Earnings call transcript Q4 2022

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Operator

Good morning, and welcome to the Brown & Brown Incorporated Fourth Quarter Earnings Conference 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 the 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 fourth quarter, and are intended to fall within the safe harbor provisions of the securities laws. Actual results or events in the future are subject to a number of risks and uncertainties and may differ materially from those currently anticipated or desired or referenced in any forward-looking statements made as a result of a number of factors. numbers company's fourth it results -- quarter, the preliminary the results its differ yesterday. include the current the in for and unaudited factors determination issued finalizes as financial from press Such release forth today set its financial risks in and Other those the filed the company Securities company's Commission. quantified the from identified that have currently reports uncertainties factors or time Exchange identified may and and to time with

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

call. any investor most website Investor addition, then are company's by this the non-GAAP Calendar financial www.bbinsurance.com measures in the found release financial to earnings on of the the call the Events. in for at used clicking measures the press of Relations or A conference comparable on can be financial in In presentation and reconciliation measures GAAP company's there non-GAAP

that and to now Chief With said, turn President, will over Powell Executive Brown, I the call Officer.

You may begin sir.

Powell Brown

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

expenses significantly of a for Ian. international with increased and acquisition BdB U.K. our few to organic fourth operating activity a strong year wanted Before additions substantially financial the we quarter exceptional increased Hurricane also I another we comments impact our milestone and while we the the off as XXXX performance our capabilities growth in even as get the GRP was into XXXX. maintaining with capped make of variable regarding in The details, margins delivered

of nearly Our only hard XX,XXX work consistently dedication the made are through and our strong results teammates. possible

the X.X% for We of number the quarter, and X. I'm million on to growing delivered transition organically. results $XXX total let's Now revenue in Slide XX%

increased margin per to EBITDAC was XX%. the points adjusted nearly income by $X.XX, net quarter. growing by basis share XXX for Our XX.X% Adjusted

nine pleased million. results quarter. We the during with for approximately we're Overall, completed acquisitions annual the $XX with of the revenues also quarter

on achieved milestone over $X.X of year I'm X% by in this Slide growing We total X. another XX% delivering organically. billion revenue, and

X% strong margin On adjusted Our for income an year net remained our XX.X%. nearly EBITDAC adjusted to at the per share basis, $X.XX. increased

revenue. a for acquisitions completing we record approximately year activity M&A XX of million with Lastly, annual had $XXX

large acquisitions performing and small well. Our both are

of fit acquire sense disciplined result to businesses our a top-quality that strategy As make financially. culturally and

in grow of results to We Brown team. detail. have financial to of Andy acquire, join a will Later proven presentation, sizes discuss track integrate, successfully our the and Brown companies able the record & being in all more

I'm on Slide X.

the with start Let's economy.

the see of businesses looking in to been still slower many There's number a positions are continue expansion the of a pace than to that previous reduction in We are general companies at fill. hiring that open albeit quarters.

our on materially impact have seeing in economy rates customers over the we're year a increased not interest past While the broad-based yet.

materially at remain the through have This higher under was slammed X/X into third insurance quarter. bound an and Ian commercial in attachment been Florida. standpoint, treaties higher certain both points Pricing residential rates. and reinsurance markets property CAT pressure be turmoil. to From Then for significant caused and

for increases QX being this a early lower in and incremental and offered last placements of limits year. price saw As we result, late year

to this and year decades property January some XX% rates The the with difficult placement last in more. of of QX most of in with XX% placements we've year CAT experienced or increasing

be have than experienced I this range. quality much mean lesser much of construction or higher higher properties that losses However, could and

associations increasing or purchasing possible as their afford we to not certain As customers loss result, was in manage this ended similar to not workers' across our lending limit the condo to lower buy or prior In would Admitted were of rates up deductibles cost X%. deductibles. were to X% compensation increases cases, allow had with limits X% X% insurance. remained up and or most quarters therefore institutions lines limits higher outlier to unable a full order down market rate or and being which significantly

or and company down rates liability competitive X%, D&O professional to public rates down of with placement remain down with to up XX% The excess more. X% X% liability

similar Regarding to quarters but deductibles to cyber, the some continuing quarter. moderation the did during last is with increase rates slight few the we story and see

the included buyers the impacting certain assignment of were insurance prior of for attorney's take but These positive of of Late of fees one-way for insurance, in environment reforms time. should will establishment be of the carriers in The State QX, backstop benefits. requirement elimination arbitration the for legal and and a regulatory litigation. changes which to there reinsurance Florida, it and

transactions completed. we From pleased we're nine the an M&A standpoint, with

sense acquire culturally make We fit financially. that continue companies and to

integration the businesses well financial with is of GRP number of we're very our acquiring the line Specifically, in expectations. and a and is performance going

the last business slowed to considered be is perspective, if previous materially a platform quarter, still aggressive on industry pricing. number the to of is a a overall transactions an market or compared From quarters. must-have, Like

on I'm Slide X. Now

-- transition sorry, I'm Let's Slide X.

segments. the discuss our four performance and transition Let's of

growth lines For business. of growth in experienced X.X% our of segment most organic Retail with the quarter, delivered good

