BRO - Earnings call transcript Q3 2021

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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 personal 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 the 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 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 release as in the preliminary yesterday. results financial differ issued the finalizes current results the that for Such factors it and financial include the numbers is forth set unaudited press Company's determination its third quarter from Other from factors not Company's currently time that Securities the Company have risks the the identified may those and and and or Exchange reports in time quantified filed with uncertainties Commission. identified to

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

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

begin. may You

Powell Brown

quarter exposure for call. was a Good you and thank XXXX business, very strong for same good that profitable combination was growth, expansion. We result a resulting authorized Brown of for Cecilia. risk new units. XX,XXX increased to another share This increases earnings quarterly joining very dividend. some rate At dividend solutions of our of XXth also by us per you, increase year Brown. combination quarter retention, our our -- for note, the good everyone, earnings we've team & morning, QX XX.X% of Thank continued our We're and time, of in growth expansion delivered for our delivering by the teammates line Directors margin an week, adjusted robust proud our in top Board improvement impressive and management Of nearly in row. our customers. last creative driven now the a drive third

to We the about in into I'm for transition results get of and Slide performance segments. X.X% total I'll our more of quarter, the the on million organically. X. a few revenue, detail let's XX.X% Now delivered growing $XXX in minutes

quarter the points grew Our third EBITDAC basis versus XX.X% by margin XXXX. to XXX of

Our the quarter change an net income estimated acquisition on third in for was excluding basis the payables. as-reported $X.XX share per and $X.XX, earn-out

quarter discuss will and presentation, the more our now detail. history, year-to-date financial as in growth strong a during completed quarter, the performance During In that summary, our for pleased really the seven X. nine best Slide I'm internal the extend our are we our the Later we're the of quarter. teammates XX.X% third and new would welcome to months warm to in like Andy joined with year-to-date. results the results acquisitions first on in all another

others reopen, struggling hire fully employees. that the pandemic and to mainly customers inability are well done that due to to the have We have throughout

geographies. a and We number a of this as restricting are operational. fully fast And companies consequence, how become in seeing can industries challenge

experience coverage putting themes are while the a material on loss reductions rates pressure loss consistent. workers, best rate placement experience or are limits and In getting chain addition to both. the From standpoint, tough good Customers increases in shortages seeing issues of pretty and are supply are with those or available costs. with inflation

to program which are a X% compensation this quarter. challenging the viewed to instances, XX% excess commercial customers very with remain rates, are the XX- XX% an dramatically X% slightly X% to which saw rates, with relatively most previous were now Rate a premium lines. The X% their that have and to both and XX% perspective, XX-plus some in are From broader Admitted down in in across a rates with umbrella manage are remains auto up obtain viewed Also, percent. to up consistent range increases customer. E&S place security Cyber up increase rates, outliers. nice as past Coastal the than XX%. as to depending protocols very XX% coverage. with outliers property, minimum continue the on difficult to increases. rates consider most expectations liability being modifications market place. to Security remains to wind continue X% workers' in be up rates As to up to are Professional to accounts most result, some we prior for quarters. were coverage quake, with could

challenging and cyber aggregate significant we're while to seeing umbrella, reduce carriers rate limits increases. E&S losses placements personal Florida or remain the California seeking lines liability, professional for due in concentrations. most and For

already million, in quarter $XX transactions during of couple annual and a approximately October. will revenues to a for and closed XXXX, the the programs which annual state-sponsored continue lines likely successful in total XX From to closing seven I've of pressure additional of and for appetite with of perspective, We've areas the M&A on deals expect be were an We acquisitions consumer. year-to-date the announced we constrained million. with put cost of in revenues personal cat insurance $XX

good prospective pipeline remains Slide about we our engagement and feel of number activity full, Our with on level X. and sellers

through our X.X% strong was customers and business organic of delivered business segments. with quarter. the of our benefit Programs capabilities from Retail and growth National four growth XX.X% organically. outstanding unit our growing quarter, all of prospects. good increases exposure broad rate We're Let's discuss another retention, driven to performance third combination great The leveraging new delivered the lines of revenue for results performance by a expansion.

driven was by binding performance rate well, delivered lines most and segment coverage. Lines good from Brokerage due retention and to most states Personal growth a Wholesale coastal with new programs increases organic increases. of X.X% our to business, by commercial businesses. great continues new mentioned Our advocacy processing was for brokerage The driven and was performing rate board. strong growth external across the by continued business performance of events, The substantially headwind, a by segment The which revenue delivered revenue quarter recent X.X%. be it the I organic quarter weather for a growth was to offset Overall, claims driven earlier. with as associated impact the factors continuing Services and

