use, subject to reimbursement paid to the Company at the maximum rate permitted by law. Mr. Hyatt Brown paid $115,852$246,904 to the Company for such personal use of the Aircraft in 2021.2022. The Company and Zambezi also are party to an 14 | BROWN & BROWN, INC.
BOARD AND CORPORATE GOVERNANCE MATTERS Airside Sub-Lease Agreement and Services Agreement, pursuant to which Zambezi leases hangar space from the Company and pursuant to which pilots and mechanics employed by the Company are available to pilot and service the Aircraft as provided therein. In 2021,2022, Zambezi paid the Company $19,937 for the lease of hangar space for the Aircraft and $342,732$291,087 for the services of pilots and mechanics employed by the Company and for parts, equipment and supplies related to the Aircraft’s maintenance and operation. On July 27, 2020, the Company, Hays Companies, Inc., a Florida corporation f/k/a BBHG, Inc. and wholly owned subsidiary of the Company (“Buyer” or “HCI”), The HG Group, Inc., f/k/a The Hays Group, Inc., a Minnesota corporation (“THG”), The Hays Group Of Wisconsin LLC, a Minnesota limited liability company (“THGW”), The Hays Benefits Group, LLC, a Minnesota limited liability company (“THBG”), PlanIT, LLC, a Minnesota limited liability company (“PlanIT”), The Hays Benefits Group of Wisconsin, LLC, a Minnesota limited liability company (“THBGW”), and The Hays Group of Illinois, LLC, a Minnesota limited liability company (“THGI”); and Claims Management of Missouri, LLC, a Missouri limited liability company (dba MMMA Claims Management) (“MMMA,” and together with THG, THGW, THBG, PlanIT, THBGW and THGI, each a “Seller” and collectively, the “Sellers”), and THG, as the Sellers’ Representative (the “Sellers’ Representative”), entered into an amendment (the “Amendment”) to the asset purchase agreement dated October 22, 2018 (the “Purchase Agreement”), pursuant to which Buyer purchased certain assets and assumed certain liabilities of the Sellers (the “Acquisition”). The Purchase Agreement provided that the Sellers may receive additional consideration from Buyer, if earned, in the form of earn-out payments (the “Earn-Out Payments”) in the aggregate amount of up to $25,000,000 in cash over three years, subject to certain conditions and the successful achievement of average annual EBITDA compound annual growth rate targets for the acquired business during 2019, 2020 and 2021 (the “Earn-Out Period”). Pursuant to the Amendment, the parties to the Purchase Agreement agreed that (a) based on the financial performance of the acquired business from the period from January 1, 2019, through June 30, 2020, Buyer has determined that the acquired business has achieved sufficient average annual EBITDA that the calculated Earn-Out Payments will exceed the maximum Earn-Out Payments amount of $25,000,000, (b) the Sellers will bewere deemed to have achieved the maximum Earn-Out Payments of $25,000,000 as of the date of the Amendment, (c) the operational covenants of Buyer with respect to the operation of the acquired business during the remainder of the Earn-Out Period arewere terminated and (d) the Earn-Out Payments of $25,000,000 will
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would be paid in accordance with the Purchase Agreement in the first quarter of calendar year 2022. Mr. James Hays, who is one of our directors and also serves as Vice Chairman of the Company, hashad the right to receive cash consideration in the amount of approximately $5,200,000 upon payment of the Earn-Out Payments pursuant to the Amendment. In March 2022, the Company paid to Sellers the Earn-Out Payments of $25,000,000. Jessica H. Whinnery, who is the daughter of Mr. James Hays, is employed by a subsidiary of the Company as a Benefits Consultant in the Company’s Minneapolis, Minnesota office and received compensation of $165,606, consisting of $159,794 for services rendered in 2021 and $5,812 in matching contributions made by the Company to her 401(k) Plan account.
The owners of The Hays Financial Group, Inc. (“HFG”), a Minnesota corporation and registered investment advisor, include Brian Whinnery, who is the son-in-law of Mr. James Hays, and who individually owns approximately 10%15% of the outstanding stock of HFG, and THG, which owns approximately 70%65% of the outstanding stock of HFG and of which Mr. James Hays individually owns approximately 21% of the outstanding stock. During 2021,2022, HFG paid HCI, a subsidiary of the Company, approximately $416,118$360,137 in connection with business referrals made from HCI to HFG, and HCI paid HFG approximately $40,381 in connection with business referrals made by HFG to HCI.HFG. During 2021,2022, TGH reimbursedpaid to HCI, a subsidiary of the Company, approximately $180,000$108,000 in rent payments for accounting and administrative services providedoffice space used by employees of HCI to THG.HCI. Jeffrey L. Hays, who is the son of Mr. James Hays, was the majority owner of RLA Insurance Intermediaries, LLC, a wholesale insurance brokerage firm headquartered in Boston, Massachusetts (“RLA”). Effective March 1, 2020, Peachtree Special Risk Brokers, LLC, a wholly owned subsidiary of the Company (“Peachtree”), acquired substantially all of the assets, and assumed certain liabilities, of RLA, pursuant to that certain asset purchase agreement (the “Asset Purchase Agreement”), by and among the Company, Peachtree, RLA and RLA’s individual owners. Pursuant to the Asset Purchase Agreement, Peachtree paid to RLA an initial purchase price of $50,725,000 at the closing of the transaction, and an additional amount of up to $22,500,000 may be paid based on the performance of the acquired assets during the three-year period following the effective date of the transaction. The Asset Purchase Agreement includes certain five-year non-competition and non-solicitation covenants applicable to Mr. Jeffrey Hays. In addition, effective as of March 1, 2020, Mr. Jeffrey Hays became employed by Peachtree as an Executive Vice President and office leader of our new “RLA Insurance Intermediaries” office, and he entered into an Employment Agreement with Peachtree that provides for payment of the following compensation for a three-year term of employment: (i) an annual base salary of $400,000, (ii) an annual bonus based upon the performance of the RLA Insurance Intermediaries office and (iii) additional commissions based upon the growth of his individual book of business. During the initial three-year employment term, Peachtree may only terminate the Employment Agreement “with cause.” Mr. Jeffrey Hays’ Employment Agreement includes a prohibition on directly or indirectly soliciting or servicing our customers or soliciting our employees to leave their employment with us. For 2021,2022, Mr. Jeffrey Hays received compensation of $530,439,$502,053, consisting of $518,839$489,853 for services rendered in 2021 and $11,600$12,200 in matching contributions made by the Company to his 401(k) Plan account.
BROWN & BROWN, INC. | 15
BOARD AND CORPORATE GOVERNANCE MATTERS Andrew M. Walker, who is the son of Chris L. Walker, is employed by a subsidiary of the Company as an underwriter in the Company’s San Diego, California office and received compensation of $252,094, consisting of $242,014 for services rendered in 2022, $576 in cash dividends paid on restricted stock granted under our 2010 Stock Incentive Plan (“2010 SIP”) and our 2019 Stock Incentive Plan (“2019 SIP”) for which conditions of vesting other than time-based conditions have been satisfied, and $9,504 in matching contributions made by the Company to his 401(k) Plan account. In addition, Mr. Andrew Walker received grants under our 2019 SIP in February 2022 and February 2023 with grant date fair values of $14,948 and $14,995, respectively. Alexander J. Walker, who is the son of Chris L. Walker, is employed by a subsidiary of the Company as a senior business development manager in the Company’s San Diego, California office and received compensation of $191,716, consisting of $184,421 for services rendered in 2022, $18 in cash dividends paid on restricted stock granted under our 2019 SIP for which conditions of vesting other than time-based conditions have been satisfied, and $7,277 in matching contributions made by the Company to his 401(k) Plan account. In addition, Mr. Alexander Walker received grants under our 2019 SIP in February 2022 and February 2023 with grant date fair values of $14,948 and $19,954, respectively. Board Structure and Process Board Leadership Our Board has the flexibility to determine whether the roles of Chairman of the Board and Chief Executive Officer should be separated or combined. The Board makes this decision based on its evaluation of the circumstances and the specific needs of the Company. Mr. Hyatt Brown, who retired from the position of Chief Executive Officer in 2009, continues to serve as Chairman of the Board, while Mr. Powell Brown serves as Chief Executive Officer. We believe our leadership structure is desirable because it allows Mr. Powell Brown to focus his efforts on running our business and managing the Company in the best interests of our shareholders while we continue to realize the benefits of Mr. Hyatt Brown’s extensive business and industry experience, knowledge of our company, current and past service on boards of other publicly traded companies and proven leadership ability. 20 | | | | | |
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The Board conducts executive sessions of non-management directors in connection with each regularly scheduled meeting of the Board. Our Lead Independent Director, H. Palmer Proctor, Jr., presides over these executive sessions. 16 | BROWN & BROWN, INC.
BOARD AND CORPORATE GOVERNANCE MATTERS Board and Board Committee Matters Our Board of Directors has an Audit Committee, Compensation Committee and Nominating/Corporate Governance Committee. The charters of each of these Board committees are available in the “Corporate Governance” section of the “Investor Relations” tab, under “Key Documents” on our website (www.bbinsurance. com)(www.bbinsurance.com) and are also available in print to any shareholder who requests a copy from the Corporate Secretary at 300 North Beach St., Daytona Beach, Florida 32114. Our committee meetings are generally attended by all Board members, subject to the availability of each director, which we believe enables our Board to function in a more collaborative, transparent and effective manner, and which we believe promotes collegiality among the Board.Board and enhances our directors’ knowledge about each area of our business. Audit Committee
| | | | AUDIT COMMITTEE | | | | | | | Members | | | | | James S. Hunt
(Chair) | Theodore J.
Hoepner | Lawrence L.
Gellerstedt III | Six Meetings Held in 2021 | | 2022: 6 | | | | | | | | | | | The Audit Committee is composed of independent directors as defined in the NYSE listed company manual and includes two audit committee financial experts, Theodore J. Hoepner and James S. Hunt, among its members. The duties of the Audit Committee are to recommend to the Board of Directors the selection of independent registered public accountants, to meet with our independent registered public accountants to review and discuss the scope and results of the annual audit, and to consider various accounting, auditing and technology matters related to the Company, including our systems of internal controls and financial management practices. | | |
Compensation Committee
| COMPENSATION COMMITTEE | | | | | | | Members | | | | | Wendell S. Reilly
(Chair) | Hugh M. Brown
Toni Jennings | Chilton D. Varner | Seven Meetings Held in 2021 | | 2022: 6 | | | | | | | | | | | Each member of the Compensation Committee is independent as defined in the NYSE listed company manual. The Compensation Committee sets the compensation for our Chief Executive Officer and reviews and approves the compensation for our other executive officers, including the Named Executive Officers. See “Executive Compensation -– Compensation Committee Report” and “Compensation Discussion and Analysis” below.Analysis.” The Compensation Committee also reviews, makes recommendations with respect to, and approves our existing and proposed compensation plans and is responsible for administering our 1990 Employee Stock Purchase Plan (“ESPP”), our 2008 Sharesave Plan, our Performance Stock Plan (“PSP”), which was suspended in April 2010, our 2000 Incentive Stock Option Plan, which expired December 31, 2008, our 2010 Stock Incentive Plan (“2010 SIP”),SIP, which was suspended in May 2019, and our 2019 Stock Incentive Plan (“2019 SIP”).SIP. The Compensation Committee is authorized by its charter to form and delegate authority to subcommittees when appropriate. | | | | NOMINATING/CORPORATE GOVERNANCE COMMITTEE |
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Members Board and Corporate Governance Matters
Nominating/Corporate Governance Committee
| | | | | | Members | | | | | H. Palmer Proctor,Jr. (Chair) | Theodore J. Hoepner
Toni Jennings | Wendell S. Reilly
Chilton D. Varner | Six Meetings Held in 2021 | | 2022: 5 | | | | | | | | | | | Each member of the Nominating/Corporate Governance Committee is independent as defined in the NYSE listed company manual. This Committee’s duties include responsibilities associated with corporate governance, as well as the nomination of persons to stand for election to the Board at our Annual Meeting of Shareholders and recommendation of nominees to the Board of Directors to fill vacancies on, or as additions to, the Board. | | |
BROWN & BROWN, INC. | 17
BOARD AND CORPORATE GOVERNANCE MATTERS Director Tenure and Board Refreshment The Nominating/Corporate Governance Committee regularly considers the composition of the Board. However, we have not established a mandatory retirement age or other term limits because we believe longer-tenured directors can bring important experience and institutional knowledge that are critical to the success of our Board and the long-term interests of our shareholders. Consideration is given to rotating committee members, committee chairs and the Lead Independent Director position generally every three to five years because we believe we benefit from having a level of consistency in our committee compositions and committee chairs, but that fresh perspectives likewise facilitate enhanced Board and committee performance. Our Nominating/Corporate Governance Committee evaluates the performance of each incumbent director at least annually before recommending such director’s nomination for an additional term. In addition, any director who has a job change must submit a letter of resignation resigning from the Board. The submission of a letter of resignation provides an opportunity for the Board to review the continued appropriateness of the director’s membership on the Board under the circumstances. Board Evaluations The Nominating/Corporate Governance Committee conducts an annual evaluation of the Board and its committees, as well as the individual performance of each director. As part of this process, all directors complete detailed confidential questionnaires to provide feedback on the effectiveness of the Board, the committees and the performance of individual directors. The results of the questionnaires are compiled anonymously by the Chair of the Nominating/Corporate Governance Committee in the form of summaries, and the feedback is reviewed and discussed by the Nominating/ Corporate Governance Committee and subsequently reported to the full Board. We believe these assessments allow us to continually improve the effectiveness of our Board and committee meetings throughout the year. Meetings and Attendance During 2021,2022, our Board of Directors held eight meetings. With the exception of one director, who attended 92% of the total number of meetings of committees of which he is or was a member, eachEach incumbent director serving during 20212022 attended 100%at least 75% of the total number of Board meetings, and 100%75% of the total number of meetings of committees of which such director is or was a member. The Board expects, but does not require, directors, all of whom, other than Hugh M. Brown are director nominees, to attend the Annual Meeting of Shareholders. All then-current members of the Board attended the 20212022 Annual Meeting of Shareholders. All BoardShareholder Engagement
We regularly meet with investors, prospective investors and Board committee meetings during 2021,investment analysts on a broad range of topics, including our strategy, financial performance and technology initiatives. We also routinely engage with shareholders after each quarterly earnings call and material news announcement, as well as in connection with conferences and other than those regular quarterly meetings heldevents. We view these conversations, which typically include our Chief Financial Officer, and may also include our Chief Executive Officer and/or the leaders of our operating segments, as opportunities for us to receive and discuss valuable insights into our shareholders’ priorities and perspectives throughout the year. We also engage with shareholders on corporate governance matters. As a result of discussions with shareholders that began in July 20212022, we recently adopted proxy access and October 2021, were conducted virtually duealso formalized our long-standing practice to consider diversity in seeking the COVID-19 pandemic.most highly qualified director candidates. 22 | | | | | |
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Board and Corporate Governance Matters
Director Compensation 20212022 Director Compensation
Our Board of Directors reviews the compensation of our non-employee directors at least every two years or as such other time as circumstances may warrant. There were no changes to the compensation of our non-employee directors for 2022. During 2022, non-employee directors were paid an annual retainer of $90,000, payable in quarterly installments. In addition, the Chairs of the Acquisition, Audit and Compensation Committees are each paid a $20,000 retainer, the Chair of the Nominating/Corporate Governance receives a $15,000 retainer and the Company’s Lead Independent Director receives a $15,000 retainer, in each case for services associated with those positions. All directors receive reimbursement of reasonable out-of-pocket expenses incurred in connection with meetings of the Board. Also, each director who is not an employee of the Company received in May 2021,2022 a grant of fully vested shares of our common stock under our 2019 SIP, valued at $100,000, valued as of the close of business on the last business day before the regular May meeting of the Compensation Committee. No director who is an employee receives separate compensation for services rendered as a director. The following table sets forth cash and other compensation earned during 2022 by directors who are not Named Executive Officers. 2022 DIRECTOR COMPENSATION | | | | | | | | | | | | | | | | | Name | | Fees Earned or
Paid in Cash ($) | | | Stock
Awards ($) | | | All Other
Compensation ($) | | | Total ($) | | | | | | | Hugh M. Brown | | | 90,000 | | | | 99,953 | | | | — | | | | 189,953 | | | | | | | J. Hyatt Brown | | | — | | | | — | | | | 218,744 | (1) | | | 218,744 | | | | | | | Lawrence L. Gellerstedt III | | | 90,000 | | | | 99,953 | | | | — | | | | 189,953 | | | | | | | James C. Hays | | | — | | | | — | | | | 1,364,078 | (2) | | | 1,364,078 | | | | | | | Theodore J. Hoepner | | | 90,000 | | | | 99,953 | | | | — | | | | 189,953 | | | | | | | James S. Hunt | | | 110,000 | | | | 99,953 | | | | — | | | | 209,953 | | | | | | | Toni Jennings | | | 90,000 | | | | 99,953 | | | | — | | | | 189,953 | | | | | | | Timothy R.M. Main | | | 110,000 | | | | 99,953 | | | | — | | | | 209,953 | | | | | | | H. Palmer Proctor, Jr. | | | 120,000 | | | | 99,953 | | | | — | | | | 219,953 | | | | | | | Wendell S. Reilly | | | 110,000 | | | | 99,953 | | | | — | | | | 209,953 | | | | | | | Chilton D. Varner | | | 90,000 | | | | 99,953 | | | | — | | | | 189,953 | |
| (1) | During 2022, J. Hyatt Brown, who is the father of J. Powell Brown, a director and President and Chief Executive Officer of the Company, and P. Barrett Brown, an Executive Vice President and President – Retail Segment, received compensation of $218,744, consisting of $180,000 for services rendered to the Company in 2022, including assistance with acquisitions and recruitment, $6,480 in matching contributions made by the Company to his 401(k) Plan account, $27,819 for reimbursement of amounts earned by the Company for personal lines insurance he purchased through the Company or its subsidiaries and $4,445 for the cost of certain club membership dues. Mr. Hyatt Brown serves as Chairman of the Board of the Company. |
| (2) | During 2022, James C. Hays received compensation of $1,364,078, consisting of $1,358,000 for services rendered to the Company in 2022 and $6,078 in matching contributions made by the Company to his 401(k) Plan account. Mr. James Hays, who serves as Vice Chairman of the Company, is a party to an Employment Agreement with the Company, effective as of November 16, 2018, that provides for payment of an annual base salary of $517,000 for a three-year term of employment, after which time this amount will be as mutually agreed upon between Mr. James Hays and the Company, and which provides that the Company will terminate the agreement only “with cause” during the initial three-year term. Pursuant to his Employment Agreement, Mr. James Hays is also eligible during the initial three-year term to participate in the Company’s Senior Leader Bonus Program in effect from time to time, and his bonus target under the Senior Leader Bonus Program is $700,000. The Company has determined that Mr. James Hays is not an executive officer. |
BROWN & BROWN, INC. | 19
BOARD AND CORPORATE GOVERNANCE MATTERS 2023 Director Compensation In March 2023, Frederic W. Cook & Co., Inc. (“FW Cook”), an independent outside compensation consulting firm retained by the Compensation Committee, conducted a comprehensive analysis of the Company’s non-employee director compensation, review, as described below. Survey ComparisonSURVEY COMPARISON
As part of FW Cook’s analysis, the Compensation Committee reviewed and considered data from the 2021 – 2022 NACD Director Compensation Report, which consisted of data from general industry companies with a blend of medium and large company data with annual revenues between $2.5 and $10 billion. As part of FW Cook’s analysis, the Compensation Committee reviewed and considered data from the 2019–2020 NACD Director Compensation Report, which consisted of data from general industry companies with annual revenues between $2.5 and $10 billion. | | | | | PEER COMPARISON GROUP FW Cook also reviewed the compensation practices of nineseven publicly traded insurance carriers and several other companies in the capital markets industry (the “Peer Comparison Group”). The Peer Comparison Group, which FW Cook also uses for conducting analyses of our pay practices and executive compensation levels, was as follows: | | Our total revenue wasis at the 46th
46th percentile and our
market capitalization is at the
56th percentile of the peer comparison group.
| | |
| | | | | | | | | | | | | Peer Company | | Business Focus | | | | | | | | | Arch Capital Group Ltd. | | Property & Casualty Insurance Carrier | | | | | | | | | AXIS Capital Holdings Limited | | Property & Casualty Insurance Carrier | | | | | | | | | Aon plc | | Insurance Intermediary | | | | | | | | | Argo Group International Holdings | | Property & Casualty Insurance Carrier | | | | | | | | | Arthur J. Gallagher & Co. | | Insurance Intermediary | | | | | | | | | CBIZ, Inc. | | Research & Consulting Services | | | | | | | | | Crawford & Company | | Insurance Intermediary | | | | | | | | | Erie Indemnity Company | | Property & Casualty Insurance Carrier | | | | | | | | | Marsh & McLennan Companies Inc. | | Insurance Intermediary | | | | | | | | | Primerica, Inc. | | Life & Health Insurance Company | | | | | | | | | Raymond James Financial, Inc. | | Investment Banking & Brokerage | | | | | | | | | RLI Corp. | | Property & Casualty Insurance Carrier | | | | | | | | | Selective Insurance Group Inc. | | Property & Casualty Insurance Carrier | | | | | | | | | Willis Towers Watson PLC | | Insurance Intermediary | | | | | | | | | Peer Company | | Business Focus | | Aon plc | | Insurance Intermediary | | Arch Capital Group Ltd. | | Property & Casualty Insurance Carrier | | Argo Group International Holdings | | Property & Casualty Insurance Carrier | | Arthur J. Gallagher & Co. | | Insurance Intermediary | | AXIS Capital Holdings Limited | | Property & Casualty Insurance Carrier | | CBIZ, Inc. | | Research & Consulting Services | | Crawford & Company | | Insurance Intermediary | | Erie Indemnity Company | | Property & Casualty Insurance Carrier | | FBL Financial Group Inc. | | Life & Health Insurance Company | | Marsh & McLennan Companies Inc. | | Insurance Intermediary | | Primerica, Inc. | | Life & Health Insurance Company | | Raymond James Financial, Inc. | | Investment Banking & Brokerage | | RLI Corp. | | Property & Casualty Insurance Carrier | | Selective Insurance Group Inc. | | Property & Casualty Insurance Carrier | | Waddell & Reed Financial, Inc. | | Asset Management & Custody Banks | | Willis Towers Watson Public Limited Company | | Insurance Intermediary |
Results of FW Cook’s Analysis Based upon the results of FW Cook’s analysis, the Compensation Committee concluded that: ● | the total annual compensation for our non-employee directors was 27% below the general industry median and 26% below the peer group median, | | | ● | the pay mix for our non-employee director compensation was more heavily weighted toward cash than equity relative to market practice and, in particular, the equity component of our non-employee director compensation was $42,500 below the peer group median, | | | ● | the retainers paid to our committee chairs were notably below the general industry median and below the 25th percentile of the peer group, | | |
the total pay for our non-employee directors (excluding retainers for our committee chairs and our Lead Independent Director) was below the market median, Table of Contents
Boardthe pay mix for our non-employee director compensation was more heavily weighted toward equity than cash, which was consistent with market practice,
the retainers paid to our Audit Committee chair and our Lead Independent Director were below the market median, the retainers paid to our Nominating/Corporate Governance MattersCommittee chair and Compensation Committee chair were generally aligned with the market median and ● | no retainer was paid to our Lead Independent Director, as compared to a median lead director retainer for the general industry of $22,045 and the peer group of $25,000, and | | | ● | the Company’s stock ownership guidelines, which required non-employee directors accumulate Brown & Brown common stock valued at least four times the current annual cash retainer within four years of joining the Board, were slightly less robust than the general market and peer group practices. |
the Company’s stock ownership guidelines, which require non-employee directors accumulate Brown & Brown common stock valued at least five times the current annual cash retainer within five years of joining the Board, were aligned with market practices. Based upon FW’s Cook’s analysis and the Compensation Committee’s recommendation, in May 2021,March 2023, the Board approved the following changes to the compensation for our non-employee directors, to be effective immediately following the 20212023 Annual Meeting of Shareholders: ● | an increase to the size of the annual cash retainer from $80,000 to $90,000, | | | ● | an increase to the size of the annual grant of fully vested common stock from $80,000 to $100,000, valued as of the close of business on the last business day before the regular May meeting of the Compensation Committee, | | | ● | increases to the annual retainers for the Board’s committee chairs and Lead Independent Director, as follows: | | | | ● | Acquisition Committee Chair – from $6,000 to $20,000 | | | | | ● | Audit Committee Chair – from $10,000 to $20,000 | | | | | ● | Compensation Committee Chair – from $10,000 to $20,000 | | | | | ● | Nominating/Corporate Governance Committee Chair – from $6,000 to $15,000 | | | | | ● | Lead Independent Director – from $0 to $15,000, and | | | | ● | to further align the long-term interests of our directors and our shareholders, a requirement that non-employee directors accumulate Brown & Brown common stock valued at least five times the current annual cash retainer within five years of joining the Board. |
The following table sets forth cash and other compensation earned during 2021 by directors who are not Named Executive Officers. All directors receive reimbursement of reasonable out-of-pocket expenses incurred in connection with meetings of the Board. No director who is annual cash retainer from $90,000 to $100,000, and
an employee receives separate compensationincrease to the size of the annual grant of fully vested common stock from $100,000 to $120,000, valued as of the close of business on the last business day before the regular May meeting of the Compensation Committee. 20 | BROWN & BROWN, INC.
PROPOSAL 2: RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS The Audit Committee of the Board of Directors has selected Deloitte & Touche LLP as the Company’s independent registered public accounting firm for services rendered as a director. 2021 DIRECTOR COMPENSATION
| NAME | | FEES EARNED OR
PAID IN CASH
($) | | STOCK
AWARDS
($) | | ALL OTHER
COMPENSATION
($) | | | TOTAL
($) | | Samuel P. Bell, III | | 52,000 | | — | | — | | | 52,000 | | Hugh M. Brown | | 85,000 | | 99,981 | | — | | | 184,981 | | J. Hyatt Brown | | — | | — | | 221,915 | (1) | | 221,915 | | Lawrence L. Gellerstedt III | | 85,000 | | 99,981 | | — | | | 184,981 | | James C. Hays | | — | | — | | 1,232,079 | (2) | | 1,232,079 | | Theodore J. Hoepner | | 85,000 | | 99,981 | | — | | | 184,981 | | James S. Hunt | | 105,000 | | 99,981 | | — | | | 204,981 | | Toni Jennings | | 85,000 | | 99,981 | | — | | | 184,981 | | Timothy R.M. Main | | 105,000 | | 99,981 | | — | | | 204,981 | | H. Palmer Proctor, Jr. | | 115,000 | | 99,981 | | — | | | 214,981 | | Wendell S. Reilly | | 105,000 | | 99,981 | | — | | | 204,981 | | Chilton D. Varner | | 85,000 | | 99,981 | | — | | | 184,981 | | | | | | | | | | | |
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Board and Corporate Governance Matters
(1) | During 2021, J. Hyatt Brown, who is the father of J. Powell Brown, a director and President and Chief Executive Officer of the Company, and P. Barrett Brown, an Executive Vice President and President – Retail segment, received compensation of $221,915, consisting of $180,000 for services rendered to the Company in 2021, including assistance with acquisitions and recruitment, $6,480 in matching contributions made by the Company to his 401(k) Plan account, $29,130 for reimbursement of amounts earned by the Company for personal lines insurance he purchased through the Company or its subsidiaries and $6,305 for the cost of certain club membership dues. Mr. Hyatt Brown serves as Chairman of the Board of the Company. | (2) | During 2021, James C. Hays, who serves as Vice Chair of the Company, received compensation of $1,232,079, consisting of $1,217,000 for services rendered to the Company in 2020, $11,600 in matching contributions made by the Company to his 401(k) Plan account and $3,479 for the cost of certain club membership dues. The Company has determined that Mr. James Hays is not an executive officer. |
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Proposal 2:
Ratification of the Appointment of Deloitte & Touche LLP as the Company’s Independent Registered Public Accountants
| | The Audit Committee of the Board of Directors has selected Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2022.the fiscal year ending December 31, 2023. Deloitte & Touche LLP has served as our independent registered public accounting firm since the fiscal year ended December 31, 2002.
| | | | |  | | | | | The Board recommends a vote FOR the ratification of Deloitte & Touche LLP for 2022. | | | | |
The Committee and the Board are requesting that shareholders ratify this appointment as a means of soliciting shareholders’ opinions and as a matter of good corporate governance. If the shareholders do not ratify the selection, the appointment of the independent registered public accountants will be reconsidered by the Committee. Even if the selection is ratified, the Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such change would be in the best interests of the Company and its shareholders. One or more representatives of Deloitte & Touche LLP are expected to be present at the Meeting, will have the opportunity to make a statement, and will be available to respond to appropriate questions from shareholders. Vote Required; Board Recommendation In order to be ratified, this Proposal 2 must receive the affirmative vote of a majority of the votes cast on the Proposal. The Board of Directors believes that the ratification of Proposal 2 is in the best interests of the Company and its shareholders. | The Board unanimously recommends a vote “FOR” this proposal. |
26 | | | | | | | |  | | The Board unanimously recommends a vote “FOR” this proposal. | |
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BROWN & BROWN, INC. | 21
Table of ContentsAUDIT MATTERS
Audit Matters
Report of the Audit Committee The Audit Committee of the Board of Directors operates pursuant to an Audit Committee Charter, which was most recently reviewed by the Committee in October 20212022 and last amended in January 2021. The Charter is posted on the Company’s website (www.bbinsurance.com) in the “Corporate Governance” section of the “Investor Relations” tab, under “Key Documents.” Each member of the Audit Committee qualifies as “independent” (as that term is defined in the NYSE listed company manual, as well as other statutory, regulatory and other requirements applicable to the Company’s Audit Committee members). With respect to the fiscal year ended December 31, 2021,2022, the Audit Committee: | 1. | has reviewed and discussed the Company’s audited financial statements with management and the independent registered public accountants; |
| 2. | has discussed with the independent registered public accountants of the Company the matters required to be discussed by the standards of the Public Company Accounting Oversight Board, including those described in Auditing Standard No. 16, Communications with Audit Committees, and the Securities and Exchange Commission; |
| 3. | has received and reviewed the written disclosures and the letter from the independent registered public accountants required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accountants’ communications with the Audit Committee concerning independence, and has discussed with the independent registered public accountants the independent registered public accountants’ independence;independence and |
| 4. | based on the review and discussions with management and the independent registered public accountants referenced above, recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021,2022, for filing with the Securities and Exchange Commission. |
It is not the duty or responsibility of the Audit Committee to conduct auditing or accounting reviews or procedures. In performing its oversight responsibility, members of the Audit Committee rely without independent verification on the information provided to them and on the representations made by management and the independent registered public accountants. Accordingly, the Audit Committee’s considerations and discussions do not assure that the audit of the Company’s financial statements has been carried out in accordance with the standards of the Public Company Accounting Oversight Board or that the financial statements are presented in accordance with generally accepted accounting principles in the United States of America (“GAAP”). AUDIT COMMITTEE James S. Hunt (Chair)
Theodore J. Hoepner
Lawrence L. Gellerstedt III 22 | BROWN & BROWN, INC.
