BRO - Earnings call transcript Q3 2020

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Operator

Good morning and welcome to the Brown & Brown, Inc.

Third Quarter Earnings Call. Today's call is being recorded. Please note that certain information discussed during this call, including information contained in the slide presentation posted in connection with this call and including answers given in response to your questions may relate to future results and events, or otherwise be forward looking in nature. Such statements reflect our current views with respect to future events including those relating to the Company's anticipated financial results for the third quarter and are intended to fall within the Safe Harbor provisions of the securities laws. or in and are materially result uncertainties currently or events number to from of or forward-looking anticipated risks any factors. of and desired a results number the as subject future a those statements of Actual made in a referenced may differ issued as the the unaudited differ financial from yesterday. current finalizes preliminary results press its for Such factors it that results include the set financial in forth numbers release company's determination its third quarter, the the time that have reports identified in factors and not Other company and currently Securities company's or may risks Exchange those uncertainties the Commission. filed the quantified to and with identified from time

factors Securities new posted with Additional revise update this is Commission. company's of forward-looking result statements business the the disclaim statements company's the as in forward-looking otherwise. call or to in any and and information in discussion obligation intention other and or any slide information, the events Exchange future connection a or as filings regarding of contained We these with presentation affecting well and prospects, as additional whether

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

begin. may You

Powell Brown

morning, quarter earnings us Good call. everyone, thank and Thank joining third you XXXX for our you, for Kevin.

want some the the quarter, level to we get comments. results for Before make into high I

leveraging creative not laser how team These like to with stage, than ways be our our levels face-to-face I'm not and support They likely investments how from with the environment new to but everyone solutions this pleased over quite technology marketing, for express our At we to see producers, years in returning existing will interactions Operating interactions. to I'd teammates. for than capabilities customer the do normal be enhance and with and easy, customers impressed new service, and time continue our this we've made of on current past. to to different say the include focused finds our delivering past quarter. performance and our in underwriting First, teammates teammates more are very innovative in few all the engage the the you our is customers. serve I'm pre-pandemic prospects. some brokers thank for

consecutive increases, for increase, of our continue navigate term we sales pandemic, As X%. we're talked very Tuesday XXth and customers. further now leverage way innovation year We've we model delivering the something our growth we shareholder that to increased Board of. to service by help we're week, are built on Directors the of last value. I'm the our our confident With dividend long and of about support quarterly lot a our how in this through our our think about will and in proud past On

our three. of get I'll our results. We transition revenue, with delivered slide results let's and performance segments. quarter. organically. the X.X% pleased into quarter very million in detail few more minutes total on the and about in of Now growing to I'm a X.X% of number I'm the had We a great $XXX

is which basis XX.X%, was points quarter third from margin up EBITDAC XXX of XXXX. the Our

year. increase which On excludes of share income an our third $X.XX, prior in an as was net basis, Our reported per net $X.XX, income increasing per adjusted payables, the acquisition on share for was change an quarter the basis. earn-out XX.X% the over XX.X%

done team dynamics of our associated outstanding our COVID-XX. with expense to response Our job the while growing base revenue has in managing an

revenues very our of million. quarter. capital particularly million with a quarter, joined acquisitions issued perspective, of XX.X-year we another teammates of approximately six during to we bonds bonds March $XXX X.X%. in $XX all issued a September. of of with pleased new During We'd a From completed with a XXXX that in like we of the We're that the considering coupon annual X.XXX%, warm coupon to welcome extend

a Brown was this capital received Brown's very manner a by in credit pleased business in very the & we quality. on well our true to which positioned of the well Later performance is debt to unprecedented and cash continues and four. the slide these presentation, will our we're of Andy perform financial Our the through insurance I'm detail. invest well operating markets, as further summary, In strength generation, disciplined our model our results we're times. strong discuss quarter believe number for results. in With reflection future flow deliver economic with the more in

you not as thought to in remember, we As second third exposure due that we anticipated. for and during earnings quarter customers. anticipated expected in the our second challenging then And slightly be indicated the in be may quarter performed most our we quarter third quarter than as units our call, would originally low decrease April, would the better

coverage. their employee this workers and or through which We retention lose industries. third We we decline of reductions companies furloughed. also employees We individuals force, and certain had or really coverage to saw layoffs off a who start employers in rate in of a in would saw restart some saw a to quarter. As which benefits taking included good compensation drive higher them good increases, their rehiring new result best doing saw business, we businesses,

industries even have been grown quite or over months. past many have are the six there that resilient However,

and comments Please geography, context. result of my to capabilities, As take customer lines coverage size, of we've a our continued of grow. diversification don't out across industry

will quarters going downs and there path over in be We that coming have customers doing them. are be our there challenges to we're ups is that to the struggling, the help We expect consequently recovery. and to believe best and

slightly. the quarter the we rate last similar they've During and cases, to saw quarters increased in few increases some

X% the perspective, workers' to part up as XX%, exception, and rates both Coastal XX%. market are rates a workers quarters. fast to XX%. to quake From depending to up declining across compensation wind they are are auto in talk to on the during an previous up board. starting up lines. rate as Commercial admitted were property, across most this XX% were is not Generally most not lot compensation most is rate as There they XX% generally are the positive in XX% of turn For liability Professional XX%. the industry. the E&S coverage remain about the seeing up rates We're X% quarter.