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

Andy Watts

highlights. Powell. and Great. our morning, financial certain discuss non-GAAP We're GAAP we'll you, Thank over everybody. on Good quarters, results number previous Slide Like X.

diluted tax For million managing the income quarter third stock and growth we XX.X% tax quarter in or tax year. net the the basis driven restricted our increased previous both of effective rate and expanded to year prior The increased third revenue growth by XX.X% is approximately $XX.X income EBITDAC points and per share for income to associated revenue margins expenses. the with increased quarter, guidance in line $X.XX. awards. of X.X%. current EBITDAC XX.X% last third growth by rate by X.X%, for the The Income of XX%. quarter while this delivered year to as the of increased strong million was the $XX.X before by or our revenue taxes with and by Net organic total of organic XX.X% driven benefit compared XXX vesting

continue XX% XX% our XXXX will for full We rate to tax year anticipate in range. be the to effective

over third a estimated both in average quarter dividends compared XXXX. we earn-out for prior per compared third the to the presents comparison. slightly change year, presents compared which was million increased quarter meaningful in increased the $XX.X this The the our weighted of after This million of acquisition number a year-over-year same acquisition share $X.XXX slide year. our shares charge and last on Slide estimated earn-out payables the to to for more period $XX.X X. year payables or believe results change of number in removing Our to We're X.X% and years,

items, taxes Excluding increased adjusted by XX.X%. an before non-cash basis on these income income

on per share over the This driven key the was change and taxes Overall, to it an income increased slide income our diluted by $X.XX, by and bottom XX.X%. Our performance. net going revenue was quarter the adjusted number net components in quarter of the basis a million to line. income $XX.X income on of very tax effective lower net growth adjusted our Slide strong growth was the I'm before top X. or presents the move income The as and per to increasing share XX.X%, compared for earnings of rate.

commissions X.X%. For increased GSCs and as exchange this contingents and our foreign by changes fees increased and by which commissions additional GSCs contingent of increased revenue, in excludes for XX.X% year. the the and we certain quarter, total Organic impact net M&A qualify activity and XX.X%, our rates by

slightly Slide months with commissions variable margin of contingent lines EBITDAC XX.X% by for delivered total XX. and revenue organic by The segments XXX The by higher amortization, to income grew GSCs income Forward impacted points growth X. EBITDAC is increased growth and and higher in payables. revenue the acquisition number earn-out to Retail managing organic all Slide past acquisition all of before basis cost. segment of X.X% compared the increased and Over across solid intercompany interest, growth tax growth XX with depreciation, number expenses even estimated over quarter activity to for XX.X%, revenue in our to EBITDAC driven as growth, business. and due changes

and total timing. organic $X of the recognized by by increased segment represents we that this a In revenue Programs quarter with million new National onboarding customer, of conjunction incremental XX.X% revenue approximately XX.X%. Our revenue

by We from result expenses quarter as than strong within non-recurring in the certain the write-off the expect basis organic XXXX. and first growth third higher $XX.X likely to points improving to revenue the our the by driven recognized impacted driven incremental of acquisitions higher Slide X.X% by of past of in half year. Slide impact of XX.X% increased costs revenue was more or be margin but XXX this the positive non-recurring revenue by with X.X%. growth the EBITDAC slightly that a XX. receivables IT growth XX.X% occurred certain variable XX. growth, of and EBITDAC and customer million organic total revenue managing The and levels delivered Brokerage incremental the On of months XX last intercompany grew compensation broker performance, segment Over charges. number of Wholesale of

flow cash of revenue revenue comments our liquidity. of conversion total delivered management of have increased segment generation experienced flow million the of continued this as nine by another year. to compared first driven operations last of strong cash with by growing $XXX Services quarter and expenses. X.X%, through nine months and XX% and organic year, cash the million growing $XX X.X% Our from months Few EBITDAC or first regarding We

strong from months nine Our first the flow ratio a of of this total operations percentage at cash XX% for of revenue as remained year.

and back over closing to positioned With of our are With the our fund in investments me combination business. generation Powell capital for to well availability, it that, let comments. continued we cash turn