Our in by benefits a sales versus employee tough organic an in to impacted of comparable couple growth lines extremely slowdown RV specialty and due to lower as in prior due quarter businesses well our the the fourth was slower year. growth as auto the

high and customers for XXXX our capabilities organic driven of the Once to a another our X.X%. offering of of the National driving our diverse growing quarter. rate organically serve should organic size new any expansion pleased for a is is well for and how good the delivered delivering segment unit growth We're of delivered This we Retail of excellent level best-in-class XX% Our solutions Programs as believe by positioned The products good full was segment another by increases. business across year have exposure range National year. very and year. with and customers results, our Programs revenue be growth most strong team nearly business programs, performance and retention performing at XX% our as again,

quarter, the X% which Our another segment increases by a even organically driven lines, challenge Brokerage and delivered been growing good of has personal rate Wholesale new for business most year. with

to well Our and organically Wholesale Brokerage positioned XXXX 'XX. segment their into for success grew X.X% is continue

our offset Services we our good by delivered customers. the for feel about expansion, and winning and claims quarter, revenue capabilities organic substantially lower deliver a result with we Overall, growth customers modest the value this For storms businesses. for claims new as of segment our increased certain

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

Andy Watts

Powell. Thank Great. everybody. Good you morning,

X. quarters we'll and certain Like GAAP non-GAAP number over We're then on discuss highlights. financial results previous our Slide

XXX of For revenue EBITDAC by the delivered fourth and margin growth, revenue quarter, increased growth X.X%, points. we our organic XX.X% basis total

Our the impacted the net and by payables, change in diluted per credit income by the million which net increased charge acquisition XX% year. was $X.XX. in in share a earn-out Both of income grew estimated of prior were XXXX, and $XX.X million XX% to $X.X

this fourth lower acquisition for deductibility XX.X% The our effective businesses year decreased by earn-out payable the to in international and driven rates year, quarter for last tax the for compared fourth as XX.X% of statutory adjustments. quarter the impact to primarily rate of of

our per $XX.X substantially compared for increased quarter XX.X% of number flat of the dividends to XXXX. year, shares the average prior was share weighted compared the fourth or Our to quarter and to

integration movements acquisition foreign We're which on XX GAAP and or payables. reconciliations adjusted The associated an one-time the costs over the change loss XX, in excludes the most to the impact GRP, X. This basis, Orchid, currencies our in Slides measures. BdB, and slide disposals, of on Slide revenues We've both with earn-out expenses. gain comparable presents on number included and results through on on net

year. On higher of versus incentive an contingent XXX by EBITDAC expense quarter expansion solid year-over-year before increased to XX.X% revenue base was even our having commissions, points variable This our income increased and basis, growth, and prior income by cost. while grew due taxes EBITDAC by basis increased XX.X%. another operating a leveraging margin margin adjusted the

growth amortization million million of EBITDAC Orchid, GRP, rate income compared acquisitions. was to a $X driven income driven BdB by as with incremental higher the both largely The $XX and adjusted higher taxes cost interest by of and of adjusted before year-over-year

Our $X.XX, increasing quarter was per income increased the XX.X%. for net diluted adjusted by share net income XX.X% and adjusted

on Slide We're XX. number

adjusted Our operating growth quarter. delivered by was total offset Retail of the organic acquisition for increasing grew segment points with by for quarter, XXX margin X.X% variable and activity driven by EBITDAC performance XX.X%, cost. revenue adjusted partially incentives, but XX.X% of higher year-over-year primarily primarily lower revenue our Adjusted EBITDAC by driven basis the growth

XX. We're on Slide number

approximately XX.X%, growth of for of of revenue acquisition and which was in do adjusted Organic $X delivered not segment to driven Programs organic impacted finalization positively National bonus the total growth programs, contingent million higher recurring growth a we our of XXXX. growth anticipate by by due XX.X% revenue activity, one Our commissions.

to claims quarter, to million. fourth of revenues $X range In we $XX it million million. Hurricane the As approximately in flood we still revenues associated processing relates with Ian, the expect $XX recognized

loss programs, Our in well the growth than originally our development as premium for Ian contingent commissions underwriting CAT Hurricane expected. were higher lower as being and to profitable due

contingent expense total commissions prior grew leveraging the points EBITDAC revenue base basis our bonus. XXX to to year adjusted XX.X% due over and the well by and previously Adjusted as growth increased as by and our higher margin XX% primarily mentioned growth

on number We're XX. Slide

Our associated recent variable driven increased points, contingent in good good Wholesale was acquisitions, organic growing revenue the partially increased and Brokerage revenue but Adjusted by an margin contingent primarily offset commissions growth X.X%, by growth, by impacted increase growth commissions. organic by segment XX.X%, of XX is expenses. with EBITDAC operating basis delivered adjusted higher XX.X% which by and total of

We're segment on revenue line year. organic substantially in Slide Services in were and Adjusted total growth with our the revenues prior number XX.