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Information Concerning Independent Registered Public Accountants
| Information Concerning Independent Registered Public Accountants |
Fees Paid to Deloitte & Touche LLP We incurred the following fees for services performed by Deloitte & Touche LLP for fiscal years 20212022 and 2020:2021: | | | 2020 | | | 2021 | | | AUDIT FEES:(1) | | $ | 1,957,973 | | | $ | 2,185,154 | | | AUDIT-RELATED FEES:(2) | | $ | 0 | | | $ | 0 | | | TAX FEES:(3) | | $ | 0 | | | $ | 0 | | | ALL OTHER FEES:(4) | | $ | 0 | | | $ | 0 | | | TOTAL: | | $ | 1,957,973 | | | $ | 2,185,154 | |
| | | | | | | | | | | | 2021 | | | 2022 | | | | | Audit Fees(1) | | $ | 2,185,154 | | | $ | 2,702,480 | | | | | Audit-Related Fees(2) | | $ | 0 | | | $ | 699,450 | (3) | | | | Tax Fees(4) | | $ | 0 | | | $ | 0 | | | | | All Other Fees(5) | | $ | 0 | | | $ | 0 | | | | | Total | | $ | 2,185,154 | | | $ | 3,401,930 | |
| (1) | Audit Fees were the aggregate fees billed to us by Deloitte & Touche LLP for professional audit services rendered for the audit of our annual financial statements, the review of financial statements included in our Forms 10-Q and the audit of our internal control over financial reporting for the fiscal years ended December 31, 2021,2022 and 2020,2021, including any out-of-pocket expense. |
| (2) | Audit-Related Fees are fees for assurance and related services reasonably related to the performance of the audit or review of our financial statements that are not reported above under the caption “Audit Fees” for the fiscal year ended December 31, 2021,2022 and 2020.2021. Deloitte & Touche LLP did not provide any such services during the periods.fiscal year ended December 31, 2021. |
| (3) | These fees were billed in connection with due diligence services performed in connection with the Company’s acquisition of GRP in 2022. |
| (4) | Tax Fees are fees for tax compliance, tax advice and tax planning for the fiscal years ended December 31, 2021,2022 or 2020.2021. Deloitte & Touche LLP did not provide any such services during the periods. |
(4)(5) | Deloitte & Touche LLP did not provide any “other services” during the periods. |
Audit Committee Policy for Pre-Approval of Independent Registered Public Accountant Services Our policy requires that the Audit Committee consider and approve in advance any proposed engagement of the independent registered public accountants to perform services in addition to those approved in connection with their annual engagement letter, except for certain limited non-audit services. During fiscal years 20212022 and 2020,2021, all services were approved by the Audit Committee in accordance with this policy. 28 | | | | | |
Negotiation of Fees Payable to the Independent Registered Public Accountant Each year, the Company’s management begins a robust, good-faith negotiation, overseen by the Audit Committee, with the independent registered public accountant regarding the independent registered public accountants’ proposed fees for the engagement. This negotiation includes a review for reasonableness of fees incurred during the previous year, as well as a review for reasonableness of fees for the proposed engagement, with consideration of any enhancements to the Company’s financial and other internal controls as a result of the Company’s year-over-year growth and expansion into new international jurisdictions. Audit Committee Audit Partner Selection In conjunction with the required rotation, the Audit Committee is involved, together with the Company’s management team, in the evaluation and selection of the new lead audit partner. BROWN & BROWN, INC. | 23
INFORMATION CONCERNING INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS Evaluation of Independent Registered Public Accountant On at least an annual basis, the Audit Committee, together with the Company’s management, evaluates the performance of the independent registered public accountants in connection with its decision to re-engage the independent registered public accountants. As part of this evaluation, which is based, in part, upon the Center for Audit Quality’s external auditor assessment tool, the Audit Committee and the Company’s management consider, among other things, the quality of services performed by the independent registered public accountants; the skill and responsiveness of the engagement team; the independent registered public accountants’ understanding of the Company, including the Company’s operational and financial risks; and the independent registered public accountants’ tenure. 24 | BROWN & BROWN, INC. Table
PROPOSAL 3: ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION At the Meeting, we will ask our shareholders to approve, on a nonbinding, advisory basis, under Section 14A of Contentsthe Exchange Act, the compensation of our Named Executive Officers as disclosed in this Proxy Statement. This proposal, commonly known as a “say-on-pay” proposal, gives our shareholders the opportunity to express their views on our executive compensation. We have held a similar shareholder vote every year since 2011 and expect to hold a similar vote at the 2024 Annual Meeting. Proposal 3:
Advisory Vote to Approve Named Executive Officer Compensation
| | At the Meeting, we will ask our shareholders to approve, on a nonbinding, advisory basis, under Section 14A of the Exchange Act, the compensation of our Named Executive Officers as disclosed in this Proxy Statement. This proposal, commonly known as a “say-on-pay” proposal, gives our shareholders the opportunity to express their views on our executive compensation. We have held a similar shareholder vote every year since 2011 and expect to hold a similar vote at the 2023 Annual Meeting.
| | | | | | | | | | The Board recommends a vote FOR the resolution to approve on a nonbinding advisory basis the compensation of the named executive officers. | | | | |
As described in detail below under “Compensation Discussion and Analysis,” our executive compensation program is designed to attract, motivate and retain our Named Executive Officers, who are critical to our success. Accordingly, our Named Executive Officers are rewarded to the extent we achieve specific annual goals and deliver financial performance intended to increase long-term shareholder value. Our Compensation Committee has adopted an approach to executive compensation that we believe enables the Company to retain its executive talent while remaining committed to our core compensation philosophy of paying for performance and aligning executive compensation with shareholder interests. The Committee continually reviews the compensation programs for our Named Executive Officers with the goal of most effectively aligning our executive compensation structure with our shareholders’ interests and current market practices. For example, (1) a significant portion of pay is performance-based, (2) compensation is incentive-driven with both short- and long-term focus and (3) we believe components of compensation are linked to increasing shareholder value. We are again asking our shareholders to indicate their support for our executive officer compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive Officers and the philosophy, program and practices described in this Proxy Statement in accordance with the SEC’s compensation disclosure rules. Accordingly, we ask our shareholders to vote “FOR” the approval, on an advisory basis, of executive compensation. The say-on-pay vote is advisory and therefore not binding on the Company, the Compensation Committee or our Board. However, our Board and Compensation Committee value the opinions of our shareholders, and to the extent there is any significant vote against the executive compensation as disclosed in this Proxy Statement, we will consider our shareholders’ concerns, and the Compensation Committee will evaluate whether any actions are necessary to address those concerns.
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Compensation Matters
Accordingly, we ask our shareholders to vote on the following resolution at the Meeting: “RESOLVED, that the compensation paid to the Company’s Named Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.” Vote Required; Board Recommendation In order to be approved, this Proposal 3 must receive the affirmative vote of a majority of the votes cast on the Proposal. The Board of Directors believes that the advisory approval of Proposal 3 is in the best interests of the Company and its shareholders. | | | | | | | | | | | The Board unanimously recommends a vote “FOR”FOR” this proposal. | |
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BROWN & BROWN, INC. | 25
COMPENSATION MATTERS Compensation Committee Report Notwithstanding anything to the contrary set forth in any of our previous filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate future filings, including this Proxy Statement, in whole or in part, the following Board Compensation Committee Report shall not be incorporated by reference into any such filings. The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management and based on this review and those discussions, has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement. COMPENSATION COMMITTEE Wendell S. Reilly (Chair)
Hugh M. Brown
Toni Jennings
Chilton D. Varner 30 | | | | | |
26 | BROWN & BROWN, INC.
Table of Contents
| Compensation Discussion and Analysis |
Executive SummaryEXECUTIVE SUMMARY
Our Compensation Committee has responsibility for the design, implementation, review and approval of the compensation of our executive officers. We seek to provide an executive compensation package that supports our business strategy and is driven by our overall financial performance, the success of the operating segments and corresponding financial performance that are directly impacted by the executive’s leadership and the performance of the individual executive. The Compensation Committee periodically reviews, with the support of an independent compensation consultant, the pay practices of other companies with the goal of seeingconfirming that the Company’s executive compensation program remains competitive but does not target compensation decisions or levels to a specific percentile or other absolute measures related to comparison group data. At last year’s Annual Meeting of Shareholders, 97%96% of the votes cast were in favor of the advisory vote to approve executive compensation. In view of this favorable vote (as well as a similar favorable vote in 2020)2021) and the success of our 20202021 executive compensation policies in incentivizing results that were aligned with the long-term interests of our shareholders, as well as other factors (including regulatory requirements, market considerations and Company and individual performance), our executive compensation policies and practices wereremained substantially unchanged from the prior year. Named Executive Officers For 2021,2022, our Named Executive Officers were as follows: NAME | PRINCIPAL POSITION | | | | | | | |  | | 
| |  | |  | |  | | | | | | J. Powell Brown | POWELL BROWN Chief Executive Officer
and President | | R. Andrew Watts | ANDREW WATTS Chief Financial Officer,
Executive Vice President
and Treasurer | | P. Barrett Brown | BARRETT BROWN Executive Vice President
and President -– Retail segment
Segment | | J. Scott Penny | SCOTT PENNY Executive Vice President
and Chief Acquisitions
Officer | Chris | CHRIS L. Walker | WALKER Executive Vice President
and President -– National
Programs segmentSegment |
We believe our compensation system continues to effectively incentivize our executive officers to deliver results for the Company that are aligned with the long-term interests of our shareholders. As reflected in the table below, we delivered another year of strong performance in 2021,2022, and as a result, the annual cash incentives for our Named Executive Officers were calculated and paid at close toabove the maximum amounts.target amounts: BROWN & BROWN, INC. | 27
COMPENSATION DISCUSSION AND ANALYSIS Performance Highlights TOTAL SHAREHOLDER RETURN(1) 
Source: CapIQ as of 12/31/2022
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Compensation Discussion and Analysis
Performance Highlights
TOTAL SHAREHOLDER RETURNS(1)
Source: FactSet as of December 31, 2021.
(1) | Calculated as change in share price plus total dividends paid. | (2) | Peer average among Arthur J. Gallagher & Co, Aon plc, Marsh & McLennan Companies, and Willis Towers Watson Public Limited Company. | | |
| ● | Strong total and organic revenue growth companywide and in all four of our operating segments | | ● | Further expansion of our industry-leading operating margins | | ● | 28th consecutive annual dividend increase, returning approximately $107 million to shareholders | | ● | Healthy growth in net cash provided by operating activities | | ● | 19 strategic acquisitions with aggregate annual revenues of approximately $132 million | | | |
| | | 2021 Performance | | 2020 Performance | | Total revenues | | $3.051 billion | | $2.613 billion | | Net income | | $587 million | | $480 million | | Diluted earnings per share | | $2.07 | | $1.69 | | Company total commissions and fees growth | | 16.9% | | 9.3% | | Retail segment total commissions and fees growth | | 20.1% | | 7.7% | | National Programs segment total commissions and fees growth | | 15.0% | | 18.0% | | Wholesale Brokerage segment total commissions and fees growth | | 14.3% | | 13.8% | | Services segment total commissions and fees growth | | 2.8% | | (10.1)% | | Company Organic Revenue1 growth | | 10.4% | | 3.8% | | Retail segment Organic Revenue1 growth | | 11.0% | | 2.4% | | National Programs segment Organic Revenue1 growth | | 12.4% | | 12.3% | | National Programs segment Organic Revenue1 growth - adjusted3 | | 12.3% | | 11.1% | | Wholesale Brokerage segment Organic Revenue1 growth | | 8.1% | | 5.5% | | Services segment Organic Revenue1 growth | | 3.0% | | (10.9)% | | Income before income taxes margin2 | | 25.0% | | 23.9% | | Adjusted EBITDAC Margin1 | | 33.3% | | 31.5% | | Net cash provided by operating activities | | $942 million | | $722 million |
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Compensation Discussion and Analysis
(1) | See Annex A for additional information regarding Organic Revenue, Organic Revenue growth and Adjusted EBITDAC Margin, which are non-GAAP financial measures, including a reconciliation to the most closely comparable GAAP financial measure. | (2) | Income before income taxes margin is calculated as the Company’s income before income taxes, as reported, divided by total revenues, as reported. | (3) | National Programs segment Organic Revenue growth was adjusted (i) for 2020 and 2021, to exclude the impact of certain offices within the National Programs segment for which Chris L. Walker, Executive Vice President and President - National Programs segment, did not have responsibility in 2020 and 2021, respectively, and (ii) for 2020 and 2021, to include the impact of certain offices within the Services and Wholesale Brokerage segments for which Mr. Walker did have responsibility in 2020 and 2021, respectively. See Annex A for additional information regarding National Programs segment Organic Revenue growth - adjusted, which is a non-GAAP financial measure, including a reconciliation to the most closely comparable GAAP financial measure. |
| | | | | | | | | | | | | | | | | | | | | | | |
| 2022
PERFORMANCE |
| |
| 2021
PERFORMANCE |
| | | | | | Strong total and ORGANIC REVENUE GROWTH companywide MAINTAINED our industry-leading operating margins 29TH consecutive annual dividend increase, returning approximately $120 MILLION to shareholders ROBUST GROWTH in net cash provided by operating activities 30 STRATEGIC ACQUISITIONS with aggregate annual revenues of approximately $435 MILLION | Total revenue | | | $3.573 billion | | | | $3.051 billion | | | | | | Net Income | | | $672 million | | | | $587 million | | | | | | Diluted earnings per shares | | | $2.37 | | | | $2.07 | | | | | | Company total commissions and fees growth | | | 16.9% | | | | 16.9% | | | | | | Retail segment total commissions and fees growth | | | 17.9% | | | | 20.1% | | | | | | National Programs segment total commissions and fees growth | | | 22.4% | | | | 15.0% | | | | | | Wholesale Brokerage segment total commissions and fees growth | | | 12.5% | | | | 14.3% | | | | | | Services segment total commissions and fees growth | | | (3.9)% | | | | 2.8% | | | | | | Company Organic Revenue1 growth | | | 8.1% | | | | 10.4% | | | | | | Retail segment Organic Revenue1 growth | | | 6.5% | | | | 11.0% | | | | | | National Programs segment Organic Revenue1 growth | | | 15.7% | | | | 12.4% | | | | | | Wholesale Brokerage segment Organic Revenue1 growth | | | 7.6% | | | | 8.1% | | | | | | Services segment Organic Revenue1 growth | | | (2.9)% | | | | 3.1% | | | | | | Income before income taxes margin3 | | | 24.5% | | | | 25.0% | | | | | | Adjusted EBITDAC Margin1 | | | 32.9% | | | | 33.3% | | | | | | Net cash provided by operating activities | | | $881.4 million | | | | $808.8 million | | | | | | (1) See Annex A for additional information regarding Organic Revenue, Organic Revenue growth and Adjusted EBITDAC Margin, which are non-GAAP financial measures, including a reconciliation to the most closely comparable GAAP financial measure. (2) Income before income taxes margin is calculated as the Company’s income before income taxes, as reported, divided by total revenues, as reported. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
28 | BROWN & BROWN, INC.
COMPENSATION DISCUSSION AND ANALYSIS Our Compensation Philosophy Our compensation system is intended to: | 1 | | 2 | | 3 | | Attract and Retain | | Compensate for Performance | | Create a Common Interest | | High-quality people that are crucial to both the short-term and long-term success of the Company | | Linked to our strategic objectives through the use of incentive compensation programs | | Between our executive officers and shareholders through compensation structures that promote the sharing of the rewards and risks of strategic decision-making |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1 | | Attract and Retain High-quality people that are crucial to both the short-term and long-term success of the Company | | | | | | 2 | | Compensate for Performance Linked to our strategic objectives through the use of incentive compensation programs | | | | | | 3 | | Create a Common Interest Between our executive officers and shareholders through compensation structures that promote the sharing of the rewards and risks of strategic decision-making |
In support of these goals, for 2021,2022, our incentive compensation program included both long- and short-term compensation and wascomponents that were tied to increases in our adjusted diluted earnings per share, Organic Revenue growth, Adjusted EBITDAC Margin and predetermined personal objectives for each of our executive officers. We believe our compensation program rewarded our executives for delivering strong financial results that aligned with the long-term interests of our shareholders.
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Compensation Discussion and Analysis
Compensation Components Our compensation philosophy is reflected in the following short-term and long-term compensation components: | | | | | 1 | | Base Salary | | RATIONALERationale
●
• Provide competitive levels of compensation to our executive officers based on scope of responsibilities and duties ● • Recruit and retain executive officers
HOW AMOUNTS ARE DETERMINED
● How Amounts Are Determined
• Based on a wide range of factors, including business results, individual performance and responsibilities, and comparative market assessments | | | | | | | | | | | 2 | | Annual CashIncentives andBonuses | | RATIONALERationale
●
• Align executive officers’ performance with annual goals and objectives ● • Create a direct link between pay and current year financial and operational performance
HOW AMOUNTS ARE DETERMINED
● How Amounts Are Determined
• Target payouts based upon comparative market assessments, recommendations by Chief Executive Officer, and input from the Compensation Committee’s independent compensation consultant, subject to the approval of Compensation Committee or, in the case of the Chief Executive Officer, recommendations from the Compensation Committee’s independent compensation consultant, subject to the approval of Compensation Committee based upon its annual Chief Executive Officer performance review ● • Actual payout based upon a combination of Company and/or segment performance and achievement of personal performance objectives
● • Additional discretionary bonus available as determined by Chief Executive Officer, subject to the approval of Compensation Committee, or, in the case of Chief Executive Officer, as determined by Compensation Committee
| | | | | | | | | | | 3 | | Long-Term EquityIncentive Awards | | RATIONALERationale
●
• Reward effective long-term capital management and decision-making ● • Focus attention on future returns to shareholders
● • Retain executive officers who have the potential to impact both our short-term and long-term profitability through a combination of time- and performance-based awards
● • Recognize and reward specific achievements and/or the previous year’s performance
● • Generally granted annually during first quarter
HOW AMOUNTS ARE DETERMINED
● How Amounts Are Determined
• Award amount determined based upon a blend of quantitative measures and consideration of personal performance, as well as comparative market assessments ● • For awards with a performance-based vesting condition, number of awarded shares may be higher or lower than target, subject to specified threshold and maximum amounts, based upon the Company’s performance during the performance period
● • Actual value realized based upon the Company’s stock price over measurement and vesting periods
|
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BROWN & BROWN, INC. | 29
Table of ContentsCOMPENSATION DISCUSSION AND ANALYSIS
Compensation Discussion and Analysis
The chart below shows the 20212022 mix of compensation for our Chief Executive Officer and for the other Named Executive Officers as a group. 
* Other pay includes those amounts shown in the Summary Compensation Table under the “All Other Compensation” column.
| * | Total of all percentages does not equal 100% due to rounding. |
How We Set Compensation Role of Management The Compensation Committee considers input from our Chief Executive Officer in making determinations regarding the compensation of our executive officers, other than our Chief Executive Officer. As part of the annual planning process, our Chief Executive Officer recommends and presents to the Compensation Committee for consideration, base salary adjustments, framework and targets for our annual cash incentive program, and long-term equity incentive award amounts, in each case based upon an individual’s performance and responsibilities, as well as comparative market data, as described below, for our executive officers, other than our Chief Executive Officer. In addition, our Chief Executive Officer periodically presents to the Compensation Committee and the Board his evaluation of each executive officer’s performance and reviews succession plans for each of our executive officers. Role of the Compensation Consultant Beginning in August 2015, the Compensation Committee engaged FW Cook to assist with a review of the components, structure and design of the long-term equity incentive arrangements with our executive officers and other key employees. The primary goal of this engagement was to help design long-term equity incentive arrangements that continue to be competitive and aligned with shareholder interests. FW Cook has remained engaged by the Compensation Committee to advise and assist with other matters related to executive and non-employee director compensation. The Compensation Committee considers FW Cook to be independent because FW Cook performed no services for the Company’s management unrelated to services performed for the Compensation Committee, and there was no conflict of interest raised as a result of any work performed by FW Cook, directly or indirectly, for the Compensation Committee during fiscal years 2015-2021.2015-2022. Comparative Market Assessments The Compensation Committee does not target compensation decisions or levels to a specific percentile or other absolute measures related to comparison group data but does periodically review the pay practices of other companies with the goal of seeing that the Company’s executive compensation program remains competitive. Historically, these analyses have been completed approximately every two or three years, unless there has been a material change in our business or in one of our segments, as comparative market rates do not typically materially change over the short term. 30 | BROWN & BROWN, INC.
Table of ContentsCOMPENSATION DISCUSSION AND ANALYSIS
Compensation Discussion and Analysis
20212022 Compensation
2021 CEOJanuary 2022 Comparative Market AssessmentAssessments
In 2019,January 2022, FW Cook conducted a comprehensive analysisanalyses of our pay practices and executive compensation levels as compared to a group offor our peers, which the Compensation Committee considered, among other things,Chief Executive Officer and Chief Financial Officer (the “January 2022 CEO/CFO Comparative Market Assessment”) and in connection with certain pay adjustmentsFebruary 2022 for our executive officers in 2020. While FW Cook did not conduct a similar comprehensive analysis in 2020 or 2021, in January 2021, FW Cook did conduct an additional analysis of the compensation levels of Mr. Powell Brown,with responsibility for the Company’s President and Chief Executive Officer,operating segments (the “January 2022 Segment Head Comparative Market Assessment”), in each case as compared to a group of our peers (the “2021 CEO“January 2022 Comparative Market Assessment”Assessments”), as described below. Peer Comparison Group
For the 2021 CEO Comparative Market Assessment, FW Cook focused on our peers in the Russell 3000 of similar size, industry, and business characteristics. The Peer Comparison Group was as follows:
| Our total revenue was at the
46th
percentile of the peer comparison group.
|
Peer Comparison Group Peer Company | | Business Focus | Aon plc | | Insurance Intermediary | Arch Capital Group Ltd. | | Property & Casualty Insurance Carrier | Argo Group International Holdings | | Property & Casualty Insurance Carrier | Arthur J. Gallagher & Co. | | Insurance Intermediary | AXIS Capital Holdings Limited | | Property & Casualty Insurance Carrier | CBIZ, Inc. | | Research & Consulting Services | Crawford & Company | | Insurance Intermediary | Erie Indemnity Company | | Property & Casualty Insurance Carrier | FBL Financial Group Inc. | | Life & Health Insurance Company | Marsh & McLennan Companies Inc. | | Insurance Intermediary | Primerica, Inc. | | Life & Health Insurance Company | Raymond James Financial, Inc. | | Investment Banking & Brokerage | RLI Corp. | | Property & Casualty Insurance Carrier | Selective Insurance Group Inc. | | Property & Casualty Insurance Carrier | Waddell & Reed Financial, Inc. | | Asset Management & Custody Banks | Willis Towers Watson Public Limited Company | | Insurance Intermediary |
For the January 2022 CEO/CFO Comparative Market Assessment, FW Cook focused on our Peer Comparison Group. For the January 2022 Segment Head Comparative Market Assessment, FW Cook focused on only those peers within the Peer Comparison Group that are insurance brokers and for which compensation information was available for executive officers with direct responsibility for operating segments similar to those overseen by our executive officers (the “Select Segment Head Peers”). For a discussion of the Peer Comparison Group, including a list of peers comprising the Peer Comparison Group, see “2023 Director Compensation.” Survey Comparison As part of the 2021 CEOJanuary 2022 Comparative Market Assessment,Assessments, the Compensation Committee also reviewed and considered data from certain third-party surveys. 36 | | | | | |
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Compensation Discussion and Analysis
Results of the 2021 CEOJanuary 2022 Comparative Market AssessmentAssessments Based upon the results of the 2021 CEOJanuary 2022 CEO/CFO Comparative Market Assessment, the Compensation Committee determined that, among other things, the total 20202021 direct compensation for Mr.Messrs. Powell Brown and Watts, which includes histheir base salary, target cash incentive amount and target long-term equity incentives, was generally aligned with the market blend median. As a result, the Compensation Committee did not apply any pay rate adjustments for Mr.Messrs. Powell Brown or Watts for 2021.2022. Based upon the results of the January 2022 Segment Head Comparative Market Assessment, the Compensation Committee determined that, among other things, the total 2021 direct compensation for Messrs. Barrett Brown, Penny and Walker, which includes their base salary, target cash incentive amount and target long-term equity incentives, was below the 50th percentile of the Select Segment Head Peers. Consideration of Last Year’s “Say-On-Pay” Vote | | | | | In accordance with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), we provide our shareholders with an opportunity to approve, on a nonbinding, advisory basis, the compensation of named executive officers. At our annual meetings of shareholders in both 2021 and 2022, our shareholders voted to approve compensation by a significant margin. In view of the favorable vote in 2022 (as well as a similar favorable vote in 2021), as well as other factors (including regulatory requirements, market considerations and Company and individual performance), we did not substantially change our executive compensation policies for 2022. | | At our 2022 Annual Meeting of Shareholders our executive compensation program was supported by 96% of votes cast. | |
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BROWN & BROWN, INC. | 31
In accordance with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), we provide our shareholders with an opportunity to approve, on a nonbinding, advisory basis, the compensation of named executive officers. At our annual meetings of shareholders in both 2020 and 2021, our shareholders voted to approve compensation by a significant margin.COMPENSATION DISCUSSION AND ANALYSIS
In view of the favorable vote in 2021 (as well as a similar favorable vote in 2020), and other factors (including regulatory requirements, market considerations, and Company and individual performance), we did not substantially change our executive compensation policies for 2021.
At our 2021 Annual Meeting of Shareholders, our executive compensation program was supported by
97%
of votes cast.
20212022 Base Salaries
The Compensation Committee did not increasechanged the 2022 base salaries for theof certain of our Named Executive Officers, in 2021.as follows: | EXECUTIVE OFFICER | 2021
BASE SALARY | | 2020
BASE SALARY | | CHANGE | | J. Powell Brown | $ | 1,000,000 | | $ | 1,000,000 | | — | | R. Andrew Watts | $ | 600,000 | | $ | 600,000 | | — | | P. Barrett Brown | $ | 700,000 | | $ | 700,000 | | — | | J. Scott Penny | $ | 600,000 | | $ | 600,000 | | — | | Chris L. Walker | $ | 700,000 | | $ | 700,000 | | — |
| | | | | | | | | | | | | Executive Officer | | 2022 Base Salary | | | 2021 Base Salary | | | Change | | | | | | J. Powell Brown | | $ | 1,000,000 | | | $ | 1,000,000 | | | | — | | | | | | R. Andrew Watts | | $ | 600,000 | | | $ | 600,000 | | | | — | | | | | | P. Barrett Brown | | $ | 800,000 | | | $ | 700,000 | | | $ | 100,000 | (1) | | | | | J. Scott Penny | | $ | 700,000 | | | $ | 600,000 | | | $ | 100,000 | (2) | | | | | | Chris L. Walker | | $ | 800,000 | | | $ | 700,000 | | | $ | 100,000 | (3) |
| (1) | The decision to increase Mr. Barrett Brown’s 2022 base salary from $700,000 to $800,000 was based upon (a) the increase in his responsibilities resulting from the Retail segment’s total revenues increasing in 2021 by 20% to approximately $1.8 billion and (b) the January 2022 Segment Head Comparative Market Assessment and the conclusion that his 2021 target total direct compensation was below the 50th percentile of the Select Segment Head Peers. |
| (2) | The decision to increase Mr. Penny’s 2022 base salary from $600,000 to $700,000 was based upon (a) his increased operational responsibility during 2021, and his expected increased operational responsibility in 2022, for certain offices within the Company’s Retail segment, in addition to his ongoing role as Chief Acquisitions Officer and (b) the January 2022 Segment Head Comparative Market Assessment and the conclusion that his 2021 target total direct compensation was below the 50th percentile of the Select Segment Head Peers. |
| (3) | The decision to increase Mr. Walker’s 2022 base salary from $700,000 to $800,000 was based upon (a) the increase in his responsibilities resulting from the National Programs segment’s total revenues increasing in 2021 by 15% to approximately $700 million and (b) the January 2022 Segment Head Comparative Market Assessment and the conclusion that his 2021 target total direct compensation was below the 50th percentile of the Select Segment Head Peers. |
2022 Annual Cash Incentives Our annual cash incentives are designed to further align executive officer compensation with our annual goals and objectives, and to create a direct link between compensation and financial and operational performance. During the first quarter of each year, the Compensation Committee approves the annual cash incentive components, consisting of financial performance measures, individual target cash incentive amounts and personal objectives, for each executive officer, including the relative weightings and goals against which performance is measured and payouts are determined for such fiscal year. Target Amounts.In February 2021,2022, the Compensation Committee determined not to change the components of our annual executive officer cash incentives, the weighting of each component or the target cash incentive amounts for our Named Executive Officers, except for the target cash incentive amounts for Mr. Penny.Barrett Brown, as follows: For Mr. Penny,Barrett Brown, the Compensation Committee determined that because Mr. Penny would have more office-specific oversightincreased his 2022 target cash incentive amount from $1,000,000 to $1,400,000 based upon (a) the increase in his responsibilities resulting from the Retail segment’s total revenues increasing in 2021 as comparedby 20% to 2020, including with respect toapproximately $1.8 billion and (b) the integrationJanuary 2022 Segment Head Comparative Market Assessment and operations of recently completed acquisitions, the weightingconclusion that his 2021 target total direct compensation was below the 50th percentile of the components of his 2021 annual cash incentive would be changed, as follows:Select Segment Head Peers: | | | | | | | | | | | | | Executive Officer | | 2022 Target Cash
Incentive Amount | | | 2021 Target Cash
Incentive Amount | | | Change | | | | | | J. Powell Brown | | $ | 2,000,000 | | | $ | 2,000,000 | | | | — | | | | | | R. Andrew Watts | | $ | 700,000 | | | $ | 700,000 | | | | — | | | | | | P. Barrett Brown | | $ | 1,400,000 | | | $ | 1,000,000 | | | | 400,000 | (1) | | | | | J. Scott Penny | | $ | 900,000 | | | $ | 900,000 | | | | — | | | | | | Chris L. Walker | | $ | 1,000,000 | | | $ | 1,000,000 | | | | — | |
| (1) | The decision to increase Mr. Barrett Brown’s 2022 PROXY STATEMENT | | 37 | | target cash incentive amount from $1,000,000 to $1,400,000 was based upon (a) the increase in his responsibilities resulting from the Retail segment’s total revenues increasing in 2021 by 20% to approximately $1.8 billion, and (b) the January 2022 Segment Head Comparative Market Assessment and the conclusion that his 2021 target total direct compensation was below the 50th percentile of the Select Segment Head Peers. |
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Compensation Discussion and Analysis
CASH INCENTIVE WEIGHTINGS FOR J. SCOTT PENNY
| COMPONENT | 2020
WEIGHTING | 2021
WEIGHTING | | Company Organic Revenue growth | 25% | 40% | | Adjusted EBITDAC Margin | 25% | 40% | | Personal objectives | 50% | 20% |
Payouts can range from 0% to 200% of the aggregate target cash incentive depending on the financial performance of the Company or the segment, as applicable, and the Named Executive Officer’s performance against personal objectives. 32 | BROWN & BROWN, INC.
