Q2 2021 Brown & Brown Inc Earnings Call
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From contained in the slide presentation posted in connection with this call and executing on just give in response to your questions may relate to future results and events or otherwise be forward looking in nature.
Such statements reflect our current views with respect to future events, including those relating to the company's anticipated financial results for the second.
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Actual results or events in the future. They are subject to a number of risks and uncertainties and may differ materially from those currently anticipated or desired or referenced in any forward looking statements made as a result of a number of factors such factors.
Factors include the Companys determination as it finalizes its financial results for the second 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 on a Saturday is identified.
Second called time to time in the Companys reports filed with the Securities and Exchange Commission additional discussion of these and other factors affecting the companys business and prospects as well as additional information regarding forward looking statements is contained in the slide presentation posted in connection with this call and then at the Companys filings with 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 on the Investor presentation for this call on the Companys website at Www Dot BB insurance dot com by clicking on Investor Relations and then calendar of events.
With that said I will now hand, the call over to Powell Brown, President and Chief Executive Officer, you may begin.
Thank you Mary Ann Good morning, everyone.
Everyone and thank you for joining us on our second quarter 'twenty..1 earnings call Q2 was a very strong quarter and it's the best in the history of Brown <unk> Brown our performance for the first 6 months of 2021 is due to the tremendous effort of our talented 11000, plus teammates that deliver creative risk management.
From solutions for our customers each of our segments delivered impressive results with strong top and bottom line growth due to more new business. Good customer retention increased premium rates across most lines of cut lines of coverage and higher exposure units driven by continued economic expansion. These results reflect.
Strength and diversity of our operating model as well as the power of a performance based culture now, let's transition to the results for the quarter I'm on slide number 3 we.
We delivered $727 million of revenue growing 21, 5% in total and 14, 7% organically. This.
This is the strongest.
This growth that we've ever delivered I'll get into more detail in a few minutes about the performance of our segments. Our EBITDA margin was 32.9, which is up 340 basis points from the second quarter of 2020, our net income per share for the second quarter was 49 cents, increasing 44% on an as reported.
Organic and adjusted basis with the latter excluding the change in estimated acquisition earn out payables during the quarter, we completed 2 acquisitions and we'd like to extend a warm welcome to all of our new teammates that joined during the quarter.
In summary, we're very pleased with our strong performance and believe we are well positioned to continue delivering.
Or do you think class solutions for our customers later in the presentation, Andy will discuss our financial results in more detail I'm on slide 4 let's start with the economy and what we saw during the quarter as companies continue to reopen and strengthen business confidence is improving however, not all companies are backing.
<unk> <unk> percent and we continue to hear about struggles with certain customer segments and hiring workers. We think this will work itself out over the coming months and quarters, but these open roles are serving as a bit of a governor on the speed of recovery.
Due to this uncertainty customers remain very focused on their insurance.
At 100 spend and therefore, managing their deductibles and aggregate limits.
Rates were generally in line with what we experienced in the first quarter. However, we started to see some moderation.
2 the level of increases in certain admitted and non admitted lines certain customers.
<unk> industries with high losses remain.
Placement challenge. However, we continue to see carriers seeking higher rate increases on renewal business, while quoting at or below expiring rates for new business of a similar risk profile.
Admitted rates continuing to be up 3.7 percentage.
<unk> and Ross most lines, the outliers or workers' compensation rates, which remain down 1% to 3% and commercial auto rates, which were up 5% to 10%.
From an E&S perspective, most rates are up 10% to 20% coastal property, both wind and quake or up 15% to 25% However, near the end of the quarter.
Percent accretive to see less upward pressure on <unk>.
Less upward rate pressure on renewals.
Professional liability for most accounts remains challenging the spec market in particular professional liability rates are generally up 10% to 25% cyber rates are generally up 10% to 20 plus percent.
<unk> with increased underwriting questions on some reduction in coverage availability.
Also excess umbrella coverage remains very difficult to place for both of these lines, we're seeing carriers reduce overall limits while seat seeking significant rate increases.