or EBITDAC by million our adjusted quarter, the increased $X.X continued expenses. of For management driven XX.X%

earnings XXXX, represents XX. This delivered billion $X.X we both growing by results growing of $X.XX In of We're XX.X%. on share EBITDAC Slide increased $X.X and our for over XX% revenues years. XX.X%, GAAP slide billion. approximately per to number

count increased and year, XX.X%. by during substantially flat XXXX was the For our paid dividends our share

on for XX. Slide years on both We're results basis. presents number our slide adjusted This an

amortization Our was associated BdB. X.X% compared higher Orchid, of interest to as income by income share by $X.XX net before driven and was and revenue per total grew XX.X%. GRP, difference with This growing income taxes and growth X.X%,

adjusted declined due prior XXXX. margin Our are we to cost. at from points remained the with variable pleased slightly Overall, EBITDAC very higher but basis by for XX.X% XX results the year strong

and color. and deliver We're captives invested to newer, growth, an capital. provide basis returns a on commissions, for some in the for we increase to contingent year fact organic like the participates quota-share and are wanted programs, property part participate goals loss with results, good evaluating on Slide personal additional wind participate number with of that of for underwriting additional participates or on the quake of we our strong do certain the capacity, One XX. two the in on a reinsurance captive It's We captives performance are CAT layer our and wind program. excess lines second drive

the in be mind that that are very we performance, CAT a Overall, quarter viewed better when volatility quarters important one basis. have they're with performance top certain full-year cannot knowing on and keep events. can evaluated It's but bottom-line it's on pleased to

we XXXX, of the about with acquisition approximately incremental $X of revenue by recognized driven million million In Orchid. $XX

exposure up For to a million risk the approximately both for $XX million any to aggregate. $XX $XX million. revenues have and of we From XXXX, captives, standpoint anticipate one occurrence million $XX in of can in we

our do, the always structured have and used approach downside upside programs capital well versus to balance a on believe objectives. and potential to disciplined we deployed we've deliver we As risk

cash comments Few and conversion. liquidity regarding

we XXXX, cash of million. delivered from For flow $XXX operations

flow of XX.X% payment XXXX. ratio to have in Our year. This higher a performance earn-outs certain original due cash lower revenues to outstanding incentive of total from ratio interest for and percentage XX.X% acquisitions as of their expense, our as compared teammates overperformed as our is to operations last paying was incremental expectations, the bonuses

of available Overall strong cash we the with finishing $XXX year capital cash. a million and are generation position, in

outstanding was of on drawn acquisition connection in balance also with BdB, GRP, the repaid $XXX Orchid. We that of and our our revolver remaining million

With in our in well-positioned the generate in to expect done well as continue larger strong liquidity on have post will position. to we continued over this revolver the are We the We capital, deployments of in as fund we quarters a cash capital. delever coming the our XXXX capacity company. past year finished as to we investments

few outlook XXXX. have We a regarding comments the for

experience. we First, be for ultimately relatively year-over-year, this them contingent by commissions, loss anticipate will driven be but flat to

in on be rate lower to tax stock rate our compensation the the pertains we it taxes, to effective tax XXXX range to limitations of benefit and of increase higher from XX%, deductibility year-over-year to estimated due the in the the tax to a slight As a benefits. of U.K., expect XX% grants certain vesting compared

our in of range be anticipate will to expense $XXX $XXX We million. the interest million

income Regarding million interest are seeing projecting income, $XX changes the subject interest to of we're how $XX improvement approximately and million some rates. to Fed nice

to relates may to include $XXX does associated $XXX million expense, This complete that projecting with it not approximately we during As amortization XXXX. amortization we're acquisitions million.

As it relates XXXX, see margins. not margins, our we that any tailwinds impact or into headwinds shouldn't do to materially major heading

that, back closing for over it let turn me comments. Powell With to

Powell Brown

Thanks, Andy, for a great report.

we couple out forward to close have 'XX and look 'XX, observations. we As a of

while growing acquisitions XX% successful expanding year footprint Brown our & was U.K. delivered and market. $X.X Brown. year in revenues capabilities billion our largest over We for last of of the had First, very year another

to and margins, variable teammates, over operations. serve continue we'll and We organically over our invested the Hurricane strong for again, We're capabilities higher to of in experience in needs at customers our invest million impacts the the as cash capital delivered in even strong from to Ian, flow position customers. costs a technology with and generated help of as grew order from well a our standpoint X%, best also $XXX in improve of

rate The potentially be property of further be to anticipating to an uncertainty as outlook of needs increases the moderation effect. the XXXX, year, it we we're consistent digest not more for losses. lot constrained. year, to admitted least be interest as insured a at Regarding higher other of to constrained potentially, market up or XX% shortages, and economic last From labor as as Ian, CAT first rates Hurricane the to expect market It's with impact. we regarding of standpoint, of there's relatively fully be take well, will as impact half XX% rates insurance inflation economic the an the capacity well well impact as expect

In moderate addition, should rates continue to professional liability downward.

and are profitable we Regarding expecting growth recent well year. they're coming performing the good acquisitions in

On an and great with we'll that help fit risk companies to great feel financially. and fit M&A and management pipeline diversity continue summary, disciplined the sense have their we a our that about of approach makes finding front, culturally solutions customers best our our In our good capabilities business, to we ability needs.

good strong forward has another year. XX,XXX momentum, almost of looking team Our and we're to

back over to that for Norma With turn Q&A let session. it the me

Operator

comes Instructions] And [Operator Peters our Greg first question from with Raymond James.

now open Your line sir. is

Greg Peters

forecast there headwinds talked morning, Good don't you everyone. or organic like in items, comparisons. two pricing. in Great. to revenue employee out difficult your catastrophe growth, benefit segment, commentary about secondly, about but And are I retail you your know one you a called some

those property this on benefits, Powell year the So, that when results this and will variables going June affect renewals year? I -- employee upcoming 'XX, Andy, how your on -- organic first about how and what's will think for like CAT

Powell Brown

Okay.