we're but both a CAT-exposed reduction carriers would where CAT for or constant. appetite near placement continue include be lines been the seeing reduction lines their most For of in continues caused now The the where to challenging. want in of umbrella This areas to rates, is tropical of limit certain will be One personal in property. the by keep lines, personal has with might area a Gulf the activity, We losses to decrease outliers. coverage can in reduce California, increasing lines with carrier believe where pressure premium or right the fires resulting access significant carrier coverage customers capacity industries States. Florida connection by and continued and in term. these many there half, in the In all Coast the reevaluation

approximately M&A Just the quarters. to give closing space an We've in during quarter million. to $XX this transactions example. not next the trend been expect with the active revenues few We of do change annual for six

During fourth on revenues in we've number quarter. $XXX closed I'm now deals three we slide of five. the already XX the transactions with a addition, quarters, closed few for first million. annualized approximately And

performance segments. our Let's of the discuss four

retail all pleased well account strong by as the retention, by model, organic very wins We're grew Our combination rate really with team and of new lines driven new good business, the face as a how face across It's to our X.X% is virtually. both performance a traditional continued quarter. segment, of in prospecting substantially improving business increases. recognized revenue third in

Our X.X% delivering quarter. National another organically, Programs impressive segment grew

Our and and lender our growth a of just to name performance was our place, driven programs, earthquake programs, many commercial continued wind strong from by our residential few. including our

segment was not the experience Brokerage for business the new organically continued as improving in We of authority Our full headwinds continued our businesses and growing, lines main are we X.X% and operation space. Wholesale realized while coverage. quarter. most fastest the line binding many grew rate back to modest Brokerage street increases personal growth delivered for business

organic We year or revenue our XX.X% next of until services allocate claims social least risk this were at drivers challenged advocacy decreased segment for for main rate for to reevaluate and area. customer terminated capacity to security more expect our the lower contract pressure related continue few other a The businesses The businesses, appetite the the quarters this for carriers to claims of many volume quarter. prior COVID-XX. lower our the decline for

low who customers expect a all like environment. you the in our range teammates for we it's this in thank continue -- strong mid our all We deliver segment for the quarter. be and for to in will fourth down organic to Overall, of single-digit to revenue to the challenging Services quarter say

let it more over in discuss detail. financials Andy to our Now, to me turn

Andrew Watts

the we'll financial and Like highlights, our discuss earn-out Powell. results Thank results, quarters, excluding number change We're you, including non-GAAP slide impact of on six. the the Good previous over adjusted morning, acquisition in payables. everybody. our certain GAAP

the $XX.X and organic X.X%. of revenue total quarter, we revenue X.X% or delivered growth For million third of growth

leverage certain one base able COVID-XX. our gain related compensation and these and write-off faster growing uncollectible factors with a to receivables stock-based of our XX.X%, of by expenses offset non-recurring headwinds regarding the to revenues of as response were increased EBITDAC higher plans. increased in the to programs, benefits expense non-cash were as long-term on the The performing were stock-based further year. our items benefits Both the A and legal associated incentive as our increased ratio compensation to quick by employee the comment and above able we for as Our prior manage recognized cost than of cost, to operating prior compensation percentage the employee and disposal we compensation revenues. stock other for slightly targets of our year, compared non-cash businesses a in driven expenses

compensation expenses expenses and other operating EBITDAC was liabilities. variable value cost. impact benefit offset the remember, deferred expenses. The of the aforementioned in decrease lesser extent, ratio with market continued the within is Please the was the the an this management change of as the COVID-XX on increase in there addition, due operating substantially other our in to margin of a response recovery zero increase to of quarter, In during deferred compensation to

in increase a by EBITDAC. taxes change acquisition before $XX year-over-year increased income than growing in was the estimated Our driven X.X%, payables. income by This at the earn-out slower primarily million pace

the next our we excluding slide, discuss adjustment. results, this will On

Our diluted XX.X% by net increased income increased our to $XX.X net income or $X.XX. by and XX.X% share million per

tax rate in the by awards. line tax tax the associated XX.X% Our XX.X%, rate, third compared to effective restricted stock was with previous quarter third The quarter was vesting guidance lower for the of driven effective was in of benefit with XXXX. which the

average $X.XXX increased to year weighted compared Our increased number compared third dividends the the and slightly prior to share of to shares or XXXX. our X.X% quarter of per

presentation payables Moving more results after believe basis. on acquisition year-on-year comparable change slide this We earn-out a our both slide seven. in years. for number removing presents This to estimated the provides

faster impact earn-out $XX net same based Since basis, estimated representing the the the third businesses last of this as During an estimates than adjusted in earn-out for earn-out million, XXXX, of of change on at of we that Remember year-to-date as change us year. at acquisition the have million of compared compared the certain increase the causing of million estimated approximately the this in to approximately $X On third the to XXXX. in quarter the $XX then, first that of certain quarter onset third our pandemic, down year time. $X was about credit liabilities in liabilities of payables earn-out the rebounded payables increase the of a quarter year. about a anticipating quarter million period estimated charge they the to