Powell Brown

profitable Thanks, and We've outstanding believe to had months continue well year Andy, we great growth. a for are of nine report. first an positioned the

lines quarters industries; or one, business of out As we 'XX, to supply when and of business And influencers of main improve is these expansion the expand. across availability and The four, play Is over will confidence remainder expect the to it influence increased the units three, and into all of exposure transitory, How inflation. it be: will year of confidence employees attract be the management the sustained? look moderate an towards the trajectory automobile. professional will constraints; COVID. the coming and chain continued the we two, resolution we From to of join many cyber, we're result valuations of lot available with market team. continue We companies will increases remain good to perspective, the The to many positioned at as heightened a anticipate with of feel with a buyers very will that great the continue a active of capital. Brown to Brown & M&A premium excess well exception and economy. pipeline underwriting for and levels

From this as of will of with long-term to operating disciplined our to our constantly our of applications creative the Brown third the to standpoint, customers. easier In leveraging teammates. consistently been & for deliver benefit nine are and progress uniquely With We're do good the delivering that, alignment the and and the continue Cecilia marketplace. our of of to were back and on for results division, key value. solutions quarter have turn continuing platforms align culture it make to each our months customer-facing enhancing the benefit to shareholder our focus Brown to to and outstanding session. for prospects summary, on are customers, we for in first positioned our making me and common ever-changing financial We succeed over data year, approach business the it and let is innovation success with these an focusing Q&A

Operator

We Instructions] first [Operator Greg Raymond now James. from will go ahead. question Peters take Please our from

Greg Peters

out lead Congratulations questions on -- we just course biggest which the Powell the outlook about comment project and sits next organic you about and the over get on the the -- of your or year you will obviously, issues guess thinking about we one how in pricing, I be talked don't I principally next quarter. of know Andy, or two. talked I the for that organic economy, you the that year? should organic. is bigger what guess And And to

you opposite the you kind when like same in of moving about time, chain direction. confidence, constraints at then about business seems the talked improved it's So and talk they're supply

can any be us organic other guideposts give for out would year think we as you So next helpful.

Powell Brown

Greg, the all, thanks Yes, comments. first of for

-- hook economy take in in country, -- business organic because are can't hire the true. in are same you customers of parts we There's can the you differences referencing what just of kind is that that construction don't And bit out country. is is restaurant in you a give off guidance. interesting and As opinions occurring those the things many let's of of know, yet And parts have we the have enough that it servers. there the where of little you're

I they to the a that we tell your or to future. give sold positive it pretty to sorry, you, question and able of whatever, can services on know interesting people how going their of an to answer And don't outlook have so is But because to goods we're most I'm is talk It's sold much. be not or cost going up, you specifically. the just

whatever lower of product, that So slightly sell it's will they but more year. next conceivable their is, margin have a

Greg Peters

it one be Right. That, is the I your organic other inflation. of conjunction strong you, guess, I I for guess with of in effects results, areas, guess, revenue would compensation.

margin lot just it's like some T&E and of at a and whether that to pressure comp. as the producing lower unpack improvement, of If results improvement you the forward there, look higher look substantial it possibility But or margin the organic there's -- the because revenue have seems you T&E. we you're might

as can you maybe cover So that well.

Powell Brown

Sure.

for all, environment about in let's are been. of we talk talent, -- very we and So first competitive a have

you we talent team, new we to number on pay-for-performance in So to this segments that our want currently enhance growth of and one. as know, acquire and company, business. retain we then is to the want opportunities and to that's opportunistically Number do the optimistically think we're teammates and new, two, great teammates, everything we not are a have

would is. or that evaluating or so years constantly and how say And issue means confused from we that think consistently, in whether three that with to now, compensate now thing our build. linear hiring how we people are ago will sometimes what teammates, we're not other It the of three we years alignment reward I people, I it's what the necessarily. long-term And trying terms is

the it's things three person that. going field. like athletes want where and can best to well, It's It's we one people. one we're of three retired. We're you not And the on these to so, hire going hire say, like people not

year, certain next people to that lot in conceivable segments our hire to it's our service of we combination customers or a thereof. some either or more produce business, business So new

in that investment I teammates. not are in that is can't hires in on So and we new budget existing afford not so current our not just that hire our to look talented actually increasing at as and it for cost related compensating them. are It's salary building

Andy Watts

Greg. Andy here. Hi,

a T&E. think, I the couple on Just of about question things,

right in about You're at direction. thinking least the

try way were they'll get the last where saw pre-COVID what done if They probably on go levels what looks see potentially, topic, will end time. over up really to that where we be all up like. we spend of will -- new exactly don't back realistically did But know as you think I to they which the T&E. don't know is, we we'll consistent year is, focus and trying costs we I and the best this we this upon for what forth year we're our based of move time That to growth. move will profitable down we can how inside deliver and do how over up probably some a we back manage the of least likelihood great XXXX with level But year be expansion had items could at mentioned. of challenging We've that everybody's the next The of you that organization. expectation. further already. on we've

Greg Peters

Great.