In the E&S space, California, and Florida personal lines.
Continues to be the most challenging the appetite for personal lines in cat areas will continue to be constrained through at least the end of 'twenty 1.
From an M&A perspective, we closed 2 transactions during the quarter with annual revenues of approximately $11 million our pipeline remains full and we feel good about the level of activity.
Treatment with prospective sellers slide 5 let's discuss the performance of our force segments.
Retail delivered an outstanding organic growth of 17, 6% for the second quarter. The performance was driven by growth across all lines of business and most customer segments through a combination.
On a strong new business, good retention rate increases and higher exposure units as a result of economic of the economic recovery Nash.
National programs grew 13, 3% organically delivering another great quarter.
Our growth was driven by strong performance from most programs due to robust new business, good retention and rate increases.
Engage the wholesale brokerage segment delivered a solid quarter with 12, 3% organic growth brokerage continues to perform very well delivering strong growth in new business and realizing continued rate increases for most lines of coverage binding authority had a good quarter driven by new business and continued economic recovery and personal lines in California.
Florida remains very difficult to place and we don't expect carrier appetite to change in the second half of the year.
The services segment had a good quarter and delivered organic revenue growth of 4.6%, primarily driven by claims processing revenue growth for the quarter was partially offset by continued.
On the senior headwinds within the advocacy businesses.
Primarily the social security space overall is very strong quarter across the board now let me turn it over to Andy to discuss our financial performance in more detail. Thanks, Paul Good morning, everybody like previous quarters, we will discuss our GAAP results certain non-GAAP.
GAAP financial highlights.
We're on slide number 6 for the second quarter, we delivered total revenue growth of $128.5 million.
We're 21, 5% and organic revenue growth of 14, 7%.
EBITDA increased by 35, 4%, which expanded EBITDA.
EBITDA margin by 340 basis points, despite lower margin associated with certain acquisitions completed in the past few quarters and slightly higher travel costs.
On the EBITDA growth was driven by the continued leveraging of our expense base and lower noncash stock based.
Patient.
Income before income taxes increased by 44, 44% growing faster than EBITDA due to a lower growth rate in amortization and interest expense as well as a decrease in acquisition earn out payables.
Net income increased by $42.5 million.
For 43, 9% on our diluted net income per share increased by 44, 1% to 49.
The effective tax rate for the second quarter of this year and last year was 25, 2%.
We continue to anticipate our full year effective tax rate for 2020.
Competence on will be in the 23% to 24% range.
Our weighted average number of shares increased slightly compared to the prior year and our dividends per share increased to 9.3 or 9.4% compared to the second quarter of 2020.
We're over on slide number 7.
This slide presents our results after the adjustment to remove the change in estimated acquisition earn out payables for both years for the second quarter of this year and last year. The impact was minimal with the adjusted and as reported diluted net income per share of <unk> 49.
Growing 44, 1% over the prior.
Year.
Moving over to slide number 8 this slide presents the key components of our revenue performance for the quarter, our total commissions and fees increased by 21, 3% and our contingent commissions in GSC increased by 2.2% organic revenue, which excludes the net impact.
M&A activity and changes in foreign exchange rates increased by 14, 7%.
Over to slide number 9.
The retail segment delivered total revenue growth of 28, 3% driven by acquisition activity over the past 12 months and organic revenue growth of 17.
<unk> of X percent, which was driven by growth across all lines of business organic growth for the quarter was positively impacted by approximately 300 basis points due to the $8 million adjustment recorded in the second quarter of last year for the economic disruption associated with the pandemic.
EBITDA margin.
Margin for the quarter increased by 510 basis points and EBITDA grew 55, 1% due to the leveraging of higher organic revenue along with a gain on disposal associated with the sale of certain books of business the.
The growth was partially offset by recent acquisitions that have mark.
<unk> lower than the average higher noncash stock based compensation and slightly higher travel costs.