Excluding grew expense. the than third in change of or the to growing in million faster both lower payables taxes, years, due quarter XX.X% primarily acquisition before EBITDAC income our $XX.X interest earn-out income

before adjusted on $XX.X by income adjusted These million $X.XX, due was XX.X% to XX.X%. our tax a faster for it income diluted net effective lower basis net grew share Our rate increasing income per than taxes and strong or the Overall, quarter. quarter. income increased was the

revenue our slide components of Moving to presents slide number the eight. performance. key This

X.X% by and and For the contingent total fees our quarter, commissions were commissions GSCs flat. our substantially increased and

activity third revenues, Our organic by impact Over nine. which net for slide M&A X.X% number the to quarter. the increased of exclude

revenue X.X%, X.X%, the past of driven driven segment delivered growth growth slightly and revenue over lines contingent organic activity growth of most Retail GSCs. XX total by Our and of acquisition across lower business was and months by which commissions

about retail recognize this certain realized incremental organic revenue the new to For of year. the business in XXX a timing points quarter, quarter fourth basis growth of expected renewals we the and from of

the EBITDAC and gain the achieved non-cash Our prior XXX basis on due grew organic margin were and of growth cost. both by IT in cost disposals, by for higher which inter-company offset pandemic, increased to EBITDAC points compensation response quarter higher year savings to and XX.X% cost partially revenue stock a higher

slide change slower acquisition to and points a Our income XX. tax in than primarily income EBITDAC, estimated before basis due Over XX to number earn-outs. increased margin grew

segment intercompany Combined organic expansion Income savings revenue XX. cost recent due well income by our XX.X% slide strong certain in more revenue one to million X.X%. with as an of IT the with increase variable response to COVID-XX. acquisitions National was growth items was before of total higher commissions. strong by growth acquisition increased the X.X% and and total number by to Our growth, revenues The sharing XX.X% increased margin revenue and slower of inter-company organic offset Programs Over impacted contingent charges, write-offs primarily expense. payables these in or receivables total EBITDAC organic than by programs. increase by earn-out than in taxes increased $XX.X driven growth, or growth $XXX,XXX as in interest higher from profit

growth than margin basis organic and XXX delivered strong due faster IT Total revenues as Brokerage growth X.X%. inter-company higher which revenue organic Our compared by non-cash due points to and revenue charges cost. to delivery the prior Wholesale offset acquisitions. XX.X% segment of response year COVID-XX, by organic the total recent variable grew growth grew and EBITDAC more revenue XX.X% in of to to reduced the and expenses compensation stock-based improved of than higher

XX.X%, grew to segment number line Over driven EBITDAC services organic by the Our XX. income Powell earlier. items with XX.X%, for and Total taxes, mentioned income before by slide declined revenues substantially growth. in revenues by our

the response organic the pandemic. taxes variable certain expenses. driven million were of the conversion and of there in For the items. quarter, and earn-out for cash decreased regarding XX.X% $X.X adjustment recorded EBITDAC in quarter lower to outlook by to IT declined no partially the higher in Income year. third comments income quarter of estimated certain third a revenue due was XX.X%, for and offset by by These reducing Few inter-company change XXXX before payables expenses in acquisition credit this

as million in by third permitted percentage Regarding cash as a about of quarter as to quarter flow primarily decreased revenues, third operations, Act. were $XX for from the expected it Cares of paid the that due quarter taxes second the

nine For XXXX. first months of the

approximately our lower revenue as realized increase percentage compared year. XX% from of working cash as capital. cash of continuing The margins, our a Our to prior XX% period expanded same manage was at flow to the taxes, driven is the by and operations

markets additional we spread Regarding year interest was Powell with thought of capital senior expense, access we long-term earlier our notes million issuances. September liquidity the the prudent late $XXX rate materially and and in receptivity to materially mentioned debt XX.X decreasing of issued prior it below the that at

credit. revolving $XXX line Our as debt we the million incremental million $XXX on repaid is of

quarter. turn are additional the positioned well line $X of With increase a further capital, by our perspective over from disciplined capital Powell. additional With that, strong business. manner, in to debt, to additional credit to fund we revolving generation our me will investments per this cash, our and a expense approximately of With interest it back grow million help let

Powell Brown

Washington X.X week. hurricanes Thanks, also for tropical and historic and a are five and Colorado been X.X in storms alone. hit are region Through of have California, Oregon, XX report. with one those burn interest rates Rates most months, this lows. There the great XX increasing hurricanes million hitting with may Coast Andy acres and at in seen of these XX in we've million Gulf instances California acres

All environment. choppy of related this is the COVID-XX and economic to addition in

We of been. large ever our have they've very and busiest customers the well. Even are numbers these laying employees off extraordinary circumstances, businesses performed others under diversified

opportunistically. XX.X%, say you'll XX.X%. across For continuing be coverage, of performance universally up strong. the With coming first Overall, grew rates the but adjusted months, X.X% certain lines we EPS not nine to in rise, EBITDAC margins financial delivered of we'd see marketplace to the have results improving business our This and new was our capital organically, board. will been

yet. at not very loss that companies usually hot. happens, strategics. point this or slowing addition, we've continues will if this exceeding point competition to to sure at between long-term they down We senior few reached In rates see insurance and There's of When anytime lot are don't equity acquisition competition private discuss moderating costs. a rates The leaders We're if be space soon. flattening.

continue for business think by honestly, ever didn't cost to in money was be X.XXX%. offering. our Quite would investing recent further I ability Our bolstered bond borrowing XX-year of our our