Just because had. hiring all maybe -- give update a of a you clarification of was promoting status the can new and I versus recruiting hiring your talking they've your point out program stat Powell, competitors about talk success your hires? us know on a new and around retention one

Powell Brown

Sure.

the one us in the things think interested I I'm give that and print it the big take print away. of always is, small So

one. and away. levels people out retention retention And I our call affiliated mean in are they is have when don't I all two, to not not We're by operate. would for number levels. good. says, That's would trying to how I what we people, more a know to a other leadership whether them I in a continue train office. at to we be many to just have And because historic at give the not that's you people way know, office cycles the role like on going is, saying know. number we historic people that or we're actively feel people enhance That capabilities as how our an But our bring so that number does somebody business. think, we've how don't recruiting trying good launch our today relative to deliver us spirit the existing we of levels. our that and hired different about our say into responsibility, if I we that, or our it'd x in don't any we retired that you really And you how hiring, is firm taking with to in organization, and and they comes many turnover countered people did But tell customers,

I any So, we for process as in where But think I no talent recruiting the of process, of is process. are this business, a we're development the retention the and terms really it time anybody, good and in -- any about busy different. feel

Operator

We will Wolfe Research. question now Zaremski take our Mike from Please go next ahead. from

Mike Zaremski

of the some Maybe color obviously about just growth. improvement has what excellent and piggybacking organic off been margin

I like the correctly if expect level Andy, tougher not can current you to maintain this hear base So kind of comps, kind to sounds from maybe alluding next you but of of margin expect year. saying you're like if commentary -- the it you to sounds improvement said it not when

weren't the -- thinking I'm about some should be move margins around and about be we want our directionally So comps, we models? make maybe it a of of to that I could should little there or bit just thinking within items kind sure onetime some tougher just kind correctly,

Powell Brown

Sure.

what the fit to is base that, organic -- we're And which XX% going organic to I'm over write and in service don't a grow lot we margin think see we mid- growth going a guidance going all, business XX%. is and steady-state we we said growth to a and business said, and of said reiterate economy. business to give don't over to over to first existing having invest We that margin our new forward. And we're remember, in to as of guidance. single-digit profile we Andy going and give our customer Mike, are So

build and organic don't anything But one it's we very growth a said nor anybody a capabilities able hire, to to That's current trend. really many number year because not we tell you to would able or lock to to opportunities today that, note. out again again, had people to we're our believe we're tell enhance say going -- on having how is good but to here margin. once next to good be quarter about we, and for we get we quarter, can't there's team. year-to-date going We on we're feel be profile our and our going your how important that's -- So you capabilities going in a to margin many to can't you, have

we to what of to say Mike, not So trying but we're continue and kind know is the but be do you, consistent. answer that's say frustrating do. I to I'm boring, we consistent. we're what we And

Mike Zaremski

guess will think pandemic undergoing Is those they that to measures kind efficiencies. Not permitting as efficiency out and greater in out be a that could a boring. specific of of of have couple business It's follow-up helping as kind to just exercises played kind down at laid that good I the lead the of pandemic kind times. lot of of of all peers, persist beyond has this some a statement? I question, Brown income of kind But guess, that any out, the

Powell Brown

Yes.

We're our estate XX% going and footprint eliminate that. to address doing all we're that. of not me let not says So XX% something we're that, that doing real or

You we got were understand to that before. efficient very

-- in consistent. some we're and of or boring, absolutely. Well, return of is specific answer other of offices. will So so, we that some evaluated the answer could and upon is evaluate that are see nothing I and can't places? The is don't that anywhere and But anywhere, potential a estate I'm modify I want to work which aware from future. it any cases at -- Andy where it the have T&E responds work -- to there's earlier, The we I But looking aware back. And to scenario in there's that now the only said have we've visibility of, we're going of doesn't mean manner work doing is into as to based thing I'm don't the think we're not believe give environment that that I'm in to The company. continue continue we we always needs kind changes. we you in in to consistent. how expansion real kind a reduction office be from there there the permanent That boring

Andy Watts

I will we I for back Michael, you weren't drive our putting in comments we reason last everybody how to cost if place mandates questions said of go and decades And why an of order in because all organization. industry-leading Yes, year, that guess stage we through had got That's had the think there complete of of that were have leaders they why confidence the lot all process. as navigate at that margins our a us to part to in we've we've of out. the know

profitable business. we very run of very a We're proud So, that.

