Brown & Brown, Inc.

Good morning and welcome to the Brown and Brown, Inc. first 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 connection with this call and including answers given in response to your question may relate to future results or end events or otherwise before looking at nature. Such statements reflect our current views with respect to future events, including those relating to the company's anticipated financial results for the first 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 risk and uncertainties and may differ materially from those currently anticipated or desired or references any forward-looking statements made as a result of a number of factors. Such factors include the company's determination as it finalizes its financial results for the first quarter that its financial results differ from the current preliminary unaudited numbers set forth in the press release issued yesterday, other factors that the company may not have currently identified or quantified, and those risks and uncertainties identified from time to time in the company's reports filed with the Securities and Exchange Commission. Additional discussion of those and other factors affecting the company's business prospects, as well as additional information regarding forward-looking statements, is contained in the slide presentation posted in connection with this call and in the company's funds for the Securities and Exchange Commission. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. In addition, there are certain non-GAAP financial measures used in this conference call. A reconciliation of any non-GAAP financial measures to the most comparable GAAP financial measure can be found in the company's earnings press release or in the investor presentation for this call on the company's website at www.bbinsurance.com by clicking on the investor relations and then calendar of events. With that set out, now I'll turn the call over to Powell Brown, President and Chief Executive Officer. You may begin.

Powell Brown Thanks, Kevin. Good morning, everyone, and welcome to our first quarter earnings call. Once again, our team delivered strong top and bottom line results. I'll provide some high-level comments regarding this performance, along with updates in the insurance market and the M&A landscape. Andy will then discuss our financial performance in more detail. And lastly, I'll wrap up with some closing thoughts before we open up to Q&A. So now let's get into the results. I'm on slide four. For the first quarter, we delivered revenues of $1.4 billion, growing 11.6% in total and 6.5% organically as compared to the same period in the prior year. Our adjusted EBITDA margin improved over 100 basis points to 38.1%. and our adjusted earnings per share grew over 13% to $1.29. On the M&A front, we completed 13 acquisitions with estimated annual revenues of $36 million. This consistently strong performance is a direct result of the dedication of our team of nearly 18,000 teammates. I'm on slide five. Main topic for the quarter was uncertainty related to tariffs, inflation, and interest rates and how they might impact economic expansion. Overall, we did not see buyers of insurance materially change their outlook, but we did see some business leaders shift to being more cautious. Generally, companies are still hiring and investing in their businesses. However, in certain cases, you're seeing some new projects put on hold for a few months due to these uncertainties. Presently, we would say the levels of investment in people and assets are fairly consistent with the past few quarters. We view this as a positive. Overall, the economies in which we operate are relatively stable, and business owners remain optimistic but have a tempered view regarding the level of growth over the coming quarters. From an insurance pricing standpoint, rate increases for most lines continued and were fairly consistent with the prior few quarters. However, they're moderating downward slightly as compared to last year. The outliers continue to be auto and casualty that are increasing. and CAAT property continues to soften during the quarter. We'll get into more detail about the CAAT property in a couple minutes. Pricing for U.S. employee benefits in the first quarter was similar to prior quarters, as medical and pharmacy costs remain up seven to nine percent. The outlier continues to be pharmacy, which is growing faster than medical. This ongoing upward pressure and the complexity of healthcare continue to drive strong demand for our employee benefits consulting businesses. Rates in the admitted P&C market moderated slightly as compared to last quarter and were up 2% to 7% for most lines versus the prior year. The downward trend for workers' compensation remained in most states, and they were flat to down 5%. For the first quarter, rate increases for non-CAT property were in the range of flat to up 5%, which is similar to the prior few quarters. For casualty, we continue to see rate increases for primary and excess layers. Consistent with the last few quarters, rates for excess casualty increased in the range of 5% to 10%. Placing higher limits or layers continues to be very challenging, both from a pricing perspective and the availability of limits. For professional liability, rates were flat to up 5% as compared to last year. Shifting to the ENS property market, as we entered the first quarter, we anticipated rates for cap property would decline 10% to 20%. With availability of capital, rates during the quarter declined a bit faster and were down 10% to 25%, and we saw outliers based on the quality of construction, claims experience, and new versus renewal business. In some cases, rates were down in excess of 25%. With the decline in rates, some buyers chose to increase their limits or modify deductibles, while others realized the savings. These savings also enabled some companies to increase their limits on other lines of coverage. As we've mentioned in the past, buyers will manage their overall insurance spend and focus on the combination of rates, limits, and deductibles. On the M&A front, we had another good quarter and acquired 13 great companies with $36 million of annual revenue. From an overall market perspective, competition for high-quality businesses remain. Let's go to slide six and transition to the performance of our three segments. Retail delivered 4.1% organic growth, which was in line with our expectations and was driven by good performance in all lines of business. As a reminder, we expected the first quarter to be lower than the others this year due to the shifting of renewal dates and timing of certain non-recurring businesses. Programs delivered another good quarter with organic growth of 13.6 percent. This performance was driven by a number of our programs with good new business retention and exposure unit expansion, as well as claims revenue associated with the 24 hurricanes. Our CAT programs, or CAT property programs, grew for the quarter slightly, even with the impact from rate decreases. Wholesale brokerage had a strong quarter with organic revenue growth of 6.7%. This performance was driven by growth across all lines through a combination of net new business and exposure unit increases, with the growth partially offset by the continued downward pressure on open brokerage cap property rates. Now I'll turn it over to Andy to get in more detail regarding our financial results.