Our till anything we it's don't you is count good, but signed. pipeline know, as

and engaging digital our automation to drive continually delivery across our we and designed investments greater efficiency products services. Two, And three, our drive optimizing the around and and an program. around and company following. digitization, capabilities analytics through processes. underlying and our continue Finally, agenda prioritize technology through data enhancing data to One, velocity initiatives the technology expanding

really closing, it In back constantly Kevin let up we better quarter. the our we thinking session. Q&A to how it about faster. it open over thought are for serve that, turn a to was With We customers good and me can

Operator

first Instructions] Peters James. today [Operator from comes you. Our Thank of Greg question Raymond

Greg Peters

everyone. morning, great like a Looks you Good had quarter.

us I First the growth on versus balance new wondering the impact organic was some revenue more on between if business. could give color the results. increases you rate of

You rate but if perspective performance increases more comments and then did out Hays. hurting. wondering call Powell, is their some about throw business comments the out, in you that. organic of And on give opportunities And I'm of about customers some maybe could the a reflection down, new your are

Powell Brown

Okay.

the over XX% know, somewhere So units historically, Greg, as of you rates number XX% a and one, and let's about was about between the impact XX-year talked talk bigger number impact when two, in that, period on Number -- say we've We're it were our exposure back overall our as going -- a business. good, business not I we but impact is pre-pandemic levels. that's one. is new

that. acknowledge it's the combination would But do I a So I all believe of of above.

pleased in in business coastal offices. are I'm so, growth new And of rate some country seeing very number with more than in places One, others, our impact the i.e. areas. a

if helped. that's are there retention Our improvement incremental levels slightly even and up that

I So Number of a think the one. it's all of above. combination

the The as and be performance, very second really question, & to their been we've very, well of team pleased the as good. Brown team continues in our Hays joining rest with Brown

with we're that and pleased on So acquisition very things there. very, lots of good going

Greg Peters

question to you I year in tax if next And called see think guess you rates would going entertainment we ideas if have are taxes know also lower where taxes. higher to and revert if -- the some -- lower out think going you T&E, I side. year, a travel wondering this we I Great. to pressure like margin should My around or are level? higher just on know follow-up going the expense be to there's would to next be I'm called out I area.

Powell Brown

Okay.

work again to we But start that like steady in yes, in it elections. on things And -- will that's visitors next do slow, Congress. travel when do to tell believe and two, of believe the increase Senate same that the don't people things as that. different entertain expenses way one. is decision next are into kind higher if we year; there outcome they're if our and is thing you as you really and of the results can't parties, to as will So relates or the that variable we and going year, a party be And will happen. how the number Number know, important its through speculate the the get we House

invest who are of to I to So I that lot that we business, could considered with the But and and are Brown & positioned of ultimate a impact Brown. what Tuesday. be regardless scenarios tell you and ends great potential outcome like the well would think have waiting that next grow you to of we regarding interest continue

Greg Peters

Okay. Perfect.

Andrew Watts

next just through which add you're Remember, would just barring our rate we our up that tax third this quarter that, effective year. year. anything expect bit of see that little down tax of level We rate happens I'll year, a all go about as to next the thinking wouldn't to elections, in next Greg, we benefit same drove got XX.X%. benefit the effective the year, would of

So little will bit, up it okay. go a

Greg Peters

the for clarification. you Thank

follow-up normal as regarding the there across number life on it next enterprise, the new like, point to looks entire is little returns new normal to T&E. margin no the one, is? one conceivable expansion or gradual about whatever things, returning year a as that Just you Powell, think could as in whatever you be increase look

Powell Brown

Yes.

Greg Peters

answers, your it. guys. thanks for right, Got All

Operator

question KBW. next of Meyer comes Our Shields from

Meyer Shields

second One pace and which third to us policyholders your is claims. with question quarter or insurers morning. the pick see the was can up good dramatically I are Thanks, help quarter? between with you your we the Can hoping filing that with regard

Powell Brown

No, I little want grainy sure reception just I wouldn't. it's make a to there.

know between marked was claims increase and QX in is insurers QX, number there a of you that what our said? You with to wanted

Meyer Shields

Exactly right, yes.

Powell Brown

no. quarter there between would around not second coverage QX, there or and claims lots pandemic, we jump in that huge haven't in you that. would say some were Yes. I potential BI claims I filed tell that on No, was anticipation seen QX of the but

Meyer Shields

that you one give of But book little you into that, perception to accounts. that, into us Okay. wondering the And don't a segment I was industry -- And more the can maybe pandemic. then of your little -- the of of break the volumes color smallest I'm to bit aspect trying of that the is hope is book? business. the insight know into out translates of I that pressures most on vulnerable get segment bit the a how

Powell Brown

Yes. All right.

let's might what So business. where have, call simple, Small discussion you we and year. of level at let's small business, think $XX,XXX just high a say, it about for let's premiums sake make at under, a it this

commercial mean So you commercial. have in retail. that you exposure in have I that

lot a because of that some in we impacted, we have said number is so have lot of areas. You of Binding addition, Authority in which or you that's in wholesale, either National Number a coastal fires business, in personal in one. Programs; two, being and as have windstorm that lines

So they're and yes, when dinner, us. operating and businesses, they're are will it. you are is if go go of a seeing of basis do impacted you out to by a to and as pressure some gone place outside see because, home, a is a major they and at you already impact and major as continued that city And go that city, the in have that making not has exposure that you places And business you a there lot are continue on have down center instances, and of -- and substantially. it of XX% people in sort you use and we live small there open, shopping us sitting outside,

the Meyer, impact. seeing would is we we're And most -- least so that say is area the that so at far,

instances, larger didn't have think the often, business were they making that it. it I to do we we financial see they that. but to businesses some And were and tough there business. it continue to saw size medium those we were more choices, smaller stable, financially resources protect early, saw In the as

are our we yes, So seeing business. that in

Meyer Shields

Thank That was Okay. much. so very you helpful.

