Q1 2023 Brown & Brown Inc. Earnings Call
Speaker 1: 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 investor relations and then calendar of events. With that said, I will now turn the call over to Mr. Powell Brown.
Speaker 1: President and Chief Executive Officer, you may begin.
Speaker 2: Good morning everybody and welcome to our Q1 2023 earnings call. Before we get into any detail, Q1 was an outstanding quarter and we're very pleased with our results. I'll provide some high level comments around our performance for the quarter along with some updates on the insurance market and M&A.
Speaker 2: landscape, then Andy will discuss our financial results in more detail, and lastly I'll wrap up with some closing thoughts before we open it up to Q&A. I'm now on slide number four. We delivered over $1.1 billion of revenue, growing 23% in total and 12.6% organically.
Speaker 2: To put this in perspective, 11 years ago our total annual revenues were $1.1 billion.
Speaker 2: Our adjusted EVADAC margin remains strong for the quarter at 35.7%. We delivered earnings per share at 83 cents, growing 7.8% over the first quarter of 2022. On the M&A front, we completed seven acquisitions with estimated annual revenues of $11 million. We're very pleased to have delivered another outstanding quarter of good profitable growth.
Speaker 2: I'm on slide five.
Speaker 2: From an economic standpoint, most businesses continue to grow and companies are still looking to hire employees. Overall, business leaders are generally cautious about the future while managing the impacts of inflation and higher interest rates. We would say there's not been a material change for what we heard from our customers in the fourth quarter of 2022.
Speaker 2: The insurance marketplace was very challenging for customers in the first quarter. Across most lines of coverage, rate increases were similar to prior quarters with admitted markets up 5 to 7 percent and excess and surplus markets up 10 to 20 percent. However, there are exceptions.
Speaker 2: Workers' compensation rates continue to decline. E&S professional liability rates, primarily public company DNO, continue to moderate with rates down 10% or more, and in some cases they're up slightly.
Speaker 2: The areas that remain the most challenging are E&S property and excess liability due to losses and increased insured values.
Speaker 2: Carriers continue to evaluate their coastal property portfolios. These actions result in more participants generally on a property placement.
Speaker 2: We continue to see underwriters increase insured values per square foot. Thus, customers are seeing premiums rise based on rates and higher values. As a result, buyers are feeling exhausted with the premium increases, and more customers are purchasing loss limits, increased deductibles, and decreasing overall limits.
Speaker 2: Pertaining the floor insurance market, everyone's watching to see the impact of the legal reforms late last year. Long term, we believe the changes would be positive. However, we think it will take some time to see improvement related to the legal changes. In the interim, more policies will continue to move into citizens. Please remember, citizens was created to be the market of last resort for residential homes.
Speaker 2: businesses don't trade. It's similar multiples to what we've seen over the past year. But from our perspective, we remain active and GRP had another solid quarter of M&A transactions. We're very pleased with their success and the quality of the businesses they're adding to the Brown and Brown team. Our disciplined approach remains centered on identifying high quality companies that fit.
Speaker 2: and our employee benefits businesses performed really well in Q1.
Speaker 2: Our program segment delivered another outstanding quarter of double-digit organic growth of nearly 34 percent fueled by new business rate increases, good retention, and claims processing revenue from Hurricane Ian. This growth was driven primarily by strong performance from our lender-place business, our diverse group of wind and quick programs and our captives.
Speaker 2: Wholesale Brokeries delivered another solid quarter with organic growth of 7%, driven by good new business and retention along with continued rate increases.
Speaker 2: The rate of growth for open brokerage slowed somewhat while the growth of our delegated authority business improved. Organic growth for the services segment was 1.6% for the quarter driven by claims processing revenue primarily related to the winter storms.
Speaker 2: I'd like to thank our 15,000 plus teammates throughout the world for delivering these strong results. Now I'd like to turn it over to Andy to discuss our financial results in more detail. Great. Thanks, Pell. And good morning, everyone. Since Pell discussed our gap results earlier in the presentation, I'll review our consolidated financial results on an adjusted basis.
Speaker 2: We're over on slide number seven. As a reminder, our adjusted measures exclude the change in estimate earnout payables. One-time acquisition costs associated with our acquisition of GRP, orchid and BDB last year, and gains or losses on business to best teachers. We're over on slide number seven.