Income before income tax margin increased 580 basis points growing faster than EBITDA, driven primarily by amortization and intercompany interest expense growing at a slower.
Lower rate than EBITDA.
Rover on a slide number 10.
Our national programs segment increased total revenue by 14% and organic revenue by 13, 3%.
Regarding outlook for the last 2 quarters of 2021, we wanted to highlight that we anticipate approximately 4.
$6 million of revenue shifting from the third quarter to the fourth quarter due to renewal timing for certain accounts.
EBITDA increased by $7.9 million or 12, 6% growing slightly slower than total revenue due to incremental costs associated with onboarding.
New customers increased non cash stock based compensation and slightly higher variable cost.
Income before income taxes increased by $18.4 million or 38% growing faster than EBITDA, primarily due to lower estimated acquisition earn outs payable and lower.
Intercompany interest expense.
Over to slide number 11.
The wholesale brokerage segment delivered total revenue growth of 17, 7% driven by acquisitions in the past 12 months and organic revenue growth of 12, 3%.
EBITDA grew by 19, 1% with a margin increase of.
Basis points, even with lower guaranteed supplemental commissions slightly higher variable operating expenses and incremental noncash stock based compensation.
Income before income taxes grew by 6.9%, which was slower than total revenue growth, primarily due to higher intercompany interest expense.
And the change in estimated acquisition earn out payables.
Over on Slide 12, our services segment increased total revenue and organic revenue by 4.6% regarding outlook, we anticipate organic revenue growth to be flat or down slightly from the second half of the year due to continued.
<unk> and processing claims by the social Security administration.
For the quarter EBITDA grew by 9.8% driven primarily by leveraging organic revenue growth income before income taxes increased by 19, 8%.
Faster than EBITDA due to lower intercompany interest expense and amortization.
Amortization.
Few comments regarding liquidity and cash conversion for the quarter.
We experienced another strong quarter of cash flow generation and have delivered $466 million of cash flow from operations through the first 6 months of 2021 growing $50 million or 12%.
<unk> as compared to the first 6 months of 2020, our ratio of cash flow from operations as a percentage of total revenue remained strong at 32% for the.
For 6 months.
For the first 6 months of 2021 with the combination of our cash generation and capital available.
We are well positioned to fund continued growth with that let me turn it back over to Powell for closing comments. Thank you Andy Great report from an economic standpoint, we continue to believe the economy will improve over the coming quarters. This should drive increased confidence among business owners and how they invest in their companies.
All those items, we believe will impact the speed and trajectory of the economy are in no particular order 1 the ability to hire workers in certain industries to supply chain issues that continue to constrain production in sales 3 the spread of and response to the Delta variant and for the.
The impact of inflation, how these play out will influence the bumps on the road to recovery.
At this stage, we believe there should be further economic improvement throughout the remainder of 'twenty, 1 and into 2022.
But not at the same pace experienced in the second quarter as a result, we anticipate some moderation of our organic revenue growth during.
On the back half of the year compared to what we delivered in the first half.
As it relates to the underwriting process, we continue to anticipate our carrier partners to be competitive for new business and accounts with low losses. We also expressed expect rate increases will be fairly similar to the first half of the year.
<unk> with maybe some moderation.
From an M&A perspective, we believe the market will remain very active there are a lot of companies looking to do transactions and we feel that we are well positioned with a good pipeline to attract great companies to join the Brown <unk> Brown team. We will continue to follow our disciplined approach of focusing on culture and financial.
Financial alignment as these have been the key to our long term success and delivering shareholder value.
We've been talking over the last few earnings calls about our technology initiatives and how these are advancing we're very pleased with our progress on the teams are doing a great job. Our holistic focus is to improve the experience for our customers.
With your partners and teammates to achieve this goal we have prioritized the following areas.
Optimize and enhance our utilization of data and analytics.
Expand our digital delivery capabilities around products and services and engage in initiatives designed to drive greater efficiency and velocity through our underwriting process.
<unk> cash.
