The paragraph is an introductory statement from Brown & Brown Inc.'s Third Quarter Earnings Call. It informs listeners that the call will discuss forward-looking information related to the company's anticipated financial results, which are subject to risks and uncertainties that could cause actual outcomes to differ from expectations. It emphasizes that any forward-looking statements are covered under Safe Harbor provisions and outlines factors that could impact results. The company also disclaims any obligation to update these statements. Additionally, non-GAAP financial measures will be used during the call.

In the Q3 earnings call, Powell Brown, President and CEO of the company, acknowledged the impact of Hurricanes Helene and Milton on the Southeastern United States and expressed the company's commitment to aiding recovery efforts. The company reported strong financial performance for the quarter, achieving nearly $1.2 billion in revenue, an 11% total growth, and 9.5% organic growth. The EBITDAC margin improved by 30 basis points to $34.9 million, and adjusted earnings per share increased by 12.3% to $0.91. Additionally, the company completed four acquisitions with annual revenues of $8 million. Powell Brown and his team highlighted their focus on providing customer solutions and achieving robust results.

In the countries where the company operates, economic conditions remain stable with continued consumer spending and business investment, though at a slower pace. In the US, there is caution due to the Presidential Election. Insurance rates are generally increasing at a slower rate, with notable changes in employee benefits and E&A property. Employee benefits costs are rising, driving demand for consulting services. P&C market rates increased for most lines, while workers' compensation rates decreased but at a moderated pace. Non-CAT property rate increases have stabilized, particularly in storm zones. Casualty rates continue to rise due to large US legal judgments and inflation.

In the recent quarters, excess casualty rates have continued to rise, while professional liability rates remained flat or slightly increased. In the E&S markets, some carriers are offering more limits for insureds and new business. CAT property rates initially increased but later decreased by 10-20% compared to the previous year’s third quarter. Some customers adjusted their coverage or saved money due to these rate changes. Moderate rate changes in one business line generally do not significantly impact overall company results. The company emphasizes diversification across various areas to maintain strong financial performance. In the M&A sphere, while acquisitions by private equity decreased due to rising interest rates, activity is now picking up as rates fall. The company remains committed to a disciplined M&A strategy, focusing on culturally and financially aligned organizations. Retail saw 3.9% organic growth, driven by strong net new business but impacted by moderating rates and slightly slower growth in exposure units.

The paragraph discusses the company's financial performance, highlighting an organic growth impacted by year-to-date adjustments and quarterly volatility. Despite these challenges, the company achieved strong results with a 22.8% organic growth, driven by new business and expansion. Various programs, including lender-placed, captives, CAT programs, and brokerage, contributed to this growth. Open Brokerage and Delegated Authority businesses performed well, with personal lines seeing growth in California and Texas. The company's balanced mix between brokerage and Delegated Authority has led to stable performance. Financial results showed total revenues of $1,186 million, an 11% increase year-over-year, along with a 13.1% rise in income before taxes and an 11.9% growth in EBITDAC.

The paragraph reports on the financial performance of a company for the quarter, highlighting a 34.9% EBITDAC margin, a decrease in the effective tax rate to 24.6% due to prior year one-time items and changes in insurance market value, and a 12.3% increase in diluted net income per share. The company saw a minor increase in weighted average shares outstanding while increasing dividends by 13% compared to Q3 2023. A 15% increase in dividend payments for Q4 2024 was also approved. The Retail segment grew total revenues by 6.5%, with organic growth at 3.9%, impacted by acquisition activity but hindered by reduced commissions and increased stock-based compensation costs. The Programs segment saw a 15.7% increase in total revenues and a 22.8% organic growth, significantly aided by new customer onboarding in its lender-placed business, despite some net acquisition and disposition effects and lower contingent commissions.

In the fourth quarter of 2023, the EBITDAC margin rose by 360 basis points to 48.2%, fueled by optimized expenses and business adjustments, despite uncertainties from Hurricane Milton. Anticipated revenue from processing flood claims due to recent hurricanes is estimated at $12-$15 million in Q4 and $18-$22 million in early 2025. Expected claims costs from Hurricane Milton are $5-$10 million. The Wholesale Brokerage segment achieved a 14% increase in total revenue, boosted by recent acquisitions and higher contingent commissions, resulting in an EBITDAC margin rise of 130 basis points to 38.6%. The company also strengthened its financial position by repaying $500 million of bonds, aligning its debt ratio with long-term averages, and generating strong cash flow of over $810 million in the first nine months, increasing operating cash flow to revenue to 22.4%.