Thanks, pal. Good morning, everybody. I'm going to review our financial results in additional detail. When we refer to EBITDAQ, EBITDAQ margin, income before income taxes, or diluted net income per share, we're referring to those measures on an adjusted basis. The reconciliations of our GAAP to non-GAAP financial measures can be found either in the appendix of this presentation or in the press release we issued yesterday. We're over on slide number seven. We deliver total revenues of $1,404,000,000. growing 11.6% as compared to the first quarter of 2024. Income before income taxes increased by 17.4%, and EBITDA grew by 14.8%. Our EBITDA margin was 38.1%, expanding by 110 basis points over the first quarter of the prior year. The higher growth in income before income taxes was due to lower interest expense associated with debt repayments. Our effective tax rate for the quarter increased slightly to 21.8% versus 19.5% in the first quarter of the prior year. The increased tax rate was driven by having less benefit associated with vesting of restricted stock awards as compared to the first quarter of last year. As a reminder, most of our restricted shares vest in the first quarter, so we can have variations and our quarterly tax rate, depending on the number of shares that vest and the change in share price. Diluted net income per share increased 13.2% to $1.29. Our weighted average shares outstanding increased slightly compared to last year, and we continue to prioritize paying down our floating rate debt as this has a higher impact on the growth of earnings per share. Lastly, our dividends paid per share increased by 15.4% as compared to the first quarter of 2024. Overall, we are very pleased with the performance for the first quarter. We're going to move over to slide number eight. The retail segment grew total revenues 12.5% with organic growth of 4.1%. The difference between total revenues and organic revenue was driven substantially by acquisition activity over the past year. Our EBITDAQ margin expanded by 120 basis points to 37.3% due to managing our expenses and the positive impact of the seasonality of revenue and profit for the Quintest acquisition. Both were partially offset by higher non-cash stock-based compensation. As we mentioned previously, approximately 60% of the revenues for Quintest are recognized in the first quarter. Therefore, we have higher margins in the first quarter and lower margins in the others. This is very similar to the profile for employee benefits in the United States. From a full-year perspective, we continue to anticipate quintests to perform within the revenue and EBITDA ranges that we previously communicated. We're on slide number nine. Programs had another strong quarter with total revenues increasing. 10.1%, and organic growth of 13.6%. In comparison to the prior year, our profit-sharing contingent commissions decreased about 6 million due to positive adjustments recorded in Q1 of 24. Lastly, we recognized approximately 12 million of hurricane claims processing revenue, which is in line with our expectations. Our EBITDA margin expanded by 220 basis points to 44.5%. primarily driven by strong organic revenue growth and managing our expenses. We're moving over to slide number 10. Our wholesale brokerage segment had another strong quarter with total revenues increasing 12% and organic growth of 6.7%. The incremental expansion in total revenues in excess of organic was driven by acquisitions completed in the last 12 months and higher contingent commissions. Our EBITDA margin decreased by 30 basis points to 32.1% due to higher non-cash stock-based compensation and the impact of foreign exchange. Isolating these changes, the underlying margin increased year over year due to managing our expenses and higher profit sharing contingent commissions. Lastly, from a cash perspective, we generated approximately 215 million of cash flow from operations. which was an increase of 200 million over the first quarter of 2024. This improvement was due to incremental taxes of approximately 120 million paid in the first quarter of 2024, which were deferred from 2023. In addition, we continue to manage our working capital and expand our margins during the quarter. As previously noted, We deferred the payment of approximately $90 million of federal income taxes for the third and fourth quarters of 24 related to IRS tax relief associated with the prior year hurricanes. These taxes will be paid in the second quarter of this year and will impact our cash flow conversion. With that, let me turn it back over to Powell for closing comments.