second Let's start first. part with the

for employee year benefits a very business, about those remarks, two that, will an standpoint, employee guidance in think pleased continue We and said performed we businesses. that we're perform benefits overall of well good. well setback. but really prepared And organic one said out I and actually was really break only EV talk benefits. Having don't in businesses really the in don't to lines had Employee our we give as from the or that with on that Let's that system. feel

ability not more limits you -- an of there instances. -- to issue. is our Greg, to it's limitations relates more are on But in mean, property I certain opinion, as my some the present pricing, affordability much of CAT the it's variable in know is it as As there, it

homeowners, if so, been an on a think you buyers four is to years XX% on all increases, a lines sudden -- of your if are say own increase, that. we the five and came you've about then year And or XX% gave there fifth if you've you of year tiring a yourself rate just and row a the say got of let's in increase giving for let's a personal

so, said I've been only unlike capacity And that, availability for I've market XX insurance in industry this having ever seen, anything now. years of the is in

a So, our it. paying like again seen not buy anymore the an will say, and but $XXX,XXX I've million, lot it and to last property there's and is, I go, for the provide insurance, they customers. which and time renewal you ever entity, afford million, if But continue I anything what a example for we and we is they're we to can more can't can't solutions this to use sometimes used have we buy think would $X.X $X their

that seeing and more, more we're So, Greg.

pricing going -- of So, is is the that it to wildcard. CAT a more

capacity downward that some those the accessing placements CAT other it seeing we're on The is in of there instances, is in thing pressure and commission now. some

So, a you're up as is but in might case, -- just as lot that you're well, the points, they commission and commission or people rate one fee your goes up we're if a then seeing to and sometimes, on going to opposed well. X your two this of cut true goes that as X, so commission think,

answer, to one harder Greg. a that's So

Greg Peters

Okay. margins 'XX. about Southeast. on I second moving just for for my pivot, -- or in your Andy, you I tailwinds in that. then you said no especially understand target, some adjusted a talked guess gave question you guidance, the It's EBITDAC comments and headwinds

frame us expect that flat in to is where maybe mean. you just out some or give can of really -- one color your us terms laying comments context maybe we be some what -- help year-over-year, Street, provide about it is to So, margins for expectations

Andy Watts

to major each we the is going always or year. everybody year I what don't the extent around not saw unknowns now. any 'XX through like incremental T&E, business need investments business, have we will Greg, investments I those pieces. that most that inflation we're we're work one, way right trying just We will everything. the tailwinds do think that any don't say but what externally, our and see anticipate into year-over-year, to versus in that that XXXX making with our Well, we're but do making see what We T&E be we'll to up call in out major happen Sure. headwinds through do else that we we on

So, gave variable, margins that into now, XXXX. but not big the that going and versus a would that guidance anything right impact really we're XXXX was because was we why seeing in specifically XXXX

Greg Peters

certain just point there know that. of some a you some sort if And you're metrics for impact organic margins? thinking organic, have of we mean, When any on if your you terms sort expand about offer rules do a about in margins, 'XX, organic I of can amount follow-up peers think the that, rule-of-thumb from organic is as that of I its not, on

Powell Brown

No.

Greg Peters

Thanks your enough. answers. for Fair

Andy Watts

Greg. right. All Thanks,

Operator

our you. Goldman next Thank moment Cox Sachs. for One our question question. with comes next from And Rob

is now open. line Your

Robert Cox

my for taking thanks Hi, question.

called in a I with wondering, benefits expectations so specifically if deceleration the the by on or toughest was respect couple growth true-up you in this Just prior Retail, quarter. a headwinds. a exposure group of quarter by to was out year more comp of created

Andy Watts

had quarter. the is the fourth about that year maybe just to had businesses last we absolutely Robert, performance a in No, outsized few way it, think

was was newer starting. business them that of One a

growth mode. in was it So,

mentioned the to. in his comparison into in businesses quarter we So, reason that's good positioned XXXX, no performed year-over-year that about as But and don't comments, the there's the in they feel for difficult. how fourth fourth makes our really Powell more are read what how quarter

Robert Cox

Any in Brown moving then Got those Florida some the for you just on of That's be think perhaps legislative it. impact onto Brown might you. near the longer and & changes. the Thank what comments term of maybe And helpful. term?

Powell Brown

for that the all, the first So, like I'd challenge positive bearers to of in for anticipate of environment we upon the insurance and State everything that we based that those. Rob, will think Florida. they see operating trial for point we out risk bar are

So, easily. place go I don't think those in

not what means to of several marketplace. the is to in this viable; years. relative Florida fundamentally that the I want and the insurance State be relative have know disruption, the don't adoption, our so-called will competitive; is really State do timing business. be bigger to governor the sustainable the of marketplace what and is And one, with three, But to in they business trying So, next create; Florida insurance to for two,

Florida to So, marketplace I believe back this a in is environment. specifically multi-year that transition -- lines personal kind believe the we of that to Florida bring

five the forward. is of in proposing it Florida, risk some to State state the participation, participation probably a of and not But additional So, have as being i.e., to going years need to this intent expand will three take it it the what may bearer. by more they're their i.e., Governor

State tell So, want you challenges for relatively is we it's other you need ahead, all-sized hard things. Florida But got and to what really of because prices the got homes. in homeowners' affordable

of versus With one the $X home between. over that's everything million, coverage $XXX,XXX A in and

those so, a disruption -- those there's all of And across lot sizes.