The paragraph discusses the impact of recent hurricanes on US Federal Tax relief, allowing the deferral of certain tax payments, which should positively affect cash flow from operations as a percentage of total revenue for 2024, projected to be 24% to 26%. The full-year EBITDAC margin is expected to increase by at least 100 basis points in 2024 compared to 2023. Powell Brown mentions that, economically, no significant changes are expected from earlier in the year, but business leaders are focused on factors like the US Presidential Election, geopolitical issues, interest rate changes, and inflation. Rates in admitted lines are expected to remain stable or slightly decrease, while the E&S market, particularly Casualty and Professional Liability, will mirror Q3 2024. CAT property rates may decrease by up to 10% going into Q4, depending on losses from the hurricanes. On M&A, the company is confident in its pipeline and capital position both domestically and internationally.

The paragraph discusses Brown & Brown's positive outlook as they head into the fourth quarter, highlighting the acquisition of Qantas expected to close in that period. The company is focused on leveraging its strengths to gain more new business and maintain momentum. During a Q&A session, Gregory Peters from Raymond James asks about the Retail segment's performance in the third quarter. Powell Brown responds by noting that while specific details won't be provided, factors like decreased incentive commissions and non-recurring revenue impacted growth. Nonetheless, they remain confident in their Retail business and caution against assuming a trend based solely on one quarter's results.

In the paragraph, Andy Watts discusses the growth pattern in their Retail business, noting it typically grows faster in the first half of the year due to Employment Benefits recorded in the first quarter. Gregory Peters acknowledges this. Rob Cox from Goldman Sachs inquires about the sustainability of growth in a flat to declining Property CAT rate environment. Powell Brown responds, explaining that while there's interest in maintaining flat rates, new market participants, notably in London, may pressure rates. He notes that Q3 is not a heavy property quarter, with more activity in Q1 and Q2, and emphasizes their balanced brokerage and binding authority businesses. He concludes by considering market discipline in Q4 amid rate changes.

The paragraph is an excerpt from a financial discussion involving Rob Cox, Elyse Greenspan, Powell Brown, and Andy Watts. Elyse Greenspan from Wells Fargo asks about the Retail segment's incentive compensation, specifically supplemental commissions introduced a few years ago, and seeks confirmation on the growth expectations for Q4 onwards. Andy Watts responds, explaining the variability of Guaranteed Supplement Commissions (GSCs) and incentive commissions alongside contingent commissions. He emphasizes the company's positive business performance and attributes future growth to rate changes and economic exposure units, predicting Q4 results to be similar to Q3 unless unusual circumstances arise.

In the paragraph, a discussion is taking place during a conference call or meeting where Yaron Kinar asks Powell Brown about the impact of non-controlling interest (NCI) on the Programs business segment, specifically regarding organic growth and adjusted margins. Powell Brown responds by saying that NCI does not affect organic growth or margins as it's only a pre-tax consideration. Kinar further inquires about the hypothetical impact if NCI adjustments were made at the segment level, to which Brown replies that regulatory rules don't permit such adjustments and the current reporting on a gross basis is compliant. The conversation then shifts to Michael Zaremski of BMO, who asks about the long-term growth prospects of the Programs segment, noting its strong growth and possible structural or secular growth factors comparable to the growth seen in the wholesale marketplace. Brown hints that many of their Programs are admitted, which might be a factor.

The article paragraph discusses the distinction between the Specialty admitted market and the traditional wholesale or non-admitted market, emphasizing the importance of understanding this difference. The author sees continued growth in the Programs business, which ranges between $85 billion and $100 billion in premiums in the US. The company has strong relationships with carrier partners and is the largest delegated underwriting authority entity in the US. While the expectation of 20% growth over a long period may be ambitious, the Program space is expected to grow consistently. The author notes that 40% of the company's revenue comes from the non-retail segment, which includes Wholesale and Programs, and this segment grew by 17.7% in Q3, highlighting its strong performance. Michael Zaremski acknowledges the impressive growth in Programs and Wholesale.

In the discussion, Powell Brown confirms that underwriters and broker-owned programs can be compensated more than carriers, often through a combination of cash, bonuses, and equity. Following a brief transition in speakers, Mark Hughes from Truist Securities inquires about $15 million in revenue from new customers in Brown's Programs, asking if any of it is non-recurring. Andy Watts explains that this revenue is primarily from onboarding new accounts, with an initial revenue surge in the first quarter and spread throughout 2025. He notes that there will be no such $15 million spike in the third quarter of 2025, as the revenue will be distributed more evenly, primarily in the first half of the year.

In the paragraph, Mark Hughes asks about any changes in the advocacy business, and Andy Watts responds that the situation remains consistent with previous years. Alex Scott from Barclays then inquires about the merger and acquisition (M&A) pipeline, particularly concerning the impact of interest rate changes on private equity interest. Powell Brown explains that as interest rates decrease, more private equity firms become interested in investments. Previously, when interest rates were higher, fewer firms were involved. Now, as rates decrease, interest is rising again. Brown indicates that the company is focusing on domestic opportunities for growth through M&A.