COMPENSATION DISCUSSION AND ANALYSIS For 2021,2022, the Compensation Committee selected the following components and weightings for the annual cash incentives for the Named Executive Officers: | | | | | | | | | | | | | | | | | | | | | | Financial Performance Measures(1) | | Personal Objectives | Executive Officer | | Weighting | | | Measure | | Weighting | | | Measure | | Weighting | | | Measure | | | | | | | | J. Powell Brown R. Andrew Watts J. Scott Penny | | | 40 | % | | Company Organic Revenue(2) growth | | | 40 | % | | Adjusted EBITDAC Margin(2) (applicable to all Named Executive Officers) | | | 20 | % | | Personal objectives established for each Named Executive Officer(4) | | | | | | | | P. Barrett Brown | | | 40 | % | | Retail segment Organic Revenue(2) growth | | | 40 | % | | Adjusted EBITDAC Margin(2) (applicable to all Named Executive Officers) | | | 20 | % | | Personal objectives established for each Named Executive Officer(4) | | | | | | | | Chris L. Walker | | | 40 | % | | National Programs segment Organic Revenue(2) growth – adjusted(3) | | | 40 | % | | Adjusted EBITDAC Margin(2) (applicable to all Named Executive Officers) | | | 20 | % | | Personal objectives established for each Named Executive Officer(4) |
| (1) | | | FINANCIAL PERFORMANCE MEASURES(1) | | PERSONAL OBJECTIVES | | | EXECUTIVE OFFICER | WEIGHTING | MEASURE | WEIGHTING | MEASURE | | WEIGHTING | MEASURE | | | J. Powell Brown
R. Andrew Watts
J. Scott Penny |  | Company Organic Revenue(2) growth |  | | |  | | | | P. Barrett Brown |  | Retail segment Organic Revenue(2) growth |  | Adjusted EBITDAC Margin(2) (applicable to all Named Executive Officers) | |  | Personal
objectives
established
for each Named
Executive
Officer(4) | | | Chris L. Walker |  | National Programs segment Organic Revenue(2) growth – adjusted(3) |  | | |  | | |
(1) | The Compensation Committee selected these financial performance measures in furtherance of our strategy to increase our Organic Revenue growth while maintaining, among other things, our strong, industry-leading operating margins. |
| (2) | See Annex A for additional information regarding Organic Revenue, Organic Revenue growth and Adjusted EBITDAC Margin, which are non-GAAP financial measures, including a reconciliation to the most closely comparable GAAP financial measure. |
| (3) | National Programs segment Organic Revenue growth was adjusted (i) for 2020 and 2021, to exclude the impact of certain offices within the National Programs segment for which Chris L. Walker, Executive Vice President and President – National Programs segment, did not have responsibility in 20202021 and 2021, respectively; and (ii) for 2020 and 2021, to include the impact of certain offices within the Services and Wholesale Brokerage segments for which Mr. Walker did havehad responsibility in 20202021; and 2021, respectively.(ii) for 2022, to include the impact of certain offices within the Services segment for which Mr. Walker had responsibility in 2022. See Annex A for additional information regarding National Programs segment Organic Revenue growth -– adjusted, which is a non-GAAP financial measure, including a reconciliation to the most closely comparable GAAP financial measure. |
| (4) | The personal objectives for each of our Named Executive Officers were approved by the Compensation Committee in February 2021.2022. |
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The target amounts for each financial performance measure were discussed over several months and then reviewed and approved by the Compensation Committee in February 2021.2022. To ensure our performance targets are rigorous and challenging, yet realistic for our executive officers, the target amounts for the Organic Revenue growth for the Company, andthe Organic Revenue growth of our operating segments, and our Adjusted EBITDAC Margin were based on our 20212022 budget. Our 20212022 budget was approved by the Board in December 20202021 and reflects a multi-month process that includes thorough and thoughtful discussions among management and the leaders of our businesses, and between management and our Board. In determining our 20212022 budget, which served as the basis for the targets for each 20212022 financial performance measure, consideration was given to, among other things: our expectation that the economy would continue to grow, but at a slower pace than the prior year, as the economy returned to more normal growth rates following the volatility in 2020 and 2021 caused by the COVID-19 pandemic; ●• | our expectation that the economy would continue to grow at a quicker rate than the prior year due to the anticipated economic recovery following the onset of the COVID-19 pandemic; | ● | our expectation that insurance premium rates would either remain relatively stable or increase moderately in 2021;2022; |
●• | | our expectation that “insurable exposure units,” which are units that insurance companies use to measure or express insurance exposed to risk (such as property values, sales and payroll levels) to determine what premium to charge the insured, would increase modestly but at the same rate as compared to the prior yearGDP due to the impact in 2020 of the COVID-19 pandemic, facilitating moderate revenue growth for many of our businesses;year-on-year comparisons; |
our expectation that travel and related costs would increase as compared to 2021 as a result of being able to see more customers and prospects in person versus remotely, as well as our continued investments in technology and data to help improve the customer and teammate experience and ●• | our previous investments in technology, incentive plans, expanding our capabilities and moderate increases to travel and related, along with moderate expected Organic Revenue growth would benefit our year-over-year operating margins modestly in 2021 | ● | our expectation that certain businesses we acquired in the previous three years, which had lower operating margins versus other comparable businesses we operate, would further grow profitably and have a positive impact on our overall 20212022 operating margins. |
BROWN & BROWN, INC. | 33
COMPENSATION DISCUSSION AND ANALYSIS For each financial performance measure, we make no payout for performance below a certain threshold. As part of our pay-for-performance framework, the Compensation Committee adopted payout curves that are intended to incentivize performance generally within a “target payout corridor” and that provide for incrementally higher and lower payouts for performance outside of the target payout corridor. Payout percentages for each financial performance measure were calculated based on the following tables:  
 
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Compensation Discussion and Analysis
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Compensation Discussion and Analysis
Determination of 20212022 Annual Cash Incentive Payouts.In the first quarter of 2022,2023, the Compensation Committee reviewed actual 20212022 performance of each financial performance measure against the target performance for each such measure as set forth in the following table: FINANCIAL
PERFORMANCE
MEASURE | | TARGET | | ACTUAL | | | PERCENTAGE
OF TARGET
PERFORMANCE | | PAYOUT
PERCENTAGE | | Adjusted EBITDAC Margin | | 31.4% | | 33.3% | (1) | | — | | 198% | | Company Organic Revenue growth | | 4.3% | | 10.4% | | | 242% | | 200% | | Retail segment Organic Revenue growth | | 4.0% | | 11.0% | | | 275% | | 200% | | National Programs segment Organic Revenue growth - adjusted | | 4.6% | | 12.3% | | | 267% | | 200% |
| | | | | | | | | | | | | | | | | Financial Performance Measure | | Target | | | Actual | | | Percentage
of Target
Performance | | | Payout
Percentage | | | | | | | Adjusted EBITDAC Margin | | | 33.6 | % | | | 32.9 | %(1) | | | — | | | | 75 | % | | | | | | Company Organic Revenue growth | | | 6.1 | % | | | 8.1 | % | | | 133 | % | | | 175 | % | | | | | | Retail segment Organic Revenue growth | | | 6.0 | % | | | 6.5 | % | | | 108 | % | | | 105 | % | | | | | | National Programs segment Organic Revenue growth – adjusted | | | 6.2 | % | | | 12.2 | % | | | 197 | % | | | 200 | % |
| (1) | In calculating the Company’s Adjusted EBITDAC Margin, theMargin: |
| 1. | The Committee excluded: (i)excluded the negative impact of the Company’s non-cash stock-based compensation expense including expenses related to our ESPP, in excess of what was reflected in the Company’s Board-approved 2021 budget, and (ii) the positive impact of the net gain on disposal resulting from sales of books of businesses in 2021. | | In making2022 budget. The Committee based its determination to exclude the negative impact of the Company’s non-cash stock-based compensation expense, including expenses related to our ESPP, in excess of what was reflected in the Company’s Board-approved 2021 budget, the Committee considereddecision upon the fact that the higher-than-budgeted non-cash stock-based compensation expense including expenses related to our ESPP, for 20212022 was the result of above-target performance by the Company for those grants of restricted stock made in February 20182019 under our 2010 SIP, which resulted in the issuance of additional shares of restricted stock, as well as higher-than-expected expenses related to our ESPP, which were driven by a higher-than-expected participation rate in our ESPP, and a higher-than-expected price of our common stock. For additional information about those grants of restricted stock made in February 20182019 under our 2010 SIP, see “Equity Incentive Plan Outcomes in 2021” below.2022.” |
These strong outcomes were driven primarily by:
| 2. | ● higher-than-anticipated levelsThe Committee excluded the negative impact of newapproximately $11.2 million of acquisition and integration costs (e.g., costs associated with regulatory filings, legal/accounting services, due diligence and the costs of integrating information technology systems) arising out of the Company’s acquisitions of GRP (Jersey) Holdco Limited and its business,
● better retention Orchid Underwriters Agency and CrossCover Insurance Services, and BdB Limited companies, which are not expected to occur on an ongoing basis in the future (“Acquisition/Integration Costs”). The Committee based its decision upon the fact that these costs were related to the Company’s acquisition of existingthese business,
● expansion and not the underlying performance of exposure units at rates higher thanthe businesses themselves, and the fact that they were not expected asto occur on an ongoing basis in the economy was recovering fromfuture.
|
| 3. | The Committee excluded the positive impact of the COVID-19 pandemicnet gain on disposal resulting from sales of books of businesses in 2020 and2022. |
| 4. | ● insurance rate increases withinThe Committee excluded the period-over-period impact of foreign currency translation (“Foreign Currency Translation”), which is calculated by applying current-year foreign exchange rates to the various functional currencies in our operating segments.
As a resultbusiness to our reporting currency of a higher level of Organic Revenue, we were able to leverage our expense base, and we delivered strong profit-sharing contingent commissions (revenues from insurance companiesUS dollars for the same period in the prior year. The Committee based its decision upon the volume andfact that fluctuations in Foreign Currency Translation are not related to the growth and/or profitabilityperformance of the business placed with such companies during the prior year) and strong guaranteed supplemental commissions (commissions from insurance companies based solely upon the volume of the business placed with such companies during the current year), all of which contributed to our strong Adjusted EBITDAC Margin.Company.
|
With respect to the achievement of personal objectives by each of the Named Executive Officers, which accounts for 20% of the 20212022 cash incentive amount for each Named Executive Officer, the Compensation Committee evaluated the level of achievement for each Named Executive Officer’s personal objectives in the first quarter of 2022.2023. The evaluation for Mr. Powell Brown, our Chief Executive Officer, was made by the Compensation Committee. For the other Named Executive Officers, the Compensation Committee, after discussion, consideration and review, accepted without modification the recommendations as proposed by the Chief Executive Officer. The Compensation Committee evaluated the achievement of each Named Executive Officer’s personal objectives in their totality instead of assigning a weight to each particular personal objective. BROWN & BROWN, INC. | 35
COMPENSATION DISCUSSION AND ANALYSIS | 2022 PROXY STATEMENT | | | | Name | | 41 | | |
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NAMEPersonal Objectives | | PERSONAL OBJECTIVES | | PERSONAL
OBJECTIVE
PORTION OF 2021
CASH INCENTIVE
Personal Objective Portion of
2022 Cash Incentive
(0-200% OF
TARGET)of Target) | | | | J. Powell Brown | | ●• contribution to driving the Company’s talent agenda, including recruiting, development, diversity and culture
●• contribution to identifying and evaluating acquisition candidatesacquiring companies that fit culturally and provide appropriate financial returns
●• contribution to driving the Company’s technology and data strategy to create new capabilities and enhance the customer and teammate experience, as well as ensuring the Company’s robust cyber posture
●• contribution to deliveringthe Company’s profitable growth for the Company
● • contribution to balancing the Company’s capital allocation to drive shareholder returns
| |  | | | | R. Andrew Watts | | ●• contribution to driving the Company’s talent agenda, including recruiting, development, diversity and culture
● • contribution to drivingthe Company’s profitable growth through enhanced analytics and implementation of optimization opportunities
• contribution to supporting the Company’s technology and data strategy to create new capabilities and enhance the customer and teammate experience ●• contribution to maintaining, streamlining and enhancing the Company’s strong control environment
● contribution to supporting the delivery of profitable growth for the Company, in enhancing the Company’s business analytics, and implementing optimization opportunities
●• contribution to balancing the Company’s capital allocation to drive shareholder returns
| |  | | | | P. Barrett Brown | | ● • contribution to driving the Retail segment’sCompany’s talent agenda, including recruiting, development, diversity and culture
● • contribution to improvingdriving incremental new business and enhancing retention of existing customersbusiness
●• contribution to balancing investments within the Retail segment’s investments and Organic Revenue growthsegment to deliver incremental profitable Organic Revenue growth
●• contribution to leveraging technology and data to create new capabilities and enhance the customer experience
●• contribution to identifying and evaluating acquisition candidatesacquiring companies that fit culturally, and provide appropriate financial returns and are properly integrated in a timely manner
| |  |
42 | | | 171% | | | |
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J. Scott Penny | | ●• contribution to driving the Company’s talent agenda, including recruiting, development, diversity and culture
●• contribution to identifying and evaluating acquisition candidatesacquiring companies that fit culturally and provide appropriate financial returns
●• contribution to overseeing the creation and execution of aensuring robust integration planplans are created and executed for allthe Company’s acquisitions
●• contribution to continue to scalescaling and growgrowing the Company’s portfolio of automobile and recreational vehicle dealer services (“F&I”) businesses
●• contribution to driving strategic initiatives within the Company’s Retail and Services segments
| |  | | | | Chris L. Walker | | ● • contribution to driving the National Programs segment’sCompany’s talent agenda, including recruiting, development, diversity and culture
●• contribution to improvingdriving incremental new business and enhancing retention of existing customersbusiness
●• contribution to balancing investments within the National Programs segment’s investments and Organic Revenue growthProgram segment to deliver incremental profitable Organic Revenue growth
●• contribution to leveraging technology and data to create new capabilities and enhance the customer experience
●• contribution to identifying and evaluating acquisition candidatesacquiring companies that fit culturally, and provide appropriate financial returns and are properly integrated in a timely manner
| |  |
36 | BROWN & BROWN, INC.
COMPENSATION DISCUSSION AND ANALYSIS As illustrated in the table below, the final 20212022 cash incentive amounts were calculated by combining the payout amounts for each of the components discussed above and then rounding the resulting number up to the nearest thousand dollars: | EXECUTIVE OFFICER | | 2021
AGGREGATE
TARGET CASH
INCENTIVE
AMOUNT | | ORGANIC
REVENUE
GROWTH
PAYOUT
AMOUNT | | ADJUSTED
EBITDAC
MARGIN
PAYOUT
AMOUNT | | PERSONAL
OBJECTIVE
PAYOUT
AMOUNT | | TOTAL 2021
CASH
INCENTIVE
PAYOUT
AMOUNT(1) | | PAYOUT
VS. TARGET
CASH
INCENTIVE
AMOUNT | | | J. Powell Brown | | $ | 2,000,000 | | $ | 1,599,709 | | $ | 1,580,000 | | $ | 800,000 | | $ | 3,980,000 | | | 199% | | | R. Andrew Watts | | $ | 700,000 | | $ | 559,948 | | $ | 553,000 | | $ | 280,000 | | $ | 1,393,000 | | | 199% | | | P. Barrett Brown | | $ | 1,000,000 | | $ | 800,355 | | $ | 790,000 | | $ | 400,000 | | $ | 1,991,000 | | | 199% | | | J. Scott Penny | | $ | 900,000 | | $ | 720,219 | | $ | 711,000 | | $ | 360,000 | | $ | 1,792,000 | | | 199% | | | Chris L. Walker | | $ | 1,000,000 | | $ | 800,355 | | $ | 790,000 | | $ | 400,000 | | $ | 1,991,000 | | | 199% | |
| | | | | | | | | | | | | | | | | | | | | | | | | Executive Officer | | 2022
Aggregate
Target Cash
Incentive
Amount | | | Organic
Revenue
Growth
Payout
Amount | | | Adjusted
EBITDAC
Margin
Payout
Amount | | | Personal
Objective
Payout
Amount | | | Total 2022
Cash
Incentive
Payout
Amount(1) | | | Payout vs.
Target
Cash
Incentive
Amount | | | | | | | | | J. Powell Brown | | $ | 2,000,000 | | | $ | 1,400,144 | | | $ | 600,000 | | | $ | 500,000 | | | $ | 2,501,000 | | | | 125 | % | | | | | | | | R. Andrew Watts | | $ | 700,000 | | | $ | 490,050 | | | $ | 210,000 | | | $ | 280,000 | | | $ | 981,000 | | | | 140 | % | | | | | | | | P. Barrett Brown | | $ | 1,400,000 | | | $ | 588,350 | | | $ | 420,000 | | | $ | 480,000 | | | $ | 1,489,000 | | | | 106 | % | | | | | | | | J. Scott Penny | | $ | 900,000 | | | $ | 630,065 | | | $ | 270,000 | | | $ | 360,000 | | | $ | 1,261,000 | | | | 140 | % | | | | | | | | Chris L. Walker | | $ | 1,000,000 | | | $ | 800,355 | | | $ | 300,000 | | | $ | 400,000 | | | $ | 1,501,000 | | | | 150 | % |
| (1) | The 20212022 cash incentive payouts are also shown in the Summary Compensation Table under the “Non-Equity Incentive Plan Compensation” column. |
While not exercised in 2021,2022, the Compensation Committee expressly reserves the right, in its sole discretion, to reduce the annual cash incentive for any Named Executive Officer, or to pay no annual cash incentive at all, if the Company’s performance is unexpectedly poor or if the intended recipient commits acts of malfeasance.
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Compensation Discussion and Analysis
2021 Discretionary Bonuses
Each of the Named Executive Officers is eligible to receive an additional discretionary bonus upon such terms and conditions as might be determined by the Chief Executive Officer, subject to the approval of the Compensation Committee, or, in the case of the Chief Executive Officer, as might be determined by the Compensation Committee. In January 2022,2023, the Compensation Committee approved the discretionary bonuses for certain Named Executive Officers based upon the Company’s strong total shareholder returns over the past five years, including total shareholder returns of 49% for 2021, as well as their outstanding individual performance and the overall performance of the Company and/or the offices over which they had oversight responsibility during 2021,2022, as follows: | EXECUTIVE OFFICER | | 2021 DISCRETIONARY
BONUS AMOUNT(1) | | | J. Powell Brown | | $ | 1,020,000 | | | R. Andrew Watts | | $ | 300,000 | | | P. Barrett Brown | | $ | 500,000 | | | J. Scott Penny | | $ | 450,000 | | | Chris L. Walker | | $ | 500,000 | |
| | | | | Executive Officer | | 2022 Discretionary
Bonus Amount(1) | | | | R. Andrew Watts | | $ | 60,000 | (2) | | | | J. Scott Penny | | $ | 20,000 | (3) |
| (1) | The 20212022 discretionary bonus amounts are also shown in the Summary Compensation Table under the “Bonus” column. |
2021
| (2) | The decision to approve a discretionary bonus of $60,000 to Mr. Watts was based upon the recommendation by Mr. Powell Brown and Mr. Watts’ contributions to the financing activities associated with the Company’s acquisition of GRP during 2022, including (a) the issuance in March 2022 of $600.0 million aggregate principal amount of the Company’s 4.200% Senior Notes due 2032 and $600.0 million aggregate principal amount of the Company’s 4.950% Senior Notes due 2052 and (b) the Company’s entry in March 2022 into a Loan Agreement evidencing unsecured delayed draw term loans in an aggregate amount of up to $300.0 million and unsecured delayed draw term loans in an amount of up to $500.0 million. |
| (3) | The decision to approve a discretionary bonus of $20,000 to Mr. Penny was based upon the recommendation by Mr. Powell Brown and Mr. Penny’s contributions to the negotiation and consummation of the Company’s acquisition of GRP during 2022. |
BROWN & BROWN, INC. | 37
COMPENSATION DISCUSSION AND ANALYSIS 2022 Equity Incentive Grants We endeavor to make our long-term equity incentive arrangements, which are generally granted on an annual basis, competitive and aligned with shareholder interests, as reflected in the following structure: TERMS | | | Terms | | RATIONALERationale | | | In general, 75% of shares granted to each executive officer as a Performance Stock Award (“PSA”) that vest based on performance (over a three-year period) and time (over a five-year period from the date of grant); 25% of shares granted to each executive officer as a Restricted Stock Award (“RSA”) that vest on time only (over a five-year period from the date of grant) | | Tying a majority of our equity awards to pre-established corporate financial objectives which drive long-term shareholder returns should more closely align the long-term interests of our executive officers and our shareholders |
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TERMS | | RATIONALE | Vesting of PSA shares tied to increases in the Company’s Organic Revenue growth (as further defined in the applicable award agreement) and compound annual growth rate of the Company’s cumulative diluted earnings per share, excluding any impact for changes in acquisition earn-out liabilities, in each case measured over a three-year period beginning January 1, 20212022 | | Organic Revenue growth and cumulative diluted earnings per share are easily understandable, directly influenced by our executive officers and are intended to drive our long-term shareholder value | | | PSAs granted to our executive officers contemplate a minimum payout of 0% and a maximum payout of 200% based upon the level of performance of each performance condition during the three-year measurement period | | Payouts for above-target performance motivate our executive officers to overperform; recognition of performance that may be less than target | | | PSAs are subject to both performance-based and time-based vesting conditions. In addition to the performance conditions described above, PSAs granted in February 20212022 are subject to an additional time-based, cliff vesting condition requiring five years of continuous employment from the date of grant | | A combination of performance- and time-based vesting conditions is intended to achieve a strong alignment between pay and performance and incentivize the long-term retention of our executive officers and key employees | | | RSAs are subject to a cliff vesting condition requiring five years of continuous employment from the date of grant; RSA recipients acquired voting and dividend rights at the time of grant but cannot dispose of the shares | | Equity awards with time-based vesting conditions continue to operate as a complement to our traditional equity awards characterized by both performance-based and time-based vesting conditions to further incentivize and reward key personnel; continued inclusion of a longer-term equity award (e.g., five years) helps attract, motivate and retain individuals whose performance drives our results | | | For certain executive officers aged 60 and older, equity awards are structured as performance stock units (PSUs) and restricted stock units (RSUs), rather than as PSAs and RSAs, to allow for the payment of awards following an executive officer’s qualified retirement | | Allowing for the payment of awards following an executive officer’s qualified retirement more effectively rewards and incentivizes executive officers who are approaching an age at which retirement is more likely |
We do not grant equity awards in anticipation of the release of material non-public information, and we do not time the release of material non-public information based on equity award grant dates. 38 | BROWN & BROWN, INC.
COMPENSATION DISCUSSION AND ANALYSIS February 2022 Equity Incentive Grants Based upon the recommendation of our Chief Executive Officer and, with respect to our Chief Executive Officer, based upon the Compensation Committee’s annual evaluation of our Chief Executive Officer’s performance, as well as input from FW Cook, the following long-term equity incentive awards for our Named Executive Officers were approved by our Compensation Committee in February 2021:2022: | EXECUTIVE OFFICER | | 2021
PERFORMANCE
STOCK AWARD
(75%) | | 2021
RESTRICTED
STOCK AWARD
(25%) | | TOTAL 2021
LONG-TERM
EQUITY INCENTIVE
AWARDS
(100%) | | TOTAL 2020
LONG-TERM
EQUITY
INCENTIVE
AWARDS | | CHANGE | | | J. POWELL BROWN | | $ | 2,250,000 | | $ | 750,000 | | $ | 3,000,000 | | $ | 3,000,000 | | $ | — | | | R. Andrew Watts | | $ | 637,500 | | $ | 212,500 | | $ | 850,000 | | $ | 700,000 | | $ | 150,000 | (1) | | P. Barrett Brown | | $ | 375,000 | | $ | 125,000 | | $ | 500,000 | | $ | 500,000 | | $ | — | | | J. Scott Penny | | $ | 375,000 | | $ | 125,000 | | $ | 500,000 | | $ | 500,000 | | $ | — | | | Chris L. Walker | | $ | 375,000 | | $ | 125,000 | | $ | 500,000 | | $ | 500,000 | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | Executive Officer | | 2022
Performance
Stock Award
(75%) | | | 2022
Restricted
Stock Award
(25%) | | | Total 2022
Long-Term
Equity Incentive
Awards (100%) | | | Total 2021
Long-Term
Equity Incentive
Awards | | | Change | | | | | | | | J. Powell Brown(1) | | $ | 2,250,000 | | | $ | 750,000 | | | $ | 3,000,000 | | | $ | 3,000,000 | | | $ | — | | | | | | | | R. Andrew Watts(1) | | $ | 525,000 | | | $ | 175,000 | | | $ | 700,000 | | | $ | 850,000 | | | $ | (150,000 | )(2) | | | | | | | P. Barrett Brown(1) | | $ | 375,000 | | | $ | 125,000 | | | $ | 500,000 | | | $ | 500,000 | | | $ | — | | | | | | | | J. Scott Penny(1) | | $ | 375,000 | | | $ | 125,000 | | | $ | 500,000 | | | $ | 500,000 | | | $ | — | | | | | | | | Chris L. Walker(3) | | $ | 375,000 | | | $ | 125,000 | | | $ | 500,000 | | | $ | 500,000 | | | $ | — | |
| (1) | The decision to increase long-term equity incentive awards for Messrs. Powell Brown, Watts, Barrett Brown and Penny are structured as PSAs and RSAs, for which vesting is conditioned upon the grantee’s continuous employment for five years following the date of grant. |
| (2) | Mr. Watts’ 2021 long-term equity incentive award from $700,000 to $850,000 reflectsreflected a one-time incremental increase of $150,000 in recognition of his leadership in developing the Company’s new Daytona Beach, Florida, campus, which was completed in 2020.2021. |
| (3) | 2022 PROXY STATEMENT | | 45 | | |
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Equity Incentive Plan Outcomes in 2021
In February 2018, certain of our Named Executive Officers received grants of PSAs under our 2010 SIP, which included performance conditions of vesting based upon the following, in each case excluding items (for example, extraordinary, nonrecurring items) the Compensation Committee determines to be appropriately disregarded for all grants subject to this vesting condition: (i) the Company’s average Organic Revenue growth (“Average Organic Revenue Growth”) and (ii) the compounded annual growth rate (“CAGR”) of our diluted earnings per share, excluding the impact of the change in estimated acquisition earn-out payables and any other items (for example, extraordinary, nonrecurring items) that the Compensation Committee determines to be appropriately disregarded for all grants subject to this vesting condition (“Adjusted EPS”). Under the applicable award agreements, the performance condition is satisfied (i) for one-half of the shares granted based on our Average Organic Revenue Growth during the three-year performance period ending December 31, 2020, as follows:
| PERFORMANCE LEVEL | | AVERAGE ORGANIC REVENUE GROWTH | | AWARDED PERCENTAGE OF
TRANCHE 1 PERFORMANCE SHARES | | Maximum | | Equal to or greater than 4.5% | | 200% | | High Target | | 3.5% | | 120% | | Target | | 3.0% | | 100% | | Low Target | | 2.5% | | 80% | | Threshold | | 1.5% | | 50% | | No Payout | | Less than 1.5% | | 0% |
and (ii) for one-half of the shares granted based on the CAGR of our Adjusted EPS during the three-year performance period ending December 31, 2020, as follows:
| PERFORMANCE LEVEL | | ADJUSTED EPS | | CAGR | | AWARDED PERCENTAGE OF
TRANCHE 2 PERFORMANCE SHARES | | Maximum | | Equal to or greater than | | Equal to or greater than | | 200% | | | | $4.16 | | 11.0% | | | | High Target | | $4.00 | | 9.0% | | 120% | | Target | | $3.89 | | 7.5% | | 100% | | Low Target | | $3.78 | | 6.0% | | 80% | | Threshold | | $3.71 | | 5.0% | | 50% | | No Payout | | Less than $3.71 | | Less than 5.0% | | 0% |
If the actual performance level for each performance condition falls in between any of the performance levels, the percentage of shares that are awarded is determined based on straight-line interpolation.
In February 2021, the Compensation Committee determined that:
● | our cumulative Average Organic Revenue Growth,The Compensation Committee determined that to more effectively reward and retain Mr. Walker, who is 64 years old, it was desirable to grant him PSUs and RSUs, which excludedallow for the positive impactpayment following his qualified retirement of “Revenue from ContractsPSUs that become awarded PSUs and the RSUs. If Mr. Walker’s retirement occurs before the third anniversary of the date of grant, the PSUs that become awarded PSUs and the RSUs will be paid to Mr. Walker on the second anniversary of his retirement, subject to Mr. Walker being in good standing with Customers (Topic 606)” and Accounting Standards Codification Topic 340 – Other Assets and Deferred Cost, both of which were adopted by the Company effective on January 1, 2018 (the “New Revenue Standard”), during the performance period was 3.4% and, therefore, fell between the target and high target performance levels, resulting in a payout percentage of 116%as of the target;date of such payment; and | ● | our Adjusted EPS, which in 2018 excluded if Mr. Walker’s retirement occurs after the positive after-tax impactthird anniversary of the New Revenue Standard,date of grant, the PSUs that become awarded PSUs and whichthe RSUs will be paid to Mr. Walker on the fifth anniversary of the date of grant, subject to Mr. Walker being in 2019 excluded the negative after-tax impact of a legal settlement paid bygood standing with the Company of approximately $4.8 million in 2019 (the “2019 Legal Matter”), and which in 2020 excluded a legal judgment entered into against the Company in 2020 for approximately $6.6 million in connection with the 2019 Legal Matter (the “2020 Legal Matter” and together with the 2019 Legal Matter, the “Legal Matters”), during the performance period was $4.28 and, therefore, fell above the maximum performance level, resulting in a payout percentage of 200%as of the target; |
The Compensation Committee concluded that it was desirable to make certain adjustments in the calculations of the Company’s actual performance, as follows:
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● Average Organic Revenue Growth and Adjusted EPS excluded the positive impactdate of the New Revenue Standard in 2018 because the adoption of New Revenue Standard was not related to the performance of the Company and did not create any long-term economic value for the Company’s shareholders, as it primarily impacts only the timing of when the Company’s recognizes revenues and expenses during the year; and
● Adjusted EPS excluded the negative after-tax impact of the 2019 Legal Matter in 2019 and the 2020 Legal Matter in 2020 because the underlying legal matter was related to the pre-acquisition activities of a business we acquired in 2012 and was not related to the performance of the Company.
| | The blended payout percentage of the Average Organic Revenue Growth and Adjusted EPS components was
158%
of the target.such payment.
|
Upon the Compensation Committee’s certification of these performance conditions, the following Named Executive Officers gained dividend rights and voting entitlement with respect to the indicated number of shares: Mr. Powell Brown – 89,636; Mr. Watts – 26,887; Mr. Barrett Brown – 13,442; Mr. Penny – 14,340; and Mr. Walker – 22,405. Except in limited circumstances, these shares will become fully vested on February 26, 2023, provided, the grantee remains continuously employed by us until such date.
See Annex A for additional information regarding Adjusted EPS and Organic Revenue growth, which are non-GAAP financial measures, including a reconciliation to the most closely comparable GAAP financial measure.
2022 Compensation
2022 Comparative Market Assessments
FW Cook conducted analyses of our compensation levels for our Chief Executive Officer and Chief Financial Officer in January 2022 (the “2022 CEO/CFO Comparative Market Assessment”) and for our executive officers with responsibility for the Company’s operating segments in February 2022 (the “2022 Segment Head Comparative Market Assessment”), in each case as compared to a group of our peers (the “2022 Comparative Market Assessments”), as described below.
Peer Comparison Group
For the 2022 CEO/CFO Comparative Market Assessment, FW Cook focused on our Peer Comparison Group, other than FBL Financial Group Inc. and Waddell & Reed Financial, Inc., which were acquired since the Compensation Committee had last approved the Peer Comparison Group in July 2021.
For the 2022 Segment Head Comparative Market Assessment, FW Cook focused on only those peers within the Peer Comparison Group that are insurance brokers and for which compensation information was available for executive officers with direct responsibility for operating segments similar to those overseen by our executive officers (the “Select Segment Head Peers”).
For a discussion of the Peer Comparison Group, including a list of peers comprising the Peer Comparison Group, see “2021 Director Compensation” above.
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Compensation Discussion and Analysis
Survey Comparison
As part of the 2022 CEO/CFO Comparative Market Assessment and the 2022 Segment Head Comparative Market Assessment, the Compensation Committee also reviewed and considered data from certain third-party surveys.
Results of the 2022 Comparative Market Assessments
Based upon the results of the 2022 CEO/CFO Comparative Market Assessment, the Compensation Committee determined that, among other things, the total 2021 direct compensation for Messrs. Powell Brown and Watts, which includes their base salary, target cash incentive amount and target long-term equity incentives, was generally aligned with the market blend median. As a result, the Compensation Committee did not apply any pay rate adjustments for Messrs. Powell Brown or Watts for 2022.
Based upon the results of the 2022 Segment Head Comparative Market Assessment, the Compensation Committee determined that, among other things, the total 2021 direct compensation for Messrs. Barrett Brown, Penny and Walker, which includes their base salary, target cash incentive amount and target long-term equity incentives, was below the 50th percentile of the Select Segment Head Peers.
As part of its ongoing evaluation of our executive officers’ compensation and based, in part, on the recommendation of FW Cook, in early 2022, the Compensation Committee approved the framework for our executive officers’ compensation for 2022, as described below.
2022 Base Salaries
The Compensation Committee changed the 2022 base salaries of certain of our Named Executive Officers, as follows:
| EXECUTIVE OFFICER | | 2022
BASE SALARY | | 2021
BASE SALARY | | CHANGE | | | J. Powell Brown | | $ | 1,000,000 | | $ | 1,000,000 | | | — | | | R. Andrew Watts | | $ | 600,000 | | $ | 600,000 | | | — | | | P. Barrett Brown | | $ | 800,000 | | $ | 700,000 | | $ | 100,000 | (1) | | J. Scott Penny | | $ | 700,000 | | $ | 600,000 | | $ | 100,000 | (2) | | Chris L. Walker | | $ | 800,000 | | $ | 700,000 | | $ | 100,000 | (3) |
(1) | The decision to increase Mr. Barrett Brown’s 2022 base salary from $700,000 to $800,000 was based upon (a) the increase in his responsibilities resulting from the Retail segment’s total revenues increasing in 2021 by 20% to approximately $1.8 billion, and (b) the 2022 Segment Head Comparative Market Assessment and the conclusion that his 2021 target total direct compensation was below the 50th percentile of the Select Segment Head Peers. | (2) | The decision to increase Mr. Penny’s 2022 base salary from $600,000 to $700,000 was based upon (a) his increased operational responsibility during 2021, and his expected increased operational responsibility in 2022, for certain offices within the Company’s Retail segment, in addition to his ongoing role as Chief Acquisitions Officer, and (b) the 2022 Segment Head Comparative Market Assessment and the conclusion that his 2021 target total direct compensation was below the 50th percentile of the Select Segment Head Peers. | (3) | The decision to increase Mr. Walker’s 2020 base salary from $700,000 to $800,000 was based upon (a) the increase in his responsibilities resulting from the National Programs segment’s total revenues increasing in 2021 by 15% to approximately $700 million, and (b) the 2022 Segment Head Comparative Market Assessment and the conclusion that his 2021 target total direct compensation was below the 50th percentile of the Select Segment Head Peers. |
2022 Annual Cash Incentives
In February 2022, the Compensation Committee determined not to change the components of our annual executive officer cash incentives, the weighting of each component, or the target cash incentive amounts for our Named Executive Officers, except for Mr. Barrett Brown. For Mr. Barrett Brown, the Compensation Committee increased his 2022 target cash incentive amount from $1,000,000 to $1,400,000 based upon (a) the increase in his responsibilities resulting from the Retail segment’s total revenues increasing in 2021 by
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20% to approximately $1.8 billion, and (b) the 2022 Segment Head Comparative Market Assessment and the conclusion that his 2021 target total direct compensation was below the 50th percentile of the Select Segment Head Peers.