Thanks, Andy. Great report. From an economic standpoint, we believe the main driver of expansion over the coming quarters will be the outcome of inflation, tariffs, and changes in interest rates. Leaders, as you know, can generally deal with most changes, but until there's a resolution regarding the extent and breadth of tariffs and inflation, companies will more than likely have a cautious bias. This does not mean that we think leaders have a negative outlook. Rather, they may change the level of investment over the coming quarters with some quarters higher or lower than prior quarters. We continue to believe there's a positive backdrop for economic expansion and growth is moderating back to more traditional levels. From a pricing standpoint, other than cat property, we do not expect any material changes in rates for admitted and non-admitted lines. For cat property, we believe rates will continue to decrease in the second quarter and could be down in the range of 10% to 30% due to the availability of capital. One of the topics that still needs to be resolved is the impact of the wildfires on the standard market for property coverage in California. On the M&A front, we continue to feel good. We have a strong pipeline, both domestically and internationally, and are building relationships with many firms. As we've spoken about, cultural alignment is the most critical factor to the success of acquisitions at Brown and Brown. We have a strong balance sheet, outstanding cash flow conversion, and access to additional capital when we need it. We're in a great position as a company. Our team continues to execute at a high level. Each of our divisions are performing well and have good momentum heading into the second quarter. There will probably be some ups and downs in the economic outlook. But with our broad diversification across geographies, customer size, lines of coverage, and capabilities, we're well positioned to capture the opportunities that are on the horizon. As we've said before, we are a solutions provider, and during times of volatility, being a great partner for our customers is critical to helping them manage uncertainty. We believe the second quarter will be a good one for the Brown and Brown team. With that, let's turn it back to Kevin and open it up for Q&A.

Thank you. Ladies and gentlemen, if you have a question or a comment at this time, please press star 1-1 on your telephone. If your question has been answered and you wish to move yourself from the queue, please press star 1-1 again. And we also ask that you limit yourself to one question, but feel free to jump back in the queue for any follow-ups. We will pause for a moment while we compile our Q&A roster.

Our first question comes from Mark Hughes with Truist Securities.

Your line is open.

Yeah, thank you. Good morning. Andy, the Quintez impact on the retail margin and this timing shift in organic also in retail, any specific numbers you might be able to share with us about what the effect was in the first quarter and then kind of what that means for the balance of the year?

So morning, Mark. is I think if you utilize the guidance that we provided before on Quinn tests, about 60% of those revenues came in the first quarter. So again, think about the margin, again, has a pretty similar profile to what employee benefits does in the first quarter. So it's just naturally going to be higher. So that'll serve as a bit of a drag in the out quarters for retail. But on a full year basis, it'll work out. It should be right in line with where we were thinking originally on the Quintess acquisition that's in there. And then the other piece he had asked about was just kind of the shifting and renewals and some of the one-time business. As we mentioned before, we anticipated that the first quarter would be about 1% below the other quarters. The first quarter for retail was pretty much right on exactly what we thought it was going to be. So we continue to have good confidence in the out quarters for the year, kind of tied back to the comments that we made earlier about just economic backdrop and where buyers are right now. So I feel real good about the business.

Very good. And then what do you anticipate for earned premium in the captives this year?

It will probably be up a little bit over last year on it, Mark. The piece is, I think you picked up on it in your research notes. And, you know, we talked about this in a couple previous calls is, you know, we're writing up to a specific amount of premium. And that's our way of capitating the risk profile inside of them. And we pretty much hit that in the first quarter, we've been kind of climbing that over the past few years. So we would not anticipate much incremental organic growth in the following quarters in the captives. Now that might move around a little bit depend upon what happens with cat property pricing back and forth but wouldn't anticipate anything material plus or minus versus last year a second through the fourth quarter i appreciate it thank you okay great thank you one moment for our next question our next question comes from mike cerensky with vmo your line is open hey morning thanks um