Robert Cox

it. growth just annual in Programs And quantify where contingents to XXXX? specifically Got you lastly programs, and Thanks. National in see you the could going maybe bonus maybe

Andy Watts

pieces think So, two -- there's think, I there. inside I Rob

as So, into contingents and loss now right in now, the organic guidance we was is during million, contingent one the as growth that recurring that least and right then, of of individual My of profitability. commissions. we growth give see about that relatively experienced not the the see inside the overall talked and depends XXXX. by didn't about don't we And flat overall company segments. all but in for again at upon just on on we XXXX, year comment calculation, was again that $X of things bonus the And

Robert Cox

Thank you.

Operator

question. moment next Thank you. for our One

with Our Bloomer Weston from comes next UBS. question

is now open. line Your

Weston Bloomer

taking questions. my for Thanks

the you benefits well? just there that a do business? expect First, you employee just is remind the comment. headwinds one quarter of seasonality in us first material be follow-up the And to of on as Can any

Andy Watts

way bit because that and of bit business business EB the that to normally it's recognized Hi, that's across see the first, little if it, is Weston. of a weighted participates. QX you lower have it's a -- one some seasonality the quarter generally just normally your revenue it, then normally how does is fourth in little good that just you quarters of kind look to which more Yes. morning, and the naturally in business. And The

least the of at our -- those comments From a fourth about some we've but and don't the similar on any into headwinds basis the business of talked carry see thought may to some about XXXX. quarter, over issues full-year QX, the what in about how we for

Weston Bloomer

you. should kind and the of similar Thank or highlighted both how the it. of you wholesale? in And in then business lines. we that there D&O impact a I professional pricing. retail think within then rates in in lower about any type of seasonality Got question know slowdown Is

Powell Brown

So, and they're speculate, one look it that in catastrophic public the you dramatically and because casualty people that years, to business would which professional might some lines. up several has property just want way might it's down about environment they it for if more a elsewhere competitive an would or say very write cases their might I they had the in is environment reducing do and markets, exposure think at coming and where last in the Weston, are pressure substantially rate

And some in good a as to businesses, down of think think a think instances be headwind, a our down. that on but it's that it of slight, headwind I important because will segment bit. So, I

Weston Bloomer

kind higher highlighted last material still one, the gain Is M&A & headwinds to you running it Brown or you. Brown? tailwinds, know in core you overall March don't And that relative at came no and the just granular business margin higher I on that a too Thank overall 'XX margin. Great. here, the but maybe is of then

Powell Brown

When you mean -- do say the you March,

Weston Bloomer

guidance you The Yes. that margin gave --

Powell Brown

what the For talked performing but during three about businesses our -- line with they're of with are combined. little We a in expected. call in line earnings expectations. some of no, quarter, Yes. the kind right bit the all last the we All seasonality

Weston Bloomer

my taking Thanks for Great. questions.

Powell Brown

you. Thank

Operator

you. Thank question our our Wells question. Greenspan moment next next Elyse One comes for And from Fargo. with

now open. Your line is

Elyse Greenspan

question, Hi, thanks. guys lender-placed you or commissions, that program? Good on they that Does first you that come morning. those you contingent would weren't that I contingents you year. they sure back lender-placed -- had next My know are assuming assume what recur Andy, didn't for the the

Andy Watts

did million one not third we the the $X the -- about that $X we quarter, during anticipated items recognize of recognize we would or fourth had the So, that is in million fourth we in saw quarter.

back the said If had we backed said, that in had million you that quarter. we year-to-date the the is up remember positive. we not -- the therefore, to stage, would anticipated was we at out quarter probably backed at extent record to We call. and third $XX call, fourth Development which that not

levels because is carry-over recognize 'XX, to those kind we company, normal so that And for there total in the level given flat. as some earnings not back some calculation. we've a consideration into guidance still and when to XXXX, four, three then of at But in have we taken look to the we would we anticipate substantially

Elyse Greenspan

wouldn't interest like maybe be Right? in little your the sounds had that You it said bit you're wouldn't pickup to but the of income income, then And accretive 'XX? I margins Okay. past fiduciary said guys a you that in to a guys be $XX big, million there. seeing $XX right? know million,

Andy Watts

Yes.

statement a that accretive true you would be look it at be itself by would margins. If it to

Elyse Greenspan

be margins saying the year. overall. interest I But else you're may like number is tailwinds, tailwind income headwinds, coming like a guess offset flat it it theoretically, getting maybe feel by something a in because sounds be to tailwind. So, does that's no that And the would isolation

Andy Watts

Yes.

business, at lot -- like ours isolation, our there's fair why I always that's think think there's within least always least. specifically, I to parts, to got moving was of things major businesses, we'll probably tailwinds But of talk are really at trying but give most that headwinds back any we're forth. or about moving there. and out And you've guidance kind and that a

Elyse Greenspan

like last employee the And about quarter happened what out year, is so start said in retail benefit guidance, that a does of think 'XX of when tough tougher last fourth the just year. concentrated comp but sound part with in first of the we stands anything part the year, you guys to but just you and -- is really then to the maybe have there one, was the don't the first it know in part like and that I comps back would give make one the year

Andy Watts

we a fourth quarter potentially is, headwind that bit, will our how earlier will all it's a first capabilities business of feel until the little XXXX. but feel be quarter really from there bit and business of top-level little at good we the Nothing positioned we Weston's during what and well customers in in like the saw question have served a about in sizes perform and we that

Elyse Greenspan

Okay. the color. for Thanks

Andy Watts

you. Thank Great.