Speaker 2: This quarter also excludes 11 million related to resolving a business matter which is considered one time in nature. The charge relates to a pre-equalization event from a business we bought over 10 years ago. We believe isolating the above items gives a better reflection of the performance of the business and provides enhanced comparability.
Speaker 3: The reconciliation of these amounts, adjusted amounts, to the most closely comparable gap amounts can be found in the appendix to this presentation.
Speaker 3: Total revenues were 1.1 billion for the first quarter, a new record for us, growing 23.5% as compared to the prior year. Income for income taxes increased by 13.2%, and even that grew by 23.2%. We had good leverage across the business.
Speaker 3: even with a few moving parts of this quarter that included some additional one-time costs that substantially offset the benefit of incremental investment income. In addition, the margins for GRP, as we mentioned before, are more evenly weighted throughout the year.
Speaker 3: versus our seasonally higher margin in the first quarter for the company.
Speaker 3: This means that negatively impacted the first quarter margin by approximately 40 basis points.
Speaker 3: As a result, GRP will benefit our margin in future quarters.
Speaker 3: Income before income taxes grew at a slower rate than total revenues due to the incremental interest and amortization expense associated with acquisitions we completed last year. The effective tax rate came in at 20 percent, which is in line with our expectations.
Speaker 3: and compares to 16.8% in the first quarter of last year.
Speaker 3: The higher tax rate is due to a lower benefit from the vesting of incentive stock shares that traditionally occur in the first quarter of the year. Our diluted net income per share increased by 7.7% from last year to 84 cents.
Speaker 3: Due to the changes in the liabilities and assets associated with our deferred compensation plan.
Speaker 3: salaries and related expenses as a percentage of revenue were negatively impacted year over year by 150 basis points. There's an offsetting benefit within other operating expenses.
Speaker 3: Lastly, our weighted average share count increased slightly and dividends paid increased about 12 percent, both as compared to the first quarter of last year.
Speaker 3: We're on slide number eight. The retail segment had an outstanding quarter, delivering organic growth of 8.8%. The adjusted EBDAQ margin contracted slightly to 37% for the quarter. While the margin remained strong, it was impacted about 100 basis points.
Speaker 3: by the level phasing of revenue and profit from GRP as compared to our higher Q1 margin in the United States during the Empire Employee Benefits Business. We expect this to be reversed and provide a positive impact to our margins in future quarters. We also realize some year-over-year headwinds associated with higher travel related expenses.
Speaker 3: which we expect these headwinds to lessen as the year continues.
Speaker 3: We're on slide number nine. National programs had another very strong quarter with organic growth 33.8% and adjusted EBITAC margin expansion of 610 basis points.
Speaker 3: The margin improvement was driven by leveraging our expense base along with the strong organic growth.
Speaker 3: Keep in mind that revenue for the quarter includes approximately 8 million dollars of claims processing revenue associated with Hurricane Ian.
Speaker 3: In addition, our captive facilities that we started last year are expected to deliver 30 to 35 million dollars of revenue this year. We recognized approximately 10 million dollars of revenue in the first quarter of this year as compared to approximately 1 million dollars of revenue in the first quarter of last year.
Speaker 3: The positive impact to organic growth from these captives will diminish in each subsequent quarter and will be negligible by the fourth quarter as we will be on a more comparative basis.
Speaker 3: While we anticipate national programs will have a good 2023, we do expect lower organic growth in the second half of this year as compared to the second half of last year. This is due to the fact that the captains will be on a more comparative basis.
Speaker 3: We had a one-time non-recurring growth bonus of $7 million in the fourth quarter of last year, and we realized approximately $8 million of revenue associated with Hurricane E and in the fourth quarter of last year. We moved on over to slide number 10. Our wholesale segment delivered another good quarter with organic growth of 7%, and the adjusted EBITAC margin contracted slightly.
Speaker 3: The driver the margin decrease was higher salaries and related costs due to incremental hiring as well as salary inflation.
Speaker 3: We're on slide number 11. The service is segment grew by 1.6% organically for the quarter, and the adjusted EBITAC margin decrease by 390 basis points. The primary drivers of the margin decrease with the volume of claims revenues for certain businesses, higher salary and related cost, as well as some one-time expense items.
Speaker 3: A few comments regarding cash generation and capital allocation.