Um, thanks for all the color on, um, kind of, um, property rates and, uh, especially cat exposed and, you know, uh, there's plenty of capacity there. Um, I guess just, you know, is it, it looks like if we try to dissect some of the programs, uh, organic growth, there, there does seem to be, uh, a downwards impact, which could be coming from, from cat property pricing, uh, being down. Is it, is it, you know, as we think about, uh, the rest of the year or just is it fair to kind of put in a bit of of headwind from downwards property pricing especially I think Brown is a bit overweight Florida versus Pierce yeah good morning Mike it's Andy here let's see if we can kind of put this into a few buckets because we wouldn't want anybody to think that the downward

trend is all associated with cat property. That would not be a good or a proper conclusion. Remember the things that we've talked about over kind of the past year that's helped fuel the growth in programs. We've talked about our lender place business has been performing really well with winning new business as well as we've had customers acquiring portfolios and we've had outstanding growth over the past few years. Still expecting good growth this year, but not probably at the same level. Mark asked earlier about the captives. And so I think we've mentioned there again that has helped fuel organic growth that will start to level itself out in 25 for the business. And then, you know, cat property is a component. It did grow during the quarter for us. Not at the same levels that we've seen over the past few years, but we did still have good growth in there through the submissions and everything that we've received in the business. And then the other piece to keep in mind in the back end of the year is we're not sure what's going to happen with the hurricane season. So remember, we had a significant amount of claims revenue in the fourth quarter. We do not budget for kind of known storms. We just use kind of a 10-year average. So depending upon what happens and if it's a relatively calm season in the back end of the year, I think it's probably realistically, at least we would think, realistic that the organic growth in the fourth quarter of programs could be around zero because of very tough comp with all the flood claim revenue. Okay.

Okay. Thanks, Andy, for unpacking that. Yes. My follow-up would be on probably the retail segment. If I think about the commentary on employee benefits and some upwards pressure on inflation there, did that come through in the retail organic this quarter? And maybe you can size up how much seasonality there is, I think, in one queue versus the rest of the year in terms of mix of benefits being higher, I believe in the, in one queue.

So, so remember that's a revenue recognition issue, Mike. And so it's sort of front loaded that Andy sort of referred to. So when I say that, that makes the assumption, if you know your thought process that all of those accounts are either on commission, not a per head per month or a fee. So most of our business is on commission, but I just want to clarify that in some of the smaller business or fully insured, there's going to be on a per head per month that we get paid. And on our larger business, many times those are on fees. As it relates to the organic growth in retail, we were very pleased with the organic growth in retail, particularly in light of what we said at the end of Q4. and in our remarks about some shifting of some things and some non-recurring revenue. And we anticipated to be a little bit higher later in the year. And so we felt good about it and continue to feel good about it.

Thank you.

Thank you. One moment for our next question. Our next question comes from Gregory Peters with Redmond James. Your line is open. Good morning, everyone.

Paul, in your closing comments, you talked about growth returning to a more normal level. And I'm reminded of a comment you used to make about the impact or weighting of economic growth versus the impact from rate increases. And I think in the last couple years you seem to, and I don't want to put words in your mouth, but you seem to indicate that you're getting a little bit heavier weighting from rate increases versus economic versus the traditional averages. Maybe you can update us because, you know, in the slide presentation, there's a couple slides there where you talk about property cap being down, affecting, you know, having an offset on organic income. And you talk about the other rate environment. So, just can you provide us some updated perspective on how you're thinking about that?

Sure. Good morning, Greg. So, first of all, what Greg is referring to is historically, I would say that our business is two-thirds to three-quarters exposure unit, and the remaining would be rate. That's how I've always sort of said that. And we've alluded to the fact that with a transition, particularly in cat property, but it could be in some heavy casualty lines into unusual umbrellas and other things, it has gone up or had a little bit higher impact on rate in the growth. So that's the first thing. The second thing that I'd like to sort of clarify for everybody is, I find it very interesting how you all are sort of surprised by the rate decreases in cat property. I would have said I thought this was going to happen a year ago. And so cat property historically goes up faster than you anticipate, and it comes down faster than you anticipate. And so it's all about the availability of limits out there, whether it be through a traditional insurance company or through a MGA or some combination thereof. So I think from a standpoint of our retail business, but it affects the whole business, we are writing a lot of new business, Greg. And our goal is to get the best program, that's the most competitive program with the most comprehensive priced comprehensive coverage for our customers. And so today, I do believe that what, if you believe what I just said, which I do, is that it would go back more closer to the two-thirds, one-third, or three-quarters, one-quarter. But I usually use two-thirds, one-third. And again, as I said earlier, I believe that if you talk to people, just the person on the street, they have a little bit more negative view of the economy than people that run and own businesses. I believe that depending on the industry that you're in, depending on your supply chain, some of these other things, your view is slightly different and maybe more moderated So we feel good about retail, and as I said, that's a long-winded answer on two-thirds, one-third.