Operator

question of comes Elyse Wells from Fargo. next Greenspan Our

Elyse Greenspan

then for the you My high-level kind of seems kind good given some this of guidance -- have quarters time, And some morning. It and segments. year. of a done good most like first thanks, Hi, question, right? about forward guys

high So the potentially on I'm weakest a the is had the trying quarter you just sense previously, to, how level, get to of -- alluded guys QX year. being

like Now the QX. was that it seems

exposures, of all put it together think we was business, trough of this feel when quarter. we new kind How second of So pricing, does just your like about the about the should comments that?

Powell Brown

good Yes, morning, Elyse.

you I it way. of could that think think

certainty, you able I think, this -- that and the I QX next there will -- is in a you is year. that of happen challenge and to on talk be going QX certainty what's to one you QX challenge want give to no know will sorry, and the around

And this we and happens to business. with as on what therefore how is, and spike, what with does believe, that impacted happen, -- the impacted by of some so, does so virus it much I continues do happens virus the shutdowns have that limited in QX not impact the

on it If we don't And you looked prayer. a at run is yes, it business and that, our on hope a trajectory think standpoint, you improving. would

to but know don't is state a -- And be believe in to know economy. what growth business we mid-single we I case. going want our we've if we business you so always steady said And that's is, organic know low digit that, don't the a

state a rates steady factors have in economy, are not impacting positively up. going that are it, i.e. unique We we

We have are impacting out going dramatically. unique that businesses, factors, have other things where virus i.e. or businesses and of reducing Corona you business exposures

give me let you Elyse. example, So an

pipeline just over work next nine it, If all are more much bidding is, as of hear work it's at end months. a have number there, for very people customers, the not, six not country, construction have there workflow they or to now that of of But you capacity our uncertainty in the to a to today and our is nine out out. last the what do you months, far because construction over most quarter talk instances, customers, good the the the of would number they don't right

seeing that places, certain pickup. we're Now, in

to Florida, people a in are Florida. Here lot moving of

got bidding you've over all place. So in the people contracts

And I wish that could of you this the we're would answer divisions that pleased level we we I delivered. you quarter. very So some but our with all I comfort, three big -- way can't. could tell we and give executed

pleased And so really we're it. with

Andrew Watts

Elyse, there could in said our downs. and commentary, ups be Yes. we

going to happen quarters. over the We expect that's coming

not going fourth guarantee We up, So bumpy more as going the QX it's now. be it's be we just up, to to it's going quarter It through way to third be could this quarter. right the could to work look be economy be will that little down. be think bit could a our down, QX it

Elyse Greenspan

I part, that business lag, comes certain XXXX? go economy right, was to we meaning ultimately bumpy, like within is a degree, just wouldn't your helpful. it when thought more when No, organic, That's could that into there the the organic into impact most for a and where QX

Powell Brown

probably, I that won't jump conclusion. No, to

I think on to underneath, the it ultimately renewal what business Elyse. gets really happens

and adjustments the So is recall in revenue too QX. back that the took therefore What down that's happens also we in appropriate we exposure think question. that what QX had units. to bring be for previously. change And renewal at We recognized for will in the

in If did out correct? we're know. don't quarter. and Again, going this they feeling that in positive find Don't there. to are what further, get how get the play we type quarter aren't audits watch units renewals is So, if the out the fourth exposure as and exposure in they companies then drop to of see units, know. first may we out the We'll things,

other limits exposures or buying Elyse, are are there know a of are you cost. thing, because potentially number of and rates customers, in instances, certain up going dropping as going different coverages down that The got who to are

you million last and $XX that, and was year came bought have actually did a [indiscernible] you lease manufacturing more $XX paying you million it for you're to than $XX million umbrella say just million. you year umbrella and see for last did the and $XX the a we let's So

excess example, where they in good pay to having you're on people bear it, So a of do of say, basically areas very you I certain business, the in can't for just I make decide or is for adjustments can't we that basically and go level more -- they're premium that certain they pay cannot say, something. in where class coverage

that to So starting see we are too.

lose sight not let's that. So of

Elyse Greenspan

between get shift I'm comp employee operating that, mentioned other in Not you some just to That's and just but expenses. the helpful. And operating costs then sense with lastly, expenses. other a I of trying quantify to Andy, impact on just deferred think some expenses.

could think of COVID kind that through OpEx have related we as quarter. come in the savings about the Just

Andrew Watts

It's about the those the was here. market So adjustment this for general questions between size expenses. to on being for year-to-date asked. fairly well out a the Okay. $X adjustment? some operating line quarter, work On people to the The question repeat the was as kind impact were deferred getting the benefits, comp We're going hear of of questions was basis, hard through as year. actually other is It's small. around how salaries and the million the what

Elyse Greenspan

Thank That's for color. helpful. Okay. you the

Powell Brown

Elyse. you, Thank

Operator

of comes Credit Mike Zaremski Suisse. next Our question from

Mike Zaremski

morning. Maybe Andy. good for Hey,

over -- I question coupon First Does some with financially X%. debt in there issue Is that. and of any a is the on see makes sense opportunity outstanding there bunch retire of a that to it [indiscernible]?

