The paragraph is an introduction to the Brown & Brown Fourth Quarter Earnings Conference Call. It notes that the call is being recorded and contains forward-looking statements regarding the company's anticipated financial results, which are subject to risks and uncertainties. Actual results may differ from preliminary figures due to various factors, including those identified in the company's SEC filings. The paragraph also mentions that non-GAAP financial measures are used in the call, and there's no obligation to update forward-looking statements.

The paragraph is from a company's fourth-quarter earnings call, where Powell Brown, the President and CEO, discusses the financial performance. The company expressed condolences for the California wildfire victims and affirmed their commitment to help. They reported outstanding results for the quarter, with nearly $5 billion in revenue for the year, driven by double-digit organic growth, earnings per share growth, and strong margin expansion. Powell attributes this success to the dedication of over 17,000 employees and a unique operating culture. For the fourth quarter, the company achieved $1.4 billion in revenue, a 15% total and 14% organic growth, an improved adjusted EBITDAC margin of 33%, and a 24.5% increase in adjusted earnings per share to $0.86. Additionally, they completed 10 acquisitions with annual revenues of $137 million.

In 2024, the company achieved $4.8 billion in revenue, increasing 13% overall and over 10% organically, with an adjusted EBITDAC margin exceeding 35%. Adjusted diluted net income per share rose 18% to $3.84, generating nearly $1.2 billion in operational cash. The company completed acquisitions totaling $174 million in annual revenue, including significant ones like Quintes in the Netherlands. The economic environment remained stable, allowing for continued growth and stable investment levels. Insurance rates generally rose but at a slower pace, with the auto and casualty lines and CAT property showing notable changes. Employee benefits pricing remained steady amid rising healthcare costs, enhancing demand for the company's consulting services. Investments have positioned them well to support businesses facing these challenges.

In the admitted Property & Casualty (P&C) market, rates increased by 2% to 7% compared to the previous year, with workers' compensation rates remaining steady or declining by up to 5% in most states. Non-CAT property rates were flat to up 5%, and primary casualty rates continued to rise due to large legal judgments, while excess casualty rates increased by 1% to 10%. Professional liability rates were flat to up 5%. In the Excess and Surplus (E&S) markets, CAT property rates decreased by 10% to 20% despite initial concerns about the impact of Hurricanes Helene and Milton. Some customers used lower rates to adjust coverage or save costs. The company's results are largely unaffected by changes in individual lines due to diversification, with growth driven by the economy and winning new business. The company also saw success in mergers and acquisitions, acquiring ten companies with $137 million in annual revenue, including their largest acquisition, Quintes.

The company is optimistic about its position in the Dutch market and anticipates growth despite strong competition. Retail saw 4.4% organic growth in Q4, with strong net new business, though somewhat affected by timing and non-recurring revenue. It achieved a 5.8% organic growth for the year. Programs reported outstanding Q4 growth of 38.6%, driven by new business, exposure expansion, and hurricane-related claims revenue, resulting in a 22.4% annual growth. As a leading global MGA/MGU operator, strategic investments have created significant market differentiation. Wholesale Brokerage experienced a 7.1% Q4 organic growth, supported by growth across all lines but slightly hampered by CAT property pressures, achieving a 9.1% annual growth. Good momentum is expected for 2025.

The paragraph presents a detailed financial overview for the company's recent quarter. It highlights significant growth, with total revenues reaching $1.184 billion, a 15.4% increase, and income before taxes rising by 27.2%. The EBITDAC margin expanded to 32.9%, and the effective tax rate slightly increased. Diluted net income per share rose by 24.6% to $0.86, while dividends per share also increased by 15.4%. In the Retail segment, revenues grew by 9.5%, with organic growth at 4.4%, largely driven by acquisitions and higher contingent commissions. Meanwhile, the Programs segment saw a noteworthy revenue increase of 28.7% and an impressive organic growth of 38.6%. Overall, the quarter is described as very strong, with positive performance across multiple segments.

The article explains that while there was revenue growth in 2024 due to higher contingent commissions and reinsurance changes, it wasn't as strong organically due to previous year's net disposition activities. The EBITDAC margin rose significantly to 47.9% due to expense leverage and business sales. Flood claims processing exceeded expectations, yielding $28 million, with future revenues estimated at $14 million to $18 million in the first half of 2025. The Wholesale Brokerage segment saw an 11.6% total revenue increase, with 7.1% organic growth, although EBITDAC margin decreased slightly. EBITDAC grew 17%, with the margin up 130 basis points to 35.2%, net income before taxes increased by 19.6%, and net income per share rose to $3.84. Overall, total revenue grew by 12.9% and the company is satisfied with its 2024 results.