constantly to shareholder them to make the order back, costs just invest sitting out of chips, we around et that we we we just where but for at one we pull because business to don't lot where deliver need value. So, that cetera, we're where a in good have long need think cut we excess our just we in our also day looking just invest term, sure put we

Powell Brown

this, you know conversion. know margins cash the also, with industry-leading and also think I I hand-in-hand go industry-leading that it's important, Mike,

dollars ability that equally invest we earn real back important business. of That's of into we're and our terms that's in -- very that. to really proud our as So

Mike Zaremski

& If retail press the the to think, brand unifying Or one about in I among the behind to one process Any -- decision? noticed helpful. branches. the, all I that? could That's release that the significance thought sneak in segment, last quick. Brown the name the real I any Brown,

Powell Brown

medium and it's to -- had talented that account the could teams on we're any to large a really over opportunity last in competitor eliminates terms X when unifying about Yes. market, number goes years. of capabilities. talking going to try confusion it a to businesses small And spin acquire the to accounts, of XX them to we've potential our -- business us No, accounts,

We're and forward. much Brown in anyway. everybody & read it. just calling into Brown we're don't really pleased, But & all Brown So going retail too we're Brown

So don't read much too into it.

Operator

next ahead. from go We Elyse from will now take Greenspan Wells question our Fargo. Please

Elyse Greenspan

guys heavy Can throughout brokerage this what first traditional of the I strong to half think sense third on in year organic that the performed half retail My because of the of was is Retail. well. growth business? third business Do bit spot year? saw and year? little a the a in quarter, question very you Obviously, you some benefits have but bunch on that give first benefits your components quarter the you relative versus us And really in a growth the of just

Powell Brown

Okay.

So let me just unpack Elyse. that,

call you business. by know. pleased out. business, growth retail, of in give growth line benefits We as of retail have said were as relates about it organic to with number X/X And we don't we X.X% what one, which our we is So the benefits, of our

I So hit said, answered think you I what but you wanted? that did what

Elyse Greenspan

which sounds like just it going break sounds year, curious the did you start benefits not -- like but sense, that just the of but and left. the provide that to rest makes you're to not this growth the saw detail, the business relative just in was of at that I which if going you're out to how the third Yes. quarter just

Powell Brown

good first in Elyse, and Yes. know it's answer, And good. the my now. good It was it's half, you

I to not that part we're disclose deal. of the like that's but pleased, -- we're So going said,

Andy Watts

pleased in all go is all and quarter, with there grew to lines just back we across. Elyse, way business to that we're our the things prepared of one the of during the the comments, performance said

Elyse Greenspan

of But to guys lines you wholesale, terms that growth business. in slowdown headwind. you point in then a did in saw a being personal And

the us numbers on what businesses, core a sense give trends, business? to wholesale you slowdown without of the within the really that what's Can giving just us is going So drove wholesale? and within the but just

Powell Brown

is observation that make I me let think So important. one

trend. a earlier, As quarter we makes I don't said believe one

business is Number is the more two, pleased you slightly remember, we're know year-to-date, and growing than authority wholesale our know very year-to-date remember, is with number X%, I So doing one. this, how brokerage. business but and

of some are have you the transparency firms into would other And that reverse. usually the

are So, a and there we authority which dramatically it's being not is to and actually you that, in on tell, is areas. having can it's And commissions policies into brokerage instances, In said, to California trying California, and people impacted binding. of flow business, a in just that as markets Florida, off of as some are personal insurance people lines, more not in losses binding Citizens. being non-renewed which but of the it's letting standard component get then in certain top by I have And Florida. them than

got a So is that markets personal where I'd you've if transitory are the that's say two got I right even lines because know term, not huge -- are environments, it's that it's, influx. what are don't you've there two

for And so a that headwind has us. created

that's what can I is much I so, put about on. would it. And tell pretty that what you But that

Elyse Greenspan

had one. one stock-based non-cash That's comp. And Andy, you then spoken the with last guys helpful.

have seen reflective for the up I guys of year. growth the trended year. this strong think this the expectation That was that flat you quarter, probably

there that up given just comp? commentary probably there's up last non-cash Any new I'm So the for we'll kind quarter that based the of assuming seeing year. one end year, about stock

Andy Watts

top been line is that's as No, as the upon versus that well share. earnings based year-to-date per all incremental year, on and up million performance Yes. correct. prior both seeing $X about We're that we've

Elyse. to end continue year, the into the back of probably that expect we'd So

Operator

Mark We Truist. ahead. Hughes take our will now question from Please from next go

Mark Hughes

you comment said... margins, I Your about think

Powell Brown

or be up you're Hi, can't Can Mark, phone Yes, pick hear might we on breaking speaker up. you you something. you. because a

Mark Hughes

this? about How Okay.

