BROWN & BROWN, INC. Q3 FY2025 earnings call

Leadership and Teammates - Welcomed over 5,000 new teammates who joined on August 1. - Announced leadership changes: Steve Hearn appointed as new Retail President; Barrett taking a personal leave. ### Dividends and Share Repurchase - Board raised dividend by 10% for the 32nd year in a row. - Expanded share repurchase authorization to $1.5 billion. ### Insurance Market Trends - Commercial insurance pricing: rates for most lines similar to Q2; CAT property and casualty outliers; employee benefits costs up; admitted P&C rates similar to prior quarter with some variations; E&S property rate changes. - Acquisition of Accession: stub period revenues, margin impact, integration costs, and noncash charges related to it. ### Cash Flow - Generated $1 billion of cash flow from operations in the first 9 months of 2025, a 24% increase from the prior year.

Retail grew total revenues by 37.8% with organic growth of 2.7%. Its EBITDAC margin increased by 150 basis points to 28%. Specialty Distribution grew total revenues by 30%, with organic growth of 4.6%. Its EBITDAC margin decreased by 110 basis points to 43.9%. The organic growth of Specialty Distribution is expected to decline in the mid-single digits for Q4 due to factors like nonrecurring flood claims processing revenue from the prior year, lender-placed business slowdown, and wind and quake programs under pressure.

Retail - Anticipates organic growth in Q4 to be similar to Q3, considering employee benefits incentive adjustments and multiyear policies. ### Specialty Distribution - Anticipates organic growth rate could decline in the range of mid-single digits for Q4 due to factors like nonrecurring flood claims, lender-placed business slowdown, and wind/quake program rate pressure. ### Accession - Q4 revenues expected to be in the range of $430 million to $450 million, adjusted EBITDAC margin slightly below the full-year margin discussed during the announcement call. ### Full-Year - Full-year adjusted EBITDAC margin expectations increased from being flat compared to 2024 to modestly higher.

• Impact of government shutdown on certain businesses, leading to potential revenue backlogs. - Rate pressure in insurance lines such as E&S property and casualty lines unless tort reform occurs. - Potential impact of late season storms on CAT property pricing and capital deployment. - Slower economic growth and rate decrease pressure in international markets, particularly the U.K.

Q: What is the relationship between organic growth and EBITDAC margins?

A: Andy stated that contingents are a material part, so a direct correlation between organic and margins doesn't work for their business. Contingents were approximately $46 million this quarter, with $12 million from Accession and organic growth at $40 million.

Q: What is the impact of the government shutdown?

A: R. Watts said there are a few businesses impacted, both in specialty and retail, like those in the Medicare social security set aside which get impacted and revenue may be backlogged, and flood business where renewals can be frontlined but new policies can't be written during shutdown.

Q: What is the 1% impact on Retail organic growth mentioned?

A: R. Watts explained it's an adjustment for incentive commissions in employee benefits, with year-over-year variance due to overperforming in 2024 and not reaching increased targets in 2025.

Q: What is the outlook for Specialty Distribution in Q4?

A: R. Watts said the organic growth rate could decline in the mid-single digits for Q4 due to factors like nonrecurring flood claims, lender-placed business slowdown, and wind/quake programs under pressure.

Q: What is the trend for the lender-placed business?

A: J. Powell Brown said it's still growing but not as quickly, with a long sales cycle, and it's a great business but not growing as fast due to competition and past growth.