2022 Equity Incentive Grants
January 2022 Equity Incentive Grants In addition to the annual long-term equity incentive arrangements described above, we may periodically grant other long-term equity incentive awards to our executive officers and other key employees to recognize and reward specific achievements and/or the previous year’s performance. In December 2021, based upon the recommendation of our Chief Executive Officer, as well as input from FW Cook, the Compensation Committee approved long-term equity incentive awards, effective as of January 1, 2022, to the following Named Executive Officers: | EXECUTIVE OFFICER | | RESTRICTED
STOCK AWARDS | | RESTRICTED
STOCK UNITS | | | R. Andrew Watts | | $ | 2,000,000 | | $ | — | | | P. Barrett Brown | | $ | 2,000,000 | | $ | — | | | J. Scott Penny | | $ | 2,000,000 | | $ | — | | | Chris L. Walker(1) | | $ | — | | $ | 2,000,000 | |
| | | | | | | | | Executive Officer | | Restricted
Stock Awards | | | Restricted
Stock Units | | | | | R. Andrew Watts | | $ | 2,000,000 | | | $ | — | | | | | P. Barrett Brown | | $ | 2,000,000 | | | $ | — | | | | | J. Scott Penny | | $ | 2,000,000 | | | $ | — | | | | | Chris L. Walker(1) | | $ | — | | | $ | 2,000,000 | |
| (1) | While the Company has historically structured the long-term equity incentive awards for our executive officers as RSAs, for which vesting is conditioned upon the grantee’s continuous employment through a specified date, the Compensation Committee determined that to better reward and retain Mr. Walker, who iswas 64 years old at that time, it was desirable to grant him Restricted Stock Units (RSUs), which allow for the payment of awarded RSUs following his qualified retirement, as described below.retirement. |
The Compensation Committee’s decision to approve these long-term equity incentive awards was based upon the exceptional performance during 2021 of each Named Executive Officer, the Company and/or the offices over which our Named Executive Officers had oversight responsibility during 2021, as well as the Company’s strong total shareholder returns during the past several years. Unlike the long-term equity incentive grantsawards the Compensation Committee generally approvesgranted in February of each year, which typically vest five years following the date of grant, these long-term equity grants have a 7.5-year incremental vesting period, as follows, which is intended to further incentivize the long-term retention of our Named Executive Officers: RSAs for Messrs. Watts, Barrett Brown and Penny These RSAs will vest in increments of 25%, 25%, and 50% on July 1, 2027, July 1, 2028 and July 1, 2029, respectively, assuming continuous employment through such vesting dates, provided that vesting will accelerate in the event of death, disability or termination (including constructive termination) without cause within 12 months following a change in control of the Company. BROWN & BROWN, INC. | 39
COMPENSATION DISCUSSION AND ANALYSIS RSUs for Mr. Walker These RSUs will be awarded in five equal installments on the first five anniversaries of the date of grant and, once awarded, will vest in increments of 25%, 25%, and 50% on July 1, 2027, July 1, 2028 and July 1, 2029, respectively, assuming continuous employment through such vesting dates, provided that vesting will accelerate in the event of death, disability or termination (including constructive termination) without cause within 12 months following a change in control of the Company. If Mr. Walker’s retirement occurs on or before July 1, 2027, awarded RSUs will be paid in increments of 25% on the first year anniversary of retirement and 75% on the second anniversary of retirement, subject to Mr. Walker being in good standing with the Company as of the dates of such payments; and if Mr. Walker’s retirement occurs after July 1, 2027, awarded RSUs will be paid post-retirement on the remaining original scheduled vesting dates, subject to Mr. Walker being in good standing with the Company as of the dates of such payments. Equity Incentive Plan Outcomes in 2022 In February 2019, certain of our Named Executive Officers received grants of restricted stock under our 2010 SIP, which included performance conditions of vesting based upon the following, in each case excluding items (for example, extraordinary, nonrecurring items) the Compensation Committee determines to be appropriately disregarded for all grants subject to this vesting condition: (i) the Company’s average Organic Revenue growth (“Average Organic Revenue Growth”) and (ii) the compounded annual growth rate (“CAGR”) of our earnings per share, excluding the impact of the change in estimated acquisition earn-out payables and any other items (for example, extraordinary, nonrecurring items) that the Compensation Committee determines to be appropriately disregarded for all grants subject to this vesting condition (“Adjusted EPS”). Under the applicable award agreements, the performance condition is satisfied (i) for one-half of the shares granted based our Average Organic Revenue Growth during the three-year performance period ending December 31, 2021, as follows: | | | | | Performance Level | | Average Organic Revenue Growth | | Awarded Percentage of
Tranche 1 Performance Shares | | | | Maximum | | Equal to or greater than 4.5% | | 200% | | | | High Target | | 3.5% | | 120% | | | | Target | | 3.0% | | 100% | | | | Low Target | | 2.5% | | 80% | | | | Threshold | | 1.5% | | 50% | | | | No Payout | | Less than 1.5% | | 0% |
and (ii) for one-half of the shares granted based on the CAGR of our Adjusted EPS during the three-year performance period ending December 31, 2021, as follows: | | | | | | | Performance Level | | Adjusted EPS | | CAGR | | Awarded Percentage of
Tranche 2 Performance Shares | | | | | Maximum | | Equal to or greater than $4.38 | | Equal to or greater than 11.0% | | 200% | | | | | High Target | | $4.22 | | 9.0% | | 120% | | | | | Target | | $4.10 | | 7.5% | | 100% | | | | | Low Target | | $3.98 | | 6.0% | | 80% | | | | | Threshold | | $3.91 | | 5.0% | | 50% | | | | | No Payout | | Less than $3.91 | | Less than 5.0% | | 0% |
If the actual performance level for each performance condition falls in between any of the performance levels, the percentage of shares that are awarded is determined based on straight-line interpolation. In February 2022, the Compensation Committee determined that: | • | | our cumulative Average Organic Revenue Growth, which in 2019 excluded a one-time, non-cash increase of approximately $8 million in the commissions and fees earned by one of the businesses in our National Programs segment in 2018 resulting solely from our implementation of “Revenue from Contracts with Customers (Topic 606)” and Accounting Standards Codification Topic 340 – Other Assets and Deferred Cost, both of which were adopted by the Company effective on January 1, 2018 (the “New Revenue Standard”), and which in 2021, excluded the period-over-period impact of Foreign Currency Translation, during the performance period was 6.1% and, therefore, fell above the maximum performance level, resulting in a payout percentage of 200% of the target and |
40 | BROWN & BROWN, INC.
COMPENSATION DISCUSSION AND ANALYSIS | • | | our Adjusted EPS, which in 2019 excluded the negative after-tax impact of a legal settlement paid by the Company of approximately $4.8 million in 2019 (the “2019 Legal Matter”), and which in 2020 excluded a legal judgment entered into against the Company in 2020 for approximately $6.6 million in connection with the 2019 Legal Matter (the “2020 Legal Matter” and together with the 2019 Legal Matter, the “Legal Matters”), during the performance period was $5.28 and, therefore, fell above the maximum performance level, resulting in a payout percentage of 200% of the target. |
The Compensation Committee concluded that it was desirable to make certain adjustments in the calculations of the Company’s actual performance, as follows: | • | | Average Organic Revenue Growth excluded the positive impact of the New Revenue Standard in 2019 because the adoption of New Revenue Standard was not related to the performance of the Company and did not create any long-term economic value for the Company’s shareholders, as it primarily impacts only the timing of when the Company’s recognizes revenues and expenses during the year and |
| • | | Average Organic Revenue Growth excluded the negative period-over-period impact of Foreign Currency Translation because fluctuations in Foreign Currency Translation are not related to the performance of the Company and |
| • | | Adjusted EPS excluded the negative after-tax impact of the 2019 Legal Matter in 2019 and the 2020 Legal Matter in 2020 because the underlying legal matter was related to the pre-acquisition activities of a business we acquired in 2012 and was not related to the performance of the Company. |
Upon the Compensation Committee’s certification of these performance conditions, the following Named Executive Officers gained dividend rights and voting entitlement with respect to the indicated number of shares: Mr. Powell Brown – 101,660; Mr. Watts – 30,498; Mr. Barrett Brown – 15,248; Mr. Penny – 22,872 and Mr. Walker – 22,872. Except in limited circumstances, these shares will become fully vested on February 25, 2024, provided, the grantee remains continuously employed by us until such date. See Annex A for additional information regarding Adjusted EPS, Organic Revenue growth and Organic Revenue growth – adjusted, which are non-GAAP financial measures, including a reconciliation to the most closely comparable GAAP financial measure. 2023 Compensation October 2022 Comparative Market Assessment In October 2022, FW Cook conducted a comprehensive analysis of our pay practices and executive compensation levels as compared to a group of our peers (the “October 2022 Comparative Market Assessment”), which the Compensation Committee considered, among other things, in connection with certain pay adjustments for our executive officers in 2023, as described below. Peer Comparison Group For the October 2022 Comparative Market Assessment, FW Cook focused on our Peer Comparison Group. For a discussion of the Peer Comparison Group, including a list of peers comprising the Peer Comparison Group, see “2023 Director Compensation.” Survey Comparison As part of the October 2022 Comparative Market Assessment, the Compensation Committee also reviewed and considered data from certain third-party surveys. Results of the 2022 Comparative Market Assessments Based upon the results of the October 2022 Comparative Market Assessment, the Compensation Committee determined that, in the aggregate, the 2022 target total direct compensation for the Company’s executive officers was only slightly below the market median, but that the 2022 target total direct compensation for each of Messrs. Powell Brown and Watts was more meaningfully below the market median. As part of its ongoing evaluation of our executive officers’ compensation and based, in part, on the recommendation of FW Cook, in early 2023, the Compensation Committee approved the framework for our executive officers’ compensation for 2023, as described below. BROWN & BROWN, INC. | 41
COMPENSATION DISCUSSION AND ANALYSIS 2023 Base Salaries The Compensation Committee did not increase the base salaries for the Named Executive Officers in 2023, except for Mr. Watts. The decision to increase Mr. Watts’ 2023 base salary from $600,000 to $650,000 was based upon the October 2022 Comparative Market Assessment and the fact that 2022 target total pay for Mr. Watts was below the market median. 2023 Annual Cash Incentives In February 2023, the Compensation Committee determined not to change the components of our annual executive officer cash incentives, the weighting of each component or the target cash incentive amounts for our Named Executive Officers, except for Messrs. Powell Brown and Watts. For Mr. Powell Brown, the Compensation Committee increased his 2023 target cash incentive amount from $2,000,000 to $3,000,000 based upon the October 2022 Comparative Market Assessment and the fact that 2022 target total pay for Mr. Powell Brown was below the market median. For Mr. Watts, the Compensation Committee increased his 2023 target cash incentive amount from $700,000 to $850,000 based upon the October 2022 Comparative Market Assessment and the fact that 2022 target total pay for Mr. Watts was below the market median. 2023 Equity Incentive Grants Based upon the recommendation of our Chief Executive Officer and, with respect to our Chief Executive Officer, based upon the Compensation Committee’s annual evaluation of our Chief Executive Officer’s performance, as well as input from FW Cook, the following long-term equity incentive awards for our Named Executive Officers were approved by our Compensation Committee in February 2022:
2023: | | | | | | | | | | | | | | | | | | | | | Executive Officer | | 2023
Performance
Award (75%) | | | 2023
Restricted
Award
(25%) | | | Total 2023
Long-Term
Equity Incentive
Awards (100%) | | | Total 2022
Long-Term
Equity Incentive
Awards(1) | | | Change | | | | | | | | J. Powell Brown(2) | | $ | 2,250,000 | | | $ | 750,000 | | | $ | 3,000,000 | | | $ | 3,000,000 | | | $ | — | | | | | | | | R. Andrew Watts(2) | | $ | 750,000 | | | $ | 250,000 | | | $ | 1,000,000 | | | $ | 700,000 | | | $ | 300,000 | (3) | | | | | | | P. Barrett Brown(2) | | $ | 375,000 | | | $ | 125,000 | | | $ | 500,000 | | | $ | 500,000 | | | $ | — | | | | | | | | J. Scott Penny(2) | | $ | 375,000 | | | $ | 125,000 | | | $ | 500,000 | | | $ | 500,000 | | | $ | — | | | | | | | | Chris L. Walker(4) | | $ | 375,000 | | | $ | 125,000 | | | $ | 500,000 | | | $ | 500,000 | | | $ | — | |
| (1) | The amounts reported in this column do not include the long-term equity incentive awards, effective January 1, 2022, PROXY STATEMENT | | 49 | | valued at $2,000,000 and granted to each of Messrs. Watts, Barrett Brown, Penny and Walker. For more information about the long-term equity incentive awards approved effective January 1, 2022, see “January 2022 Equity Incentive Grants.” |
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| EXECUTIVE OFFICER | | 2022
PERFORMANCE-
BASED AWARD
(75%) | | | 2022
TIME-BASED-
ONLY AWARD
(25%) | | | TOTAL 2022
LONG-TERM
EQUITY INCENTIVE
AWARDS
(100%) | | | TOTAL 2021
LONG-TERM
EQUITY INCENTIVE
AWARDS | | | CHANGE | | | J. Powell Brown(1) | | $ | 2,250,000 | | | $ | 750,000 | | | $ | 3,000,000 | | | $ | 3,000,000 | | | $ | — | | | R. Andrew Watts(1) | | $ | 525,000 | | | $ | 175,000 | | | $ | 700,000 | | | $ | 850,000 | | | $ | (150,000 | )(2) | | P. Barrett Brown(1) | | $ | 375,000 | | | $ | 125,000 | | | $ | 500,000 | | | $ | 500,000 | | | $ | — | | | J. Scott Penny(1) | | $ | 375,000 | | | $ | 125,000 | | | $ | 500,000 | | | $ | 500,000 | | | $ | — | | | Chris L. Walker(3) | | $ | 375,000 | | | $ | 125,000 | | | $ | 500,000 | | | $ | 500,000 | | | $ | — | |
(1)(2) | The long-term equity incentive awards for Messrs. Powell Brown, Watts, Barrett Brown and Penny are structured as PSAs and RSAs, for which vesting is conditioned upon the grantee’s continuous employment for five years following the date of grant. |
(2)(3) | The decision to increase Mr. Watts’ 20212023 long-term equity incentive award reflected a one-time incremental increase of $150,000 in recognition of his leadership in developingfrom $700,000 to $1,000,000 was based upon the Company’s new Daytona Beach, Florida, campus, whichOctober 2022 Comparative Market Assessment and the fact that 2022 target total pay for Mr. Watts was completed in 2020.17% below the market median. |
(3)(4) | The Compensation Committee determined that to better reward and retain Mr. Walker, who is 6465 years old, it was desirable to grant him Performance Stock Units (PSUs)PSUs and RSUs, which allow for the payment following his qualified retirement of PSUs that become awarded PSUs and the RSUs. If Mr. Walker’s retirement occurs before the third anniversary of the date of grant, the PSUs that become awarded PSUs and the RSUs will be paid to Mr. Walker on the second anniversary of his retirement, subject to Mr. Walker being in good standing with the Company as of the date of such payment; and if Mr. Walker’s retirement occurs after the third anniversary of the date of grant, the PSUs that become awarded PSUs and the RSUs will be paid to Mr. Walker on the fifth anniversary of the date of grant, subject to Mr. Walker being in good standing with the Company as of the date of such payment. |
Other Compensation We also provide the following compensation and benefits to attract and retain key employees. Benefits Generally Along with all other full-time employees, each of the Named Executive Officers is eligible: (a) to receive matching contributions to the Company’s 401(k) Plan; (b) to participate in our ESPP; (c) to participate in group medical, dental and other benefit plans and (d) to the extent permitted by applicable law, for reimbursement of amounts earned by the Company on personal lines insurance such as homeowners and flood insurance purchased by such Named Executive Officer. Our 401(k) Plan provides for matching contributions of up to four percent (4.0%) of the contributions made by each participant. The 401(k) Plan also permits discretionary profit-sharing contributions, but the Company made no such contributions to the accounts of Named Executive Officers for 2021.2022. 42 | BROWN & BROWN, INC.
COMPENSATION DISCUSSION AND ANALYSIS Dividend Payments on Unvested Stock Awards The Named Executive Officers receive dividends on unvested shares, or dividend equivalents on unvested units, granted pursuant to the Company’s equity incentive compensation plans (i) that have exclusively time-based vesting requirements (e.g., time-based RSAs or RSUs), or (ii) for which the applicable performance conditions have been satisfied in accordance with the applicable award agreements, but the time-based vesting requirements have not been satisfied (e.g., performance-based PSAs or PSUs). Deferred Compensation Plan The Named Executive Officers are eligible to participate in the Company’s non-qualified deferred compensation plan, which provides the opportunity to defer receipt of up to 75% of base salary and up to 100% of cash incentive and bonus compensation. Participant deferrals are credited to the participant’s deferral contribution account. The participant’s account is credited with earnings based on the performance of the participant’s investment allocation among a menu of investment options designated by the Company. The Company is permitted, but not required, to make matching contributions and other discretionary contributions under this plan. The Company made no matching or other discretionary contributions to the accounts of Named Executive Officers for 2021. 50 | | | | | |
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Compensation Discussion and Analysis2022.
A participant’s account under the Company’s non-qualified deferred compensation plan generally is distributed in a lump sum or installments upon the participant’s retirement, other termination of employment or death. However, in some circumstances (including hardship), all or a portion of the participant’s deferral account may be distributed on one or more specified dates prior to termination of employment. Participants elect at the time of deferral to have the distributions made in a lump sum or annual installments. Personal Benefits Certain golf or social club membership dues paid by the Named Executive Officers who have responsibility for the entertainment of customers,clients, prospective customersclients and principals of acquisition prospects may be reimbursed by the Company or paid on behalf of the Named Executive Officer. Additionally, the Company reimburses the costs of annual physical examinations that are not otherwise covered by insurance, certain car service expenses, and for certain financial and tax planning services for each of the Named Executive Officers. Policy on Tax Deductibility The deductibility of compensation payments can depend upon numerous factors, including the nature of the payment and the time that income is recognized under various plans, agreements and programs. Interpretations of and changes in applicable tax laws and regulations and other factors beyond the Compensation Committee’s control also can affect the deductibility of compensation. The Compensation Committee considers the anticipated tax treatment of the Company’s compensation programs and payments, including the potential impact of Section 162(m) of the United States Internal Revenue Code of 1986, as amended. Section 162(m) disallows a tax deduction for any publicly held corporation for individual compensation exceeding one million dollars in any taxable year for certain executive officers. Before the effective date of the Tax Cuts and Jobs Act of 2017 (the “Tax Reform Act”), which was signed into law in December 2017, amounts in excess of one million dollars were deductible if they qualified as performance-based compensation under a plan that was approved by the shareholders and that met certain other technical requirements. With respect to awards made before the Tax Reform Act, our general policy was to try to deliver equity-based compensation to employees in as tax-efficient a manner as possible, taking into consideration the overall cost to the Company. However, because our interests and our shareholders’ interests may sometimes be best served by providing compensation that is not deductible in order to attract and retain high-quality people that are crucial to both the short-term and long-term success of the Company, the Compensation Committee has determined at this time to retain the flexibility to provide for compensation that is not deductible. As a result of the Tax Reform Act, the exemption from the Section 162(m) deduction limit for performance-based compensation has been repealed, effective for taxable years beginning after December 31, 2017. Therefore, compensation paid to our covered executive officers in excess of one million dollars is not deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017. Also, the Tax Reform Act expands the number of individuals covered by the Section 162(m) deduction limit. We will continue to monitor the pre-2018 equity-based awards and endeavor to preserve the deductibility of such awards if and when they are paid. Despite the Compensation Committee’s efforts to structure these awards in a manner intended to be exempt from the Section 162(m) deduction limit, because of uncertainties as to the application and interpretation of Section 162(m) after the Tax Reform Act and the Internal Revenue Service regulations that govern the scope of the transition relief provided by the legislation, no assurance can be given that compensation intended to satisfy the requirements for exemption from Section 162(m) will do so. In addition, the Compensation Committee reserves the right to modify compensation that was initially intended to be exempt from Section 162(m) if it determines that such modifications are consistent with the Company’s business needs. BROWN & BROWN, INC. | 43
COMPENSATION DISCUSSION AND ANALYSIS Payments Upon Termination or Change in Control With the exception of Mr. Walker and Mr. Watts, all of the Named Executive Officers have employment agreements with the Company that include change-in-control provisions. The terms of our employment agreements with our Named Executive Officers are described below in “Employment and Deferred Compensation Agreements.”
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The 2010 SIP and 2019 SIP provide for double-trigger vesting under which all participants, including all of the Named Executive Officers, would become vested in the following amounts if the participant’s service with us is involuntarily or constructively terminated (other than for specified causes, as set forth in the 2010 SIP and 2019 SIP) within 12 months after a change-in-control transaction, which is defined in each plan and designated as a “Transfer of Control” in the 2010 SIP and a “Change in Control” the 2019 SIP: ●• | For | for all grants, except those performance-based restricted stock and unit grants in or after February 2020,2021, 100% of all unvested restricted stock and unit grants granted pursuant to such 2010 SIP or 2019 SIP grants agreements and |
●• | For | for all performance-based restricted stock and unit grants in or after February 2020,2021, the greater of: (a) 100% of such unvested restricted stock and unit grants or (b) the percentage of unvested restricted stock and unit grants determined in accordance with the applicable performance schedule based upon the actual level of achievement (up to the applicable maximum level of achievement) from the first day of the performance period to the date on which the change-in-control transaction occurs. |
For information concerning the value of the vested shares that each of the Named Executive Officers would have under the 2010 SIP and the 2019 SIP in the event that termination of employment after a change-in-control transaction had occurred on the last business day of 2021,2022, see the table titled “Potential Payments Upon Termination or Change in Control - 2021” below.– 2022.” The PSP (which was terminated in 2010) provides that all outstanding grants of PSP stock shall become fully vested and non-forfeitable in the event of: (i) the Company’s entry into any agreement to sell all or substantially all of its assets or to enter into any merger, consolidation, reorganization, division or other corporate transaction in which Company stock is converted into another security or into the right to receive securities or property, where such agreement does not provide for the assumption or substitution of PSP stock; (ii) any tender or exchange offer for the Company’s stock accepted by a majority of the shareholders of the Company; or (iii) the death of J. Hyatt Brown and the subsequent sale by his estate, his wife, his lineal descendants, any trust created for his benefit during his lifetime, or any combination of the foregoing, of the Company stock owned by J. Hyatt Brown prior to his death. The PSP further provides that if any shares of PSP stock become fully vested and non-forfeitable because of the occurrence of these events, the Company shall pay to the holders of such shares, within 60 days of the occurrence of such event, the full amount of any federal and state income tax liability incurred by such holder as a result of such vesting, including, without limitation, any excise tax with respect to such vesting (e.g., under Internal Revenue Code Section 4999 and any successor provision) as well as the amount of any tax liability with respect to such “gross-up” payment. This excise tax gross-up provision is a legacy provision that applies only to awards that were granted under the PSP prior to its suspension in 2010, and no new agreements that contain excise tax gross-up provisions have been entered into, and no previous agreements containing such legacy provisions have been materially amended. Additionally, the PSP provides that in the event of any “Change in Control” (as defined in the PSP, and excluding the triggering events described above), the Board thereafter shall have the right to take such action with respect to any shares of PSP stock that are forfeitable, or all such shares of PSP stock, as the Board in its discretion deems appropriate under the circumstances to protect the interests of the Company in maintaining the integrity of the awards under the PSP. The PSP further states that the Board shall have the right to take different action with respect to different “Key Employees” (as defined in the PSP) or different groups of “Key Employees,” as the Board in its discretion deems appropriate under the circumstances. For information concerning the value of the vested PSP stock that each of the Named Executive Officers would have in the event that one of the triggering events described above occurred on the last business day of 2021,2022, see the table titled “Potential Payments Upon Termination or Change in Control - 2021” below. 52 | | | | | |
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Compensation Discussion and Analysis
Employment and Deferred Compensation Arrangements Messrs. Powell Brown, Barrett Brown and PennyMESSRS. POWELL BROWN, BARRETT BROWN AND PENNY
Messrs. Powell Brown and Penny entered into new employment agreements with the Company in 2014, and Mr. Barrett Brown entered into a new employment agreement with the Company in 2015, in each case replacing previous employment agreements that had different terms. Compensation under these agreements is not specified, but rather is to be agreed upon between us and the executive from time to time. See “Compensation Discussion and Analysis” for information concerning the considerations affecting the compensation of the Named Executive Officers. The agreements include a provision that states that in the event of a “Change in Control,” defined as a circumstance in which the holders of more than 50% of the voting stock of the Company before the transaction closes hold less than 50% of the voting stock of the Company after the transaction closes, if the resulting entity employs executives with duties similar in character, classification or responsibilities to the Named Executive Officer’s, the Agreement shall be 44 | BROWN & BROWN, INC.
COMPENSATION DISCUSSION AND ANALYSIS deemed modified to provide the Named Executive Officer with “equivalent terms and benefits to those of similar executives.” The new employment agreements include, among other provisions, restrictive covenants prohibiting the solicitation or diversion of business or employees for a period of two years following voluntary or involuntary separation from employment and also prohibit disclosure of confidential information. These agreements may be terminated by either party at any time, with or without cause or advance notice. Mr. WalkerMR. WALKER
Mr. Walker entered into an employment agreement with the Company effective January 9, 2012, in connection with our acquisition of Arrowhead General Insurance Agency, Inc. The agreement may be terminated by either party at any time, with or without cause or advance notice. Compensation under the agreement is at an amount agreed upon between us and Mr. Walker from time to time, and for a period of two years following the termination of employment, the agreement prohibits Mr. Walker from directly or indirectly soliciting or servicing our customers, or soliciting our employees to leave their employment with us. Mr. WattsMR. WATTS
In connection with his hiring in 2014, Mr. Watts and the Company entered into an employment agreement with an initial term that ended on February 17, 2017 (the “Term”), pursuant to which, among other things, Mr. Watts: (1) received a stock grant with a grant date fair value of $250,002 that fully vested on February 17, 2019 (i.e., five years after the date of grant); (2) received a stock grant with a grant date fair value of $474,991 that fully vested on February 17, 2017 (i.e., three years after the date of grant); and (3) received a stock grant with grant date fair value of $800,020, which included a five-year, performance-based vesting condition that the Compensation Committee determined in February 2019 was achieved and vested in years five, six and seven. Following the conclusion of the Term on February 17, 2017, the terms of the employment agreement continued in effect, except that the agreement may now be terminated by either party at any time, with or without cause or advance notice. Compensation under the agreement is at an amount agreed upon between us and Mr. Watts from time to time, and for a period of two years following the termination of employment, the agreement prohibits Mr. Watts from directly or indirectly soliciting or servicing our customers, or soliciting our employees to leave their employment with us. The above descriptions of our employment agreements with our Named Executive Officers are summaries and are qualified by reference to the copies of such agreements that have been filed as exhibits to our SEC filings as follows: ●• | | With respect to Messrs. Powell Brown, Barrett Brown and Penny, Exhibit 10.2 to Form 10-Q for the quarter ended September 30, 2014; |
●• | | With respect to Mr. Watts, Exhibit 10.2 to Form 10-Q for the quarter ended March 31, 2014;2014 and |
●• | | With respect to Mr. Walker, Exhibit 10.1 to Form 10-Q for the quarter ended March 31, 2013. |
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Compensation Discussion and Analysis
Hedging and Pledging Policies; Stock Ownership Requirements; Clawback Policy The Board has adopted policies prohibiting the hedging (as defined below) of our stock by directors, executive officers and other members of our Senior Leadership Team and prohibiting the pledging of our stock by directors, as well prohibiting the pledging of our stock held pursuant to our stock ownership requirements by our executive officers and other members of our Senior Leadership Team. For the purposes of this policy, “hedging” includes engaging in short sales of Company stock and engaging in hedging transactions in publicly traded options that are based on the trading price of Company stock, such as puts, calls and other derivative securities. BROWN & BROWN, INC. | 45
COMPENSATION DISCUSSION AND ANALYSIS Our stock ownership requirements provide that members of the Company’s Senior Leadership Team must accumulate Company stock valued at the following multiples of their base salaries within three years of hire or promotion, and retain such stock until retirement, separation from employment or removal from one of the categories set forth below: STOCK OWNERSHIP GUIDELINES -– NAMED EXECUTIVE OFFICER COMPLIANCE
AS OF DECEMBER 31, 20212022 
| (1) | Ownership levels include: (i) shares owned directly or indirectly, excluding shares owned by immediate family members as to which beneficial ownership is disclaimed; (ii) unvested PSP shares that have met the applicable performance conditions under the applicable award agreements; and (iii) unvested 2010 SIP and 2019 SIP shares or units that (a) are subject to a time-based-only vesting condition or (b) have met the applicable performance conditions under the applicable award agreements. For Messrs. Powell Brown and Barrett Brown, ownership levels exclude 2,384,5482,201,877 shares held by the James Hyatt Brown Nongrantor Charitable Lead Annuity Trust, of which each of them is a trustee and a remainder beneficiary. |
| (2) | The ownership requirements are as follows: Chief Executive Officer -– six times base salary; Senior Leadership Team members who are “officers” pursuant to Section 16 of Securities Exchange Act 1934 -– three times base salary;salary and Senior Leadership Team members who are not “officers” pursuant to Section 16 of the Securities Exchange Act of 1934 -– one times base salary. |
In addition, each non-employee director is required to accumulate Brown & Brown common stock valued at least five times the current annual cash retainer within five years of joining the Board. | | | | | | | | | | | | | On average, each of our non-employee directors owns Brown & Brown common stock valued at | | 52x
44x
the current annual cash retainer.retainer as of December 31, 20212022. | | |
The Board has adopted a policy that provides for the clawback of certain performance-based compensation in the event of a restatement of the Company’s financial results, other than a restatement caused by a change in applicable accounting rules or interpretations. Under the policy, if any performance-based equity or non-equity compensation paid to a current or former officer of the Company in the three years prior to the date of restatement would have been a lower amount had it been calculated based on the restated results, the Board’s Compensation Committee will evaluate recovery of such performance-based equity or non-equity compensation. If a recovery is determined to be appropriate, then the Compensation Committee will seek to recover, for the benefit of the Company and to the extent permitted by applicable law, the after-tax portion of the difference between the previously awarded compensation and the recalculated compensation. In determining whether to seek recovery under the Company’s clawback policy, the Compensation Committee will take into account such considerations as it deems appropriate, including, without limitation, whether the assertion of a claim may violate applicable law or prejudice the interests of the Company in any related proceeding or investigation, and the likelihood of success under applicable law. 46 | BROWN & BROWN, INC.