Powell Brown

A better.

Mark Hughes

hear you Can Sorry. this? me? about How

Powell Brown

yes. Yes,

Mark Hughes

now? me hear you Can

Powell Brown

ahead. go Yes,

Mark Hughes

Okay. a magnitude of you think you Is year to to in Very there the said or year. get you've you good. next fair margin about talking That year. for just that won't that margin don't clarify, Andy, margins, improvement -- improvement isn't you expect I margin next seen the potential mean the improvement happen doesn't this reading?

Andy Watts

to manage some everybody's we're as guess, next some In likelihood just we're I would probably we there just based Yes, upon is, the have we upside expectations. trying have would investing, much just business downside that year.

Mark Hughes

exactly. Yes,

think that, you've seeing higher will some is not Okay. customers if are be higher a maybe when a to inflation, net if from from think that values Then got on revenue, we about loss asset tailwind with reason impact carriers Should seeing positive? maybe inflation, about their a as net of we for customers, you, by that think a businesses offset be wouldn't it some your -- benefit inflation. some there

Powell Brown

hands. and velocity a two, consumer's bit inflation a money of money supply, consumers Well, I'm It's -- are money, function that know, a areas. are function number industry, it speculating a you And money a things. is on the I and that's the because, of spending that I say of in think that little which there's as in lot there of lot of two when that depends certain

with So we or moment, customers goods if quickly. may but sold -- up cases, our just cost customers' cost at for services a go up, sold many stay and may of their revenues more of their go

then could but term, in be positive impacted. impact potential So, negatively short have it the other that could businesses are there a

think right you my that? how now is would neutral. a So, more Andy, respond of I to position

Andy Watts

Yes.

their et of manage through about aggregates, cetera, Because their to cost to are how evaluate that in comment. variable they're is if think et that a happens it this. trying their of look insurance buyer they at that modify a other is, The way fair the piece Mark, they and very of their total their may you isolation, is how going does that's thing insurance? the if costs one think, I cetera, deductibles, inside probably up,

So mind. there's kind linear just in to that lot one moving just not factors of that's organic? of -- drives the There's of keep there's always kind just a

Mark Hughes

there Programs, Okay. timing. million revenue you the Can National in revenue about think of first incremental I XQ? half? the a say And And got be say program magnitude that first you $X had you incremental mentioned from Andy, question. anything in then you And about half. then suggested would the anything from in revenue final can you more incremental the

Andy Watts

a apart that pull little assuming bit. So

that's anticipated. year. third stand case first And we last the you lag a quarter accounts if And that what when from represents of it going recall, what to kind quarter. end some from the and to those And moving million behind up said fourth happens commentary be of the you is the quarter. the previous we over quarter what a there transition half of would there's to potentially fourth $X then $X the our of changed said onboarded of thought out customer there provider on up $X quicker fourth We normally comment. million you're quarter. would We we the $X was onboarded, have just would million that kind next that been have million, of third still of it the we revenue in that haven't a So over new will on than any show versus we

Operator

Shields Meyer comes go ahead. Our KBW. next Please question from from

Meyer Shields

that that to I Is that quarter, its next $X If moving Or is million Is to Mark's onetime question. to now fourth will the $X quarter? million home? the new that fourth year? on in now tag can also just correct

Powell Brown

it, will That May. Yes. the be for new home

incremental $X take out $X quarter, to everybody move to to we'll is, So once we'll What renewal want had and million, you way keep that appropriate million you in one, estimate No, almost to ends that probably the and just up on around do to -- onboard move that's we similar don't fourth. mind then we it the to your the is now to the wanted $X when the the fourth you that quarter to were for or third third kind $X million cycle pick million. then now in comes of suggesting you the again, when, accounts revenue keep it on and up period. see of

be So incorrect. that would

Meyer Shields

third of quarter, moved I'm I Right. out if understand sorry, the correctly.