In summary, we couldnt be happier with the financial performance of the second quarter and the first half of the year. The results are just outstanding.
Our team is doing an incredible job of leveraging our wide ranging capabilities to win new customers and retain our existing customers. We are well positioned to continue delivering.
<unk> profitable growth with that now let me turn it back over to Marion for Q&A.
Thank you if you would like to ask a question. Please press star 1 on your telephone keypad. Please ensure the mute function on your phone is switched off and on your signal to reach our equipment.
If you find your question <unk>.
And good third you may remove yourself from the queue by pressing star too, but again, please press star 1 to ask a question.
We will take the first question from Greg Peters from Raymond James.
Good morning, everyone.
<unk>.
And congratulations on a strong quarter.
Before I ask a question about.
Your results probably worthwhile to get.
You guys to weigh in on what you perceive might be the opportunities and headwinds from the fall back from.
On the fact that day on Willis towers Watson merger has been cancelled.
Good morning, Greg and thank you for the comment.
Number 1.
I would say that we were probably surprised like many people.
And.
And the fact that it was not able to come to some sort of conclusion with the Doj.
Having gone on that long.
Apprised us.
Anytime you have a transaction of that size that is in any industry that fails to go forward, there's going to be change.
<unk> organization some people.
May decide they want to be on different teams.
They may decide to go on different direction with different businesses Theres all kinds of scenarios.
But from a standpoint of our focus is on our existing customer base and the new customers that we can.
<unk> and bring on to our team and the way you do that is through high quality talented people that we have 11000, plus today and we're on our way to the next level on the next level.
So I would tell you that we're always looking for good people and we're always looking at.
Talking to new prospects and so.
Disruption creates an opportunity, but like I said.
Wish ill will on anybody and.
That was a very unusual dynamic that surprised us.
Alright.
Switching to your results.
On the organic revenue.
Can results you commented about the.
The the balance between rate new business et cetera, I was wondering if you could give us some more color specifically as it relates to retail on how much is it new business versus how much of his existing customers just coming back online getting back up and.
Revenue et cetera, if you give some additional color on that that'd be helpful.
Right. Thanks for the question, Greg as you know, we don't give that level of detail.
And I know, that's what everybody wants.
But what I would tell you is we are writing a lot of new business.
Period, we.
Running have some customers that are coming back online.
It's helpful. You have in some instances rate increases you also have remember certain industries that are not coming back online. So I don't want to give you the impression that every industry is coming back online.
Do hang on at the same rate and speed as every other industry and so the.
The restaurant business is just 1 perfect example, but.
I would tell you that we are very pleased with.
Our retention of our existing cut.
Customers and the amount of new business that we're writing across the system in all of our divisions.
Got it.
I guess the final question I'll ask is on free cash flow conversion rate of.
In excess of 30% is well above what your annual run rate.
It usually is.
Are you anticipating that the back half is going to be lower to bring down the average for the full year.
And maybe you can talk about.
Some of the nuances that has driven the free cash flow result that you've reported this first 6 months.
Good morning, Greg It's Andy.
The so I guess I'll take your question into 2 pieces.
Let's talk about the first 6 months of the of the year. So on a as reported basis, we're at the $30 to $28.3 last year.
And keep in mind last year.
As part of the pandemic a lot all companies to defer their tax payments. So we had talked about fact that we had a $50 million deferral of taxes last year into the third quarter. So.
Further demonstrates.
And what a great first 6 months of this year that we had that is primarily driven out of the incremental margins and the growth that we've had in the first 6 months of the year, we manage our working capital very tightly have always for many years.
As it relates to the back end of the year.
The phasing of the business between the first and second half of the year, but we would still anticipate it being.
Good.
Got it thanks for the answers.
Thank.
<unk>.
The next question comes from Phil Stefano from Deutsche Bank.
Yes. Thanks.
Good morning, I was hoping we can revisit the programs business.
Can you talk a little bit about what drives the continued acceleration America Inc.