Hey, Greg, the other thing to keep in mind, and we've mentioned this a bunch over the past few years, is our diversification. And again, if you go way back in history, yes, we were probably more related to Florida and potentially California. But with the industries that we serve, the lines of coverage, geographies across the business, the CAP property can have a movement maybe on offices in certain locations. But the ability to have a material impact on our numbers across the board is much less than what it was years ago. And that's all been done with kind of purpose for the strategy on how we diversify the organization.

Great. The moderator's instructions said one question, but everyone seems to be asking a follow-up. So I just slipped in my follow-up, which would be, can you talk about the outlook for the flood business? You know, it's a federal government program. And, you know, FEMA, it's unclear, it sits inside of FEMA, so it's unclear what's going to happen with the flood program. And I'm just curious about your perspectives, given all the changing dynamics happening in Washington, D.C.

So, Greg, let's look at a historical perspective of flood and then put that kind of an overlay, the current environment. So as you probably know, the flood program has not been reauthorized for an extended period of time, meaning something like a five-year traditional reauthorization or something in a long time. So basically, they have been reauthorizing for shorter periods of time because they can't get the full reauthorization through. I use that as a backdrop to say this. We believe that the flood program is a critical program in the United States for homeowners. And I believe the government and everything that we hear would lead us to feel that way. That said, I think the likelihood of having a longer-term reauthorization in the next year to several years is probably lower because it just seems to be getting kicked the can down the road. And that's what our team says, and we're very close to the people involved in Washington. But as you know, we write about a third of all the write-your-own-flood premiums in the United States. And so that's kind of how we feel about it.

Got it. Thanks for the answers.

Yeah. Thank you. One moment for our next question. Our next question comes from Josh Schenker with Bank of America. Your line is open.

Hey, Josh. Good morning to everybody. How are you doing? Good morning. You know, people want to focus on cash, and I just have a more general question about the state of Florida. It seems like after 837, a lot of the lawyers lost a lot of revenue and a lot of different kinds of risk. Is the cost of risk going down in the state of Florida broadly, and what impact should we have on Florida pricing broadly compared to the national economy over the next couple of years? Should Florida...

growth be lower than the rest of the country okay so interesting question Josh first of all is the cost of risk going down in the state of Florida and I would I have to temper this statement if you are on cat property and it went really high your cost of risk is coming down okay I'm talking about the rate on that however The overall cost of risk in the sense that what a person is paying to insure the similar property, i.e., let's say their home, is actually going up still because you have increased cost of construction. So you have insurance to value and increased cost of construction issues. So somebody's home might have been, let's say, on a replacement cost at, I'll make this up, $200 a square foot, and in the event that there is a loss, it will cost them $300 a square foot to replace that house in like kind or quality. So that's number one. Number two, if you think about it, particularly in certain areas of the state, this is more pronounced, but if you go to southeast Florida, there are a number of uninsured motorists on the highways. And so the cost of liability insurance and physical damage for the auto, whether it's personal or commercial, continues to go up. And it is highlighted by these very large awards that the plaintiff's bar usually highlights. But there are a lot of fairly large awards. And so you have to keep that in mind. As it relates to growth in the state of Florida, what's happening, in my opinion, is this. Florida used to be a very inexpensive place to live, relatively speaking, other than barring South Florida beating Southwest and Southeast Florida. Today, there has been an escalation in home prices and land values, so it's not as inexpensive as it once was. And so it's a transitionary market, and there are more and more people that are coming here that are fleeing high-tax states like the state that you live in, and they're coming here, and they think it's wonderful. So we believe that there's going to be continued growth in the economy in Florida in the near to intermediate and long term.

And what about the price of liability, court costs, legal fees, you know, on the casualty side of the coin? Is there any change going on there?

Yeah. So the answer to the question is, I think, if we'll make it very simple, I think that even with the tort reform that has occurred, and that seems to point in the right direction, that is overshadowed by the size and frequency of larger settlements. And so it's a very difficult push-pull environment. And I would say that there's more push on rates up than pull on rates down due to reform.

Okay. Good answers. Thank you very much. And I appreciate the color. Thanks, Josh. Yep.