Andy Watts

Exactly.

anyway. have you guys most your So in models all those

it again, do count. you'll So don't double

Meyer Shields

Got it.

us terms should update give within advocacy of you when Can Okay. normalize? in an the services businesses

Powell Brown

flipping that that, but Washington, at if the I'm working you could just been government We on a to by wish trying we that, that, want of type not really you us tell know, could we business in as that answer is impacted, on I'm and greatly hasn't that processing the and call for what's of you Mayer. while. you give full steam about to going whatever insight some could saying be going or

backlog, you yet. can we don't say, we It's months like not answer. six know don't and we So have an from have now,

So it's going to kind plot along. of

Andy Watts

we work know thing itself other those, Meyer, the it mean on is time. does out I over Yes.

historically is know If just and cycle you just at go look to that back these don't going long cycles. last. how business, it We goes through this

Meyer Shields

fair. in folks? Okay. increase can. for non-client-facing Are question, I seeing guys any compensation That's you perfectly Final expenses if

Powell Brown

the a as competitive -- all seeing earlier, said it's time. I environment We're

our in think So, of as we that business, all teammates.

So, it wouldn't isolate we It's of one group teammates. to teammates. all

Andy Watts

XXXX. XXXX comment Powell's earlier, because to a in went in competitive up up versus Yes went we're environment, They salaries XX%. in

So, we that marketplace time. in all the the see

Meyer Shields

the question normal more great don't things to was the years we call more hear I I to unusual of, past resignation it guess rumblings relative compensation? Right, the want in or of drift that instead maybe upward because seem

Powell Brown

happening is answer let's it that. what with lots But what line in historically. So is ratio across retention that That has is of businesses. absolutely I've said our been

of months, the magnitude, last changes lots people's XX in that So, the has of created many think minds. I

changes to things time deciding that. or periods balance leave industries make work are and in people long like some for they've been And of life

that see all having said place. so over the that, And affecting our customers we

to So it's real. tell We're you it's real. here

Operator

next go our ahead. question take Phillips now Michael Morgan Please from will We Stanley. from

Michael Phillips

of these is pressures attention opening profitability of for know there, obviously you one went cost your which and levels clients about a the insurance. through pay in to extent why comments, to Paul, don't pressures talked clients reasons I whole host ever insurance maybe maybe to do. to guess and conversation have to how but no they're rate coming or much impacting I from kind before than more of carriers? levels into companies they that I what of idea, extent not, accept is willing play which

Powell Brown

Right.

on clients of insurance focused are companies. profitability not So generally speaking,

So thing. that's the first

be that the important increases are And settlement or might year-over-year to losses like something discussions then X%. these thing the where let's conversation, going on loss higher by, about I second loss X%, what's term, listen as are very significant expect. it's that XXx, would of sometimes verdicts you happening that. cost the sometimes is that around your normal. you meaning there if same like you and The would X%, they're up be carriers, sudden, outside the the some but X%, the seem cost start And verdict of a say, nuclear talking depending a to is would where it's see don't x of be all the now, these

order, focused not or she cost; One, is performance is company. their the What dialed insurance the the or two, possible controlling short to is? might question coverage extent generally into -- so options And on making in options. is answer to the is, customer on the have and and the focused can of coverage program three, he best designed. Flexibility best and they this they the sure be the not get; flexibility

that so there that's So limited conversation. the than kind be pressure more on options in pricing the be something when of may together, there you put all write. there every of to would those therefore, And marketplace, might know, the course it insurance as are you really of wants certain segments company

our possible, making extent when real that the conundrum to key the there's we surprises. the lies to therein is no sure there's customers, with talk So but --

manage and come to the and we So we what about ideas up the talking their forward. coverage and often early see with costs to and going our how customers marketplace, in process

Michael Phillips

helpful, Powell. That's separate Totally Okay. question.

again, Another time quarter losses, of today. severe which and of pretty again weather even lots and flood occurring this and includes again are

change environment So of floating? frequency of do continuation space I guess, that are service slide you others guess to segment, in any what of that seeing kind kind and in competitive want there you I the for on of the your given in, do

Powell Brown

things are of different in people There The answer question space. to the that the trying lots flood is. are

broad and a so that it's is that statement, aware I'm of earth new As anything shattering. not different

the write However, zones. worst people private flood. the about you're starting to flood flood, interest in but the and really want private don't more of to they to more more, hear that's great, write And Michael,

with a sort loss, on to where carriers lies model aware but seeing a like low -- any of aren't you sometimes probability they lots relevance it's not not a can that of wind is So we're willing writing therein not flood price the building, great AAA would of program that seeing of statistical and it challenge. -- that, way. What I'm we're have like we're construction

So with know rating risk X.X that going to we're you NFIP.