You typically call out on a few items, where I think I missed out on the opening remarks.
So from quarter.
We didn't really call it out Phil from a standpoint of we had a lot of strong performance across all of our programs businesses.
I think in the past, we've obviously called out things that have cat exposure and those businesses continue to perform well but.
It's not exclusive to those businesses.
We would just tell you that the entire segment performed really well in the quarter.
Okay, all right and so I feel like when we were talking about organic in the past there's been a bit.
Disparity between the halves.
But it was not.
What businesses have started to come back.
In listening to the opening remarks today it feels like business confidence is improving and maybe the haves and have nots is being shifted more so because of things like headwinds in hiring or.
Supply chain.
On the half as opposed to business confidence.
Is that a fair characterization that we have this shift.
And how should we think about this with the framework that you talked about moderation of organic in the back half of the year.
Yeah.
Thank you.
I think your statement Phil.
It is.
Okay.
True.
And kind of.
Just at face value the challenge with that is those people that experienced the toughest time during the downturn are going to have the longest memories.
Relative to the go forward and their confidence and thought process and reinvesting in their business. So.
I think that your assessment is correct.
Yes, I also think there are lots of people that are watching.
There is this great.
Desire to get.
And B, so called normal again, and yet now people are watching the delta variant spread very closely and how does that impact their business and they're hiring so I think that we are.
We're just trying to we think that the economic or the GDP.
Expansion in the second half of the year is going to slow down slightly it will not be like what it was in the second.
Quarter doesn't mean, it's going negative doesn't mean anything like that it just if you look at all the stuff that we're seeing it just moderates shows a moderation in the second half of the year, we agree with that.
And.
That's kind.
And answer to that.
Hey, Phil the only thing that we mentioned it bill the other thing we mentioned in our comments.
And this is as you're talking about the haves and have nots.
Have not so those industries that were most impacted over the past 15 to 18 months 1 of the areas.
How we where they are challenged and hopefully this again will work itself out over the coming quarters as their ability to hire workers.
And so that's just going to take a while for that to work itself through the system for them to get back in there and that's why we've made the comment about a little bit of a governor right now as to how quickly things can recover.
<unk> got it thank you.
Thank you.
The next question comes from Mark Hughes from <unk>. Please go ahead.
Yes. Thank you good morning.
Paul when you talked about.
I heard you say coastal you saw less upward pressure on renewals at the end of the quarter.
Did I hear that properly and then.
Got it and think have you talked about the Florida coastal still being difficult to place I think your description.
A description of the coastal property that you raised the upper bound.
Q2 versus <unk>.
Little more detail there would be great.
Sure. So my first comment was specifically directed at commercial properties not individual homeowners.
So what I'm, saying is is we're seeing a slight.
Tapering of the rate increases we saw in the.
As part of the second quarter, the comment about California and Florida.
Personal lines homeowners and particularly certain segments of those personal personal lines markets. So they can be older homes, they could be lower value homes, they could be frame construction.
The loans and in California case, it could be anything in a brush fire area.
All of those type of things so.
What I would say is when you see that range Mark.
There could be still a slight wiggle in the range be it either the bottom or the top.
<unk> don't read too much into that in terms of we just kind of want you to know where the vast majority of those renewals are coming in and the point being is as we got down towards the end of June we started to see some renewals with slightly less rate pressure did not.
<unk> up but those are on commercial buildings.
Include a condo I mean, that's that's habitation all but not a standalone home loan book, If you had a home in Fort Lauderdale on home and Miami or wherever.
And then.
Any comment on employee.
Meaning how.
How did you see payrolls any particular consulting projects just the growth there versus the P&C.
We're very pleased with how our benefits business has performed this year and we continue to write a lot of new business.
<unk>.
Because it's an area obviously that it's very expensive it's complex it's utilized.
By the employees of the insured.
And.
We have continued to add capabilities in our benefits area and feel really good about it so.
Both segments performed really well on Q2, so it's not a.