Powell Brown

Thanks, Elyse.

Operator

Thank Zaremski question. Michael you. our next our BMO And question for comes moment with next Capital One from Markets.

Your open. now line is

Michael Zaremski

are has about parts you clearly rates parts just higher, came potentially a if little wash moving on or or focusing view or the a curious maybe curious this if is Maybe negative all in a benefit even kind commission your morning. -- environment of so good you or the margins moving but moving because a I'm that out is bit or changed. high materially market. to kind if whether Hi, at dislocation and whether the changed that there's growth talk net of parts of and the just back net property as lot the see of view level net-net, has your neutral pressures,

Powell Brown

being and any clients changes net just it's Yes. of nature, reason saying i.e., -- but and say, some see bad but I pressures tough, a of limits hedge raising net-net are that for also hand look potential a positive, or but commission limits that because comes or we can't -- Michael, I reduced slight the and in basically And for this. anything deliverer would of news because positive uncalled. the a market is by basically probably with carriers we like know true say the No. it yet when their slight I it's that's

that. would think be positive want will -- how it is think to you it be So, about I slightly that I will

Michael Zaremski

inflationary of impacts to income on gears switching Maybe helpful. That's Brown. the Okay. statement

to about I there T&E. more can think the it on being insulated on and kind pressures kind mean I of Brown's inflation a and due you about was the maybe of do the of the commission where kind from what T&E When wrong front-line think how I wage of some are somewhat comment elaborate salespeople think unknowns model are. you kind I'm maybe by But just inflation of paid. and made

Powell Brown

people, find just and administrative that. talk pressure. space not the is like marketing very anybody administer people let's wage out on in think one pressure war is that salespeople, to things about around We're there else I things your or And looking talent immune that are that's So, thing. competitive like wage people, important could or the of not we and there comment our very just people but service claims be for people or a

So, it's a very competitive marketplace.

think don't because I number that that that. one. want far we're you immune to to So That's from are we

think same, much significant pressure ticket we though -- hotel where on, it's the you're T&E much say going. there's pressure, as that if do think just the more two, Number -- entertainment. not to an say just so depending let's and we airplane on a be there's that We you or travel going when

where seeing that's pressure. so, And we're that

isn't the so, here above, as our seems it is be and that The unlike not all is you or there. of or inflationary England,, to although pressure environment. higher pressure Ireland as in through business follow, is we're working high an not it many businesses wage other well. know, in And as it is high But the that that of

what of kind Michael. mean by that's we that, So,

Michael Zaremski

just one. Any -- you in that could administer, program that the material. quick flood the to in sneak California from one be flooding helpful. that impact maybe That's And

Powell Brown

No.

seen enough anything interestingly in haven't California. We

get a you know, don't As of begin with. lot they rain to

in And there so, are buy not when they of flood of do flooding, significant a California. rain, people lot and that lot State a they the of get get insurance

So, it's no. We don't see that.

Michael Zaremski

Thank you.

Powell Brown

you. Thank

Operator

moment next comes from One our you. Thank next Yaron with for Jefferies. question And question. Kinar our

open. now is line Your

Yaron Kinar

couple thanks for my guess I tied already to questions. questions I and may it everybody, [all] you received. morning, have back think and of my question good Hi, a other first be

about facing think talked segments commissions, think ones you you environment, maybe which benefit you maybe various difficult property you see pressure would the would placing -- where most do reduced more greater As the do business. which the and kind about components from rate CAT you of see maybe

Powell Brown

Yaron, sure becomes understand bit? that, elaborate difficult, You're you I correctly? becomes to little think saying repeat or want question more make can easier? just that you do the a what what I then and I Did hear

Yaron Kinar

Programs more that face which think do Wholesale the which guess would maybe I would have Retail and benefit or greater you of asking really and pressure? I'm segments you National four three

Powell Brown

Okay.

at -- or would benefit So, the little I first say differently not. look off, it more a than I

term this use the maybe things suffer more that. and for didn't You or

a fortune. moment. retail look Let's deal customer. directly has with at the the We for Retail good

you particular a mildly relative business. go have, I'd have relative But growth heavy to I organic you that those lifting to going and rates said, lot you're reductions up, commissioned may in So, to increases to in have going some might that of instances. it's as say positive and delivering

their of and In to fill property business. brokers out jobs, difficult, lines wholesale, makes trying it significantly more

That I wholesale. -- more will $XXX be had and handled million. it you in XX% two or is So, be that pulling or got said, your will get is took it now And or to $XXX line pressure placements markets six one million markets, if as a to that retail there and conflict you then continue participation that their in seven most in of and think to call you was cutting the to it there if well. want it market, put back by there

Programs, it's National capacity matter In a of availability.

were type not allowed their before. but those a underwritten of out different as capacity you have there MGAs number and years a are by and MGUs, number who of over profitable, number year, So, last not just many of there of carriers a know,

consider excuse Nicole. so, very is with and with a last and facilities, flight -- Ian prior losses the pleased results we delivered in me what there and -- including And we're we've the that our year And sense of year to to last the -- quality. underwriting