One moment for our next question. Our next question comes from Meyer Shields with KBW. Your line is open.

Great. Thanks so much, and good morning. I was hoping that you could clarify. I think, Andy, you mentioned that without flood revenues in the fourth quarter, organic could be zero. Is that if there are no flood revenues, or is that at the 10-year average?

No. So, let's see. Again, we'll re-clarify on that one. If there is minimal flood claim revenue in the fourth quarter, then the organic is probably closer to zero.

Okay, but that's worse than what you're budgeting using the average?

That is, yeah, if you pull it down on the averages, it won't be too far off there if you use a 10-year average. Okay, that's very helpful.

The second question, with regard to cat property, I guess a key question I'm hearing a lot is are we seeing signs of any standard insurers or admitted insurers coming back in sort of cutting out the wholesale brokerage entirely for cat property?

Well, generally speaking, the answer is no. And so here's what I would – I'll give you an example. if you have a property in Miami and it's, if it's, I'm going to, I'm going to flip it around Meyer. So you can see this example, if it's in a standard market and the rate is, let's say 60 cents, I just made that up and the standard market wants a 10% increase, a five to 10% increase on that property. the the lowest rate they might get on that same property in the ens market is a buck having said that very few standard markets would write it's they've grandfathered that property in so what i'm saying is is if you have a if it's at a buck and they don't want to write it in the standard market they're not coming back in at a buck so they have there's some old grandfathered standard market business that permeates in Southeast Florida in particular, that's not exclusively, it could be other places, but the answer is no, we're not seeing that right yet. Okay. That's very helpful. Thank you so much.

One moment for our next question. Our next question comes from Andrew Anderson, but Jeffrey, your line is open.

Hi everybody, good morning. This is Charlie on for Andrew. I just have one question and it was on lender place business, which I know you guys touched on a little bit earlier on the call, but was there any incremental either benefit or headwind from lender place insurance in 1Q25 within programs? I think previously you guys may have mentioned that there was going to be like more of a return to a regular seasonal cadence there, but I guess any color would be helpful.

Hi, good morning, Charlie. It's Andy here. No, there are no headwinds year over year to the business. It just didn't grow at the same pace that it did a year ago. And just we want to make sure we clarify the growth that we're seeing in the business is due to us winning new accounts or customers buying portfolios. The actual lender placed ratio is not materially changing. which that's always to us a good indicator to the health of the economy. That means people are still in a good financial position that they're able to pay their insurance. So just want to make sure that we clarified that.

Okay. Yeah. And then I guess just on the seasonality there, just no material changes, I guess it sounds like.

No, that one, that business doesn't really have a seasonality to it, Charlie. just because they're – again, it primarily is placing coverage on homeowners, and that's just kind of throughout the entire year. Where you'll get different seasonality is when we bring on a new account is – you'll have a bump of multiple months of revenue through a transition when you've got to get letters back out to the homeowners. So that's the only thing that really causes, I wouldn't call that seasonality. That's just you're onboarding a new account. You'll pick up an extra two or three months of revenue, and then when you make a lap, you lose it on comparability. But that's just kind of how the business works in there.

Okay. Got it. Well, I appreciate the color. Thanks, guys.

Yeah, thank you. Mm-hmm.

One moment for our next question. Our next question comes from Brian Meredith with UBS. Your line is open.

Yeah, thanks. A couple of them here for you. First one, I know there's some legislation actually in Florida trying to turn back some of the reforms that happened. I'm not sure if you got any updates on where that is, and do you think that may reverse the course of kind of the pricing pressure that we're seeing right now?

The answer to the question is, We know that there is not a lot of interest in the state Senate or in the governor's office to have proposed legislation as written implemented.

Good. That's helpful. Thanks. And then the second question, I was just wondering, MGA business, I'm just curious, right now it appears that carriers are you know, have a lot of demand and appetite for MGA type business. I'm curious what your outlook is for the MGA business. Do you think that, you know, is continuing, you know, here for a while? Or do you think maybe we start to see some of that slow at some point from a carrier appetite perspective, particularly with some of the big rate reductions we're seeing and call it E&S property and stuff?