The company generated $1.174 billion in operating cash flow, a 16.2% increase from the previous year, and maintained a strong cash flow to revenue ratio of 24.4%. They deferred $90 million in federal taxes due to IRS relief for 2024 hurricanes, payable in Q2 2025, and used $250 million from their credit facility for the Quintes acquisition. They ended 2024 with a debt to EBITDA ratio consistent with their 10-year average. For 2025, they expect a slight decrease in contingent commissions, influenced by California wildfires and the hurricane season. In the Retail division, Q1 organic revenue growth will be lower, with Quintes’ acquisition leading to a revenue and margin boost in Q1 but less favorable margins in subsequent quarters due to revenue phasing.

The company anticipates its 2025 revenue and EBITDAC to align with previous projections and expects the effective tax rate to remain around 24-25%. Interest expenses are projected to be between $170 million and $180 million due to expected rate cuts in 2025, while interest income is forecasted between $65 million and $70 million. Despite a likely decrease in net income and contingents, adjusted EBITDAC margins for 2025 should remain stable. Economic stability is expected to persist in the regions of operation, supporting moderate business growth and investment. Key concerns for U.S. business leaders include policy shifts, tariffs, interest rates, inflation, and geopolitical issues, impacting business investment strategies. The company will discuss insurance pricing for early 2025 later, highlighting the importance of managing California wildfire risks to prevent significant losses.

The paragraph discusses anticipated trends in insurance pricing in California for both admitted and non-admitted property, expecting a slight moderation or downward shift in rates for admitted lines in the latter half of 2024. The conversation about the E&S markets is split between CAT property and other lines, with casualty and professional liability rates expected to remain stable. There is anticipated downward pressure on CAT property rates, with potential declines exceeding 20% based on construction quality and loss experience. On the mergers and acquisitions front, the company has a strong pipeline domestically and internationally and is seeing moderation in valuation multiples for larger PE-backed businesses. The company ended the year in a strong financial position, with plans to leverage its capabilities to win more business in 2025. It aims to continue using its solution selling model to retain and attract customers. The paragraph concludes with an invitation for Q&A, handing over to Michelle to manage questions.

In the paragraph, Gregory Peters asks about the drivers behind the company's net new business success and their outlook for 2025, particularly concerning California. Powell Brown responds by highlighting the record new business written across all divisions in 2024 and expresses optimism about continuing this trend due to their capabilities and collaboration. He calls California's situation complicated, noting issues such as the fare plan's impact, and the role of admitted and non-admitted carriers. The state's officials are grappling with the challenge of offering acceptable market availability and competitive pricing, leading to a potential significant expansion in the Excess and Surplus (E&S) market.

The paragraph discusses the impact of demand surges and the need for quality contractors in the industry, emphasizing their influence on pricing and response capabilities. During a conference call, Robert Cox from Goldman Sachs asks about the current retail run rate and its implications for the future, specifically heading into 2025. Andy Watts explains that timing issues in various business segments affected the organic growth rate by 40 to 60 basis points but anticipates recovery in future quarters. He expresses confidence in the business's momentum and collaboration heading into 2025. Robert Cox then inquires about the sustainability of organic growth in the Program segment for 2025.

The paragraph discusses the current state and future outlook of contingent commissions and program growth in the insurance industry. Andy Watts mentions that while contingents had a strong year, there was some downward pressure in the Retail sector, particularly in personal lines. As they move into 2025, more downward pressure is anticipated due to calculation adjustments for 2023 contingents. Additionally, potential impacts from losses in California on certain programs are uncertain. Powell Brown adds that program growth has previously been driven by flood, wind, and quake, but there's now more rate pressure and a moderating growth rate across the industry. Despite this, they remain optimistic about their programs business, partly due to strong carrier partner relationships and strategic price adjustments to stay competitive.

In the paragraph, company executives, including Andy Watts and Powell Brown, are discussing their financial outlook and guidance for specific business segments. They mention that while they are confident about their programs in 2025 and beyond, they have reached a steady performance level with their captive premiums and won't see as much growth as in previous years. Despite a 1% headwind expected in the first quarter of the upcoming year, they reassure that their retail business is projected to have low to mid-single digit organic growth. Elyse Greenspan of Wells Fargo inquires about how to adjust projections, and the executives suggest balancing any expected decrease in the first quarter with increases in subsequent quarters to maintain the annual outlook.