So, the I'd say the It's that in not limited other by authority the programs do there it's combat of, a hand-to-hand in capacity. people and different up can the but it of we to that limits thing, their growth and conflict potential two, put what availability. do, is is a getting limited underwriting we're we by do have we actually facilities, can in

decides if give grow. fact, to So their to they markets capacity market us cut that back ability or in a on will our to impact

that I think this. they decide want their to it's if that commission now, be they as they about mention, and is, mean never I very ability everybody good it right in as are think thing to conversely, time important And future to where I bad for to CAT And a one would seem our or that level what as Things even do improves. is grow. The impact as the challenged the there will seem. though by market change

a foreshadowing not not at it like there doesn't are that ball. we're are looking X mean And a I'm certain But XX from long-term at a months very or Z, that's have going then other we it. opportunistically looking crystal or markets markets Y that that are it saying. I'm they Now are what have That something, now, because in approaching way are don't there to partnership.

looking opposed we're for as the the capacity But would to latter former. out globally. we prefer Obviously,

will that point. at everybody I pass to of too pressure know kind some just So, want this

Yaron Kinar

Thank you. for a That's I helpful gears switch M&A to second. could color. If

had seeing a there? Is a slowing. is think that of just activity robust. are the said that pipeline too That bid-ask wide? drivers Or I So, you M&A that remains there are spread said, you other function

Powell Brown

No, no.

the I we're activity say talking slowing, about the M&A think is remember, industry. you when

in you down know, the private very substantially been private year. and number quarter, was equity as of So, the the prior of has over big and a QX equity prior announced transactions QX participant, or

at kind you would we're paid. with which is point multiples it that, call an and clash the see unusual interesting is market there that like think if interest in to to slight I this want a rates sort of of buyers increased decrease --

think And of multiples be private by monetize like for in going what Or are which their owned them. better at levels historic yes, other multiples businesses there forward. pressure are maybe businesses, opportunities to they of equity said, there'll some were anticipation maybe we'd or on that

might they possible, a they if using an in So from multiple, get that at as a higher then of want example. I'm think to now. out year just

term think year I we're very to next XX three lot about and the months. good So, focused see we're a or to activity one long-term our in years, it's going long The business us part is on of long-time. is a the not

paying culturally we organically. teammates fit businesses in there and in there, We're make growing the our so, but focusing debt. financially, we're and Andy down on be And out we're as period, investing business sense looking businesses will aggressively believe those interim said, for that our

Yaron Kinar

you Thank much. very

Powell Brown

you. Thank

Operator

for Hughes moment question Thank our One next Mark our And comes you. from question. with Truist. next

now is line open. Your

Mark Hughes

Thank good Yes. you, morning.

Powell Brown

Good morning.

Mark Hughes

your you flood markets, capacity. for quest growth. Anything seen find Did your about amount is impact Powell, restrictions? good you instance? a thinking perhaps any harder a had talked a noteworthy organic or and quake about you you're on reinsurance programs could that the any for with Have any cut-back

Powell Brown

Yes.

we That reduction of may a somewhat is in think present we no is just now, would neutral. or basis, question. of have right on a debt a good where be net think So, thanks or the entities capacity terms -- in for they maybe slightly, pretty outcome net of capacity. certain down but the We time, but some moving target, at businesses trading flat it's

point, view as vantage a win. And that from our we

not But facilities aware prior magnified talked it's our this more something I'm or and a talked that year. a even flood but we year, quake, that So, involve in last about specifically you well. the of and thing but about could we've asked as years, about wind

to that of will the and secure. directly capacity be -- new not directly to opportunities Our amount exclusively, National but we're able growth linked Programs

organically, not are mean that able that more that not will we we're any so, at if it if the globally. that's secure means capacity capacity, just looking in organically grow organic slight growth And able to to going does we procure more be can't fact, to are new limitation on we which we a grow

Mark Hughes

the on captive. Understood. And then

revenue kind in would per that pretty a I return mentioned You of feel got economics need on high to the if loss order a you've some $XX good you of of thinking million to revenue, you've retention One in there, multiple event. about $XX generating properly? about got margin the $XX Am million think years would over retention. that but million

Powell Brown

profit had place There's any that two, means third And would the about to There captive is that captive is being want the you premium, one, back prior loss be is. answer program to that any loss, for going the number a if parts to a amount you question your which you one I'm three two-fold. on in the them what time really losses. in retain think the subsequent to of Well, reinstatement event. retention in which captive. Number you I just put that's distributed. There's period the

that we And very I we invest so, us are is our that are you mindful would tell for looking and the returns way help what capital, grow of the business. we

turn things against we So, would us, investments, in inputs, did just event tell reasonable were the think then would the we them. or do not those them I meaning And is, if long-term you them. not that not economics what we viable that make won't make cost,

Andy Watts

you adequate a how guess on walk you seeing.... -- just question said you think mean talked I I do -- but -- it how same through when about you if if you that we're because you not us returns, maybe you expand Mark, seeing providing can way for Hi, the you, are,

Mark Hughes

I think...

Andy Watts

We're retaining --

Mark Hughes

Yes.

you're revenue. in million If generating $XX

event about. But so the out was $XX margin, if million. one was And then That maybe hit million. your retention that a you and of just $XX real simple thinking Hurricane is -- years the have view a influences I XX% Florida And of math just economics. a per three

Andy Watts

Okay.