Andrew Watts

of at that makes economics because this to everything. would always sense Mike, probably and stage, But would that We not evaluate do that. now right the just

Mike Zaremski

it. environment. kind loss of hand, kind trend, the carriers excess you the table said I'm hand, of made one year. I rate On Powell lot in rate could portfolio, some are that thinking about you the I comments, rate the the Okay, color. this a you that guess, of of can is given now momentum that, their some that on about of mean got the in minority more get a of dissipates coming other that on is guess maybe

certain environment challenging very too. keep and next a want to you you to about quarters a for constant or even the by talked half, where few limit remain premium to trend you reduce that expect might carrier that the -- think that companies mentioned to I for

rate just you So more are guys me gave. some and environment on just color and the maybe give -- is extreme example what is an that you seeing

Powell Brown

Sure.

are you different So believe see we reinsurance, quickly going it's examples, tail of we like areas, let's back come easily that in number the to tracking really half next automobile can low in in limit that more marketplace. see do liability their extreme Number said believe could believe, for and to be capital say. maybe. on think to think color have certain be provide be although would or be and might impact middle moderation which number on business companies or The the liability, but accessed, increases general to And about you United the question will gave the very not senior whatever impact, it. rate there could do for rate one. professional So little the be like be how two. one umbrella price? But see year States, Where have the account you made you that that the been repeat particularly product have increases the we everybody. was, the that going you it where CAT same And is, the a or let's example That's a or question cost business do a I you going go will also environment? into business two will of careful, of that script, to could manufacturing traditional to there's can something that going Mike, we'll we ask. property, of short that, opportunistic be we something leaders that it we see said in there it insurance but are the in not or claims towards missed could I case moderate. lines

made to that, money has that auto, a that a not a a top the the I top don't XX% say example, believe of I be of lot you believe is, a can these increase GL, XX% for of on for -- to I And be XX% increase things, on casualty So years. have the number industry would of increase. then but reality case.

And becomes they in costs years more that that start the road off wherever can tend a to to mitigate level things doing base to customer answer three that start there say it the stomach tolerance that, think the is, and/or actually units when Let's row. they a then is take say I I And difficult. they can.

-- So get very limit exclusively. umbrella same we when typically talk accounts, the or when price half more, I on that those but not about an large the talk are you about for

those very but more, may market XX% their are going somebody if up and much that as next and umbrella. again, is chug XX%, X% you've I rates areas maybe you're that up to or could XX% of in impacted, some year. got business auto along, don't increases, that admitted XX%, seeing umbrella but think to going be drop up much they're So But X%

going to markets returns high to where the CAT point a be say in. to enough where going property, other So to are are want there's we pile

there be going so going at happen. when to But happen. And point will don't that I it's a and exactly of that's some moderating know to

all when the so of job doing creates challenges are -- very best all creates opportunities, of the for kinds not It that can their it the save we broker with frustrated help And business. place and to kinds in also be day. hopefully them people come and may

Mike Zaremski

passed with kind for it's kind that's think that's a And again, as stimulus organic when is we vice if should year growth in -- progresses. And our of would that's something would just well. you mean be I of your level helpful. -- be thinking after and about election numbers a the on customers some Okay, something of think should positive versa. last we macro quickie a as the we

Powell Brown

Yes.

first think, doesn't if to all, on speculate we're going I that happens of happen. it not or if

think if a now point slightly were will going or to to impact, if regardless -- it's stop. know. future because the where I But would don't in in it you positive there the have of be we but a fact So is happen, stimulus

some will there so, reckoning point. And there be at a

are that, three get right And let's said the the line say. on months, having kind that of so, might businesses another

to that pickup that is, about typically small to talked to it, business And period, about of determined, enough that quarter question they much we some And those but we then stop. think does economy can be going Mike, what the not yet that's earlier. about think might make in fact fall we the it. the so Not category about so ultimately impact, have the that under

And so to going a is And there's some of industries, I there reckoning think, consolidation. some still in absolutely be there. fallout, in day

Mike Zaremski

See next you. quarter. Thank so. you guess I

Operator

of Kinar Yaron from comes question Goldman Sachs. next Our

Yaron Kinar

it's everybody. that? decrease My talk first pipeline? is Is M&A, appetite a a Hey, bit. been see in there M&A picking to good a how and color of goes the M&A morning can up can And little then function you any an little you meetings you about the increased more in-person about bit offer It for appetite question just And again. a seems maybe activity. that like

Powell Brown

thought activity. morning, you'd that And weeks That's six stopped said then a Yaron. myself number going Good me would foremost. started the tell Sure. we to really one, We you asked or there of likelihood back and six and think and for it it stopped happen eight for sort really call is up M&A, it. if in and Andy asked there's lot last I you, think is weeks a first we I just in thought April, -- about was do in again. picking you'd what it if of potential sort of And months.