The paragraph discusses the company's international market strategy, emphasizing the importance of cultural fit, financial viability, and stable operating environments. The speaker mentions the excitement about closing a deal with Qantas in The Netherlands and highlights the importance of operating in countries with stable governments and economies. In a Q&A session, Meyer Shields from KBW asks about the timing and revenue impact of lender-placed insurance in Programs. Powell Brown clarifies that the $15 million represents about six months of revenue, mostly affecting the first half of 2025, with no impact on full-year margins, only between quarters. Another question follows from Grace Carter with Bank of America.

In the paragraph, Grace Carter asks Powell Brown about the pressure on retail contingents due to higher loss ratios affecting carrier partners, particularly in the auto sector for both personal and commercial lines. Brown acknowledges the issue, noting it started in 2023 due to increased frequency and severity of claims which are affecting profitability, and he anticipates continued pressure. Scott Heleniak then shifts the discussion to the Employee Benefits business, seeking insights on positive trends in healthcare for Q3 versus the first half, as well as potential opportunities for 2025, both organically and through mergers and acquisitions. Brown highlights that the organization has invested over the past decade to enhance capabilities for handling customers of any size in employee benefits.

The paragraph discusses the company's ability to support growing businesses, highlighting their focus on middle and upper middle market sectors and the opportunities they see in healthcare cost management. They are exploring potential acquisitions but remain confident in their existing business and employee benefits services even if no acquisitions occur. Powell Brown expresses excitement about serving clients of all sizes. During a Q&A session, Brian Meredith from UBS inquires about the impact on contingent commissions from Milton and Helene in the fourth quarter. Powell Brown indicates there might be adjustments similar to past situations, with outcomes still uncertain.

The paragraph discusses a few key points related to insurance claims and property losses. It highlights that the previous year's fourth quarter had positive adjustments due to low claim activity, particularly in the Program space, suggesting potential significant year-over-year changes, although the magnitude is uncertain. Andy Watts points out two specific factors affecting losses: first, high auto losses linked to storms like Helene and Milton, where vehicles are damaged in floods; and second, a correlation between property losses and structures built before stricter building codes were enacted post-2005. Older homes, especially from the 1930s and 1940s, tend to have fewer losses compared to those from the mid to late 20th century, likely due to differing building standards. The conversation shifts to financial considerations, with Gregory Peters from Raymond James asking about how deferred tax payments will positively impact free cash flow in 2024.

In the dialogue, Powell Brown confirms that additional tax payments for 2024 and 2025 will lower the free cash flow conversion rate for 2025 due to IRS rules requiring payment in the second quarter. This reduction in conversion is contrasted with a rise in the 2024 conversion rate by a percentage point, attributed to a deferral. Despite the timing issues affecting different years, Brown emphasizes the strong trajectory and growth of the business, maintaining confidence in achieving a conversion rate in the '24 to '26 range. Subsequently, Elyse Greenspan from Wells Fargo inquires about a significant increase in investment income for the quarter, seeking insight into expectations for net investment income as interest rates change moving forward.

In the paragraph, Andy Watts discusses the impact of previously issued bonds on interest income, noting that the $600 million in bonds issued earlier contributed an additional $6-7 million to the quarter's interest income. He cautions not to use the current $31 million as a future run rate, as it will decrease in the next quarter. Powell Brown adds that, although they don't provide organic growth guidance, the company's adjustments in Q3 offer a good starting point for Q4. Elyse Greenspan confirms this with a calculation of around 5% for the Retail Q4 starting point. Andy Watts also highlights the importance of net investment income and the effect of rate changes, adding that as the company grows, fiduciary cash will increase, impacting ratios, and that floating rate debt should be considered.

In the paragraph, Powell Brown discusses the organization's investment strategy, explaining that about 25% of their debt is structured to be at a floating rate, which has been beneficial for shareholder value. At the end of September, they had just under $800 million in floating rate debt. He also addresses a question from Mark Hughes about the margin impact from investments in "Teammates." Brown clarifies that these investments are opportunistic rather than planned, emphasizing their focus on investing in the right people when they become available, as they believe these investments will pay off in the future. Brown reassures that there is no secret initiative and this approach is considered part of their normal opportunistic investing strategy.

In the Q&A portion of the call, Michael Zaremski from BMO asked about pricing trends in the Casualty sector, including differences between E&S, admitted, and non-admitted markets. Powell Brown responded that there is a current discipline in Casualty pricing across these segments, and he expects continued rate pressure in areas like general liability, excess liability, and both commercial and personal auto insurance. Despite varying trends reported by different carriers, this pressure is consistent across segments. The call concluded with Powell Brown expressing satisfaction with Q3 performance and optimism for Q4 and 2025.

The operator concludes the presentation and instructs the audience to disconnect, wishing them a wonderful day.

This summary was generated with AI and may contain some inaccuracies.