PROPOSAL 4: APPROVAL, ON AN ADVISORY BASIS, OF ONE YEAR AS THE INTERVAL AT WHICH AN ADVISORY VOTE ON THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS WILL BE CONDUCTED We are required under Section 14A of the Exchange Act to provide our shareholders with the opportunity to vote, on a nonbinding, advisory basis, for their preference on how frequently an advisory vote on the compensation of our named executive officers, such as the “say on pay” proposal, above, should be conducted. By voting on this Proposal 4, shareholders may indicate whether they would prefer an advisory vote on named executive officer compensation once every one, two or three years. We expect to hold a similar vote at the 2029 Annual Meeting. After careful consideration, our Board has determined that an advisory vote on executive compensation that occurs every year is the most appropriate alternative for the Company, and therefore our Board recommends that you vote for a one-year interval for the advisory vote on executive compensation. In determining its recommendation, our Board considered that an annual advisory vote on executive compensation will allow our shareholders to provide us with their direct input on our compensation philosophy, policies and practices as disclosed in the Proxy Statement every year. This vote is advisory and therefore not binding on the Company, the Compensation Committee or our Board. Our Board and our Compensation Committee value the opinions of our shareholders and will take into account the outcome of the vote, however, when considering the frequency of future advisory votes on executive compensation. The Board may decide that it is in the best interests of our shareholders and the Company to hold an advisory vote on executive compensation more or less frequently than the option approved by our shareholders. You may cast your vote on your preferred voting frequency of an advisory vote on executive compensation by choosing any one of the following options: an advisory vote every one year; an advisory vote every two years; an advisory vote every three years; or abstaining from voting. Please note that when casting a vote on this proposal, you will not be voting to approve or disapprove the Board’s recommendation. Vote Required; Board Recommendation The option that receives the highest number of votes cast by shareholders will indicate the frequency for the advisory vote on executive compensation selected by shareholders casting votes on this Proposal. Abstentions and broker non-votes will have no effect on the vote. 54 | | | | | | | | |
Table of Contents
| | | Executive Compensation TablesThe Board of unanimously recommends a vote for “ONE YEAR” on this proposal | |
|
BROWN & BROWN, INC. | 47
The following table sets forth the compensation earnedreceived by our Named Executive Officers for services rendered to us in such capacity for the years ended December 31, 2022, 2021 2020 and 2019, except in the case of Mr. Barrett Brown who was not a Named Executive Officer in 2020 or 2019, for the years ended December 31, 2020, and 2019, respectively.2020. Summary Compensation Table 2019–20212020-2022 NAME AND
PRINCIPAL POSITION | | FISCAL
YEAR | | SALARY
($)(1) | | BONUS
($) | | STOCK
AWARDS
($)(2) | | NON-EQUITY
INCENTIVE PLAN
COMPENSATION
($) | | ALL OTHER
COMPENSATION
($)(3) | | TOTAL
($) | | J. Powell Brown
Chief Executive Officer and President | | 2021 | | 1,000,000 | | 1,020,000 | | 2,940,017 | | 3,980,000 | | 261,018 | | 9,201,035 | | | | 2020 | | 1,038,462 | | — | | 2,948,008 | | 3,017,000 | | 250,830 | | 7,254,300 | | | | 2019 | | 1,000,000 | | 250,000 | | 1,946,101 | | 1,750,000 | | 231,924 | | 5,178,025 | | R. Andrew Watts
Chief Financial Officer Executive Vice President and Treasurer | | 2021 | | 600,000 | | 300,000 | | 832,964 | | 1,393,000 | | 66,103 | | 3,192,067 | | | | 2020 | | 618,461 | | — | | 687,830 | | 1,020,000 | | 67,764 | | 2,394,055 | | | | 2019 | | 500,000 | | 43,000 | | 583,833 | | 782,000 | | 62,417 | | 1,971,250 | | P. Barrett Brown
Executive Vice President and President - Retail segment | | 2021 | | 700,000 | | 500,000 | | 489,957 | | 1,991,000 | | 33,854 | | 3,714,811 | | | | | | | | | | | | | | | | | | J. Scott Penny
Executive Vice President and Chief Acquisitions Officer | | 2021 | | 600,000 | | 450,000 | | 489,957 | | 1,792,000 | | 61,394 | | 3,393,351 | | | | 2020 | | 618,461 | | — | | 491,286 | | 1,240,000 | | 89,690 | | 2,439,437 | | | | 2019 | | 500,000 | | — | | 437,846 | | 1,050,000 | | 100,439 | | 2,088,285 | | Chris L. Walker
Executive Vice President and President – National Programs segment | | 2021 | | 700,000 | | 500,000 | | 489,957 | | 1,991,000 | | 51,405 | | 3,732,362 | | | | 2020 | | 724,615 | | — | | 491,286 | | 1,801,000 | | 56,492 | | 3,073,393 | | | | 2019 | | 644,231 | | 153,000 | | 437,846 | | 1,197,000 | | 53,975 | | 2,486,052 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name and Principal Position | | Fiscal
Year | | | Salary ($)(1) | | | Bonus ($) | | | Stock
Awards
($)(2) | | | Non-Equity
Incentive Plan
Compensation
($) | | | All Other
Compensation
($)(3) | | | Total ($) | | | | | | | | | | J. Powell Brown Chief Executive Officer and President | | | 2022 | | | | 1,000,000 | | | | — | | | | 2,953,648 | | | | 2,501,000 | | | | 286,985 | | | | 6,741,633 | | | | | 2021 | | | | 1,000,000 | | | | 1,020,000 | | | | 2,940,017 | | | | 3,980,000 | | | | 261,018 | | | | 9,201,035 | | | | | 2020 | | | | 1,038,462 | | | | — | | | | 2,948,008 | | | | 3,017,000 | | | | 250,830 | | | | 7,254,300 | | | | | | | | | | R. Andrew Watts Chief Financial Officer Executive Vice President and Treasurer | | | 2022 | | | | 600,000 | | | | 60,000 | | | | 2,689,057 | | | | 981,000 | | | | 78,459 | | | | 4,408,516 | | | | | 2021 | | | | 600,000 | | | | 300,000 | | | | 832,964 | | | | 1,393,000 | | | | 66,103 | | | | 3,192,067 | | | | | 2020 | | | | 618,461 | | | | — | | | | 687,830 | | | | 1,020,000 | | | | 67,764 | | | | 2,394,055 | | | | | | | | | | P. Barrett Brown Executive Vice President and President – Retail Segment | | | 2022 | | | | 798,077 | | | | — | | | | 2,492,134 | | | | 1,489,000 | | | | 331,134 | | | | 5,110,345 | | | | | 2021 | | | | 700,000 | | | | 500,000 | | | | 489,957 | | | | 1,991,000 | | | | 33,854 | | | | 3,714,811 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | J. Scott Penny Executive Vice President and Chief Acquisitions Officer | | | 2022 | | | | 698,077 | | | | 20,000 | | | | 2,492,134 | | | | 1,261,000 | | | | 89,583 | | | | 4,560,794 | | | | | 2021 | | | | 600,000 | | | | 450,000 | | | | 489,957 | | | | 1,792,000 | | | | 61,394 | | | | 3,393,351 | | | | | 2020 | | | | 618,461 | | | | — | | | | 491,286 | | | | 1,240,000 | | | | 89,690 | | | | 2,439,437 | | | | | | | | | | Chris L. Walker Executive Vice President and President – National Programs Segment | | | 2022 | | | | 798,077 | | | | — | | | | 2,492,134 | | | | 1,501,000 | | | | 41,666 | | | | 4,832,877 | | | | | 2021 | | | | 700,000 | | | | 500,000 | | | | 489,957 | | | | 1,991,000 | | | | 51,405 | | | | 3,732,362 | | | | | 2020 | | | | 724,615 | | | | — | | | | 491,286 | | | | 1,801,000 | | | | 56,492 | | | | 3,073,393 | |
| (1) | Amounts shown for 2020 reflect the inclusion of 27 regular pay periods, as compared to 26 regular pay periods in 20212022 and 2019.2021. |
| (2) | Amounts shown under the “Stock Awards” column reflect the aggregate grant date fair value of awards computed in accordance with Statement of Financial Accounting Standards ASC Topic 718 (formerly “SFAS 123(R)”) with respect to stock granted under the 2010 SIP and the 2019 SIP to our Named Executive Officers rather than the dollar amount recognized during the fiscal year for financial statement purposes. The assumptions used for the valuations are set forth in Note 12 to our audited consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.2022. See the “Compensation Discussion and Analysis” and the “Outstanding Equity Awards at Fiscal Year-End - 2021” tables– 2022” table for information with respect to stock granted under the PSP, the 2010 SIP and the 2019 SIP prior to 2021.2022. For awards that are performance based, the indicated grant date fair value amounts assume that the target level of performance will be achieved. |
| | Amounts shown under the “Stock Awards” column include the aggregate grant date fair value of all awards. For 2019, 2020, 2021 and 2021, 75%2022, a portion of the shares granted to each Named Executive Officer were either PSAs or PSUs, and 25%portion of the shares granted to each Named Executive Officer were RSAs.either RSAs or RSUs. Assuming the highest level of performance conditions will be achieved for the PSAs and PSUSs in this column (200% for 2019, 2020, 2021 and 2021)2022), the grant date fair value for each Named Executive Officer, including both PSAs or PSUs, as applicable, and RSAs or RSUs, as applicable, would be as follows: |
| | NAME | FISCAL
YEAR | | MAXIMUM
VALUE
($) | | FISCAL
YEAR | | MAXIMUM
VALUE
($) | | FISCAL
YEAR | | MAXIMUM
VALUE
($) | | | | J. Powell Brown | 2019 | | 3,392,215 | | 2020 | | 5,146,051 | | 2021 | | 5,130,071 | | | | R. Andrew Watts | 2019 | | 1,017,667 | | 2020 | | 1,200,685 | | 2021 | | 1,453,454 | | | | P. Barrett Brown | | | | | | | | | 2021 | | 854,951 | | | | J. Scott Penny | 2019 | | 763,201 | | 2020 | | 857,611 | | 2021 | | 854,951 | | | | Chris L. Walker | 2019 | | 763,201 | | 2020 | | 857,611 | | 2021 | | 854,951 | |
| | | | | | | | | | | | | | | | | | | | | | | | | Name | | Fiscal Year | | | Maximum Value ($) | | | Fiscal Year | | | Maximum Value ($) | | | Fiscal Year* | | | Maximum Value ($) | | | | | | | | | J. Powell Brown | | | 2020 | | | | 5,146,051 | | | | 2021 | | | | 5,130,071 | | | | 2022 | | | | 5,157,334 | | | | | | | | | R. Andrew Watts | | | 2020 | | | | 1,200,685 | | | | 2021 | | | | 1,453,454 | | | | 2022 | | | | 3,203,216 | | | | | | | | | P. Barrett Brown | | | | | | | | | | | 2021 | | | | 854,951 | | | | 2022 | | | | 2,859,372 | | | | | | | | | J. Scott Penny | | | 2020 | | | | 857,611 | | | | 2021 | | | | 854,951 | | | | 2022 | | | | 2,859,372 | | | | | | | | | Chris L. Walker | | | 2020 | | | | 857,611 | | | | 2021 | | | | 854,951 | | | | 2022 | | | | 2,859,372 | |
| * | The long-term equity incentive awards reported for 2022 include the time-based-only long-term equity incentive awards, effective January 1, 2022, each with a grant date fair value of $1,999,958 and granted to each of Messrs. Watts, Barrett Brown, Penny and Walker. For more information about the long-term equity incentive awards approved effective January 1, 2022, see “January 2022 Equity Incentive Grants.” |
| (3) | These dollar amounts include the items identified in the table titled “All Other Compensation Table - 2021” below. | | – 2022.” |
48 | BROWN & BROWN, INC.
Table of ContentsEXECUTIVE COMPENSATION TABLES
Executive Compensation Tables
All Other Compensation Table 2019–20212020-2022 | NAME | | YEAR | | PERQUISITES
AND OTHER
PERSONAL
BENEFITS
($)(1) | | INSURANCE
PREMIUMS
($)(2) | | COMPANY
CONTRIBUTIONS
TO RETIREMENT
AND 401(K)
PLANS
($) | | CASH
DIVIDENDS
($)(3) | | OTHER
($) | | TOTAL
($) | | | J. Powell Brown | | 2021 | | 1,365 | | 5,395 | | 11,600 | | 242,658 | | — | | 261,018 | | | | 2020 | | 4,991 | | — | | 11,400 | | 234,439 | | — | | 250,830 | | | | 2019 | | 15,521 | | — | | 11,200 | | 205,203 | | — | | 231,924 | | | R. Andrew Watts | | 2021 | | 16,675 | | 2,169 | | 11,600 | | 35,659 | | — | | 66,103 | | | | 2020 | | 15,006 | | — | | 11,400 | | 41,358 | | — | | 67,764 | | | | 2019 | | 14,967 | | 2,049 | | 11,200 | | 34,201 | | — | | 62,417 | | | P. Barrett Brown | | 2021 | | — | | — | | 11,600 | | 22,254 | | — | | 33,854 | | | J. Scott Penny | | 2021 | | 16,675 | | — | | 11,600 | | 33,119 | | — | | 61,394 | | | | 2020 | | 15,035 | | 5,097 | | 11,400 | | 58,158 | | — | | 89,690 | | | | 2019 | | 16,412 | | 4,797 | | 11,200 | | 68,030 | | — | | 100,439 | | | Chris L. Walker | | 2021 | | 22,020 | | — | | — | | 29,385 | | — | | 51,405 | | | | 2020 | | 17,006 | | — | | — | | 39,486 | | — | | 56,492 | | | | 2019 | | 11,270 | | — | | — | | 42,705 | | — | | 53,975 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Year | | | Perquisites
and Other
Personal Benefits
($)(1) | | | Insurance
Commissions
($)(2) | | | Company
Contributions to
Retirement
and 401(k) Plans ($) | | | Cash
Dividends ($)(3) | | | Other ($) | | | Total ($) | | | | | | | | | | J. Powell Brown | | | 2022 | | | | 4,119 | | | | 59 | | | | 12,200 | | | | 270,607 | | | | — | | | | 286,985 | | | | | | | | | | | | | 2021 | | | | 1,365 | | | | 5,395 | | | | 11,600 | | | | 242,658 | | | | — | | | | 261,018 | | | | | | | | | | | | | | 2020 | | | | 4,991 | | | | — | | | | 11,400 | | | | 234,439 | | | | — | | | | 250,830 | | | | | | | | | | R. Andrew Watts | | | 2022 | | | | 18,052 | | | | 2,335 | | | | 12,200 | | | | 45,872 | | | | — | | | | 78,459 | | | | | | | | | | | | | 2021 | | | | 16,675 | | | | 2,169 | | | | 11,600 | | | | 35,659 | | | | — | | | | 66,103 | | | | | | | | | | | | | | 2020 | | | | 15,006 | | | | — | | | | 11,400 | | | | 41,358 | | | | — | | | | 67,764 | | | | | | | | | | P. Barrett Brown | | | 2022 | | | | — | | | | — | | | | 12,200 | | | | 32,525 | | | | 286,409 | (4) | | | 331,134 | | | | | | | | | | | | | | 2021 | | | | — | | | | — | | | | 11,600 | | | | 22,254 | | | | — | | | | 33,854 | | | | | | | | | | J. Scott Penny | | | 2022 | | | | 16,675 | | | | 12,473 | | | | 12,200 | | | | 48,235 | | | | — | | | | 89,583 | | | | | | | | | | | | | 2021 | | | | 16,675 | | | | — | | | | 11,600 | | | | 33,119 | | | | — | | | | 61,394 | | | | | | | | | | | | | | 2020 | | | | 15,035 | | | | 5,097 | | | | 11,400 | | | | 58,158 | | | | — | | | | 89,690 | | | | | | | | | | Chris L. Walker | | | 2022 | | | | 12,670 | | | | — | | | | — | | | | 28,996 | | | | — | | | | 41,666 | | | | | | | | | | | | | 2021 | | | | 22,020 | | | | — | | | | — | | | | 29,385 | | | | — | | | | 51,405 | | | | | | | | | | | | | | 2020 | | | | 17,006 | | | | — | | | | — | | | | 39,486 | | | | — | | | | 56,492 | |
| (1) | These amounts include reimbursement of the cost of annual physical examinations to the extent not otherwise covered by insurance, the reimbursement of the cost of certain financial and tax planning services and reimbursement of certain club membership dues and car service expenses. For additional information, see “Compensation Discussion and Analysis -– Other Compensation.” |
| (2) | These amounts include amounts earned by the Company and reimbursed to these employees for personal lines insurance purchased by these employees through the Company or its subsidiaries. |
| (3) | These amounts represent cash dividends paid on granted PSP, 2010 SIP and 2019 SIP shares for which conditions of vesting other than time-based conditions have been satisfied. | | |
56(4) | | | | | Amount reflects costs associated with the temporary relocation of Mr. Barrett Brown and his family to London, England from June 2022 to August 2022, including approximately $238,487 for housing costs; $10,825 for transportation costs, including car service and rental cars; $27,844 for airline fares costs and $8,893 for tax gross ups. |
BROWN & BROWN, INC. | 49
Table of ContentsEXECUTIVE COMPENSATION TABLES
Executive Compensation Tables
Grants of Plan-Based Awards in Fiscal 20212022 The following table provides information about the range of possible annual incentive cash payouts in respect of 20212022 performance, the range of shares that may be earned pursuant to the stock grants made to our Named Executive Officers under our 2019 SIP in 20212022 and the grant date fair value of these stock grants computed under Statement of Financial Accounting Standards ASC Topic 718 (formerly “SFAS 123(R)”). | | | | ESTIMATED FUTURE PAYOUTS UNDER
NON-EQUITY INCENTIVE PLAN
AWARDS(1) | | ESTIMATED FUTURE PAYOUTS
UNDER EQUITY INCENTIVE
PLAN AWARDS(2) | | GRANT DATE
FAIR VALUE
OF STOCK
AWARDS
($)(5) | | | NAME | GRANT
DATE | | THRESHOLD
($)(3) | | TARGET
($) | | MAXIMUM
($)(4) | | THRESHOLD
(#) | | TARGET
(#) | | MAXIMUM
(#) | | | | J. Powell Brown | 2/23/21 | | 0 | | 2,000,000 | | 4,000,000 | | | | | | | | | | | 2/23/21 | | | | | | | | 0 | | 48,722 | | 97,444 | | 2,190,054 | | | 2/23/21 | | | | | | | | — | | 16,240 | | 16,240 | | 749,963 | | | R. Andrew Watts | 2/23/21 | | 0 | | 700,000 | | 1,400,000 | | | | | | | | | | | 2/23/21 | | | | | | | | 0 | | 13,804 | | 27,608 | | 620,490 | | | 2/23/21 | | | | | | | | — | | 4,601 | | 4,601 | | 212,474 | | | P. Barrett Brown | 2/23/21 | | 0 | | 1,000,000 | | 2,000,000 | | | | | | | | | | | 2/23/21 | | | | | | | | 0 | | 8,120 | | 16,240 | | 364,994 | | | 2/23/21 | | | | | | | | — | | 2,706 | | 2,706 | | 124,963 | | | J. Scott Penny | 2/23/21 | | 0 | | 900,000 | | 1,800,000 | | | | | | | | | | | 2/23/21 | | | | | | | | 0 | | 8,120 | | 16,240 | | 364,994 | | | 2/23/21 | | | | | | | | — | | 2,706 | | 2,706 | | 124,963 | | | Chris L. Walker | 2/23/21 | | 0 | | 1,000,000 | | 2,000,000 | | | | | | | | | | | 2/23/21 | | | | | | | | 0 | | 8,120 | | 16,240 | | 364,994 | | | 2/23/21 | | | | | | | | — | | 2,706 | | 2,706 | | 124,963 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards(1) | | | Estimated Future Payouts
Under Equity Incentive
Plan Awards(2) | | | Grant Date
Fair Value of Stock Awards
($)(5) | | Name | | Grant
Date | | | Threshold
($)(3) | | | Target ($) | | | Maximum ($)(4) | | | Threshold
(#) | | | Target
(#) | | | Maximum
(#) | | | | | | | | | | | J. Powell Brown | | | 2/21/22 | | | | 0 | | | | 2,000,000 | | | | 4,000,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2/21/22 | | | | | | | | | | | | | | | | 0 | | | | 34,018 | | | | 68,036 | | | | 2,203,686 | | | | | | | | | | | | | | | 2/21/22 | | | | | | | | | | | | | | | | — | | | | 11,339 | | | | 11,339 | | | | 749,961 | | | | | | | | | | | R. Andrew Watts | | | 2/21/22 | | | | 0 | | | | 700,000 | | | | 1,400,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1/1/22 | | | | | | | | | | | | | | | | — | | | | 28,457 | | | | 28,457 | | | | 1,999,958 | | | | | | | | | | | | | | 2/21/22 | | | | | | | | | | | | | | | | 0 | | | | 7,937 | | | | 15,874 | | | | 514,159 | | | | | | | | | | | | | | | 2/21/22 | | | | | | | | | | | | | | | | — | | | | 2,645 | | | | 2,645 | | | | 174,940 | | | | | | | | | | | P. Barrett Brown | | | 2/21/22 | | | | 0 | | | | 1,400,000 | | | | 2,800,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1/1/22 | | | | | | | | | | | | | | | | — | | | | 28,457 | | | | 28,457 | | | | 1,999,958 | | | | | | | | | | | | | | 2/21/22 | | | | | | | | | | | | | | | | 0 | | | | 5,669 | | | | 11,338 | | | | 367,238 | | | | | | | | | | | | | | | 2/21/22 | | | | | | | | | | | | | | | | — | | | | 1,889 | | | | 1,889 | | | | 124,938 | | | | | | | | | | | J. Scott Penny | | | 2/21/22 | | | | 0 | | | | 900,000 | | | | 1,800,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1/1/22 | | | | | | | | | | | | | | | | — | | | | 28,457 | | | | 28,457 | | | | 1,999,958 | | | | | | | | | | | | | | 2/21/22 | | | | | | | | | | | | | | | | 0 | | | | 5,669 | | | | 11,338 | | | | 367,238 | | | | | | | | | | | | | | | 2/21/22 | | | | | | | | | | | | | | | | — | | | | 1,889 | | | | 1,889 | | | | 124,938 | | | | | | | | | | | Chris L. Walker | | | 2/21/22 | | | | 0 | | | | 1,000,000 | | | | 2,000,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1/1/22 | | | | | | | | | | | | | | | | — | | | | 28,457 | | | | 28,457 | | | | 1,999,958 | | | | | | | | | | | | | | 2/21/22 | | | | | | | | | | | | | | | | 0 | | | | 5,669 | | | | 11,338 | | | | 367,238 | | | | | | | | | | | | | | | 2/21/22 | | | | | | | | | | | | | | | | — | | | | 1,889 | | | | 1,889 | | | | 124,938 | |
| (1) | For additional information related to the annual cash incentive awards including performance targets and measures, see “Compensation Discussion and Analysis.” |
| (2) | The “Estimated Future Payouts Under Equity Incentive Plan Awards” column shows the range of shares that may be earned pursuant to the stock awards granted under our 2019 SIP in 2021.2022. For additional information related to these grants, see “Compensation Discussion and Analysis.” |
| (3) | For additional information related to the annual cash incentive awards including performance targets and measures, see “Compensation Discussion and Analysis.” |
| (4) | For additional information related to the annual cash incentive awards including performance targets and measures, see “Compensation Discussion and Analysis.” |
| (5) | The “Grant Date Fair Value of Stock Awards” column shows the full grant date fair value of the shares granted to our Named Executive Officers under our 2019 SIP in 2021.2022. The grant date fair value of the awards is determined under Statement of Financial Accounting Standards ASC Topic 718 (formerly “SFAS 123(R)”) and represents the amount we would expense in our financial statements over the vesting schedule for the grants. In accordance with SEC rules, the amounts in this column reflect the actual ASC 718 accounting cost without reduction for estimates of forfeitures related to service-based vesting conditions. The amounts reflect our accounting for these grants and do not correspond to the actual values that may be realized by the grantees. |
50 | BROWN & BROWN, INC.
Table of ContentsEXECUTIVE COMPENSATION TABLES
Executive Compensation Tables
Outstanding Equity Awards at Fiscal Year-End – 20212022 | | OPTION AWARDS | | STOCK AWARDS | | NAME | | NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED
OPTIONS (#)
EXERCISABLE | | NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED
OPTIONS (#)
UNEXERCISABLE | | EQUITY
INCENTIVE
PLAN AWARDS:
NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED
UNEARNED
OPTIONS
(#) | | OPTION
EXERCISE
PRICE
($) | | OPTION
EXPIRATION
DATE | | NUMBER OF
SHARES OR
UNITS OF
STOCK THAT
HAVE NOT
VESTED
(#) | | MARKET
VALUE OF
SHARES OR
UNITS OF
STOCK THAT
HAVE NOT
VESTED
($)(1) | | EQUITY
INCENTIVE
PLAN
AWARDS:
NUMBER OF
UNEARNED
SHARES,
UNITS OR
OTHER
RIGHTS THAT
HAVE NOT
VESTED
(#) | | EQUITY
INCENTIVE
PLAN AWARDS:
MARKET OR
PAYOUT VALUE
OF UNEARNED
SHARES, UNITS
OR OTHER
RIGHTS THAT
HAVE NOT
VESTED
($)(2) | | | J. Powell Brown | | — | | — | | — | | — | | — | | 640,733 | | 45,030,715 | | 145,934 | | 10,256,242 | | | R. Andrew Watts | | — | | — | | — | | — | | — | | 83,621 | | 5,876,884 | | 39,875 | | 2,802,415 | | | P. Barrett Brown | | — | | — | | — | | — | | — | | 52,710 | | 3,704,459 | | 23,474 | | 1,649,753 | | | J. Scott Penny | | — | | — | | — | | — | | — | | 85,260 | | 5,992,073 | | 27,286 | | 1,917,660 | | | Chris L. Walker | | — | | — | | — | | — | | — | | 73,996 | | 5,200,439 | | 27,286 | | 1,917,660 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards | | | Stock Awards | | Name | | Number of Securities Underlying Unexercised Options (#) Exercisable | | | Number of Securities Underlying Unexercised Options (#)
Unexercisable | | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | | | Option
Exercise Price ($) | | | Option
Expiration Date | | | Number of Shares or Units of Stock That Have Not Vested (#) | | | Market Value of Shares or Units of Stock That Have
Not Vested ($)(1) | | | Equity Incentive Plan Awards: Number of Unearned Shares, Units
or Other Rights That Have Not Vested (#) | | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units
or Other Rights That Have Not Vested ($)(2) | | | | | | | | | | | | J. Powell Brown | | | — | | | | — | | | | — | | | | — | | | | — | | | | 640,412 | | | | 36,484,272 | | | | 129,122 | | | | 7,356,080 | | | | | | | | | | | | R. Andrew Watts | | | — | | | | — | | | | — | | | | — | | | | — | | | | 107,450 | | | | 6,121,427 | | | | 32,563 | | | | 1,855,144 | | | | | | | | | | | | P. Barrett Brown | | | — | | | | — | | | | — | | | | — | | | | — | | | | 75,641 | | | | 4,309,268 | | | | 21,519 | | | | 1,225,937 | | | | | | | | | | | | J. Scott Penny | | | — | | | | — | | | | — | | | | — | | | | — | | | | 114,308 | | | | 6,512,127 | | | | 21,519 | | | | 1,225,937 | | | | | | | | | | | | Chris L. Walker | | | — | | | | — | | | | — | | | | — | | | | — | | | | 27,448 | | | | 1,563,713 | | | | 51,865 | | | | 2,954,749 | |
| (1) | | (1) | The market value shown was determined by multiplying the number of shares of stock that have not vested by $70.28,$56.97, the closing market price of our common stock on December 31, 2021.2022. |
| | | (2) | The market value shown was determined by multiplying the number of unearned stock shares (at target) by $70.28,$56.97, the closing market price of our common stock on December 31, 2021.2022. |
Option Exercises and Stock Vested – 20212022 | | OPTION AWARDS | | STOCK AWARDS | | NAME | | NUMBER OF
SHARES ACQUIRED
ON EXERCISE
(#) | | VALUE REALIZED
ON EXERCISE
($) | | NUMBER OF SHARES
ACQUIRED ON
VESTING
(#) | | VALUE REALIZED
ON VESTING
($)(1) | | | J. Powell Brown | | — | | — | | 136,688 | | 6,279,580 | | | R. Andrew Watts | | — | | — | | 73,467 | | 3,349,713 | | | P. Barrett Brown | | — | | — | | 48,551 | | 2,218,599 | | | J. Scott Penny | | — | | — | | 58,250 | | 2,710,230 | | | Chris L. Walker | | — | | — | | 38,801 | | 1,759,237 | |
| | | | | | | | | | | | | | | | | | | | Option Awards | | | Stock Awards | | Name | | Number of Shares Acquired on
Exercise (#) | | | Value Realized on Exercise ($) | | | Number of Shares Acquired on
Vesting (#) | | | Value Realized on Vesting ($)(1) | | | | | | | J. Powell Brown | | | — | | | | — | | | | 113,320 | | | | 7,278,544 | | | | | | | R. Andrew Watts | | | — | | | | — | | | | 37,771 | | | | 2,426,031 | | | | | | | P. Barrett Brown | | | — | | | | — | | | | 22,663 | | | | 1,455,644 | | | | | | | J. Scott Penny | | | — | | | | — | | | | 24,170 | | | | 1,552,439 | | | | | | | Chris L. Walker | | | — | | | | — | | | | 69,420 | | | | 4,545,425 | |
| (1) | | (1) | The value realized upon the vesting of stock awards is the number of shares multiplied by the market value (being the closing market price as of the previous trading day) of the underlying shares on the vesting date. The value realized was determined without considering any taxes that were owed upon vesting. |
Nonqualified Deferred Compensation at Fiscal Year-End – 20212022 | NAME | | EXECUTIVE
CONTRIBUTIONS IN
2021(1)
$ | | REGISTRANT
CONTRIBUTIONS
IN 2021
$ | | AGGREGATE
EARNINGS IN
2021
$ | | AGGREGATE
WITHDRAWALS/
DISTRIBUTIONS
$ | | AGGREGATE
BALANCE AT
12/31/2021
$ | | | J. Powell Brown | | 754,250 | | — | | 863,141 | | — | | 5,728,813 | | | R. Andrew Watts | | 357,000 | | — | | 94,682 | | — | | 1,018,092 | | | P. Barrett Brown | | — | | — | | — | | — | | — | | | J. Scott Penny | | — | | — | | 22,718 | | — | | 145,211 | | | Chris L. Walker | | 140,000 | | — | | 10,867 | | — | | 150,867 | |
| | | | | | | | | | | | | | | | | | | | | Name | | Executive Contributions in 2022(1) $ | | | Registrant Contributions in 2022 $ | | | Aggregate Earnings in 2022 $ | | | Aggregate Withdrawals/ Distributions $ | | | Aggregate Balance at 12/31/2022 $ | | | | | | | | J. Powell Brown | | | 1,250,000 | | | | — | | | | (1,310,389 | ) | | | — | | | | 5,668,425 | | | | | | | | R. Andrew Watts | | | 592,550 | | | | — | | | | (217,876 | ) | | | — | | | | 1,392,766 | | | | | | | | P. Barrett Brown | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | J. Scott Penny | | | — | | | | — | | | | (32,048 | ) | | | — | | | | 113,163 | | | | | | | | Chris L. Walker | | | 157,692 | | | | — | | | | (45,232 | ) | | | — | | | | 263,327 | |
| (1) | | (1) | In each instance, the indicated executive contribution is included in the amounts reported for that Named Executive Officer in the Summary Compensation Table for 2021.2022. |
58 | | | | | |
BROWN & BROWN, INC. | 51
Table of ContentsEXECUTIVE COMPENSATION TABLES
Executive Compensation Tables
Potential Payments Upon Termination or Change in Control – 20212022 | NAME | | BENEFIT(1) | | BEFORE
CHANGE IN
CONTROL
TERMINATION
W/O CAUSE
RESIGNATION
FOR GOOD
REASON
($) | | AFTER CHANGE
IN CONTROL
TERMINATION
W/O CAUSE OR
RESIGNATION
FOR GOOD
REASON
($)(2) | | VOLUNTARY
TERMINATION
($) | | DEATH
($) | | DISABILITY
($) | | CHANGE IN
CONTROL
($) | | | J. Powell Brown | | PSP | | — | | — | | — | | 4,987,069 | | 4,987,069 | | 7,440,731 | (3) | | | | 2010 SIP | | | | 23,928,161 | | | | — 41,189,640 | | 41,189,640 | | 21,032,274 | (4) | | | | 2019 SIP | | | | 15,595,694 | | — | | 5,171,093 | | 5,171,093 | | — | | | R. Andrew Watts | | PSP | | — | | — | | — | | — | | — | | — | | | | | 2010 SIP | | — | | 7,443,425 | | — | | 6,312,186 | | 6,312,186 | | — | | | | | 2019 SIP | | — | | 4,038,289 | | — | | 1,311,136 | | 1,311,136 | | — | | | P. Barrett Brown | | PSP | | — | | — | | — | | 152,086 | | 152,086 | | 226,913 | (3) | | | | 2010 SIP | | — | | 4,252,783 | | — | | 3,687,201 | | 3,687,201 | | — | | | | | 2019 SIP | | — | | 2,599,095 | | — | | 861,734 | | 861,734 | | — | | | J. Scott Penny | | PSP | | — | | — | | — | | 2,433,937 | | 2,433,937 | | 3,631,446 | (3) | | | | 2010 SIP | | — | | 4,794,361 | | — | | 3,945,988 | | 3,945,988 | | — | | | | | 2019 SIP | | — | | 2,599,095 | | — | | 861,734 | | 861,734 | | — | | | Chris L. Walker | | PSP | | — | | — | | — | | — | | — | | — | | | | | 2010 SIP | | — | | 6,436,664 | | — | | 5,588,291 | | 5,588,291 | | — | | | | | 2019 SIP | | — | | 2,599,095 | | — | | 861,734 | | 861,734 | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Benefit(1) | | | Before Change in Control Termination w/o Cause Resignation for
Good Reason ($) | | | After Change in Control Termination w/o Cause or
Resignation for Good Reason ($)(2) | | | Voluntary
Termination ($) | | | Death ($) | | | Disability ($) | | | Change in Control ($) | | | | | | | | | | J. Powell Brown | | | PSP | | | | — | | | | — | | | | — | | | | 4,042,591 | | | | 4,042,591 | | | | 6,031,566 | (3) | | | | | | | | | | | | | 2010 SIP | | | | | | | | 12,940,679 | | | | — | | | | 29,989,749 | | | | 29,989,749 | | | | 17,049,070 | (4) | | | | | | | | | | | | | | 2019 SIP | | | | | | | | 15,226,087 | | | | — | | | | 7,182,107 | | | | 7,182,107 | | | | — | | | | | | | | | | R. Andrew Watts | | | PSP | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | 2010 SIP | | | | — | | | | 3,881,936 | | | | — | | | | 3,881,936 | | | | 3,881,936 | | | | — | | | | | | | | | | | | | | 2019 SIP | | | | — | | | | 5,497,548 | | | | — | | | | 3,427,958 | | | | 3,427,958 | | | | — | | | | | | | | | | P. Barrett Brown | | | PSP | | | | — | | | | — | | | | — | | | | 123,283 | | | | 123,283 | | | | 183,939 | (3) | | | | | | | | | | | | | 2010 SIP | | | | — | | | | 2,156,258 | | | | — | | | | 2,156,258 | | | | 2,156,258 | | | | — | | | | | | | | | | | | | | 2019 SIP | | | | — | | | | 4,158,639 | | | | — | | | | 2,818,050 | | | | 2,818,050 | | | | — | | | | | | | | | | J. Scott Penny | | | PSP | | | | — | | | | — | | | | — | | | | 1,972,985 | | | | 1,972,985 | | | | 2,943,703 | (3) | | | | | | | | | | | | | 2010 SIP | | | | — | | | | 2,509,415 | | | | — | | | | 2,509,415 | | | | 2,509,415 | | | | — | | | | | | | | | | | | | | 2019 SIP | | | | — | | | | 4,185,639 | | | | — | | | | 2,818,050 | | | | 2,818,050 | | | | — | | | | | | | | | | Chris L. Walker | | | PSP | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | 2010 SIP | | | | — | | | | 1,262,797 | | | | — | | | | 1,262,797 | | | | 1,262,797 | | | | — | | | | | | | | | | | | | | 2019 SIP | | | | — | | | | 4,158,639 | | | | — | | | | 2,818,050 | | | | 2,818,050 | | | | — | |
| (1) | | (1) | All figures shown for the value of stock granted under the PSP, 2010 SIP and 2019 SIP that would vest upon death, disability or following a change in control are calculated based on the assumption that the triggering event(s) for such vesting took place on December 31, 2021,2022, the last business day of the Company’s last completed fiscal year, and that the price per share of our common stock is $70.28,$56.97 the closing market price as of that date. Other than the amounts shown in the column captioned “Change in Control” payable under the PSP, the figures shown in this table do not reflect the impact of the excise tax under Sections 280G and 4999 of the Internal Revenue Code, which may effectively reduce the amounts of change-in-control payments that a Named Executive Officer may receive, and do not reflect the assignment of any value to non-competition and other restrictive covenants or determinations of reasonable compensation that may reduce the amounts of change-in-control payments subject to the excise tax. For more detailed information concerning the change-in-control provisions of the PSP, the 2010 SIP and the 2019 SIP, see “Compensation Discussion and Analysis -– Payments Upon Termination or Change in Control,Control.” above. All figures shown in this table would be paid in lump-sum payments by us in accordance with the applicable grant agreements. |
| | | (2) | The figures shown in this column were determined as follows: (a) for all grants, except those performance-based restricted stock grants in or after February 2019,2020, the amount contemplates 100% of all unvested restricted stock grants granted pursuant to such 2010 SIP and 2019 SIP grant agreements, and (b) for those performance-based restricted stock grants in or after February 2019,2020, the amount contemplates the greater of: (i) 100% of such unvested restricted stock grants or (ii) the estimated percentage of unvested restricted stock grants determined in accordance with the applicable performance schedule based upon the actual level of achievement (up to the applicable maximum level of achievement)achievement and assuming the applicable performance level is adjusted, downward, pursuant to the Compensation Committee’s exercise of its discretion, to exclude the following from the first day of the performance period to December 31, 2021,2022, the date on which the Transfer of Control occurs: (x)occurs, as follows: (w) in 2019, the negative impact of the 2019 Legal Matter and the negative impact of a one-time, non-cash increase of approximately $8 million in the commissions and fees earned by one of the businesses in our National Programs segment in 2018 resulting solely from our implementation of the New Revenue Standard; (y) in 2020, to exclude the negative impact of the 2020 Legal Matter; (x) in 2021 and 2022, to exclude the period-over-period impact of Foreign Currency Translation; (y) in 2022, to exclude the positive impact of the decrease in expense we recognized related to the Legal Matters and the negative impact of Acquisition/Integration Costs and (z) in 2021,2022, to include guaranteed supplemental commissions as part of core commissions and fees and, therefore, as a component of the positive period-over-period impact of foreign currency translation, which is calculated by applying current-year foreign exchange rates to the same period in the prior year.Company’s Organic Revenue. |
| | | (3) | These figures represent amounts that would be paid pursuant to the terms of the PSP in the event of a change in control as defined in the PSP and include the following excise tax gross-up amount to be paid by the Company on PSP shares on behalf of the participant in the event of change in control: Mr. Powell Brown - $2,453,662;– $1,988,975; Mr. Barrett Brown - $74,827;– $60,656 and Mr. Penny - $1,197,509.– $970,718. The excise tax gross-up amount has been calculated assuming the excise tax rate of 20% multiplied by the excess of the value of the change- | | |
Table of Contents
Executive Compensation Tables
| in-controlchange-in-control payments over the executive’s average W-2 earnings for the last five calendar years, and assuming a blended effective tax rate of approximately 40% for each executive. However, the excise tax gross-up is only applicable if the sum of all payments equals or exceeds three times the executive’s average W-2 earnings for the past five calendar years. Further, the excise tax gross-up assumes no value is assigned to non-competition and other restrictive covenants or determination of reasonable compensation that may apply to the participant. Such excise tax gross-up amounts also assume a change in control date of December 31, 2021,2022, at our closing market price of $70.28$56.97 as of that date. The excise tax gross-up provision is a legacy provision that applies only to awards that were granted under the PSP prior to its suspension in 2010 and does not apply to awards under the 2010 SIP or the 2019 SIP. No new agreements that contain excise tax gross-up provisions have been entered into, and no previous agreements containing such legacy provisions have been materially amended. |
| | | (4) | This amount would be paid pursuant to that certain grant under our 2010 SIP made on April 29, 2010 for 374,080 shares. This grant replaced 374,080 shares granted under our PSP on July 21, 2009, which had inadvertently exceeded the maximum number of shares permitted to be awarded in a particular calendar year. In order to assure achievement of the full intent of the original PSP grant, the replacement grant under the 2010 SIP has identical performance-based and other vesting conditions, including those associated with a change in control, to the original PSP grant. | | |
60 | | | | | |
52 | BROWN & BROWN, INC.