Yeah, so I think, let's back up, Brad, and talk about why there is that interest in the MGA business. I think it's a combination of things. Number one, the carriers believe it's a way for them to get large chunks of premium potentially if someone moves a program to them. So there's an appeal of that in terms of trying to grow their business. That's number one. Number two, the quality of the underwriting in a number of the MGAs is quite good. And so the days, you know, if you go back 15 years ago, the carriers viewed the underwriting or MGA space as a little bit like the Wild West. And they were cowboys and maybe not as detailed or the data was not as good. And today, the carriers don't support cowboys. They actually cut them off. And so, you know, you have to have a system, a process that works. You've got to show good results over time. You know, it's more of a true partnership. So do I think there will be a decreased interest in MGAs from carriers in the near to intermediate term No, I think it would be the contrary. As it relates to pressure on rates, depending on the line of business, I think that they will mirror the market and in some instances be more pronounced on the market. And it just depends because if you've got a casualty program for liability on law enforcement officials, that could have upward pressure versus cat property versus an automobile program versus a contractor program. So it's very program specific. And as it relates to us, you know, we feel really good about our MGA, MGU business because it's so diversified. And people recognize, go ahead. Sorry, Brad.

No, that was good. Keep going. I'm sorry.

No, I mean, I just think the carriers recognize quality, and they want to associate with people that can actually bring them quality business and have an appropriate partnership over a long period of time.

Makes sense. Thank you.

Thanks, Brian. Thank you. One moment for our next question. Our next question comes from Elise Greenspan with Wells Fargo. Your line is open.

Hi, thanks. Good morning. My first question is just on the margin outlook. I know last year you guys, last quarter, sorry, you guys said you were looking for, you know, margins to be roughly flat in 25 versus 24. I was just hoping you can comment, you know, where, how Q1 shook out, you know, relative to expectations. I know there were some pushes and pulls with the segments, the quintus seasonality, et cetera, and And what's your current view for your full year margin and how that might have changed over the last three months?

So good morning, Elise. And it hasn't changed. It's exactly what we described in the Q4 call. It would be a little bit higher in Q1, which was met our expectations. And you have the um expense you know uh more loaded in q2 three and four in quintess as an example but we don't have a modification and quite honestly we are very pleased with our margin um and so yeah we feel good about it and i hope you do actually yes thanks um and then my second question um is on um

just retail, right? You know, you guys had guided to the Q1 being about 1% lower than the full year, which, you know, based on the prepared commentary, it sounds like it was in line with expectations. You know, obviously, you know, as you pointed out, you know, there's just some uncertainty with tariffs, et cetera, right now. You know, just based on, you know, how you see, you know, everything developing and It sounds like you guys still think, right, the full year could be around 5%, maybe a little bit above, given what you had highlighted with the Q1. I was hoping you could just expand upon that as well, Powell.

Okay, Elise. So let's go back to we're very consistent at Brown & Brown. You may not like the consistency, but we're consistent, and we say it's a low- to mid-single-digit organic growth business. And so we have not changed our position on the growth guidance, even though we really don't give growth guidance. We had to give you that in Q1. We are very pleased with the way retail is performing because of the breadth of our capabilities and our market relationships. And I find it interesting, Elise, if I may take a moment, that there are some people out there that thought 6.5% organic growth was not that good, a quarter. And I'm surprised because we think it's a good quarter. And if you think about historically, which what people are saying is there is a movement back to more traditional organic growth levels. And as you've seen by the other firms that you cover, it seems to be occurring that I think it's an interesting perspective. And so, you know, depending on who you are, and in your case, you didn't see it exactly the way we did this quarter, but we feel good, not only about retail, but about wholesale and programs. And we also feel good about the rest of the year.

Yeah, if you would, this morning's Andy here. If you go back to our prepared comments, the thing that we said inside of there is, We're not seeing the buyers of insurance materially change their level of investments at this stage. Doesn't mean that things can't go positive or negative on that one, but we still feel good with the backdrop right now and continue, honestly, from where we were three months ago to now, we're not materially changing our outlook.

Okay, that's helpful. Thanks, both. Thank you. Thank you both.

One moment for our next question. Our next question comes from Mark Hughes, Latrua Securities. Your line is open.

Yeah, thanks. Just a couple quick ones on property. I think your non-CAT property pricing description was flat at 5%. I think that's pretty consistent with 4Q. Do you think is non-CAT property at a pretty good equilibrium? Do you think it stays at this level?

