Brown & Brown(BRO) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported total revenues of $1.6 billion for the third quarter, representing a growth of 35.4% year-over-year and 3.5% organic growth [6][15] - Adjusted EBITDA margin improved by 170 basis points to 36.6%, and adjusted earnings per share increased over 15% to $1.05 [6][15] - Income before income taxes rose by 34%, and EBITDA grew by 41.8% [15] Business Line Data and Key Metrics Changes - The Retail segment achieved total revenue growth of 37.8%, with organic growth at 2.7% [16] - Specialty distribution segment grew total revenues by 30%, with organic growth of 4.6% [18] - The impact of acquisitions, particularly AssuredPartners, contributed significantly to revenue growth, with AssuredPartners generating approximately $285 million in total revenue for the stub period [14][16] Market Data and Key Metrics Changes - Commercial insurance pricing remained stable, with rates for most lines similar to the previous quarter [7][8] - Medical costs increased by 6% to 8%, while pharmacy costs rose over 10% [7] - Workers' compensation rates were flat to down 3%, and casualty rates saw increases of 5% to 10% [8][9] Company Strategy and Development Direction - The company aims to enhance its solutions and value to customers through leadership changes and strategic acquisitions [4][5] - The Board of Directors raised the dividend by 10% and expanded share repurchase authorization to $1.5 billion, indicating a focus on shareholder value [5] - The company is actively pursuing M&A opportunities that align culturally and financially, with a strong pipeline domestically and internationally [25] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about economic growth remaining stable, with decreasing interest rates and a growing customer base [23] - The company anticipates similar pricing trends in the admitted market and expects continued upward pressure on casualty lines [24] - Management noted that the organic growth for retail is expected to remain stable, with potential headwinds from employee benefits incentives [16][39] Other Important Information - The company generated $1 billion in cash flow from operations in the first nine months of 2025, a 24% increase compared to the same period in 2024 [20] - The effective tax rate for the quarter was 24.7%, consistent with the prior year [16] - The company expects Q4 revenues for AssuredPartners to be in the range of $430 to $450 million [21] Q&A Session Summary Question: Relationship of organic growth to EBITDA margins - Management clarified that organic growth is just one component of margin drivers and should not be directly correlated with margins [29][30] Question: Impact of government shutdown on business - Management acknowledged some businesses are impacted, particularly in specialty and retail segments, but expect revenue to catch up over time [31][32] Question: Retail organic growth impact - Management explained the 1% impact on organic growth was due to adjustments in employee benefits incentives [35][36] Question: Future of admitted vs. E&S market - Management indicated that while there may be some movement from E&S back to admitted markets, the E&S market continues to grow [42] Question: Property renewal rates outlook - Management expects property renewal rates to remain similar, with potential for some markets to become more aggressive at year-end [53][54] Question: Technology investments - Management discussed ongoing investments in technology to enhance customer experience and operational efficiency [81][82]