Table of Contents
As required by Section 953(b) of the Dodd-Frank Act, and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Mr. Powell Brown, our President and Chief Executive Officer: Chief Executive Officer Pay Ratio For 2021,2022, our last completed fiscal year: ●• | | the median of the annual total compensation of all employees of our company, other than Mr. Powell Brown, was $91,957;$96,278; and |
| • | | | ● | the annual total compensation of Mr. Powell Brown, as reported in the Summary Compensation Table, was $9,201,035.$6,741,633. |
| • | | | ● | Based on this information, for 2021,2022, the ratio of the annual total compensation of Mr. Powell Brown to the median of the annual total compensation of all employees, other than Mr. Powell Brown, was 10070 to 1. |
Methodology To identify the median of the annual total compensation of all our employees, other than Mr. Powell Brown, as well as to determine the annual total compensation of our median employee and Mr. Powell Brown, we took the following steps: | 1. | 1. We determined there was no change in our employee population or employee compensation arrangements during the last two completed fiscal yearyears that we believe would significantly impact the pay ratio disclosure for 2021.2022. Accordingly, we used the same median employee we identified in 2020 for purposes of calculating our pay ratio disclosure for 2021.fiscal years 2021 and 2020. As permitted under SEC rules, we did not consider as part of our determination employees from our 2022 acquisition of GRP (estimated headcount of 2,100).
|
| 2. | 2. We determined that, as of December 26, 2020, the last day of our last regular pay period in 2020, our employee population consisted of approximately 11,123 full-time, part-time, seasonal and temporary employees, with 10,933 of these individuals located in the United States, 45 of these individuals located in the United Kingdom, 132 of these individuals located in Canada, 11 of these individuals located in Bermuda, and two of these individuals located in the Cayman Islands.
|
| 3. | 3. As permitted by SEC rules, we chose to exclude (a) all of the non-U.S. employees described from the determination of the “median employee” because they account for less than 5% of our total employees and (b) 60 employees hired in December 2020 in connection with our acquisition of substantially all of the assets of South & Western General Agency, Inc. and all issued and outstanding shares of its affiliate, S&W Premium Finance Company, Inc. Our employee population, after taking into consideration these adjustments, consisted of approximately 10,873 individuals.
|
| 4. | 4. To identify the “median employee” from our employee population, we compared the amount of compensation of our employees as reflected in our payroll records as reported to the Internal Revenue Service on Form W-2 for 2020. In making this determination, we annualized the compensation of approximately 2,025 permanent employees (full-time and part-time) who were hired in 2020, but did not work for us for the entire fiscal year. Since we do not widely distribute annual equity awards to our employees, the grant date fair values of such awards were excluded from our compensation measure. Fewer than 10% of our employees receive annual equity awards.
|
| 5. | 5. We identified our median employee as of December 26, 2020 using this compensation measure, which was consistently applied to all our employees included in the calculation. We did not make any cost-of-living adjustments in identifying the “median employee.”
|
| 6. | Once we identified our median employee, we combined all of the elements of such employee’s compensation for 20212022 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation of $91,957. $96,278. The difference between such employee’s annual total compensation and such employee’s Form W-2 compensation represents (a) $3,406$3,767 in matching contributions made by the Company to such employee’s 401(k) Plan account and (b) an increasea decrease of $3,392$1,666 in the performance-based bonus paid to such employee in January 2023 for service in 2022 as compared to the performance-based bonus paid to such employee in January 2022 for service in 2021 as compared to the performance-based bonus paid to such employee in January 2021 for service in 2020.2021. |
| 7. | 7. With respect to the annual total compensation of Mr. Powell Brown, we used the amount reported in the “Total” column of the Summary Compensation Table.
|
BROWN & BROWN, INC. | 53
In accordance with theSEC’s disclosure requirements regarding pay versus performance (“PVP”), this section presents the SEC-defined “Compensation Actually Paid” (“CAP”). Also required by SEC’s new PVP rules, this section compares CAP to various measuresused to gauge our performance. Our compensation decisions are made independently of disclosure requirements. CAP is a supplemental measure to be viewed alongside performance measures described under “Compensation Discussion and Analysis,” not in replacement. Pay Versus Performance Table In accordance with the SEC’s new PVP rules, the following table sets forth information concerning the compensation of our Named Executive Officers for each of the fiscal years ended December 31, 2022, 2021 and 2020, and our financial performance for each such fiscal year: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Summary
Compensation
Table Total for
CEO ($) | | | Compensation Actually Paid to CEO ($) (1) | | | Average
Summary
Compensation
Table Total for
Non-CEO
NEOs ($) | | | Average Compensation Actually Paid to Non-CEO NEOs ($) (2) | | | Value of Initial Fixed $100
Investment Based on: | | | | | | Organic Revenue growth rate (4) | | | | | | | Peer Group
Total
Shareholder
Return (3) | | | | | | | | | | | | | 2022 | | | 6,741,633 | | | | (5,295,763 | ) | | | 4,728,133 | | | | 2,800,269 | | | $ | 147.41 | | | $ | 149.06 | | | $ | 671.8 | | | | 8.1 | % | | | | | | | | | | | | 2021 | | | 9,201,035 | | | | 32,778,563 | | | | 3,508,148 | | | | 6,939,244 | | | $ | 180.65 | | | $ | 145.28 | | | $ | 587.1 | | | | 10.4 | % | | | | | | | | | | | | 2020 | | | 7,254,300 | | | | 15,105,043 | | | | 2,573,911 | | | | 4,184,212 | | | $ | 121.00 | | | $ | 106.20 | | | $ | 480.5 | | | | 3.8 | % |
| (1) | The Compensation Actually Paid to J. Powell Brown, President and Chief Executive Officer of the Company, for each of the fiscal years ended December 31, 2022, 2021 and 2020, is calculated, as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Reported summary
compensation
table total for CEO
($) (a) | | | Reported value
of equity
awards ($) (b) | | | Equity
award
adjustments
($) (c)* | | | Reported change
in the actuarial
present value of
pension benefits
($) (d) | | | Pension benefit
adjustments | | | Compensation actually paid to CEO ($) ( a - b + c - d + e | | | | | | | | | | | 2022 | | | 6,741,633 | | | | 2,953,648 | | | | (9,083,748 | ) | | | — | | | | — | | | | (5,295,763 | ) | | | | | | | | | | 2021 | | | 9,201,035 | | | | 2,940,017 | | | | 26,517,545 | | | | — | | | | — | | | | 32,778,563 | | | | | | | | | | | 2020 | | | 7,254,300 | | | | 2,948,008 | | | | 10,798,751 | | | | — | | | | — | | | | 15,105,043 | |
| | * | The equity award adjustments shown in this column are calculated as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year end fair
value of equity
awards granted
during the year
($) | | | Year over year
change in
fair value
of outstanding
and unvested
equity awards
($) | | | Fair value as of
vesting date of
equity
awards granted
and vested in
the year
($) | | | Year over year
change in fair
value of equity
awards granted
in prior years
that vested in
the year
($) | | | Fair value at
the end of the
prior year of
equity awards
that failed to
meet vesting
conditions in
the year
($) | | | Value of
dividends or
other
earnings paid
on stock or
option awards
not otherwise
reflected in
fair value or
total
compensation
($) | | | Total equity
award
adjustments
($) | | | | | | | | | | | | 2022 | | | 2,506,468 | | | | (10,904,630 | ) | | | — | | | | (685,586 | ) | | | — | | | | — | | | | (9,083,748 | ) | | | | | | | | | | | 2021 | | | 7,989,712 | | | | 18,728,632 | | | | — | | | | (200,798 | ) | | | — | | | | — | | | | 26,517,545 | | | | | | | | | | | | 2020 | | | 4,031,415 | | | | 6,639,119 | | | | — | | | | 128,217 | | | | — | | | | — | | | | 10,798,751 | |
| (2) | The average Compensation Actually Paid to our Named Executive Officers, other than J. Powell Brown, President and Chief Executive Officer of the Company, for each of the fiscal years ended December 31, 2022, PROXY STATEMENT2021 and 2020, is calculated, as follows. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Average reported summary compensation table total for non-CEO NEOs ($) (a) | | | Average
reported
value of
equity awards
($) (b) | | | Average
equity award
adjustments
($) (c)* | | | Average
reported
change in
the actuarial
present value
of pension
benefits ($)
(d) | | | Average
pension benefit
adjustments ($)
(e) | | | Average compensation actually paid to non-CEO NEOs | | | | | | | | | | | 2022 | | | 4,728,133 | | | | 2,541,365 | | | | 613,501 | | | | — | | | | — | | | | 2,800,269 | | | | | | | | | | | 2021 | | | 3,508,148 | | | | 575,709 | | | | 4,006,805 | | | | — | | | | — | | | | 6,939,244 | | | | | | | | | | | 2020 | | | 2,573,911 | | | | 540,422 | | | | 2,150,723 | | | | — | | | | — | | | | 4,184,212 | |
| * | The equity award adjustments shown in this column are calculated as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Average year end
fair value of
equity awards
granted during
the year
($) | | | Average year over
year change in
fair value of
outstanding and
unvested equity
awards
($) | | | Average fair
value as of
vesting
date of
equity
awards
granted and
vested in
the year
($) | | | Average year
over year
change in
fair value of
equity
awards
granted in
prior years
that vested
in the year
($) | | | Average
fair value
at the end
of the
prior year
of equity
awards
that failed
to meet
vesting
conditions
in the
year
($) | | | Average
value of
dividends or
other
earnings paid
on stock or
option
awards not
otherwise
reflected in
fair value or
total
compensation
($) | | | Average
total equity
award
adjustments
($) | | | | | | | | | | | | 2022 | | | 2,080,633 | | | | (1,255,815 | ) | | | — | | | | (211,317 | ) | | | — | | | | — | | | | 613,501 | | | | | | | | | | | | 2021 | | | 1,564,556 | | | | 2,529,319 | | | | — | | | | (87,070 | ) | | | — | | | | — | | | | 4,006,805 | | | | | | | | | | | | 2020 | | | 739,039 | | | | 1,304,049 | | | | — | | | | 107,635 | | | | — | | | | — | | | | 2,150,723 | |
| | Peer average among Arthur J. Gallagher & Co, Aon plc, Marsh & McLennan Companies, and Willis Towers Watson Public Limited Company. |
| | Seefor additional information regarding Organic Revenue growth, which is a non-GAAP financial measure, including a reconciliation to the most closely comparable GAAP financial measure. |
Relationship between Pay and Performance In accordance with the SEC’s new PVP rules, we are providing the following graphs showing the relationships between information presented in the PVP table. Equity awards constitute a significant portion of compensation for our NEOs, and as a result, CAP will vary based on year-over-year changes in our stock price resulting in appreciation or depreciation in the value of equity awards granted to our NEOs. The value of equity awards will not be realized by the NEOs before any applicable performance goals are satisfied and the awards vest. The ultimate value of such awards is subject to changes in the stock price. RELATIONSHIP BETWEEN CAP, AND NET INCOME AND ORGANIC REVENUE GROWTH The graph below reflects the relationship between the CEO and average Non-CEO NEO CAP, the Company’s net income and the Company’s Organic Revenue growth for the fiscal years ended December 31, 2022, 2021 and 2020:
RELATIONSHIP BETWEEN CAP, AND COMPANY TOTAL SHAREHOLDER RETURN AND PEER GROUP TOTAL SHAREHOLDER RETURN The graphs below reflect the relationship between the CEO and average Non-CEO NEO CAP, the Company’s total shareholder return (assuming an initial fixed investment of $100) and the peer group’s total shareholder return (assuming an initial fixed investment of $100) for the fiscal years ended December 31, 2022, 2021 and 2020:
List of Most Important Financial Performance Measures In accordance with the SEC’s new PVP rules, the following tabular list sets forth the financial performance measures the Company has determined are the most important financial performance measures used to link compensation actually paid to Company performance during the last fiscal year: | | | Financial Performance Measure | | 61 | | | |
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Other Important Information
Organic Revenue(1) growth rate | | | | | Other Important Information | Adjusted EBITDAC Margin(1) | | | | | | | | | | Total Shareholder Return(2) | | |
| (1) | For additional information related to how we link our executive compensation programs to Adjusted EBITDAC Margin, Organic Revenue growth and Adjusted EPS, see “Compensation Discussion and Analysis.” |
| (2) | While Total Shareholder Return is not used as one of the metrics tied to the payouts under our incentive plans, the actual value realized under our equity incentive awards is based upon the Company’s Total Shareholder Return (i.e., stock price and dividends paid) over the applicable performance and vesting periods. |
Security Ownership of Management and Certain Beneficial Owners The following table sets forth, as of February 28, 2022,27, 2023, the record date for the Meeting, information as to our common stock beneficially owned by (1) each of our directors, all of whom, other than Hugh M. Brown, are director nominees, (2) each Named Executive Officer named in the Summary Compensation Table, (3) all of our directors and current executive officers as a group and (4) any person or entity whom we know to be the beneficial owner of more than five percent of the outstanding shares of our common stock. | NAME OF BENEFICIAL OWNER(1) | | AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP(2)(3) | | PERCENT OF
TOTAL | | J. Hyatt Brown(4) | | 37,742,578 | | 13.33% | | Hugh M. Brown(5) | | 47,761 | | * | | J. Powell Brown(6) | | 5,690,319 | | 2.01% | | Lawrence L. Gellerstedt III | | 6,057 | | * | | James C. Hays | | 348,195 | | * | | Theodore J. Hoepner | | 113,561 | | * | | James S. Hunt | | 19,509 | | * | | Toni Jennings | | 49,235 | | * | | Timothy R.M. Main | | 27,399 | | * | | H. Palmer Proctor, Jr.(7) | | 37,879 | | * | | Wendell S. Reilly | | 229,461 | | * | | Chilton D. Varner | | 72,982 | | * | | P. Barrett Brown(8) | | 1,404,499 | | * | | J. Scott Penny(9) | | 694,024 | | * | | Chris L. Walker | | 160,627 | | * | | R. Andrew Watts | | 248,119 | | * | | All current directors and executive officers as a group (20 persons)(10) | | 47,208,063 | | 16.67% | BlackRock Inc.(11)
55 East 52nd Street
New York, NY 10055 | | 19,349,635 | | 6.83% | The Vanguard Group, Inc.(12)
100 Vanguard Boulevard
Malvern, PA 19355 | | 28,277,849 | | 9.99% | Select Equity Group, L.P.(13)
380 Lafayette Street, 6th Floor
New York, New York 10003 | | 18,275,989 | | 6.46% |
| | | | | | | | | Name of Beneficial Owner(1) | | Amount and Nature
of Beneficial Ownership(2)(3) | | | Percent of Total | | | | | J. Hyatt Brown(4) | | | 37,740,928 | | | | 13.30 | % | | | | Hugh M. Brown(5) | | | 50,739 | | | | * | | | | | J. Powell Brown(6) | | | 5,556,716 | | | | 1.96 | % | | | | Lawrence L. Gellerstedt III | | | 16,284 | | | | * | | | | | James C. Hays | | | 360,648 | | | | * | | | | | Theodore J. Hoepner | | | 115,228 | | | | * | | | | | James S. Hunt | | | 20,253 | | | | * | | | | | Toni Jennings | | | 50,902 | | | | * | | | | | Timothy R.M. Main | | | 29,066 | | | | * | | | | | Jaymin B. Patel | | | 0 | | | | 0 | % | | | | H. Palmer Proctor, Jr.(7) | | | 41,546 | | | | * | | | | | Wendell S. Reilly | | | 231,128 | | | | * | | | | | Chilton D. Varner | | | 74,649 | | | | * | | | | | P. Barrett Brown(8) | | | 1,413,284 | | | | * | | | | | J. Scott Penny(9) | | | 691,637 | | | | * | | | | | Chris L. Walker | | | 164,200 | | | | * | | | | | R. Andrew Watts | | | 260,384 | | | | * | | | | | All current directors and executive officers as a group (20 persons)(10) | | | 47,039,271 | | | | 16.58 | % | | | | BlackRock Inc.(11) 55 East 52nd Street New York, NY 10055 | | | 16,545,072 | | | | 5.83 | % | | | | The Vanguard Group, Inc.(12) 100 Vanguard Boulevard Malvern, PA 19355 | | | 27,779,153 | | | | 9.79 | % | | | | Select Equity Group, L.P.(13) 380 Lafayette Street, 6th Floor New York, New York 10003 | | | 17,261,734 | | | | 6.08 | % |
| | | (1) | Unless otherwise indicated, the address of such person is c/o Brown & Brown, Inc., 300 NorthN. Beach St., Daytona Beach, Florida 32114. |
| | | (2) | Beneficial ownership of shares, as determined in accordance with applicable SEC rules, includes shares as to which a person has or shares voting power and/or investment power, or as to which a person has the right to acquire beneficial ownership within the next |
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| 60 days. We have been informed that all shares shown are held of record with sole voting and investment power, except as otherwise indicated. |
58 | BROWN & BROWN, INC.
OTHER IMPORTANT INFORMATION | | | (3) | The number and percentage of shares owned by the following persons include the indicated number of shares owned through our 401(k) plan as of February 28, 2022:27, 2023: Mr. Powell Brown - 41,569;– 41,904; Mr. Watts -– 0; Mr. James Hays -– 585; Mr. Barrett Brown - 10,371;– 10,545; Mr. Penny - 19,295;– 19,283; Mr. Walker - 0;– 0 and all current directors and executive officers as a group - 71,820.– 72,317. |
| | | | The number and percentage of shares owned by the following persons also include the indicated number of unvested shares which such persons have been granted under our PSP as of March 1, 2021:February 27, 2023: Mr. Powell Brown - 70,960;– 32,000; Mr. Watts -– 0; Mr. Barrett Brown – 2,164;0; Mr. Penny - 34,632;– 0; Mr. Walker - 0;– 0 and all current directors and executive officers as a group – 128,804.32,000. These PSP shares have voting and dividend rights due to satisfaction of the first condition of vesting based on stock price performance, but the holders thereof currently have no power to sell or dispose of the shares, and the shares are subject to forfeiture. |
| | | | In addition, the number and percentage of shares owned by the following persons also include the indicated number of unvested shares which such persons have been granted under our 2010 SIP and 2019 SIP as of February 28, 202227, 2023 and for which the first condition of vesting has been satisfied: Mr. Powell Brown – 490,560;493,688; Mr. Watts – 57,385;52,142; Mr. Barrett Brown – 142,377;30,708; Mr. Penny – 274,213;38,332; Mr. Walker –199,301;– 10,756 and all current directors and executive officers as a group – 2,184,901.666,680. These 2010 SIP and 2019 SIP shares have voting and dividend rights due to satisfaction of the first condition of vesting, but the holders thereof currently have no power to sell or dispose of the shares, and the shares are subject to forfeiture. |
| | | | In addition, the number and percentage of shares owned by the following persons include the indicated number of unvested shares which such persons have been granted under our 2010 SIP and 2019 SIP in the form of time-based onlytime-based-only grants as of February 28, 2022:27, 2023: Mr. Powell Brown – 78,892;72,987; Mr. Watts – 50,065;48,728; Mr. Barrett Brown – 44,787;40,336; Mr. Penny – 42,464;41,607; Mr. Walker – 13,820;9,094 and all current directors and executive officers as a group – 350,734.303,691. These time-based only grants have voting and dividend rights, but the holders thereof have no power to sell or dispose of the shares, and the shares are subject to forfeiture in the event that the recipient does not continue to be employed with us for a specified number of years following the date of grant. |
| | | (4) | Of the shares beneficially owned by Mr. Hyatt Brown, 37,606,57837,604,928 are held by Ormond Riverside, Limited Partnership, of which Swakopmund, Inc. is the General Partner that has voting and investment power over such shares. Swakopmund, Inc. is 100% owned by the Swakopmund Trust of 2009, a revocable trust created by Mr. Hyatt Brown, who is the sole trustee thereof and retains the sole voting and investment powers with respect to all the shares of Swakopmund, Inc. An additional 136,000 shares are held in an IRA account. |
| | | (5) | Mr. Hugh Brown’s ownership includes 8001,287 shares owned by his spouse, as to which he disclaims beneficial ownership. |
| | | (6) | Mr. Powell Brown’s ownership includes (a) 30,558 shares owned by children living in his household, as to which he disclaims beneficial ownership; and (b) 2,384,548 shares held by the James Hyatt Brown Nongrantor Charitable Lead Annuity Trust (the “CLAT”), of which Mr. Powell Brown has exclusive power and authority over decisions relating to the management and investment of any common stock of the Company held by the CLAT, so long as he remains a trustee of the CLAT.ownership. |
| | | (7) | Mr. Proctor’s ownership includes 448 shares owned by his spouse, as to which he disclaims beneficial ownership. |
| | | (8) | Mr. Barrett Brown’s ownership includes (a) 2,324 shares owned by children living in his household, as to which he disclaims beneficial ownership, and (b) 90,000 shares pledged as collateral for a credit facility extended by a bank to Mr. Barrett Brown. |
| | | (9) | Mr. Penny’s ownership includes 192 shares owned by children living in his household, as to which he disclaims beneficial ownership, and 357,056 shares owned jointly with his spouse. |
| | | (10) | Includes amounts beneficially owned by all our current directors and executive officers as of February 28, 2022,27, 2023, as a group. |
| | | (11) | The amount shown is derived from a Schedule 13G/A filed by BlackRock, Inc. (“BlackRock”) on February 1, 2022,2023 reporting beneficial ownership as of December 31, 2021.2022. According to the Schedule 13G/A, BlackRock has sole voting power over 17,446,82815,083,829 shares, shared voting power over 0 shares, sole dispositive power over 19,349,63516,545,072 shares and shared dispositive power over 0 shares. |
| | | (12) | The amount shown is derived from a Schedule 13G/A filed by The Vanguard Group (“Vanguard”) on January 10, 2022,February 9, 2023 reporting beneficial ownership as of December 31, 2021.2022. According to the Schedule 13G/A, Vanguard has sole voting power over 0 shares, shared voting power over 377,258329,953 shares, sole dispositive power over 27,330,75926,809,710 shares and shared dispositive power over 947,090969,443 shares. |
| | | (13) | The amount shown is derived from a Schedule 13G13G/A filed by Select Equity Group, L.P. (“Select Equity”) on February 14, 2022,2023 reporting beneficial ownership as of December 31, 2021.2023. According to the Schedule 13G,13G/A, Select Equity has sole voting power over 0 shares, shared voting power over 18,275,98917,261,734 shares, sole dispositive power over 0 shares and shared dispositive power over 18,275,98917,261,734 shares. |
Annual Meeting and Proxy Solicitation Information These proxy materials are made available to shareholders in connection with the solicitation of proxies by the Board of Directors of Brown & Brown, Inc. to be voted at the Annual Meeting of Shareholders, to be held virtually at 9:00 a.m. (EDT) on Wednesday, May 4, 2022,3, 2023 and at any postponements or adjournments. The close of business on February 28, 2022,27, 2023 has been fixed as the record date for the determination of shareholders entitled to notice of and to vote at the Meeting. At the close of business on the record date, we had outstanding 283,122,029283,698,194 shares of $0.10 par value common stock, entitled to one vote per share. These proxy materials were first mailed to shareholders of record on March 23, 2022.
Table of Contents22, 2023.
Other Important Information
Notice of Internet Delivery As permitted by SEC rules, Brown & Brown, Inc. is making this Proxy Statement and its Annual Report available to its shareholders electronically via the Internet. If you received a Notice by mail, you will not receive a printed copy of the proxy materials in the mail (unless you request them, as described below and explained in the Notice). Instead, the Notice instructs you on how to access and review all of the important information contained in the Proxy Statement and Annual Report. The Notice also instructs you on how you may vote online. If you received a Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions in the Notice for requesting the materials.
BROWN & BROWN, INC. | 59
OTHER IMPORTANT INFORMATION Attending the Virtual Annual Meeting Both shareholders of record and shareholders who hold their shares in “street name” will need to register to be able to attend the Annual Meeting via live audio webcast, submit their questions during the meeting and vote their shares electronically at the Annual Meeting by following the instructions below. If you are a shareholder of record, you must: ●• | | Follow the instructions provided on your proxy card to first register at http://www.viewproxy.com/bbinsurance/2022/2023/htype.asp by 11:59 p.m. (EDT) on May 1, 2022.April 30, 2023. You will need to enter your name, phone number and email address as part of the registration, following which you will receive an email confirming your registration, as well as the password to attend the Annual Meeting. |
●• | | On the day of the Annual Meeting, if you have properly registered, you may enter the Annual Meeting by logging in using the link and password you received via email in the registration confirmation you received when you registered at http://www.viewproxy.com/bbinsurance/2022/2023/htype.asp. |
●• | | If you wish to vote your shares electronically at the Annual Meeting, you will need to visit www.AALvote.com/BRO during the Annual Meeting while the polls are open (you will need the virtual control number included on your proxy card). |
If your shares are held in a “street name,” you must: ●• | | Register at http://www.viewproxy.com/bbinsurance/2022/2023/htype.asp by 11:59 p.m. (EDT) on May 1, 2022. | | You will need to enter your name, phone number, and email address, and provide a copy of the legal proxy (which may be uploaded to the registration website or sent via email to VirtualMeeting@viewproxy.com) as part of the registration if you plan to vote at the meeting, following which you will receive an email confirming your registration and a virtual control number if you plan to vote at the meeting, as well as the password to attend the Annual Meeting.April 30, 2023. |
You will need to enter your name, phone number and email address, and provide a copy of the legal proxy (which may be uploaded to the registration website or sent via email to VirtualMeeting@viewproxy.com) as part of the registration if you plan to vote at the meeting, following which you will receive an email confirming your registration and a virtual control number if you plan to vote at the meeting, as well as the password to attend the Annual Meeting. Please note, if you do not provide a copy of the legal proxy, you may still attend the Annual Meeting by showing proof of ownership but will be unable to vote your shares electronically at the Annual Meeting. ●• | | On the day of the Annual Meeting, if you have properly registered, you may enter the Annual Meeting by logging in using the link and password you received via email in the registration confirmation you received when you registered at http://www.viewproxy.com/bbinsurance/2022/2023/htype.asp. |
●• | | If you wish to vote your shares electronically at the Annual Meeting, you will need to visit www.AALvote.com/BRO during the Annual Meeting while the polls are open (you will need the virtual control number assigned to you in your registration confirmation email). |
Further instructions on how to attend the Annual Meeting via live audio webcast, including how to vote your shares electronically at the Annual Meeting are posted on http://www.viewproxy.com/bbinsurance/2022/htype. asp2023/htype.asp under Frequently Asked Questions (FAQ). The Annual Meeting live audio webcast will begin promptly at 9:00 a.m. (EDT) on May 4, 2022.3, 2023. We encourage you to access the meeting prior to the start time. Online check-in will begin at 8:30 a.m. (EDT), and you should allow ample time for the check-in procedures. 64 | | | | | |
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Other Important Information
Technical Difficulties We will have technicians ready to assist you with any technical difficulties you may have accessing the Annual Meeting live audio webcast. Please be sure to check in by 8:30 a.m. (EDT) on May 4, 2022,3, 2023, the day of the Annual Meeting, so we may address any technical difficulties before the Annual Meeting live audio webcast begins. If you encounter any difficulties accessing the Annual Meeting live audio webcast during the check-in or meeting time, please email VirtualMeeting@viewproxy.com or call (866) 612-8937. Voting Your Shares; Required Votes Shares represented by duly executed proxies in the accompanying form that we receive prior to the Meeting will be voted at the Meeting. If you specify in the proxy a choice with respect to any matter to be acted upon, the shares represented by such proxy will be voted as specified. If your proxy card is signed and returned without specifying a vote or an abstention, the shares represented by such proxy will be voted according to the recommendation of the Board of Directors. The Board of Directors knows of no other matters that may be brought before the Meeting. However, if any other matters are properly presented for action, it is the intention of the named proxies to vote on them according to their best judgment. 60 | BROWN & BROWN, INC.