So, more. that some these to there on opportunity probably and -- clarify the lies

on on what in want we do participating underwriting we're way we in these we're the to trying profits. the profits participate captives. the doing think contingent do these, Here's is commissions, about What to we is everybody underwriting

and business. they're on this else is So, and paying everything commissions the where not we're in coming

part it the that's operating a just it's versus underwriting -- think profit, normal of through thinking you're in there. I traditional call piece that profit So, coming about as assume operating it's profit maybe it's

into we can these very, we're we and Powell's year an our get capital want didn't appropriate So, point, with performance if put we pleased to this the return. that very to think

Powell Brown

would doesn't $XX mean And million. the up to -- million, it $XX Mark, that is be

very And important than so, than can that less substantially there it or a that. be less is distinction,

Mark Hughes

clarity. the you. appreciate Thank I

Powell Brown

you. Thank No.

Operator

Thank moment our for you. One question. next

Our with Michael comes Citi. next Ward question from

open. now is line Your

Michael Ward

to was good guys, commissions I maybe Hurricane on last that if and maybe related true-ups. one, hurt One morning. you, share you profit wondering Ian could color the any if in was programs Thank of any

Andy Watts

did we be, the would that did morning, we at the to quarter $X backed that that million mentioned losses we've off had fourth Therefore, What Hurricane Ian that's at we Good thing. is, ahead to quarter. in $XX Mike. say which what did is $X not positive point thought million million the the Andy level, here. as said anything had million related we go the to It's also, based one earlier, programs million in not record end was again, a were or development -- true-ups, we come and at going wouldn't we right? the of record third of upon $X that to anticipated our $X in and

in Programs, the based upon in the it don't generally that partners, you profitable over our all volatility and delivered recorded in just we fourth back other move and they sometimes the for we that carrier All see quarter, contingents the that -- sometimes was -- -- that's calculations our growth they force. make you we we just most year-end National do where

Michael Ward

lower just Is one should think there the anything RV you and helpful. about? sales. thinking auto pressure we you. called -- that there be else one, Maybe quick Super auto that specialty. last and on -- Is out, Thank I

Powell Brown

remember, probably incentives quarter of third units. and little lift sort in speculate don't I mean, I move don't of you some will beyond that, the put-in-place Also little inventory on in light year. out I environment incentives, that the but so. bit think probably know economic the more think if to levels that that industry, be the I No, on a think will probably outlook a in

in most fully going thing, that. you're inventory We the important some slight. use if think the that, I is to and predict there, uptick So, see is we can't but

Michael Ward

much Okay. guys. Thanks very

Powell Brown

would great. one take question, Norma, that more We'll be

Operator

you. Thank

from question with Han next the Our line Derek KBW. comes of

is open. now Your line

Derek Han

kind I that the was morning, had on but Programs growth the Andy, about even thank Good called for million strong and moderate, to business. that of you Program's just a out expectation excluding you. actually think question you your sequentially. accelerated $X growth previously really talked organic I organic

relative what internal that outperformance just color you on can your more drove kind give us expectations? So, to some of

Andy Watts

Yes.

it captives delivered we million So, that the we one through came there about the was of Orchid and from about other $X $XX said talked million revenue of of items we acquisition. the in

of that remainder being growth to that level, organic the same but on continued side. not in 'XX, at the going So, see We're Derek.

Derek Han

it. Got

that Okay, European and on the impact you give the that's going integration on helpful. your just BdB some anticipated us I then know quick organic economic well. just GRP And Can businesses? outlook and growth color is one one. those the for

Powell Brown

Sure.

of and Republic England in obviously the into Ireland. largest Northern Ireland we and in So, And remember that have Italian meaning do do GRP is business the and in Italy, -- producer business England XX% the And then do business and BdB, businesses we of both of and in we already London in me, Republic Ireland, excuse France are we That's Lloyd's. over also we Belgium. Ireland marketplace. business into business of

dissimilar oil to lot like pressure it's of which and tell that. a in not would So, that hear, living, what I i.e., see on and England fuel things of you wages cost you is

And have yet significant so buying draft on we from their habits. -- a a customer but seen a not down from comp standpoint,

you seeing economy exposure So, the smaller although -- either globally. a that not it way trends relates is, it Lloyd's Western fine market any be our what there unusual in along remember big Europe, to think in we're seems I would is we to tell as much be other it's moving would a

are writings of But States. about in the are I think the United their worldwide. XX% premium other XX

to nice growth have continuing are we have business Lloyd's we so, -- inside which And our three. of our brokers, now

that so, pleased we're very decades-long Meyer BBB. And and

Derek Han

you. thank Okay,

Operator

Mr further for Powell I'd closing back no to conference the showing remarks. I'm to like you. any Thank hand questions,

Powell Brown

you We good thought appreciate very really we're your about year a Thank all was and last much. Norma. excited Thanks, We year the energy. future. time and

I think my this. final comment would be

each constraints look feel years is relates our As and don't it We and think the i.e. about relates so our multiple business trend quarter. over don't quarter one through year. we're we measure to largest work economic trends and years of of at segments, as it outcomes a that next and to because There good limitations, we way constraints, of three to some but those. are going into market going we

day. we Thank you. So next a talking to you quarter. have look forward nice And to

Operator

This for participation. concludes today's call. Thank your conference you

You wonderful a disconnect. Everyone now day. may have

Brown & Brown (BRO) 24 Jan 232022 Q4 Earnings call transcript