It's not 1 over the other but as it specifically relates to your question.
That's how I would answer it.
Performing really nicely.
Okay.
And finally, our new business you've mentioned a couple of times and you say you don't break apart your AR growth drivers I understand that but is there. Some difference now is it a step function that theres more business out on the market and you're capturing share or is that.
That's good.
Strong, but more in line with historical.
I don't I don't think there is some thing going on dramatically different.
Today, but what I would say is this.
We were very pleased with our performance.
And then <unk>.
During the first wave of Covid and we were.
As I've said before I was very pleased at the amount of new business that we wrote over a video conference, where we weren't able to meet what the people in certain periods of time.
And those opportunities have.
Have continued to remain <unk> accelerate with people wanting to see us.
And so we're out talking to people all over the country.
And we just have some really cool opportunities and so I don't I don't think there is some I don't want to give you the impression that there is some.
Something different.
Different that's going on it's just we're executing really well.
Okay.
Thank you.
Okay.
The next question comes from Elyse Greenspan from Wells Fargo.
Hi, Good morning on my first question is.
On the margin side on.
Thank you guys.
Alright.
As expected flat to slightly up margins for the year.
Reaffirm net last quarter I believe but you guys are sitting after the first half of the year over just over 200 basis points of margin improvement. So can you just give us an update on how you think.
Thank God.
Margins will trend for the full year or how you think they'll trend on.
The second half of the year relative to the improvement you saw on the first half.
Good morning Elyse.
No. We had said we when we started the year on even through the first quarter flat to up slightly for the year.
And Youre right were up about 10% 210 basis points right now.
We feel good where we are for the year at this stage.
I think that depending upon how the back end of the year looks that we will have some margin improvement don't know exactly where that will come out.
We would not anticipate.
The same level of growth on a full year basis is what we saw on the first 6 months just because we know we're going to have some increase in our variable cost in the back end of the year again don't know exactly where those are going to land. We feel good about the back end of the year and probably have some some margin expansion, but don't expect it at the.
Same level as the first 6 months okay.
Yeah.
Okay. That's helpful.
And then my second question going back to the guidance.
From.
Maybe moderation in organic in the second half.
So I mean, we're sitting on I know, we only arent even folds well we've done.
So I, but have you guys seen a moderation.
In July relative to where things were trending in the second quarter.
And when you say moderation right you guys printed.
Really strong.
It came in at 12% right per the first half in terms of organic.
And so could we still be in the double digits in the second half of the year, even with some moderation.
So at least.
First of all thank you for recognizing the strong performance in the first half of the year. We appreciate that.
And so we're very pleased with 12, 1%.
Percent of organic growth.
Number 2.
Again as you know, we don't give organic growth guidance.
We have historically said that we're a low to mid single digit organic growth business in a steady state economy. Obviously, there are some unique dynamics that are going on right now in terms.
Turns of economic expansion and rates and some other things that are helping with that but we're executing our plan as well as we ever have so what I would say is this.
We would just ask you to think about the economic indicators.
<unk> that you see out there that we can see.
When we looked at <unk> decided to give that potential moderation in the second half of the year. So whether you look at GDP car sales whatever it is that you are looking at that May give you an idea of kind.
How were thinking around in the second half of the year, but we're not we're not going to give organic growth guidance in the second half.
Have you seen it Inc. How like I know, we're not even done with July but if you've seen anything on the data indicate things are slowing or is it more just like you said looking at economic.
Ohmic indicators and just thinking that things like flow as we move through the third quarter and in the fourth quarter as well.
At least you know that I couldnt answer that right now because that would be a forward looking statement I know I appreciate your interest, but we're not going to comment on July.
But we're.
Keep doing what we're doing.
Which you know we're going to we're going to continue to deliver for our existing customer base and we're writing a lot of new business.
And you know we've said that we think there could be some rate moderation in the second half of the year don't think it's going to be enormous but it could.
It absolutely is going to happen in our opinion.