to President be one. potential now the been the to cap taxes, of In a doing would possibility end position interest of this Congress be would with there in lot generally weeks last and there two. off year the Number that some the between in that have structure, has a things and activity. That's means increased and gains the an table number you So of six year. tax chips which lower rate they take want tax or increase would the

last the raised it got of But really think somebody between pipe happen So working now, end potentially if going the see two of to result not a year everything I that. takes and you're a as you've their if week, they're unless hand the things perfectly, in now while.

done so then. it be to And by or not able may get may

tell concern does And expenses. to hard that's just do a reduction having businesses is sure what and based variable want we to variable if what anticipate. look want could buy tell you we in are having also are basis, that like that we you if look on we to know would make ongoing numbers I -- you our that So, well, a broad expenses, you in as other reduction at some agencies statement, and

in So of financially, about arms your a talking opportunities that And business. there out win-win. fit. the really We the an lot revenue streams the a then levels people is the the getting that on that's is basis that to expense and key some around And culturally out with way in ongoing good feel there. is there process, figuring structure something are is a just

thing they that good said there the PE better or buyers than distinctions in is, strategics. not not necessarily but the past, does And are we among other, is different. As it's the are is mean unknown. very competitive, only interesting the although only -- one

are sorted And process. those out bidding things in that usually so,

go gives be know say And I then get are comfortable pick with but cut most because up. you they you three times Brown. with they So not number, process. a the the is, or Brown be core did, you could is in the not going that there different that let's we be But say the ultimately of throw do for and a their many blanket may the we because to it most over It people the dollars tell firm in meeting the three it pricing a they'll figure deal with years, fit. you time cultural only. And that that frustrated down what PE. because be out culturally, That four just seller might a comes pricing then may the always went firms highest put deal to if culturally with feel be and them, the how & to firm just than

a difference just it's philosophy. of So

Yaron Kinar

appreciate the tax, And second impact into call key any potential that I things the in you business. directly question, the that could at out you're considerations the then gains impact change your All looking right. answer. capital selection about other my full

Powell Brown

through question are really gains there we're changes election. this than is, for other The cap tax thinking Sure. any that

is, short the answer sure. so, And

that think about let's So a just for moment.

of I things the the the in States. of One about evolution a lot talked is healthcare United

in or carried things to some health that And buyers. PE And ACA of does That's health healthcare I'm variation CAT not specifically How talking about potentially forward. about ancillary do and is have and large gains I'm so, of the talking line, going is the there and/or modified the like Obama providing a talking that possibility. insurance. insurance. Number would fact we And that's a about interest. two, impact. what if business eliminated, Care that

And State taxes so impact we going you taxes is those. whole number is number. There the speculation that and there's a of the a a of of limit to things from about bunch about evaluated, around security unlimited There things. think interplay an talked Federal and between and

deficits Texas Some like or going the York don't going of to New you of states Florida places that more Connecticut are that coming to and or to people that Jersey in is you live income California tax. opportunity like live the other states have or to departure New fund in get the more create in, which and states of a

to all work. is how so, going that And

years And kind to to going so interesting let's structure more evolution/migration of tax say, be places couple to that of it's the next, amenable see states. really in

Yaron Kinar

Got it. Thank you.

Powell Brown

Welcome.

Operator

comes Mark of next from Truist. question Our Hughes

Mark Hughes

the Thank Good National was morning. Yes. amount? The what you. write-off in Programs, receivables

Powell Brown

was said, so million. you was what Yes, there [indiscernible]. question write-off around $X about Mark, the your on

Mark Hughes

next going year, for be rate tax or is XQ still the tax year? whole lower it the then And a is million. rate $X to throughout steady

Powell Brown

the by go you XXXX at quarters. it a back better think next view look on XXXX when No, about facing probably will year, up is actually the

Mark Hughes

Okay.

but XQ, much. So maybe a little not lower that in

Powell Brown

it barometer. stock at a Mark. better see in that that will reason Again, this No, be much we lower XXXX. was that level won't The the the why we XXXX, And Yes. vesting had look -- same was won't restricted that of year much lower. It be

Mark Hughes

the the charges, headwinds? charges a kind IT for that that some on to inter-company Does margins then or year moderate, is have going quite And an time. Okay. be next still IT had say, impact of

Powell Brown

It will probably start to moderate year. out next

been have to in starting we've it's those making level. A you lot of we corporate we've at know, as out as segments funded time. the them So programs investments that over the out, back then charging in -- And been matured XXXX. technology

Mark Hughes

on next and And supplementals quarter, the finally contingents then any body that? language

Powell Brown

with the new a Mark. really recall have rules. view as probably on don't those you Again, we No, accounting

upon of placement for policies. throughout those based are the We year the accruing the

So until we on view year. next get collection we a don't really into cash have

Mark Hughes

Thank you very much.

Powell Brown

Thank Mark. Sure, you. Yes.

Operator

Our next Phil from question comes Bank. Deutsche Stefano of

Phil Stefano

Yes. Thanks and good morning.

Powell Brown

Good morning.

Phil Stefano

was you an to going from year that like it program. have this Earlier expense there position the not felt we're guys

field benefits? place improvement have expenses quarter to got ship any this like And the We changed curious in in I feels we're second in what insight was And better on incentives or quarter. a there correctly. drove than was you And what run management from if regional operation, to do third for variable lean the their so. it to them margin going

Powell Brown

Okay.

