BROWN & BROWN, INC. Q2 FY2025 earnings call

• Acquisition of Accession: Substantially all approvals with 8/1 close expected, successful equity and debt issuances, and integration plans underway. - Financial Results: $1.3 billion revenue, 9.1% growth, 3.6% organic growth, adjusted EBITDAC margin 36.7%, adjusted earnings per share $1.03, 15 acquisitions with $22M annual revenue. - Insurance Market: Rates moderated, classic softening signs, admitted P&C rates moderating, cat property rates down, casualty rate increases, E&S property rates down 15-30%. - M&A: 29 acquisitions YTD with ~$60M annual revenue.

Retail delivered organic growth of 3% with total revenues growing 7.9%, EBITDAC margin decreasing by 50 basis points to 27.5%. Programs had 4.6% organic growth, total revenues increased 6.1%, and EBITDAC margin expanded by 320 basis points to 52.8%. Wholesale Brokerage had total revenues increase 14.5% with organic growth of 3.9%, and EBITDAC margin increased by 80 basis points to 34.1%.

• Anticipate 8/1 close of Accession acquisition. - Expect admitted rates to continue moderating in the second half, cat property rates to decrease in Q3/Q4, and Casualty and Professional Liability rate changes similar to Q2. - Plan to combine Programs and Wholesale segments into Specialty Distribution starting Q3.

• Insurance market rate fluctuations and competition. - Uncertainties in economic factors like tariffs and interest rates. - Integration challenges related to the Accession acquisition.

Q: When you think about the Retail organic in the quarter, you had talked last quarter about maybe some timing of new business. In this quarter, you talked about a strong pipeline, but likewise with some fluctuations on a quarterly basis. Could you expand on that? What fluctuations there might have been? How is that shaping up for 3Q?

A: Sure. Based on the consensus of what we were going to grow in Q2 in Retail versus what we delivered, over half that discrepancy was because of rates, so downward pressure on rates. The other half is we basically just had lower new business in the quarter. And so sometimes that can happen. And as I said, I feel like -- I feel that we have good new business going into the third quarter, but it -- every quarter is a little different, and our visibility into it seems to indicate that we are in good shape for Q3. But I just want to make sure that everybody understood that over -- more than half the discrepancy was because of rate pressure.

Q: Yes, I just wanted to ask on the contingents, some strong growth in the contingent commissions there. Just curious, is there a theme? Or is that more driven by certain products?

A: Rob, I think probably a couple of themes on that front is I think what we're seeing, at least in number of areas in our business is that overall profitability, right, for a number of the carriers is up and also for a number of our programs, they're performing really well. So we're participating in the profits that underpin those. So again, maybe just a piece to keep in mind is when you see the organic growth at times starting to moderate down, the other side of that is also generally an increase in the contingent commissions. That's why we focus so much on growth in the cash because of all of that -- that's why we also look at it on a total revenue basis because there is a linkage inside of there. But overall, we feel really good with how we're performing on the contingent commissions. In the Program space, it's one of the things that we really pride ourselves on is the discipline of our underwriting and making sure that we're delivering really good results back for our carrier partners.

Q: So I guess for my question, I'm going to focus on Accession, the strategies and 180. I guess since you've had some time to look at the business in a lot greater detail, I know you said, Powell, that you're excited, but I'm curious about your perspective on the financials. I know you previously had mentioned out some integration expenses, revenue synergies, expense synergies, et cetera. I'm wondering if you have any visibility on how the timing of those costs and synergies might be realized over the next couple of years? And related to that, just the Retail -- the organic profile of the business, in particular, 180, I'm curious what your perspectives are on the business since you've had some more time to look at it.

A: Greg, so first off, as it relates to the numbers that we talked about in the announcement and the revenue and expense synergies, we talked about capturing those over the next 3.5 years. So nothing's changed on that from what we talked about in the previous call. As it relates to the 2 businesses, risk strategies and 180, I would make this comment. Number one, we have been very impressed with the talent inside both of the organizations. So they do have deep specializations and very talented people, and that's very nice. I've met a lot of them now or talked to a lot of them, which I can confirm that, that is absolutely true. As it relates to 180, not unlike our program facilities, they have a deep commitment to underwriting and they have more of a casualty book of business than a property-driven or cat heavy book of business. And some of those are tougher classes of business, meaning transportation and some other things. And so I continue to be very, very impressed with the discipline and the people in those businesses. And we believe that, as I think we said the last time, that their growth profile is substantially similar to ours over time. And so we feel really good about the business, overall, individual divisions, the whole deal. We're excited about it.