OTHER IMPORTANT INFORMATION If your shares are held in “street name,” a stock brokerage account or by a bank or other nominee, you have the right to provide instructions on voting as requested by your broker, bank or nominee. Under the NYSE’s rules, your broker, bank or nominee is permitted to vote your shares on the second proposal concerning the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accountants for the fiscal year ending December 31, 20222023 even if your broker, bank or nominee has not been given specific voting instructions as to this matter. Your broker, bank or nominee is not permitted to vote your shares on the first or third proposals. After you have returned a proxy, you may revoke it at any time before it is voted by taking one of the following actions: (i) giving written notice of the revocation to our Corporate Secretary at 300 North Beach St., Daytona Beach, Florida 32114, or by email to annualmeeting@bbins.com; (ii) executing and delivering a proxy with a later date; or (iii) voting in person at the Meeting. Votes cast by proxy or in person at the Meeting will be tabulated by Alliance Advisors, LLC, and by one or more inspectors of election appointed at the Meeting, who will also determine whether a quorum is present for the transaction of business. A quorum is present when a majority in interest of all the common stock outstanding is represented by shareholders present in person or by proxy. Shares of the common stock represented by proxies received by the Company (whether through the return of the enclosed proxy card, by telephone or over the Internet), where the shareholder has specified his or her choice with respect to the proposals described in this Proxy Statement (including the election of directors), will be voted in accordance with the specification(s) so made. If your proxy is properly executed but does not contain voting instructions, or if you vote via telephone or the Internet without indicating how you want to vote with respect to any item, your shares will be voted “FOR” the election of all nominees for the Board of Directors; “FOR” the ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accountants for the fiscal year ending December 31, 2022; and2023; “FOR” the advisory vote to approve Named Executive Officer compensation.compensation and “ONE YEAR,” on an advisory basis, as the desired frequency of holding an advisory vote on the compensation of the Named Executive Officers. A valid proxy also gives the individuals named as proxies authority to vote in their discretion when voting the shares on any other matters that are properly presented for action at the Meeting. If the shares you own are held in “street name” by a broker or other nominee entity and you provide instructions to the broker or nominee as to how to vote your shares, your broker or other nominee entity, as the record holder of your shares, is required to vote your shares according to your instructions. Under the NYSE rules, certain proposals, such as the ratification of the appointment of the Company’s registered public accountants, are considered “routine” matters, and brokers and other nominee entities generally may vote on such matters on behalf of beneficial owners who have not furnished voting instructions. For “non-routine” matters, such as the election of directors, and the “say on pay” advisory vote, and the advisory vote on the desired frequency of holding an advisory vote on the compensation of the Named Executive Officers, brokers and other nominee
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Other Important Information
entities may not vote unless they have received voting instructions from the beneficial owner. A “broker non-vote” occurs when a broker or other nominee entity does not vote on a particular proposal because it does not have authority under the NYSE rules to vote on that particular proposal without receiving voting instructions from the beneficial owner. Broker non-votes, as well as properly executed proxies marked “ABSTAIN,” will be counted for purposes of determining whether a quorum is present at the Meeting. For information regarding the voting standard for Proposal 1, see “Vote Required; Majority Voting; Board Recommendation,Recommendation.” above. In order to pass, each of Proposals 2 and 3 must receive the affirmative vote of a majority of the votes cast on the Proposal. AAbstentions and broker non-vote will not have an effect on these proposals. An abstentionnon-votes will not have an effect on Proposals 1, 2 or 3. With respect to Proposal 4, the frequency receiving the greatest number of votes (one, two or three years) will be considered the frequency approved by shareholders. Abstentions and broker non-votes will have no effect on Proposal 4. Proxies may be solicited by our officers, directors and regular supervisory and executive employees, none of whom will receive any additional compensation for their services. Also, Alliance Advisors, LLC may solicit proxies on our behalf at an approximate cost of $8,500,$12,000, plus reasonable expenses. Such solicitations may be made personally or by mail, facsimile, telephone, messenger or via the Internet. We will pay persons holding shares of common stock in their names or in the names of nominees, but not owning such shares beneficially, such as brokerage houses, banks and other fiduciaries, for the expense of forwarding solicitation materials to their principals. We will pay all of the costs of solicitation of proxies. Our executive office is located at 300 NorthN. Beach St., Daytona Beach, Florida 32114 (telephone number (386) 252-9601).
BROWN & BROWN, INC. | 61
OTHER IMPORTANT INFORMATION Proposals of Shareholders Pursuant to applicable requirements of Rule 14a-8 under the Securities Exchange Act of 1934, proposals of shareholders intended to be presented at the 20232024 Annual Meeting of Shareholders must be received by us no later than November 23, 2022,2023, in order to be considered for inclusion in our Proxy Statement and form of proxy/voting instruction related to that meeting. Such proposals will need to be in writing and comply with SEC regulations regarding the inclusion of shareholder proposals in Company-sponsored proxy materials. In addition, For a shareholder’s notice of nomination of one or more director nominations to be included in our Proxy Statement and form of proxy/voting instructions pursuant to the proxy solicited byaccess right included in Section 1.9 of our By-Laws, the Board of Directors for the 2023 Annual Meeting of Shareholders will confer discretionary authority to vote on any shareholder proposal presented at that Meeting, unless we are provided withCompany must receive such written notice no earlier than the close of such proposal by February 6, 2023.business on December 5, 2023 and no later than the close of business on January 4, 2024. The notice must contain the information required in our By-Laws, and the shareholder(s) and nominee(s) must comply with the information and other requirement in our By-Laws relating to the inclusion of nominees in our proxy materials. In addition, the Company’sour By-Laws require that for any shareholder proposal for other business or director nomination to be properly presented atbrought before the 20232024 Annual Meeting of Shareholders, whether or not also submitted for inclusion in the Company’s proxy statement, the shareholder proposal or director nomination must comply with the advance notice requirements set forth in theour By-Laws, and the Company must receive written notice of the matter no earlier than the close of business on January 4, 20232024 and no later than the close of business on February 3, 2023.2024. Each such written notice must contain the information set forth in our By-Laws. The advance notice requirement in our By-Laws supersedes the By-Laws.notice period in Rule 14a-4(c)(1) under the Securities Exchange Act of 1934 regarding discretionary proxy authority with respect to shareholder business. In addition to satisfying the foregoing requirements under the Company’sour By-Laws, to comply with the universal proxy rules, shareholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than March 5, 2023.4, 2024. Any shareholder proposals or nominations should be sent to our Corporate Secretary at 300 NorthN. Beach St., Daytona Beach, Florida 32114. 66 | | | | | |
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Our 20212022 Annual Report to Shareholders (the “Annual Report”) accompanies this Proxy Statement. We will provide to any shareholder, upon the written request of such person, a copy of our Annual Report on Form 10-K, including the financial statements and the exhibits thereto, for the fiscal year ended December 31, 2021,2022, as filed with the SEC pursuant to Rule 13a-1 under the Securities Exchange Act of 1934, as amended. Any such request should be directed to Brown & Brown, Inc., 300 North Beach St., Daytona Beach, Florida 32114 Attention: Corporate Secretary. No charge will be made for copies of such Annual Report on Form 10-K; however, a reasonable charge will be made for copies of the exhibits. Only one copy of this Proxy Statement and the accompanying Annual Report is being delivered to shareholders who share an address unless we have received contrary instructions from one or more of such shareholders. We will promptly deliver a separate copy of this Proxy Statement and the accompanying Annual Report to any shareholder at a shared address to which a single copy of these documents has been delivered upon our receipt of a written or oral request from that shareholder directed to the address shown above, or to us at (386) 252-9601. Any shareholder sharing a single copy of the Proxy Statement and Annual Report who wishes to receive a separate mailing of these materials in the future, or any shareholders sharing an address and receiving multiple copies of these materials who wish to share a single copy of these documents, in the future, should also notify us at the address and telephone number shown above. The material referred to in this Proxy Statement under the captions “Compensation Discussion and Analysis,” “Compensation Committee Report,” and “Report of the Audit Committee” shall not be deemed soliciting material or otherwise deemed filed and shall not be deemed to be incorporated by any general statement of incorporation by reference in any filings made under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended. By Order of the Board of Directors 
Robert W. Lloyd
CorporateANTHONY M. ROBINSON
Assistant Secretary Daytona Beach, Florida March 23, 202122, 2023 BROWN & BROWN, INC. | 63
Table of Contents
Annex A Information Regarding Non-GAAP Financial Measures
| Annex A Information Regarding Non-GAAP Financial Measures |
This Proxy Statement contains references to Organic Revenue, Organic Revenue growth, Organic Revenue growth -– adjusted, Adjusted EBITDAC, Adjusted EBITDAC Margin, and Adjusted EPS, which are non-GAAP financial measures. These measures are not in accordance with, or an alternative to the GAAP information provided in the financial statements contained in our Annual Report on Form 10-K. A reconciliation of this non-GAAP financial information to our GAAP information is contained in this Annex A.A. Organic Revenue, Organic Revenue – adjusted, Organic Revenue growth and Organic Revenue growth -– adjusted.We view Organic Revenue, Organic Revenue – adjusted, Organic Revenue growth and Organic Revenue growth -– adjusted as important indicators when assessing and evaluating our performance on a consolidated basis and for each of our segments because they allow us to determine a comparable, but non-GAAP, measurement of revenue growth that is associated with the revenue sources that were a part of our business in both the current and prior year and that are expected to continue in the future. We believe presenting these non-GAAP financial measures allows readers of our financial statements to measure, analyze and compare our consolidated growth, and the growth of each of our segments, in a meaningful and consistent manner. Adjusted EBITDAC and Adjusted EBITDAC Margin.We view Adjusted EBITDAC and Adjusted EBITDAC Margin as important indicators when assessing and evaluating our performance because it allows us to determine a comparable, but non-GAAP, measurement of our operating margins in a meaningful and consistent manner. Adjusted EPS.Adjusted EPS means our diluted earnings per share, excluding the impact of the change in estimated acquisition earn-out payables and any other items (for example, extraordinary, nonrecurring items) that the Compensation Committee determines to be appropriately disregarded for all grants subject to a vesting condition of Adjusted EPS. We believe that Adjusted EPS provides a meaningful representation of our operating performance and is also presented to improve the comparability of our results between periods by eliminating the impact of certain items that have a high degree of variability. We present such non-GAAP supplemental financial information, as we believe such information provides additional meaningful methods of evaluating certain aspects of our operating performance from period to period on a basis that may not be otherwise apparent on a GAAP basis. Our industry peers may provide similar supplemental non-GAAP information with respect to one or more of these measures, although they may not use the same or comparable terminology and may not make identical adjustments. This supplemental financial information should be considered in addition to, not in lieu of, our Consolidated Financial Statements. 68 | | | | | |
64 | BROWN & BROWN, INC.
Table of ContentsANNEX A INFORMATION REGARDING NON-GAAP FINANCIAL MEASURES
Annex A Information Regarding Non-GAAP Financial Measures
Reconciliation of Total Commissions and Fees to Organic Revenue Growth and Organic Revenue Growth – Adjusted The reconciliation of total commissions and fees, included in the Consolidated Statement of Income, to Organic Revenue for the year ended December 31, 2022, is as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (in millions, except percentages) | | Total
Commissions
and Fees | | | Total
Net
Change | | | Total
Net
Growth
% | | | Contingents | | | Total Core
Commissions
and Fees(2) | | | Acquisition
Revenues | | | Divested
Business | | | Foreign
Currency
Translation | | | Organic
Revenue(3) | | | Organic
Revenue
Growth | | | Organic
Revenue
Growth
% | | | | 2022 | | | 2021 | | | 2022 | | | 2021 | | | 2022 | | | 2021 | | | 2022 | | | 2021 | | | 2021 | | | 2022 | | | 2021 | | | | | | | | | | | | | | | | | | Retail(1) | | | 2,080.4 | | | | 1,764.9 | | | | 315.5 | | | | 17.9 | % | | | 48.8 | | | | 38.9 | | | | 2,031.6 | | | | 1,726.0 | | | | 205.1 | | | | 7.2 | | | | 3.9 | | | | 1,826.5 | | | | 1,714.9 | | | | 111.6 | | | | 6.5 | % | | | | | | | | | | | | | | | | | National Programs | | | 858.1 | | | | 701.1 | | | | 157.0 | | | | 22.4 | % | | | 27.6 | | | | 35.3 | | | | 830.5 | | | | 665.8 | | | | 64.9 | | | | 3.3 | | | | 0.6 | | | | 765.6 | | | | 661.9 | | | | 103.7 | | | | 15.7 | % | | | | | | | | | | | | | | | | | Wholesale Brokerage | | | 452.8 | | | | 402.6 | | | | 50.2 | | | | 12.5 | % | | | 12.3 | | | | 8.0 | | | | 440.5 | | | | 394.6 | | | | 18.6 | | | | 2.4 | | | | — | | | | 421.9 | | | | 392.2 | | | | 29.7 | | | | 7.6 | % | | | | | | | | | | | | | | | | | Services | | | 171.9 | | | | 178.9 | | | | (7.0 | ) | | | (3.9 | )% | | | — | | | | — | | | | 171.9 | | | | 178.9 | | | | — | | | | 1.9 | | | | — | | | | 171.9 | | | | 177.0 | | | | (5.1 | ) | | | (2.9 | )% | | | | | | | | | | | | | | | | | Total Company | | | 3,563.2 | | | | 3,047.5 | | | | 515.7 | | | | 16.9 | % | | | 88.7 | | | | 82.2 | | | | 3,474.5 | | | | 2,965.3 | | | | 288.6 | | | | 14.8 | | | | 4.5 | | | | 3,185.9 | | | | 2,946.0 | | | | 239.9 | | | | 8.1 | % |
The reconciliation of total commissions and fees, included in the Consolidated Statement of Income, to Organic Revenue growth and Organic Revenue growth – adjusted, which excludes the period-over-period impact of Foreign Currency Translation, for the year ended December 31, 2021 is as follows: | 2021 | | RETAIL(1) | | NATIONAL PROGRAMS | | WHOLESALE BROKERAGE | | SERVICES | | TOTAL | (IN THOUSANDS, EXCEPT
PERCENTAGES) | | 2021 | | | 2020 | | | 2021 | | | 2020 | | | 2021 | | | 2020 | | | 2021 | | | 2020 | | | 2021 | | | 2020 | | | Commissions and fees | | $ | 1,764,922 | | | $ | 1,470,093 | | | $ | 701,108 | | | $ | 609,842 | | | $ | 402,635 | | | $ | 352,161 | | | $ | 178,857 | | | $ | 174,012 | | | $ | 3,047,522 | | | $ | 2,606,108 | | | Total change | | $ | 294,829 | | | | | | | $ | 91,266 | | | | | | | $ | 50,474 | | | | | | | $ | 4,845 | | | | | | | $ | 441,414 | | | | | | | Total growth % | | | 20.1 | % | | | | | | | 15.0 | % | | | | | | | 14.3 | % | | | | | | | 2.8 | % | | | | | | | 16.9 | % | | | | | | Profit-sharing contingent commissions | | | (38,895 | ) | | | (35,785 | ) | | | (35,259 | ) | | | (27,278 | ) | | | (8,072 | ) | | | (7,871 | ) | | | — | | | | — | | | | (82,226 | ) | | | (70,934 | ) | | GSCs | | | (16,452 | ) | | | (15,128 | ) | | | (1,619 | ) | | | 238 | | | | (934 | ) | | | (1,304 | ) | | | — | | | | — | | | | (19,005 | ) | | | (16,194 | ) | | Core commissions and fees(2) | | $ | 1,709,575 | | | $ | 1,419,180 | | | $ | 664,230 | | | $ | 582,802 | | | $ | 393,629 | | | $ | 342,986 | | | $ | 178,857 | | | $ | 174,012 | | | $ | 2,946,291 | | | $ | 2,518,980 | | | Acquisitions | | | (138,968 | ) | | | — | | | | (8,151 | ) | | | — | | | | (22,998 | ) | | | — | | | | — | | | | — | | | | (170,117 | ) | | | — | | | Dispositions | | | — | | | | (4,403 | ) | | | — | | | | (478 | ) | | | — | | | | — | | | | — | | | | (364 | ) | | | — | | | | (5,245 | ) | | Foreign currency translation | | | — | | | | — | | | | — | | | | 1,161 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 1,161 | | | Organic Revenue(3) | | $ | 1,570,607 | | | $ | 1,414,777 | | | $ | 656,079 | | | $ | 583,485 | | | $ | 370,631 | | | $ | 342,986 | | | $ | 178,857 | | | $ | 173,648 | | | $ | 2,776,174 | | | $ | 2,514,896 | | | Organic Revenue(3) growth | | $ | 155,830 | | | | | | | $ | 72,594 | | | | | | | $ | 27,645 | | | | | | | $ | 5,209 | | | | | | | $ | 261,278 | | | | | | | Organic Revenue(3) growth rate | | | 11.0 | % | | | | | | | 12.4 | % | | | | | | | 8.1 | % | | | | | | | 3.0 | % | | | | | | | 10.4 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (in thousands, except percentages) | | Total
Commissions
and Fees | | | Total
Net
Change | | | Total
Net
Growth
% | | | Contingents | | | GSCs | | | Total Core
Commissions
and Fees(2) | | | Acquisition
Revenues | | | Divested
Business | | | Foreign
Currency
Translation | | | Organic
Revenue(3) | | | Organic
Revenue
Growth | | | Organic
Revenue
Growth
% | | | | 2021 | | | 2020 | | | 2021 | | | 2020 | | | 2021 | | | 2020 | | | 2021 | | | 2020 | | | 2021 | | | 2020 | | | 2020 | | | 2021 | | | 2020 | | | | | | | | | | | | | | | | | | | | Retail(1) | | | 1,764.9 | | | | 1,470.1 | | | | 294.8 | | | | 20.1 | % | | | 38.9 | | | | 35.8 | | | | 16.5 | | | | 15.1 | | | | 1,709.5 | | | | 1,419.2 | | | | 139.0 | | | | 4.4 | | | | — | | | | 1,570.5 | | | | 1,414.8 | | | | 155.7 | | | | 11.0 | % | | | | | | | | | | | | | | | | | | | National Programs | | | 701.1 | | | | 609.8 | | | | 91.3 | | | | 15.0 | % | | | 35.3 | | | | 27.3 | | | | 1.6 | | | | (0.2 | ) | | | 664.2 | | | | 582.7 | | | | 8.2 | | | | 0.5 | | | | (1.2 | ) | | | 656.0 | | | | 583.4 | | | | 72.6 | | | | 12.4 | % | | | | | | | | | | | | | | | | | | | Wholesale Brokerage | | | 402.6 | | | | 352.2 | | | | 50.4 | | | | 14.3 | % | | | 8.0 | | | | 7.9 | | | | 0.9 | | | | 1.3 | | | | 393.7 | | | | 343.0 | | | | 23.0 | | | | — | | | | — | | | | 370.7 | | | | 343.0 | | | | 27.7 | | | | 8.1 | % | | | | | | | | | | | | | | | | | | | Services | | | 178.9 | | | | 174.0 | | | | 4.9 | | | | 2.8 | % | | | — | | | | — | | | | — | | | | — | | | | 178.9 | | | | 174.0 | | | | — | | | | 0.4 | | | | — | | | | 178.9 | | | | 173.6 | | | | 5.3 | | | | 3.1 | % | | | | | | | | | | | | | | | | | | | Total Company | | | 3,047.5 | | | | 2,606.1 | | | | 441.4 | | | | 16.9 | % | | | 82.2 | | | | 71.0 | | | | 19.0 | | | | 16.2 | | | | 2,946.3 | | | | 2,518.9 | | | | 170.2 | | | | 5.3 | | | | (1.2 | ) | | | 2,776.1 | | | | 2,514.8 | | | | 261.3 | | | | 10.4 | % |
The reconciliation of total commissions and fees, included in the Consolidated Statement of Income, to Organic Revenue growth for the year ended December 31, 2020, is as follows: | 2020 | | RETAIL(1) | | NATIONAL PROGRAMS | | WHOLESALE BROKERAGE | | SERVICES | | TOTAL | (IN THOUSANDS, EXCEPT
PERCENTAGES) | | 2020 | | | 2019 | | | 2020 | | | 2019 | | | 2020 | | | 2019 | | | 2020 | | | 2019 | | | 2020 | | | 2019 | | | Commissions and fees | | $ | 1,470,093 | | | $ | 1,364,755 | | | $ | 609,842 | | | $ | 516,915 | | | $ | 352,161 | | | $ | 309,426 | | | $ | 174,012 | | | $ | 193,641 | | | $ | 2,606,108 | | | $ | 2,384,737 | | | Total change | | $ | 105,338 | | | | | | | $ | 92,927 | | | | | | | $ | 42,735 | | | | | | | $ | (19,629 | ) | | | | | | $ | 221,371 | | | | | | | Total growth % | | | 7.7 | % | | | | | | | 18.0 | % | | | | | | | 13.8 | % | | | | | | | (10.1 | )% | | | | | | | 9.3 | % | | | | | | Profit-sharing contingent commissions | | | (35,785 | ) | | | (34,150 | ) | | | (27,278 | ) | | | (17,517 | ) | | | (7,871 | ) | | | (7,499 | ) | | | — | | | | — | | | | (70,934 | ) | | | (59,166 | ) | | GSCs | | | (15,128 | ) | | | (11,056 | ) | | | 238 | | | | (10,566 | ) | | | (1,304 | ) | | | (1,443 | ) | | | — | | | | — | | | | (16,194 | ) | | | (23,065 | ) | | Core commissions and fees(2) | | $ | 1,419,180 | | | $ | 1,319,549 | | | $ | 582,802 | | | $ | 488,832 | | | $ | 342,986 | | | $ | 300,484 | | | $ | 174,012 | | | $ | 193,641 | | | $ | 2,518,980 | | | $ | 2,302,506 | | | Acquisitions | | | (79,580 | ) | | | — | | | | (34,173 | ) | | | — | | | | (25,861 | ) | | | — | | | | (1,484 | ) | | | — | | | | (141,098 | ) | | | — | | | Dispositions | | | — | | | | (11,772 | ) | | | — | | | | (377 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | (12,149 | ) | | Foreign currency translation | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | Organic Revenue(3) | | $ | 1,339,600 | | | $ | 1,307,777 | | | $ | 548,629 | | | $ | 488,455 | | | $ | 317,125 | | | $ | 300,484 | | | $ | 172,528 | | | $ | 193,641 | | | $ | 2,377,882 | | | $ | 2,290,357 | | | Organic Revenue(3) growth | | $ | 31,823 | | | | | | | $ | 60,174 | | | | | | | $ | 16,641 | | | | | | | $ | (21,113 | ) | | | | | | $ | 87,525 | | | | | | | Organic Revenue(3) growth rate | | | 2.4 | % | | | | | | | 12.3 | % | | | | | | | 5.5 | % | | | | | | | (10.9 | )% | | | | | | | 3.8 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (in millions, except percentages) | | Total
Commissions
and Fees | | | Total
Net
Change | | | Total
Net
Growth
% | | | Contingents | | | GSCs | | | Total Core
Commissions
and Fees(2) | | | Acquisition
Revenues | | | Divested
Business | | | Organic
Revenue(3) | | | Organic
Revenue Growth | | | Organic
Revenue
Growth % | | | | 2020 | | | 2019 | | | 2020 | | | 2019 | | | 2020 | | | 2019 | | | 2020 | | | 2019 | | | 2020 | | | 2019 | | | 2020 | | | 2019 | | | | | | | | | | | | | | | | | | | Retail(1) | | | 1,470.1 | | | | 1,364.8 | | | | 105.3 | | | | 7.7 | % | | | 35.8 | | | | 34.2 | | | | 15.1 | | | | 11.0 | | | | 1,419.2 | | | | 1,319.6 | | | | 79.5 | | | | 11.8 | | | | 1,339.6 | | | | 1,307.8 | | | | 31.8 | | | | 2.4 | % | | | | | | | | | | | | | | | | | | National Programs | | | 609.8 | | | | 516.9 | | | | 92.9 | | | | 18.0 | % | | | 27.3 | | | | 17.5 | | | | (0.2 | ) | | | 10.6 | | | | 582.7 | | | | 488.8 | | | | 34.2 | | | | 0.4 | | | | 548.6 | | | | 488.4 | | | | 60.2 | | | | 12.3 | % | | | | | | | | | | | | | | | | | | Wholesale Brokerage | | | 352.2 | | | | 309.4 | | | | 42.8 | | | | 13.8 | % | | | 7.9 | | | | 7.5 | | | | 1.3 | | | | 1.4 | | | | 343.0 | | | | 300.5 | | | | 25.9 | | | | — | | | | 317.1 | | | | 300.5 | | | | 16.6 | | | | 5.5 | % | | | | | | | | | | | | | | | | | | Services | | | 174.0 | | | | 193.6 | | | | (19.6 | ) | | | (10.1 | )% | | | — | | | | — | | | | — | | | | — | | | | 174.0 | | | | 193.6 | | | | 1.5 | | | | — | | | | 172.5 | | | | 193.6 | | | | (21.1 | ) | | | (10.9 | )% | | | | | | | | | | | | | | | | | | Total Company | | | 2,606.1 | | | | 2,384.7 | | | | 221.4 | | | | 9.3 | % | | | 71.0 | | | | 59.2 | | | | 16.2 | | | | 23.0 | | | | 2,518.9 | | | | 2,302.5 | | | | 141.1 | | | | 12.2 | | | | 2,377.9 | | | | 2,290.3 | | | | 87.5 | | | | 3.8 | % |
BROWN & BROWN, INC. | 65
Table of ContentsANNEX A INFORMATION REGARDING NON-GAAP FINANCIAL MEASURES
Annex A Information Regarding Non-GAAP Financial Measures
The reconciliation of total commissions and fees, included in the Consolidated Statement of Income, to Organic Revenue growth and Organic Revenue growth – adjusted, which excludes a one-time, non-cash increase of approximately $8 million in the commissions and fees earned by one of the businesses in our National Programs segment in 2018 resulting solely from our implementation of the New Revenue Standard (the “2018 Programs Business New Revenue Standard Adjustment”), for the year ended December 31, 2019 is as follows: | 2019 | | RETAIL(1) | | NATIONAL PROGRAMS | | WHOLESALE BROKERAGE | | SERVICES | | TOTAL | | 2018 PROGRAMS
BUSINESS
NEW REVENUE
STANDARD
ADJUSTMENT | | TOTAL - ADJUSTED | (IN THOUSANDS,
EXCEPT
PERCENTAGES) | | 2019 | | | 2018 | | | 2019 | | | 2018 | | | 2019 | | | 2018 | | | 2019 | | | 2018 | | | 2019 | | | 2018 | | | 2019 | | | 2018 | | | 2019 | | | 2018 | | | Commissions and fees | | $ | 1,364,755 | | | $ | 1,040,574 | | | $ | 516,915 | | | $ | 493,878 | | | $ | 309,426 | | | $ | 286,364 | | | $ | 193,641 | | | $ | 189,041 | | | $ | 2,384,737 | | | $ | 2,009,857 | | | $ | — | | | $ | (8,134 | ) | | $ | 2,384,737 | | | $ | 2,001,723 | | | Total change | | $ | 324,181 | | | | | | | $ | 23,037 | | | | | | | $ | 23,062 | | | | | | | $ | 4,600 | | | | | | | $ | 374,880 | | | | | | | $ | 8,134 | | | | | | | $ | 383,014 | | | | | | | Total growth % | | | 31.2 | % | | | | | | | 4.7 | % | | | | | | | 8.1 | % | | | | | | | 2.4 | % | | | | | | | 18.7 | % | | | | | | | (100.0 | )% | | | | | | | 19.1 | % | | | | | | Profit-sharing contingent commissions | | | (34,150 | ) | | | (24,517 | ) | | | (17,517 | ) | | | (23,896 | ) | | | (7,499 | ) | | | (7,462 | ) | | | — | | | | — | | | | (59,166 | ) | | | (55,875 | ) | | | — | | | | — | | | | (59,166 | ) | | | (55,875 | ) | | GSCs | | | (11,056 | ) | | | (8,535 | ) | | | (10,566 | ) | | | (76 | ) | | | (1,443 | ) | | | (1,350 | ) | | | — | | | | — | | | | (23,065 | ) | | | (9,961 | ) | | | — | | | | — | | | | (23,065 | ) | | | (9,961 | ) | | Core commissions and fees | | $ | 1,319,549 | | | $ | 1,007,522 | | | $ | 488,832 | | | $ | 469,906 | | | $ | 300,484 | | | $ | 277,552 | | | $ | 193,641 | | | $ | 189,041 | | | $ | 2,302,506 | | | $ | 1,944,021 | | | $ | — | | | $ | (8,134 | ) | | $ | 2,302,506 | | | $ | 1,935,887 | | | Acquisitions | | | (272,383 | ) | | | — | | | | (5,721 | ) | | | — | | | | (3,628 | ) | | | — | | | | (16,541 | ) | | | — | | | | (298,273 | ) | | | — | | | | — | | | | — | | | | (298,273 | ) | | | — | | | Dispositions | | | — | | | | (7,743 | ) | | | — | | | | (790 | ) | | | — | | | | (1,268 | ) | | | — | | | | — | | | | — | | | | (9,801 | ) | | | — | | | | — | | | | — | | | | (9,801 | ) | | Foreign currency translation | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | Organic Revenue(2) | | $ | 1,047,166 | | | $ | 999,779 | | | $ | 483,111 | | | $ | 469,116 | | | $ | 296,856 | | | $ | 276,284 | | | $ | 177,100 | | | $ | 189,041 | | | $ | 2,004,233 | | | $ | 1,934,220 | | | $ | — | | | $ | (8,134 | ) | | $ | 2,004,233 | | | $ | 1,926,086 | | | Organic Revenue growth(2) | | $ | 47,387 | | | | | | | $ | 13,995 | | | | | | | $ | 20,572 | | | | | | | $ | (11,941 | ) | | | | | | $ | 70,013 | | | | | | | $ | 8,134 | | | | | | | $ | 78,147 | | | | | | | Organic Revenue growth %(2) | | | 4.7 | % | | | | | | | 3.0 | % | | | | | | | 7.4 | % | | | | | | | (6.3 | )% | | | | | | | 3.6 | % | | | | | | | | | | | | | | | 4.1 | % | | | | |
The reconciliation of total commissions and fees, included in the Consolidated Statement of Income, to Organic Revenue growth for the year ended December 31, 2018, is as follows:
| 2018 | | RETAIL(1) | | NATIONAL PROGRAMS | | WHOLESALE BROKERAGE | | SERVICES | | TOTAL | (IN THOUSANDS, EXCEPT