So, clear. that was pretty Phil, think I

could people the think I understand [ph] question.

to going not I'm So that. repeat

saying, remember, to be not You going out a to know we're firms expecting think we going businesses. to got some that some is savings I answer there temporary we expense and X program permanent, amount everything there built is and until. individual are of is, of some of centralized that into the it's ours are be this And remember,

you your of So are if Atlanta. whole all expenses at in your are Atlanta, --

are in you expenses Texas, in If you dictate you in are the that the that depending variable service, that office to other incurred and they businesses going centers all office. on the run Texas, P&E that and and got that's of your

In Arizona, of number and of in over So all say customers that country California, of let's the Washington. right? they that high is. discussion, a flat just Oregon have The sake Atlanta number office for the are this whatever business and customers of

all are that's stopped. the time. so Well people were And there airplanes on

expenses the and are let's customers. Myers, see within Fort XX your can Florida dramatically go customers Atlanta in, and of might So say, are and majority saved than and will they those you the in that driving, drive different be if be miles vast still

So, some expenses rate to and over new relative in We QX the no, retention, QX. it's tell variable a function magic think I you, thing would business there not of just wand increases. is or more

Andrew Watts

sure commentary, more up is, we we to quarter that, we will don't would were expenses. make XXXX. organic, as the trying were I In are managing year go starting it the versus increased and was mentioned, to engage end as because well third are conclusion, that variable see to into anticipate to in the margin just the are balancing we the expenses. quarter, take a But we starting and to as also are the of the anticipating Phil, more in continue back of jump on more Yes. able conveyed slowly the we with was customers prepared we our we up what able second that to and expenses out as variable

Phil Stefano

underwriters, or maybe that margins negotiations a get expectation of forward contingents? true Got it, there okay. if aside that change the whether at were sharing And the for was look, positioning, the can do it cost for we your in sharing in around profit talk loss excess is and about your in does not As future or true, the potential some change cost. pricing of your profit Putting of posturing the get? pricing that's loss point expectations better there at you excess

Powell Brown

contingency or results we remember is the sharing profit on based because No, that have.

And you have someone is up. freak on unanticipated, so large and truck is could have and going hit a accident and limit law somebody, you based so that there you could rate kills insurance But loss. ensure that of totally numbers, where a you have

think your our based very of In So performance the book remember, conceptually I is upon it's thought correct. much business. of actuality,

overall the the you Brown of, insurance company & with confuse business of the there. And the so inside result to want results I let's don't say, Brown

Phil Stefano

thank Understood. you. Got it,

Powell Brown

we more queue, do the in many How Kevin. you. Thank sir. have

Operator

further currently is There one question.

Powell Brown

then up that for we'll take We'll go Okay. last wrap and and question today.

Operator

of Michael Morgan Certainly. from The last question Phillips today Stanley. comes

Michael Phillips

I if for outlook place so near-term it. much could putting Powell, on the for thanks the thoughts I any wonder Well, business. just me appreciate you just lender give see you in.

Powell Brown

Sure.

for business. lender placed So question is, the the outlook

one, complementary. in number is know, investment both business we as to that, Procter think I made you a an which Protector and additive Loan they're

So that's the first thing.

business us And that more things is of is forced business. thing it to new where are we writing, programs, you'd important. the I more very existing it's expansion that's writing tell call but accounts, you, on they're would some second what of having The

financial to getting go and XXXX, to you their the increase is was different Yes. us how that, XXXX that you more as So if existing XXXX an companies portfolio expanding portfolios. opposed and say Andy. back institution, Isn't that with

handle two against capabilities size and lot, all like placed or shouldn't our that's handful only with that, portfolios There the investments with us. really positive made. we to traditional including a are big we're the think large for that not like one XXX handfuls are there two in I So of that say firms but investments, or technology, lot thing sizes, now, pound I lender middle-market And gorillas. we've and better And ones. the compete and able those the the --

So we got And a Mike going of there. great job. on stuff and a cool is team Cox his doing lot

So the yes, like business. we

Andrew Watts

or Yes, seeing. is new foreclosures thing. we'd you important business closure read up. we're that This in Very they out in Mike, were that want commentary into that's guys what our our is just an seeing we're lender purely uptick place who not to on there, picking

Michael Phillips

retail earlier that Andy, I Appreciate that. I up say comment XQ. broke the about in slide a it. in something revenue I on on because, of something the heard leak thought opening for kind made you remarks you Thanks but me, Real I apologize, so quick,

Powell Brown

really the had we Yes. around close fourth quarter, or the and fourth We quarter of third the to organic points quarter. anticipated was right anticipated quarter -- we the -- fourth basis so in just quarter. would the originally the third phone, XXX in into the would about out, third the We'll in had question revenue from on we renew the around -- that call benefit quarter had which was this in the

between the a movement quarters. just that's So

Michael Phillips

guys. Thanks, Okay.

Powell Brown

you. Thank

day. thank We and Thank you quarter, hope forward January. have Okay, very talking we for a your you a you all to much. you much time. look very great Have to in wonderful

Operator

that gentlemen, for call. concludes your Thank and you Ladies participation. today's conference

You now disconnect. may

Brown & Brown (BRO) 27 Oct 202020 Q3 Earnings call transcript