And we're going to continue to invest in the business by looking for acquisitions that fit culturally make sense financially.
But yeah, we haven't we're not going to comment on what we've seen in the first part of July.
Yes, it will lead to a couple other things just to keep in mind.
As youre thinking about the back end of the year.
Versus the first half of the year.
Keep in mind that we have we have a higher weighting of employee benefits to the first half of the year and that grew very well force.
Very very pleased with the performance there the second and we were talking about this last year as.
Our lender placed business had just an outstanding 2020 <unk>.
Performing well again this year, but the year on year.
<unk> are going to be extremely challenging.
They probably realistically will not grow over or.
Or is the same amount they did last year. So thats just can make the second.
Half of the year, just more challenging to grow over that so just kind of keep those in mind as you're thinking about kind of waiting on the full year.
Okay.
Okay. That's helpful. Andy Thanks, Andy on Palo.
Thank you. Thank you.
The next question comes from Meyer Shields from J B W.
Okay.
Great. Thanks, good morning.
Let's take another whack from.
Sorry.
Second quarter organic was obviously very strong you're doing a lot of things right. Some of it is the environment and was hoping you could talk about how that's impacting.
M&A discussions.
Well.
Yeah, I think that I think the impact on M&A discussions. If there is something that is driving a discussion differently is the potential change in the tax laws as opposed to.
On the rate environment or the topping of.
The market or whatever the case may be.
So everybody sells and when they sell on why they seller for different reasons, but I would say that.
<unk>, a very common point that is raised and lots of discussions that doesn't mean, the reason, but a reason.
Is the concern that the tax structure.
Sure maybe differently.
Next year.
On businesses that will be sold and so on how is that going to be impacted.
In the U S tax structure so.
What I would say Meyer is this to your point.
We understand that.
It's a little bit of an environment and economic positive impact, but I do want to make sure that you remember that.
Growing at 14, 7% on a $2.6 billion trailing base.
Is it a pretty big number.
So I would.
I would like to make sure that you and everybody else out there listening understand that.
I wouldn't want anyone to take that for granted that is not easy.
It is something that we're very proud of.
And we've got a lot of we got a lot of things firing on all.
Their insurers, but just I would I would moderate that comment just a little bit.
<unk>.
No understood. That's very helpful. I guess, what I was trying to get.
On.
And then another.
The standard of is whether there are broader than normal differences in terms of future productivity.
Among.
Potential acquisitions like between.
Your perspective, and the potential sellers.
Well I think.
I think there is.
2 ways to look at that I think there are very high expectations of value and.
So on the interesting thing is how people.
Portray their business going forward, particularly if there's a business broker involved might be very optimistic so you have to.
Low form of a pro forma is not actual numbers.
So we.
We look closely at that that's how I would I would answer that question.
Okay.
That's helpful.
Also earlier you talked about the various.
Technology priorities going forward in terms of data and analytics et cetera from our perspective, where are we going to see that make the biggest difference.
From a revenue or margin sector.
Well, yes.
Here's the way I would tell you.
You aren't going to be able to see it.
In a REIT on a piece of paper and say huh, there's the deal what youre going to be able to see is we're going to implement technology.
We either bought or developed or both into our systems that make us more efficient and we're going to continue to invest in the business to grow the thing.
Quickly going forward. So what I would try to say is we're going to we're going to capture data, we're going to invest in the technology, we're going to make.
So that is easier for our teammates and our customers, but we're going to continue to reinvest in the business as well. So we said as someone said earlier that we were going to have incremental margin improvement in 2021, we've been very fortunate.
In the year to date so far.
<unk> thing and he talked about what we think we're going to see in terms of margins in the second half of the year, but it is part of a long term game plan to enable us to be more competitive.
And deliver for our customers, so youre not going to we're not going to be able to say here's your deal we're going to break it out.
Any line item, we're not going to do that.
We're just not going to do it but we are investing in it and it's important that you know that but at the end of the day, we're going to just have to apply that to our customers.
