Brown & Brown(US:BRO)2024-01-23 16:52Financial Data and Key Metrics Changes - The company reported a full year revenue of over $4 billion, achieving a 10.2% organic revenue growth and nearly $1.5 billion of adjusted EBITDAC [9][19] - Adjusted diluted net income per share increased by 16% from the previous year to $0.58, with an adjusted effective tax rate of 23.9%, down from the previous year [14][19] - EBITDAC margin expanded to 27%, driven by leveraging the expense base, despite being partially offset by higher non-cash stock-based compensation [15][17] Business Line Data and Key Metrics Changes - The Program segment grew organically by 5.4% in Q4, despite higher flood claims revenue in the prior year [10] - Wholesale Brokerage experienced significant growth, with organic growth of 14.5% in Q4 and 12% for the year, driven by strong performance in delegated authority personal lines and open brokerage [11] - The Services segment saw a decline in organic revenue by 5.9% for the quarter, primarily due to external factors impacting advocacy businesses [39] Market Data and Key Metrics Changes - The admitted market rates increased by 5% to 10% for most lines, while CAT property rates were up 10% to 30% [34] - Professional liability and cyber coverage continued to soften compared to the previous year, with rate changes for professional liability ranging from slight increases to decreases of up to 20% [35] - The overall economic sentiment among customers was described as cautiously optimistic, with continued investment in their businesses, albeit at a slower rate than the previous year [8] Company Strategy and Development Direction - The company aims to leverage collective capabilities to deliver the best solutions for customers, focusing on M&A activity, having completed acquisitions with approximately $162 million in annual revenue [6][32] - The company plans to enhance existing capabilities and add new ones both domestically and internationally, with a strong pipeline for future acquisitions [25][32] - The company is transitioning from four to three segments (Retail, Programs, and Wholesale Brokerage) following the divestiture of certain businesses [22] Management's Comments on Operating Environment and Future Outlook - Management anticipates continued moderation of inflation, which is expected to drive consumer demand for products and services [24] - The company expects contingent commissions to be relatively flat to down year-over-year, influenced by loss experience [20] - Management expressed confidence in the company's position and momentum heading into 2024, with a goal of reaching $8 billion in annual revenues [70] Other Important Information - The company generated over $1 billion in cash flow from operations, growing 14.5% over the prior year, with a strong cash flow ratio of approximately 24% [47] - Adjusted EBITDAC margin for the quarter was 31%, slightly decreasing compared to the previous year due to a one-time reinsurance policy change [41] - The company will modify its non-GAAP adjusted measures to exclude the impact of noncash intangible asset amortization for consistency with other public brokers [23] Q&A Session Summary Question: Will margins increase with the divestiture of businesses? - Management indicated that margins may improve but did not provide a definitive answer [71] Question: How will the change in reinsurance costs impact expected losses? - Management clarified that while the reinsurance change incurs a cost, it limits P&L exposure and is expected to drive incremental organic growth [78][79] Question: How impactful were international deals completed in 2022? - Management expressed satisfaction with the performance of international businesses, which met or exceeded expectations [80] Question: What is the outlook for investment income next year? - Management did not provide a specific outlook for investment income, citing uncertainty in interest rates [146] Question: How is the company addressing the shift of catastrophe-exposed property business? - Management noted that there is a continued flow of business from admitted markets to the E&S market, which is expected to persist [130]