PERCENTAGES) | | 2018 | | | 2017 | | | 2018 | | | 2017 | | | 2018 | | | 2017 | | | 2018 | | | 2017 | | | 2018 | | | 2017 | | | Commissions and fees | | $ | 1,040,574 | | | $ | 942,039 | | | $ | 493,878 | | | $ | 479,017 | | | $ | 286,364 | | | $ | 271,141 | | | $ | 189,041 | | | $ | 165,073 | | | $ | 2,009,857 | | | $ | 1,857,270 | | | Total change | | $ | 98,535 | | | | | | | $ | 14,861 | | | | | | | $ | 15,223 | | | | | | | $ | 23,968 | | | | | | | $ | 152,587 | | | | | | | Total growth % | | | 10.5 | % | | | | | | | 3.1 | % | | | | | | | 5.6 | % | | | | | | | 14.5 | % | | | | | | | 8.2 | % | | | | | | Profit-sharing contingent commissions | | | (24,517 | ) | | | (23,377 | ) | | | (23,896 | ) | | | (20,123 | ) | | | (7,462 | ) | | | (8,686 | ) | | | — | | | | — | | | | (55,875 | ) | | | (52,186 | ) | | GSCs | | | (8,535 | ) | | | (9,108 | ) | | | (76 | ) | | | (31 | ) | | | (1,350 | ) | | | (1,231 | ) | | | — | | | | — | | | | (9,961 | ) | | | (10,370 | ) | | Core commissions and fees(2) | | $ | 1,007,522 | | | $ | 909,554 | | | $ | 469,906 | | | $ | 458,863 | | | $ | 277,552 | | | $ | 261,224 | | | $ | 189,041 | | | $ | 165,073 | | | $ | 1,944,021 | | | $ | 1,794,714 | | | New Revenue Standard | | | 1,254 | | | | — | | | | (7,973 | ) | | | — | | | | 935 | | | | — | | | | (10,307 | ) | | | — | | | | (16,091 | ) | | | — | | | Acquisitions | | | (73,405 | ) | | | — | | | | (7,289 | ) | | | — | | | | (2,514 | ) | | | — | | | | (7,969 | ) | | | — | | | | (91,177 | ) | | | — | | | Dispositions | | | — | | | | (1,270 | ) | | | — | | | | (114 | ) | | | — | | | | (106 | ) | | | — | | | | — | | | | — | | | | (1,490 | ) | | Foreign currency translation | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | Organic Revenue(3) | | $ | 935,371 | | | $ | 908,284 | | | $ | 454,644 | | | $ | 458,749 | | | $ | 275,973 | | | $ | 261,118 | | | $ | 170,765 | | | $ | 165,073 | | | $ | 1,836,753 | | | $ | 1,793,224 | | | Organic Revenue(3) growth | | $ | 27,087 | | | | | | | $ | (4,105 | ) | | | | | | $ | 14,855 | | | | | | | $ | 5,692 | | | | | | | $ | 43,529 | | | | | | | Organic Revenue(3) growth rate | | | 3.0 | % | | | | | | | (0.9 | )% | | | | | | | 5.7 | % | | | | | | | 3.4 | % | | | | | | | 2.4 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (in millions, except percentages) | | Total
Commissions
and Fees | | | Total
Net Change | | | Total
Net
Growth % | | | Contingents | | | GSCs | | | Total Core
Commissions
and Fees(2) | | | Acquisition
Revenues | | | Divested
Business | | | Organic
Revenue(3) | | | Organic
Revenue Growth | | | Organic
Revenue
Growth % | | | | 2019 | | | 2018 | | | 2019 | | | 2018 | | | 2019 | | | 2018 | | | 2019 | | | 2018 | | | 2019 | | | 2018 | | | 2019 | | | 2018 | | | | | | | | | | | | | | | | | | | Retail(1) | | | 1,364.8 | | | | 1,040.6 | | | | 324.2 | | | | 31.2 | % | | | 34.2 | | | | 24.5 | | | | 11.0 | | | | 8.5 | | | | 1,319.6 | | | | 1,007.6 | | | | 272.4 | | | | 7.8 | | | | 1,047.2 | | | | 999.8 | | | | 47.4 | | | | 4.7 | % | | | | | | | | | | | | | | | | | | National Programs | | | 516.9 | | | | 493.9 | | | | 23.0 | | | | 4.7 | % | | | 17.5 | | | | 23.9 | | | | 10.6 | | | | 0.1 | | | | 488.8 | | | | 469.9 | | | | 5.7 | | | | 0.8 | | | | 483.1 | | | | 469.1 | | | | 14.0 | | | | 3.0 | % | | | | | | | | | | | | | | | | | | Wholesale Brokerage | | | 309.4 | | | | 286.3 | | | | 23.1 | | | | 8.1 | % | | | 7.5 | | | | 7.5 | | | | 1.4 | | | | 1.3 | | | | 300.5 | | | | 277.5 | | | | 3.6 | | | | 1.2 | | | | 296.9 | | | | 276.3 | | | | 20.6 | | | | 7.4 | % | | | | | | | | | | | | | | | | | | Services | | | 193.6 | | | | 189.0 | | | | 4.6 | | | | 2.4 | % | | | — | | | | — | | | | — | | | | — | | | | 193.6 | | | | 189.0 | | | | 16.6 | | | | — | | | | 177.0 | | | | 189.0 | | | | (12.0 | ) | | | (6.3 | )% | | | | | | | | | | | | | | | | | | Total Company | | | 2,384.7 | | | | 2,009.8 | | | | 374.9 | | | | 18.7 | % | | | 59.2 | | | | 55.9 | | | | 23.0 | | | | 9.9 | | | | 2,302.5 | | | | 1,944.0 | | | | 298.3 | | | | 9.8 | | | | 2,004.2 | | | | 1,934.2 | | | | 70.0 | | | | 3.6 | % | | | | | | | | | | | | | | | | | | 2018 Programs Business New Revenue Standard Adjustment | | | — | | | | (8.1 | ) | | | 8.1 | | | | (100 | )% | | | — | | | | — | | | | — | | | | — | | | | — | | | | (8.1 | ) | | | — | | | | — | | | | — | | | | (8.1 | ) | | | 8.1 | | | | | | | | | | | | | | | | | | | | | | | Total Company – Adjusted | | | 2,384.7 | | | | 2,001.7 | | | | 383.0 | | | | 19.1 | % | | | 59.2 | | | | 55.9 | | | | 23.0 | | | | 10.0 | | | | 2,302.5 | | | | 1,935.9 | | | | 298.3 | | | | 9.8 | | | | 2,004.2 | | | | 1,926.1 | | | | 78.1 | | | | 4.1 | % |
| (1) | The Retail segment includes commissions and fees reported in the “Other” column of the segmentSegment Information in Note 16 of the Notes to the Consolidated Financial Statements, which includes corporate and consolidation items. |
| (2) | CoreTotal core commissions and fees is defined as total commissions and fees less (i) profit-sharing contingent commissions (revenues from insurance companies based upon the volume and the growth and/or profitability of the business placed with such companies during the prior year (“Contingents”)), and less (ii) for all fiscal years ended December 31, 2021 and earlier, guaranteed supplemental commissions (commissions from insurance companies based solely upon the volume of the business placed with such companies during the current year (“GSCs”)). |
| (3) | “Organic Revenue,” which is a non-GAAP financial measure, is defined as total core commissions and fees less (i) the first twelve months of commission and fee revenues generated from acquisitions, less (ii) divested business (net commissions and fees generated from offices, and books of business sold by the Company) with the associated revenue removed from the corresponding period of the prior year, less (iii) for the calculation of Organic Revenue in 2021 and 2022, the period-over-period impact of foreign currency translation, which is calculated by applying current-year foreign exchange rates to the same period in the prior year, andForeign Currency Translation, less (iv) for the calculation of Organic Revenue in 2018, the impact of the New Revenue Standard. |
70 | | | | | |
Table of Contents
Annex A Information Regarding Non-GAAP Financial Measures
For 2021,2022, National Programs segment Organic Revenue growth was adjusted to (i) exclude the impact of certain offices within the National Programs segment for which Chris L. Walker, Executive Vice President and President - National Programs segment, did not have responsibility in 2021, and (ii) to include the impact of certain offices within the Services and Wholesale Brokerage segmentssegment for which Mr. Walker did havehad responsibility in 20212022 (collectively, the “2021“2022 Office-Based Adjustments”). The growth rate for National Programs segment Organic Revenue -– adjusted, which is a non-GAAP financial measure, for the year ended December 31, 2021,2022, is as follows: (IN
THOUSANDS, | | TOTAL COMMISSIONS AND FEES | | | TOTAL | | | TOTAL NET | | CONTINGENTS | | GSCs | | | CORE COMMISSIONS AND FEES(1) | | | ACQUISI-
TION REVENUES | | | DIVESTED BUSINESS | | | ORGANIC REVENUE(2) | | | FOREIGN CURRENCY | | | ORGANIC | | | ORGANIC REVENUE | | EXCEPT
PERCENTAGES) | | 2021 | | | 2020 | | | Net
CHANGE | | | GROWTH
% | | | 2021 | | | 2020 | | | 2021 | | | 2020 | | | 2021 | | | 2020 | | | 2021 | | | 2020 | | | 2021 | | | 2020 | | | TRANSLA-
TION | | | REVENUE GROWTH | | | GROWTH
% | | | National Program | | | 701,108 | | | | 609,842 | | | | 91,266 | | | | 15.0 | % | | | 35,259 | | | | 27,278 | | | | 1,619 | | | | (238 | ) | | | 664,230 | | | | 582,802 | | | | 8,151 | | | | 478 | | | | 656,079 | | | | 582,324 | | | | 1,161 | | | | 72,594 | | | | 12.4 | % | | 2021 Office-Based Adjustments | | | 117,508 | | | | 105,930 | | | | 11,577 | | | | 10.9 | % | | | — | | | | — | | | | — | | | | — | | | | 117,508 | | | | 105,930 | | | | — | | | | 364 | | | | 117,508 | | | | 105,567 | | | | — | | | | 11,941 | | | | | | | National Programs - Adjusted | | | 818,616 | | | | 715,772 | | | | 102,843 | | | | 14.4 | % | | | 35,259 | | | | 27,278 | | | | 1,619 | | | | (238 | ) | | | 781,738 | | | | 688,732 | | | | 8,151 | | | | 842 | | | | 773,587 | | | | 687,890 | | | | 1,161 | | | | 84,535 | | | | 12.3 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (in thousands, except percentages) | | Total
Commissions
and Fees | | | Total
Net Change | | | Total
Net
Growth % | | | Contingents | | | Total Core
Commissions
and Fees(1) | | | Acquisition
Revenues | | | Divested
Business | | | Foreign
Currency
Translation | | | Organic
Revenue(2) | | | Organic
Revenue Growth | | | Organic
Revenue
Growth % | | | | 2022 | | | 2021 | | | 2022 | | | 2021 | | | 2022 | | | 2021 | | | 2022 | | | 2021 | | | 2021 | | | 2022 | | | 2021 | | | | | | | | | | | | | | | | | | National Program | | | 858.1 | | | | 701.1 | | | | 157.0 | | | | 22.4 | % | | | 27.6 | | | | 35.3 | | | | 830.5 | | | | 665.8 | | | | 64.9 | | | | 3.3 | | | | 0.6 | | | | 765.6 | | | | 661.9 | | | | 103.7 | | | | 15.7 | % | | | | | | | | | | | | | | | | | 2022 Office-Based Adjustments | | | 89.9 | | | | 117.5 | | | | (27.6 | ) | | | (23.5 | )% | | | (0.9 | ) | | | 0.0 | | | | 90.8 | | | | 117.5 | | | | (13.1 | ) | | | 4.4 | | | | 0.0 | | | | 103.9 | | | | 113.1 | | | | (9.2 | ) | | | | | | | | | | | | | | | | | | | | | National Programs – Adjusted | | | 948.0 | | | | 818.6 | | | | 129.4 | | | | 15.8 | % | | | 26.7 | | | | 35.3 | | | | 921.3 | | | | 783.3 | | | | 51.8 | | | | 7.7 | | | | 0.6 | | | | 869.5 | | | | 775.0 | | | | 94.5 | | | | 12.2 | % |
| (1) | CoreTotal core commissions and fees, which is a non-GAAP financial measure, is defined as total commissions and fees, less (i) Contingents, and less (ii) for all fiscal years ended December 31, 2021 and earlier, GSCs. |
| (2) | “Organic Revenue,” which is a non-GAAP financial measure, is defined as total core commissions and fees less (i) the first twelve months of commission and fee revenues generated from acquisitions, less (ii) divested business (net commissions and fees generated from offices, and books of business sold by the Company) with the associated revenue removed from the corresponding period of the prior year, less (iii) the period-over-period impact of foreign currency translation, which is calculated by applying current-year foreign exchange rates to the same period in the prior year, and less (iv) for the calculation of Organic Revenue in 2018, the impact of the New Revenue Standard. |
For 2020, National Programs segment Organic Revenue growth was adjusted to (i) exclude the impact of certain offices within the National Programs segment for which Chris L. Walker, Executive Vice President and President - National Programs segment, did not have responsibility in 2020, and (ii) to include the impact of certain offices within the Services and Wholesale Brokerage segments for which Mr. Walker did have responsibility in 2020 (collectively, the “2020 Office-Based Adjustments”). The growth rate for National Programs segment Organic Revenue - adjusted, which is a non-GAAP financial measure, for the year ended December 31, 2020, is as follows:
(IN
THOUSANDS, | | TOTAL COMMISSIONS AND FEES | | | TOTAL | | | TOTAL NET | | CONTINGENTS | | GSCs | | | CORE COMMISSIONS AND FEES(1) | | | ACQUISI-
TION REVENUES | | | DIVESTED BUSINESS | | | ORGANIC REVENUE(2) | | | FOREIGN CURRENCY | | | ORGANIC | | | ORGANIC REVENUE | | EXCEPT
PERCENTAGES) | | 2021 | | | 2020 | | | Net
CHANGE | | | GROWTH
% | | | 2021 | | | 2020 | | | 2021 | | | 2020 | | | 2021 | | | 2020 | | | 2021 | | | 2020 | | | 2021 | | | 2020 | | | TRANSLA-
TION | | | REVENUE GROWTH | | | GROWTH
% | | | National Program | | | 609,842 | | | | 516,915 | | | | 92,927 | | | | 18.0 | % | | | 27,278 | | | | 17,517 | | | | (238 | ) | | | 10,566 | | | | 582,802 | | | | 488,832 | | | | 34,173 | | | | 377 | | | | 548,629 | | | | 488,455 | | | | — | | | | 60,174 | | | | 12.3 | % | | 2020 Office-Based Adjustments | | | 13,095 | | | | 16,731 | | | | (3,637 | ) | | | (21.7 | )% | | | (122 | ) | | | (667 | ) | | | (1 | ) | | | (3 | ) | | | 13,217 | | | | 17,402 | | | | — | | | | — | | | | 13,218 | | | | 17,402 | | | | | | | | (4,185 | ) | | | | | | National Programs - Adjusted | | | 622,937 | | | | 533,646 | | | | 89,290 | | | | 16.7 | % | | | 27,156 | | | | 16,850 | | | | (239 | ) | | | 10,563 | | | | 596,019 | | | | 506,234 | | | | 34,173 | | | | 377 | | | | 561,847 | | | | 505,857 | | | | — | | | | 55,989 | | | | 11.1 | % |
(1) | Core commissions and fees is defined as total commissions and fees, less (i) Contingents, and less (ii) GSCs. | (2) | “Organic Revenue,” which is a non-GAAP financial measure, is defined as total core commissions and fees less (i) the first twelve months of commission and fee revenues generated from acquisitions, less (ii) divested business (net commissions and fees generated from offices, and books of business sold by the Company) with the associated revenue removed from the corresponding period of the prior year, less (iii) for the calculation of Organic Revenue in 2021 and 2022, the period-over-period impact of foreign currency translation, which is calculated by applying current-year foreign exchange rates to the same period in the prior year, andForeign Currency Translation, less (iv) for the calculation of Organic Revenue in 2018, the impact of the New Revenue Standard. |
66 | BROWN & BROWN, INC.
ANNEX A INFORMATION REGARDING NON-GAAP FINANCIAL MEASURES For 2021, National Programs segment Organic Revenue growth was adjusted to (i) exclude the impact of certain offices within the National Programs segment for which Chris L. Walker, Executive Vice President and President – National Programs segment, did not have responsibility in 2021, and (ii) include the impact of certain offices within the Services and Wholesale Brokerage segments for which Mr. Walker had responsibility in 2021 (collectively, the “2021 Office-Based Adjustments”). The growth rate for National Programs segment Organic Revenue – adjusted, which is a non-GAAP financial measure, for the year ended December 31, 2021, is as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (in thousands, except percentages) | | Total
Commissions
and Fees | | | Total
Net Change | | | Total
Net
Growth % | | | Contingents | | | GSCs | | | Total Core
Commissions
and Fees(1) | | | Acquisition
Revenues | | | Divested
Business | | | Organic
Revenue(2) | | | Foreign
Currency
Translation | | | Organic
Revenue Growth | | | Organic
Revenue
Growth % | | | | 2021 | | | 2020 | | | 2021 | | | 2020 | | | 2021 | | | 2020 | | | 2021 | | | 2020 | | | 2021 | | | 2020 | | | 2021 | | | 2020 | | | 2020 | | | | | | | | | | | | | | | | | | | | National Programs | | | 701.1 | | | | 609.8 | | | | 91.3 | | | | 15.0 | % | | | 35.3 | | | | 27.3 | | | | 1.6 | | | | (0.3 | ) | | | 664.2 | | | | 582.8 | | | | 8.2 | | | | 0.5 | | | | 656.0 | | | | 583.5 | | | | 1.2 | | | | 72.5 | | | | 12.4 | % | | | | | | | | | | | | | | | | | | | 2021 Office-Based Adjustments | | | 117.5 | | | | 105.9 | | | | 11.6 | | | | 10.9 | % | | | — | | | | — | | | | — | | | | — | | | | 117.5 | | | | 105.9 | | | | — | | | | 0.4 | | | | 117.5 | | | | 105.5 | | | | — | | | | 12.0 | | | | | | | | | | | | | | | | | | | | | | | | National Programs – Adjusted | | | 818.6 | | | | 715.7 | | | | 102.9 | | | | 14.4 | % | | | 35.3 | | | | 27.3 | | | | 1.6 | | | | (0.3 | ) | | | 781.7 | | | | 688.7 | | | | 8.2 | | | | 0.9 | | | | 773.5 | | | | 689.0 | | | | 1.2 | | | | 84.5 | | | | 12.3 | % |
| (1) | 2022 PROXY STATEMENT | | 71 | | Total core commissions and fees, which is a non-GAAP financial measure, is defined as total commissions and fees, less (i) Contingents, and less (ii) for all fiscal years ended December 31, 2021 and earlier, GSCs. |
Table of Contents
| (2) | “Organic Revenue,” which is a non-GAAP financial measure, is defined as total core commissions and fees less (i) the first twelve months of commission and fee revenues generated from acquisitions, less (ii) divested business (net commissions and fees generated from offices, and books of business sold by the Company) with the associated revenue removed from the corresponding period of the prior year, less (iii) for the calculation of Organic Revenue in 2021 and 2022, the period-over-period impact of Foreign Currency Translation, less (iv) for the calculation of Organic Revenue in 2018, the impact of the New Revenue Standard. |
Annex A Information Regarding Non-GAAP Financial Measures
Reconciliation of Income Before Income Taxes to Adjusted EBITDAC and Reconciliation of Income Before Income Taxes Margin to Adjusted EBITDAC Margin The reconciliation of income before income taxes, included in the Consolidated Statement of Income, to Adjusted EBITDAC for the years ended December 31, 2021,2022 and 2020,2021, and the reconciliation of Income Before Income Taxes Margin, included in the Consolidated Statement of Income, to Adjusted EBITDAC Margin for the years ended December 31, 2021,2022 and 20202021 is as follows: | | | FOR THE YEAR ENDED
DECEMBER 31, | | (IN THOUSANDS, UNAUDITED) | | 2021 | | | 2020 | | | Income Before Income Taxes | | | 762,823 | | | | 624,099 | | | Amortization | | | 119,593 | | | | 108,523 | | | Depreciation | | | 33,309 | | | | 26,276 | | | Interest | | | 64,981 | | | | 58,973 | | | Change in estimated acquisition earn-out payables | | | 40,445 | | | | (4,458 | ) | | EBITDAC(1) | | | 1,021,151 | | | | 813,413 | | | Income Before Income Taxes Margin(2) | | | 25.0 | % | | | 23.9 | % | | EBITDAC Margin(3) | | | 33.5 | % | | | 31.1 | % | | Loss/(Gain) on disposal | | | (9,605 | ) | | | (2,388 | ) | | Non-cash stock-based compensation expense impact in excess of budget | | | 4,162 | | | | 4,809 | | | 2020 Legal Matters | | | — | | | | 6,550 | | | Adjusted EBITDAC(4) | | | 1,015,709 | | | | 822,384 | | | Adjusted EBITDAC Margin(4) | | | 33.3 | % | | | 31.5 | % |
| | | | | | | | | | | | For the Year Ended
December 31, | | (in millions, unaudited) | | 2022 | | | 2021 | | | | | Income Before Income Taxes | | | 876.1 | | | | 762.8 | | | | | Amortization | | | 146.6 | | | | 119.6 | | | | | Depreciation | | | 39.2 | | | | 33.3 | | | | | Interest | | | 141.2 | | | | 65.0 | | | | | Change in estimated acquisition earn-out payables | | | (38.9 | ) | | | 40.4 | | | | | EBITDAC(1) | | | 1,164.2 | | | | 1,021.1 | | | | | Income Before Income Taxes Margin(2) | | | 24.5 | % | | | 25.0 | % | | | | EBITDAC Margin(3) | | | 32.6 | % | | | 33.5 | % | | | | Loss/(Gain) on disposal | | | (4.5 | ) | | | (9.6 | ) | | | | Non-cash stock-based compensation expense impact in excess of budget | | | 3.9 | | | | 4.2 | | | | | Acquisition/Integration Costs | | | 11.2 | | | | — | | | | | Foreign Currency Translation | | | — | | | | (1.4 | ) | | | | Adjusted EBITDAC(4) | | | 1,174.8 | | | | 1,014.3 | | | | | Adjusted EBITDAC Margin(4) | | | 32.9 | % | | | 33.3 | % |
| (1) | “EBITDAC,” which is a non-GAAP financial measure, is defined as income before interest, income taxes, depreciation, amortization and the change in estimated acquisition earn-out payables. |
| | | (2) | Income Before Income Taxes Margin is calculated as the Company’s income before income taxes, as reported, divided by total revenues, as reported. |
| | | (3) | “EBITDAC Margin,” which is a non-GAAP financial measure, is defined as EBITDAC divided by total revenues. |
| | | (4) | “Adjusted EBITDAC” and “Adjusted EBITDAC Margin,” which are both non-GAAP financial measures, are defined as EBITDAC and EBITDAC Margin, respectively, in each case adjusted to exclude (i) for 2021 and 2020, the positive impact of the net gain on disposal resulting from sales of books of business, (ii) for 2021 and 2021, the negative impact of the Company’s non-cash stock-based compensation expense in excess of what was reflected in the Company’s Board-approved annual budget, and (iii) for 2020,2022, the negative impact of the 2020 Legal Matter.Acquisition/Integration Costs, and (iv) the impact of Foreign Currency Translation. |
BROWN & BROWN, INC. | 67
ANNEX A INFORMATION REGARDING NON-GAAP FINANCIAL MEASURES Reconciliation of Diluted Net Income Per Share to Adjusted EPS The reconciliation of diluted earnings per share, included in the Consolidated Statement of Income, to Adjusted EPS for the 12-month periods ended December 31, 2021, 2020, 2019, and 2018,2019, is as follows: (in (in thousands, except for diluted net income per share and Adjusted EPS, unaudited) CALENDAR
YEAR | | DILUTED
NET INCOME
PER
SHARE | | | WEIGHTED
AVERAGE
NUMBER OF SHARES
OUTSTANDING-
DILUTED | | | NET INCOME
ATTRIBUTABLE
TO COMMON
SHARES
($) | | | CHANGE IN
ESTIMATED
ACQUISITION
EARNOUT PAYABLES
(PRE-TAX)
($) | | | AFTER-TAX
EFFECT OF
ADJUSTMENTS
($)(1) | | | AFTER-TAX
ADJUSTMENTS(2) | | | ADJUSTED
NET INCOME
ATTRIBUTABLE
TO COMMON
SHARES | | | ADJUSTED
EPS(3) | | | 2018 | | | 1.22 | | | | 275,521 | | | | 335,958 | | | | 2,969 | | | | 2,197 | | | | (14,388 | ) | | | 323,766 | | | | 1.18 | | | 2019 | | | 1.40 | | | | 274,616 | | | | 385,641 | | | | (1,366 | ) | | | (1,035 | ) | | | 3,599 | | | | 388,205 | | | | 1.41 | | | 2020 | | | 1.69 | | | | 275,867 | | | | 465,286 | | | | (4,458 | ) | | | (3,432 | ) | | | 5,043 | | | | 466,897 | | | | 1.69 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 4.28 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Calendar Year | | Diluted
Net
Income
Per Share | | | Weighted
Average
Number of Shares
Outstanding-
Diluted | | | Net Income
Attributable
to Common
Shares ($) | | | Change in
Estimated
Acquisition
Earnout Payables
(Pre-Tax) ($) | | | After-Tax
Effect of
Adjustment
($)(1) | | | After-Tax
Adjustments
($)(2) | | | Adjusted
Net Income
Attributable
to Common
Shares | | | Adjusted
EPS(3) | | | | | | | | | | | 2019 | | | 1.40 | | | | 274,616 | | | | 385,641 | | | | (1,366 | ) | | | (1,035 | ) | | | 3,599 | | | | 388,205 | | | | 1.41 | | | | | | | | | | | 2020 | | | 1.69 | | | | 275,867 | | | | 465,286 | | | | (4,458 | ) | | | (3,432 | ) | | | 5,043 | | | | 466,897 | | | | 1.69 | | | | | | | | | | | 2021 | | | 2.07 | | | | 277,414 | | | | 574,162 | | | | 40,445 | | | | 31,128 | | | | | | | | 605,290 | | | | 2.18 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 5.28 | |
| (1) | After-tax effect of adjustments calculated using the Company’s effective tax rate for the respective year. |
| (2) | The after-tax adjustments are: (i) for 2018, an adjustment to exclude the positive impact of the New Revenue Standard; (ii)(1) for 2019, an adjustment to exclude the negative impact of the 2019 Legal Matter in 2019;2019 and (iii)(ii) for 2020, an adjustment to exclude the negative impact of the 2020 Legal Matter in 2020. |
| (3) | A non-GAAP financial measure. |
72 | | | | | |
Table of Contents
300 North Beach Street
Daytona Beach, FL 32114
(386) 252-9601
bbinsurance.com68 | BROWN & BROWN, INC.
ANNUAL MEETING OF SHAREHOLDERS
BROWN & BROWN, INC. 
Virtual Meeting THIS PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 4, 2022,3, 2023, 9:00 A.M. (EDT) The undersigned hereby appoints Robert W. LloydAnthony M. Robinson and R. Andrew Watts and each of them as proxies with full power of substitution, with all the powers the undersigned would possess if personally present, to vote all shares of Common Stock of Brown & Brown, Inc. which the undersigned is entitled to vote at the Annual Meeting of Shareholders and any adjournment(s) thereof. The Annual Meeting of Shareholders will be held virtually. In order to attend the meeting, you must register at http://www.viewproxy.com/bbinsurance/2022/2023/htype.asp by 11:59 P.M. (EDT) on May 1, 2022.April 30, 2023. On the day of the Annual Meeting of Shareholders, if you have properly registered, you may enter the meeting by clicking on the link provided and the password you received via email in your registration confirmation. Further instructions on how to attend and vote at the Annual Meeting of Shareholders are contained in the Proxy Statement in the section titled “Attending the Virtual Annual Meeting.” (Continued (Continued and to be signed on the reverse side)
PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED. All shareholders who wish to attend the Virtual Meeting, must register at:
www.viewproxy.com/bbinsurance/2022/2023/htype.asp The deadline for registration is May 1, 2022April 30, 2023 at 11:59 P.M. (EDT) NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS:
The Notice of Meeting, Proxy Statement, and Annual Report to Shareholders are available at
www.viewproxy.com/bbinsurance/20222023
Table of Contents
The Board of Directors recommends a vote FOR all director nominees, and FOR Proposals 2 and 3: 1. | Election of Directors. |
| | 01 | J. Hyatt Brown | 05 | James C. Hays | 09 | Timothy R.M. Main | | | 02 | Hugh M. Brown | 06 | Theodore J. Hoepner | 10 | H. Palmer Proctor, Jr. | | | 03 | J. Powell Brown | 07 | James S. Hunt | 11 | Wendell S. Reilly | | | 04 | Lawrence L. Gellerstedt III | 08 | Toni Jennings | 12 | Chilton D. Varner |
o | FOR ALL NOMINEES
| o | WITHHOLD AUTHORITY FOR ALL NOMINEES
| o | FOR ALL EXCEPT
(SEE INSTRUCTIONS BELOW)
|
(Instructions:3 and for ONE YEAR on Proposal 4: 1. Election of Directors. 01 J. Hyatt Brown 02 J. Powell Brown 03 Lawrence L. Gellerstedt III 04 James C. Hays 05 Theodore J. Hoepner 06 James S. Hunt 07 Toni Jennings 08 Timothy R.M. Main 09 Jaymin B. Patel 10 H. Palmer Proctor, Jr. 11 Wendell S. Reilly 12 Chilton D. Varner FOR ALL NOMINEES WITHHOLD AUTHORITY FOR ALL NOMINEES FOR ALL EXCEPT (SEE INSTRUCTIONS BELOW) (Instructions: To withhold authority to vote for any indicated nominee, mark “FOR ALL EXCEPT” and write the number(s) of the nominee(s) in the box provided to the right.)
2. | To ratify the appointment of Deloitte & Touche LLP as Brown & Brown, Inc.’s independent registered public accountants for the fiscal year ending December 31, 2022. |
o 2. To ratify the appointment of Deloitte & Touche LLP as Brown & Brown, Inc.’s independent registered public accountants for the fiscal year ending December 31, 2023. FORoAGAINSToABSTAIN
DO NOT PRINT IN THIS AREA
(Shareholder Name & Address
Data)
|
Address Change/Comments: (If you noted any Address Changes and/or Comments above, please mark box.) o
VIRTUAL CONTROL NUMBER
3. | To approve, on an advisory basis, the compensation of named executive officers. |
o 3. To approve, on an advisory basis, the compensation of named executive officers. FORoAGAINSToABSTAIN
4. To conduct an advisory vote on the desired frequency of holding an advisory vote on the compensation of named executive officers. ONE YEAR TWO YEARS THREE YEARS ABSTAIN In their discretion the Proxies are authorized to vote upon such other business as may properly come before the Annual Meeting or any adjournment(s) thereof. Persons who do not indicate attendance at the Annual Meeting on this proxy card may be required to present proof of stock ownership to attend. This proxy, when properly executed, will be voted in the manner directed herein by the undersigned shareholder. If no direction is made, this proxy will be voted FOR the election of all of the director nominees listed on this proxy card, and FOR Proposals 2 and 3. (Joint3 and for ONE YEAR for Proposal 4. DO NOT PRINT IN THIS AREA (Shareholder Name & Address Data) Address Change/Comments: (If you noted any Address Changes and/or Comments above, please mark box.) VIRTUAL CONTROL NUMBER Date Signature Signature (Joint Owners)
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer.
PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED. VIRTUAL CONTROL NUMBER
PROXY VOTING INSTRUCTIONS Please have your 11-digit control number ready when voting by Internet or Telephone INTERNET Vote Your Proxy on the Internet: Go to www.AALvote.com/BRO Have your proxy card available when you access the above website. Follow the prompts to vote your shares. TELEPHONE Vote Your Proxy by Phone: Call 1 (866) 804-9616 Use any touch-tone telephone to vote your proxy. Have your proxy card available when you call. Follow the voting instructions to vote your shares. MAIL Vote Your Proxy by Mail: Mark, sign, and date your proxy card, then detach it, and return it in the postage-paid envelope provided. 
INTERNET
Vote Your Proxy on the Internet:
Go to www.AALvote.com/BRO
Have your proxy card available when you access the above website. Follow the prompts to vote your shares.
| | 
TELEPHONE
Vote Your Proxy by Phone: Call 1 (866) 804-9616
Use any touch-tone telephone to vote your proxy. Have your proxy card available when you call.
Follow the voting instructions to vote your shares.
| | 
MAIL
Vote Your Proxy by Mail:
Mark, sign, and date your proxy card, then detach it, and return it in the postage-paid envelope provided.
|
|
Commitee Chair 