And they'll be able to see the benefits.
And mayor.
Cutting across all.
All of our segments. So again, you are not going to just see.
A retail or a wholesale jumped by excellent either top line. The bottom line, it's something thats, just going to naturally organically happen over time.
In all the segments, but it's 1 of the key priorities force.
Got.
On the line.
Thank you.
As a reminder to ask a question. Please press star 1 we'll now take our next question from Michael Phillips from Morgan Stanley.
Thanks, Good morning, everybody a bit of a follow up too.
Earlier comments on second half on margin and expenses I guess specifically.
On <unk>, we've heard some varying opinions on how that's going to play out from second half of the year. Just curious on your on your opinion, there or do we get back to <unk> by the end of the year or how does it look.
Yes.
It's Paul Michael and the answer is do I think we're going to get back to full <unk> by the end.
End of the year I think that that's unlikely.
But we're starting to see a ramp up because I can tell you our customers on our prospects want to see us.
And so we.
We are on airplanes and trains and automobiles a lot more today.
Then we have been and I only anticipate.
Increasing.
Okay. Thanks, and then 1 more for you I guess in the opening question on kind of a fallout from the.
The merger that didn't happen.
You mentioned opportunities on talent is what you were kind of alluding to I guess does that have other implications on just broader.
Pay divisions for the mix or the pace at all for industry M&A.
Okay.
Uh huh.
That's interesting I don't.
I don't.
Uh huh.
So I don't think so.
What I mean.
And so there'll be more demand for kind of middle market or lower M&A.
M&A big ones didn't happen.
Yes, I don't think so I think there's it's those are 2 independent things I think there is a demand in the insurance brokerage space for all sizes.
As you know that's number 1 number 2.
What you see certain firms.
Are interested in acquiring or building more than others large and on.
Upper middle market capabilities.
And that could.
Domestically or internationally for that matter and.
Some firms have tried to focus on hiring teams as you know from large brokers and moving them over historically, we havent done that we have hired people from other firms and we have acquired people and other organization.
Patients that had been at large firms before and so I think those are 2 independent things I do think that.
Any time you have.
Shakeup in something like this combined.
And by that with the.
The pandemic and the ongoing.
Issues around the pandemic I think you have still a lot of people that are evaluating.
Do I want to be part of this type of organization or whatever that is or do I want something a little different.
And.
That may create opportunity for entrepreneurial firms like ours Thats the way we look at it.
Okay. Thanks.
Andy Thanks services.
Thank you.
We'll now take the next question from Mark Hughes from <unk>. Please go ahead.
Yeah. Thank you just.
Detail, Andy you talked about the social security administration kind of slow rolling cleans.
Could you expand on the.
Yes.
We were talking about this last year and again, it's kind of a trend that we see that just happens over different cycles, where.
The social security administration will either accelerate the processing of a number of cases that we have submitted in there and they did that back in the debt.
It's kind of back into 17.18, a little bit of 19, then what happens is then they constrain the.
We're of.
Lawyers that they have and they're reviewing cases those slowdown.
Over time, and then it will kind of work back out you've probably seen the announcement that there the previous director is no longer with the administration and they're looking to put a new 1 and so that will again.
Cause some changes up there.
As the cycle will kind of work through it and then.
Hopefully the the amount that we've been submitting in there we will get processed over the coming year. It does take a while it just doesn't turn back on like a faucet overnight. We've got really good inflow into the business, we just can't.
Get the.
The output from SSA, and Thats, where we anticipate headwinds at least for the back end of the year and then we will have a view as to what it looks like for 'twenty 2 when we get some more.
Road covered.
Thank you.
Okay.
As there are no further questions I would like to.
Back over to your hosts for any additional or closing remarks.
Thank you all very much we look forward to talking to you. After our Q3 for our Q3 earnings call have a wonderful day and thank you bye bye.
Thank you that will conclude today's conference call. Thank you for your participation ladies and gentlemen, you may now disconnect.
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Yeah.
Yeah.
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