The discussion involves Elyse Greenspan asking about margin expectations and headwinds, specifically regarding flood-related revenue and organic growth in different segments. Andy Watts responds that the overall company guidance does not break down by segment, but investment income and contingents are expected to be headwinds. Despite these, the rest of the business should perform well, leading to relatively flat adjusted EBITDAC margins for the total company. Regarding the corporate segment's negative EBITDA in Q4, Watts mentions it included one-off costs, which can vary over time, but nothing unusual occurred. The operator then invites the next question from Alex Scott about the M&A environment.

In the paragraph, Powell Brown addresses the potential for increased mergers and acquisitions (M&A) among private equity-backed companies that may have outgrown private markets. He highlights the importance of cultural fit and financial sense when considering such opportunities. Brown mentions the anticipated consolidation in the industry over the next few years and notes that recent large acquisitions have involved private equity-backed firms. While being financially conservative and reducing debt, Brown emphasizes their preparedness to pursue acquisitions of any size if the right opportunity arises. Overall, they are confident in their market positioning and growth strategy.

The paragraph features a discussion involving Alex Scott and Powell Brown about the geographical exposure of a lender-placed insurance business, indicating that it operates throughout the entire United States and not just in specific regions like Southeast Florida or California. The conversation touches on upcoming challenges in California related to insurance non-renewals. Separately, Mark Hughes from Truist Securities inquires about a $19 million change in reinsurance items and its impact on organic growth. Andy Watts explains that this adjustment negatively affected organic growth in the fourth quarter of the previous year but will not create a difficult comparison for future growth assessments between Q4 '24 and Q4 '25.

Mark Hughes and Powell Brown are discussing the challenges of rebuilding in California after significant losses, specifically focusing on the shortage of quality contractors. Brown speculates that due to the scale of the demand, there may not be enough contractors available. Additionally, he mentions the lengthy process of obtaining building permits, which can take up to 1.5 years, and suggests that government officials might need to find ways to expedite construction, potentially on a scale similar to the Marshall Plan. In a subsequent exchange, Charlie (standing in for Michael Zaremski) from BMO asks about margin expectations, and Andy Watts explains that it's primarily driven by operating leverage, given the diverse and varied nature of the businesses in question.

The paragraph discusses a conversation between Charles Lederer and Powell Brown about the impacts of depopulation of citizens into the private market in Florida on their guidance and commission structures. Powell Brown states that it does not have a material impact. Dean Criscitiello then asks about the decelerating property pricing and its effect on customer shopping and property account migration to wholesale markets. Powell Brown responds that there is no decrease in movement and explains with an example of Florida cold storage warehouse owners, highlighting the continued pressure on insurance premiums despite potential downward rate trends in the market.

The paragraph discusses the impact of cost-saving measures and rate increases on property owners and managers, emphasizing the emotional toll despite intellectual understanding. Dean Criscitiello and Powell Brown discuss how the competitive nature of the market requires earning customer trust. Brown notes an increase in casualty line submissions, particularly in the excess and surplus (E&S) market, with consistent rate increases in automobile insurance. There is a net inflow of accounts into the E&S market, and more submissions are being made to the wholesale market than before.

The paragraph discusses trends in the insurance market, particularly focusing on the shift of certain types of business, such as property and casualty, from the admitted market to the non-admitted or E&S (Excess and Surplus) market due to increased risk factors like convective storms. This shift is driven by the admitted market demanding higher deductibles. Andy Watts explains that buyers are more concerned with balancing their premiums rather than focusing solely on rate changes. They adjust elements like retention and coverage limits to manage costs. Dean Criscitiello and Andy Watts discuss the lack of direct correlation between rate changes and commissions or premiums paid by customers. Following this discussion, Scott Heleniak from RBC Capital Markets asks about the impact of organic hiring on the company's growth, seeking insights into hiring trends in 2024 and previous years.

The paragraph features a discussion between Scott Heleniak, Powell Brown, and Andy Watts, focusing primarily on hiring practices and business performance. Powell Brown talks about the company's hiring strategy, highlighting their efforts to recruit a diverse range of employees from various industries, including those with and without an insurance background, and through acquisitions. Scott Heleniak inquires about claims costs for the captive business, confirming with Andy Watts that they were within the previously guided $5-10 million range. There's also a mention of expected growth in the captive business for 2025, albeit at a slower rate. The conversation then shifts to Michael Zaremski from BMO.

The paragraph is a segment from a conference call where Andy Watts discusses adjustments for Helene and Milton in the third and fourth quarters, respectively, noting that no significant changes were announced. There is a cautious outlook for 2025 due to potential loss development and events in California. Charles Lederer briefly acknowledges, and Powell Brown concludes the session by expressing satisfaction with last year's performance and optimism for 2025, thanking participants and looking forward to the next quarterly discussion.

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