You and maps around flood they appropriate. discussions at have looking are

there's flood things segments is the on, is around, private of have discussion the market not of and that And this You going an yet, growth enormous lot opportunity. a of amount kinds all serves. writing NFIP hey, a

Washington on long-winded to; in our trying of and; plugged broader in one, ability that's dramatically answer, I'm to a to it but anything aware what's always base. service be but impacting customer going industry, business as So our we're creative and not the impacts two,

Andy Watts

no in of mind do we substantially claims. adjudication in division, keep Mike, Services flood our And

years going But that If sold a National business of still with that we're in we claim Programs recall, number ago. if show division. to work it's business activity, normally up to that's We going you out our there. see

Operator

take question now go Greg Raymond We our will Please next ahead. James. from Peters from

Greg Peters

multiples an the Thank the comments, paid and beyond M&A Can update Europe America other give you for your and and into market. In areas? you've for allowing me a North to the follow-up. ask us footprint bottom about your know talked I expanding being on ground you appetite

Powell Brown

Sure.

tell it's would comment that multiple of an other our I people -- EBITDA is definition than I or always you a interesting what? EBITDAC different of on that think Because So people. Greg,

try might what we to out. they might expense so And recurring a believe is take

in in you across It's operation remarks, to Vancouver, continues business And pleased intermediate January, business And also I've talked XXXX, be that's valuations with in in kind Insurances a the Special O'Leary year, and this bought wholesale It's of at a very it, the be end teammates, the a of near of as to which to we've don't beginning term, do -- bought in basically Cork, so, know, changing which pleased called the then great before, we that. is, just two, I that we're Canada. to based Risk. number one. and I of which high very British refer as in Number we're about the as about. said in I way about range. Ireland, equally we bunch high see as continue I says changed And it of would the we Columbia,

And in rule are financially. there if make those there's so we business London, do always you have done areas is of and sense our law. And for do looking where a about those opportunities areas we're and fit There and business currently. or something typically can that that business think culturally two

it's to London, So going that don't I lots I not that and I a but sleep of -- sexy. that expansion international I'm fly don't think about think of is And on not and Greg, when to sounds of hard you, airplanes, lots investment is think me, I to people it sleep, I've meeting. but got do sexy hours it's three

cheek, So be I all will -- question a financially trying we're really ultimately sense are financially, but think some say to in little that culturally as that, be, the opportunities, to we think and those well. we fit tongue work look but we with makes can partner we make that there people

Greg Peters

you in -- elevated last to reason relative rate you're area that your the some conversion five a Got slightly there a new is years, for rate Or normal just year? running cash to expect we in like remarks. terms I additional in say, that free to, on this was the it. rate what It cash commented is Andy, are prepared about other conversion any would environment like seems the should flow going looking come why be the at down? previous get of we And of free know, conversion. comments flow I type looks you

Andy Watts

we've Yes. have We what capital of past. this conversion The very talked drives and the closely high working Thanks manage about part our That's years. for for ratio. in -- Greg. question, the our

the the that have is pulls margins other what that an of to margins how last organization, wouldn't in that a of that's a on back up back little going And combination. look down the if few as move will but up you or in XXs years, deliver two low over maybe at our by a we The down range. probably XX% year-to-date bit, anything points those anticipate I anything moved kind It in and and forth, least few nature.

grow that invest We sure our cash so that can on we that are and our revenues into take very, into it back we can business. making very cash focused ultimately,

Powell Brown

And if Yes. obviously, we other impacts that's to you have an that that encourage you incurred cash. firms in because evaluate expense

comparator as that to, at might like look it's enlightening. a change payables. that to not acquisition if look And you you items so like I at earn-out earn, the you than you as it access And have other non-cash to cash be those that say, adjusted really in

have question. other of had more one take We're -- and do going hour, will the wrap top a up at questions? to we couple the I we any So

Operator

at no further over are There questions the time. phone this

Powell Brown

with you Thank XX.X% for Perfect. X% time. your in all what's your going XX.X% again We're at Cecilia. organic very appreciate Programs, I'll you much. and business. stress on and in with We're much thank X.X% pleased the growth Retail, XX.X% help, very Services. year-to-date. very We Wholesale for in

what's we great we're look So you. quarter. going you Thank very a Have and pleased next talking forward with on, to to day.

Operator

may that conclude today's call. gentlemen, now conference Thank your you Thank will you you. And for and disconnect. Ladies participation.

Brown & Brown (BRO) 26 Oct 212021 Q3 Earnings call transcript