I think, Mark, that's hard to tell right now, and the reason I say that is although there's not as much chaos in that segment right now, that assumes that we have maybe a light hurricane season. If we have an active hurricane season where there's landfall and significant damage, I do believe that that definitely impacts standard market pricing. The other thing is let's not lose sight of there are other areas that are dealing with things that maybe we don't talk as much about, i.e., hailstorms and tornadoes in places where deductibles are changing very significantly. And just I know it's obvious, but the wildfire exposure and just fires in general, and so You have all these dynamics that are going on at once. And so the long-winded answer of saying hard to say, I think it's probably pretty good right now, but we are in a wait and see relative to the storms this year. And those are across all segments, wind, hail, tornadoes, fire, etc.,

Very good. And then on the cap property, in your experience, you talked about how it runs up and then it runs back down. Would it usually be kind of one and done? You get that down 30 or what have you, and that tends to stabilize? Or do you think that's a multi-year process? You get a decrease this year and then maybe it decreases next year as well. What would your experience be?

So let's back up and say that this particular period of time has been different than in the past. So historically, I would think that it would go up for one or two years and then come down for one or two years or a little more, and then it would sort of kind of do its thing. In this case, we went up for an extended period of time, let's say it was five years, and the pricing as you know, typically is never exactly perfect. So those cap prices, if you looked at them, actuarially are probably a little higher, you know, in some cases than they should be. And as a result, there's going to be downward pressure this year. And then the question is, what happens if there's a storm or not? If there is not an active storm season, We will see additional pressure next year. If there is a storm, then that changes that statement. But I don't believe that it will go down as rapidly for as many years as it has gone up. That is an important distinction because there is some level of discipline. I just don't know where that floor is. And so it's a very interesting time. And it's opportunistic. And once again, it depends on the hurricane season, which, by the way, starts in just over a month.

Very helpful.

Thank you. Thanks, Mark. We're going to have two more questions, if we can. One moment.

Our next question comes from Alex Scott with Barclays. Your line is open.

Hey, good morning. The question I had for you is on this dynamic between some of the large end of the market pricing trends we're seeing versus, I'd say, more stable or still increasing. It's the small to medium end of the market. And I was just interested in your perspective on that. From your viewpoint, what's driving, I'd say, what's seemingly one of the bigger divergences that we've seen there? How would you characterize Brown's sort of exposure to those trends over the next couple of years if they persist?

Okay, so we, as I like to describe our firm, we are a truly middle and upper middle market business. That is the vast majority. We have a good SME book, and we do have some very large accounts, too. and we're very strategic about how we work with those customers. So, Alex, what I think you're referring to is this. Let's paint the backdrop. Number one, the most competitive environment on a rate standpoint per unit typically is in the largest accounts. And as a result, the large account space historically has not made much money for the insurance carriers. These are broad generalizations. Conversely, on the lower end, the SME end and the middle market has been more profitable because the rates, if you look at the rate of a similar business in the very large account space and one in a smaller unit or smaller business, That rate is going to be a little bit higher. And the performance on those accounts historically has been substantially better. So the carriers write and want to write that very profitable business. So having said that, remember the very large accounts in many instances are on fees. So it's not driven by commissions. where small, medium, and upper middle market accounts are typically on commissions. So if you were going to paint that picture, and we'll just compare it to cat property, if you get paid a commission on something that pays $100,000, and this year it's $70,000, then your revenue goes down. Conversely, if they pay $7 million, and it goes from seven to six, your fee, at many instances, stays the same So your revenue is generally the same. Does that answer your question, Alex?

Yep, that's very helpful. My other questions were answered, so thank you.

Thank you, Alex. We'll take one more.

One moment. Our next question comes from our shields with KBW. Your line is open.

Great. Thanks so much for fitting me in. I just want to check in now that this is becoming more relevant, whether you're seeing a difference in economic growth expectations from clients outside of the U.S. as you are domestically.

I think there's more questions about growth overseas than we find here in the United States. That's a very broad statement, but... I think it would be moderated slightly, and I think it depends on where you are.

We're not seeing anything that is like this material change in outlook. I think back to Elise's comment, and we said in the markets in which we participate, I mean, in Europe, we're primarily in England and Netherlands and Ireland are the major markets for us, and the backdrop there is still good. It doesn't mean there's not some pockets here and there, but there's pockets everywhere. There's pockets up in Canada, et cetera. But no changes materially on that front.

Okay, perfect. Thank you very much.

Thank you.

Okay. Go ahead, Kevin. No, I was just going to turn the call back to you, pal, so you can go ahead with your closing remarks.

Yep. Thank you all very much. As we said, I think we had a really – we feel we had a really good quarter and are excited about Q2 and beyond. Hope you all have a wonderful day, and thank you for your time.

Bye. Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.