Speaker 3: We generated approximately $60 million of cash living operations in the first quarter of this year, which was impacted by higher interest and paying taxes for last year that were deferred as a result of Hurricane E&R relief. We are continuing to expect another strong year of cash generation and discipline deployment.
Speaker 3: We ended the quarter with approximately 564 million hours of operating cash.
Speaker 3: We are planning further debt repayments during the year as we've done following larger deployments of capital. We are very proud of our industry-leading ratio of cash-woof and operations to total revenues and believe we are in a strong capital position to invest in the business and help drive further growth in the future.
Speaker 3: Lastly, we want to update our full-year guidance regarding margins.
Speaker 3: Based on the good results for the first quarter and what we can see over the coming quarters, we are raising our outlook and as a result, our margin should be up slightly for the full year versus our previous guidance of flat. With that, let me turn it back over to Powell for closing comments. Thanks Andy for a great report.
Speaker 2: We continue to watch the impact of inflation and increases in interest rates on the economies in which we operate. As a result, we expect business leaders will continue to be cautious regarding the pace of their hiring and investing over the coming quarters. With that said, most of our customers are prospering. In the marketplace, buyers have pricing fatigue due to increases delivered over the last several years.
Speaker 2: without wind coverage in their personal policies.
Speaker 2: We continue to talk with our carrier partners about capacity, the flight, quality, and diversification. Our MGA and MGUs have delivered good underwriting results over many years due to our discipline approach. As a result, this positions us well to retain and or increase our capacity that will help deliver incremental organic growth.
Speaker 2: from our programs. We're pleased with the performance of our recent international acquisitions of GRP and BDB. They're growing nicely, winning new business and retaining customers. In the case of GRP, they're also completing high-quality acquisitions and adding to our capabilities in geographic footprint. Many of you have seen that we completed our first Canadian retail acquisition of high-court brekkles on April 1st. They're located in Toronto with approximately 110 teammates. We'll add to our capabilities in the Canadian marketplace.
Speaker 2: We'd like to welcome all teammates that have joined us over the past few months, and lastly, we're in a strong position with a good M&A pipeline.
Speaker 2: Overall, we feel really positive about our business and how our team is executing. We're winning more new business and doing a good job of retaining our customers. Our focus is on leveraging the total capabilities of Brown and Brown for the benefit of our customers, both domestically and internationally.
Speaker 2: We're looking forward to having a good 2023 and have a lot of momentum coming out of the first quarter. With that, we'll turn it back over to Mikey and open the lines for Q&A.
Speaker 1: Thank you. As a reminder to ask a question, you will need to press star 11 on your telephone. Please stand by while we compile the GND roster.
Speaker 1: Your first question comes from the line of Western Blumer from UBS. Your line is open.
Speaker 4: Good morning. My first question is on the outlook for now margin expansion for the full year. I hope you could break out maybe by segment where you're expecting to see margin expansion. I'm more focused on retail there where the one key the margin is still down XGRP. So if you could maybe
Speaker 3: Break out the pluses and minuses there, that'd be great. Good morning, Wes, Andy here. So we don't provide that level granularity on outlook by the segments and everything, but just a couple things, maybe to take into consideration. You know, our comments earlier as we had about 100 basis points of headwinds.
Speaker 3: as the year comes along, we're on a more comparative basis. So hopefully it kind of gives you an idea of what it should look like.
Speaker 4: Got it. And was there any impact in retail from wage inflation and hiring as well? I know you called that out in a couple other segments.
Speaker 3: Yeah, we had some of it when you call it out specifically, but we've got it in all, I mean, we have a number of our segments because we're always investing in the business. So you can always have some up and downs by the quarters based upon timing of hiring and growth. And that's last one. I know you have a guide to FX in the past, but it's...
Speaker 4: Is there an FX headwind that's kind of built into that margin guide as well for maybe the second quarter?
Speaker 4: an FX headwind that's kind of built into that margin guide as well for maybe the second quarter.
Great. Thank you for taking the questions. Thank you. Your next question is from the line of Elise Greenstand from Wells Fargo. Your line is open. Hi, thanks. Good morning. My first question was also on the margin side. So first of all, I just...
get better in all other quarters. I just want to think about the seasonality of that and then also would you expect in that updated guidance that your margins will expand in the other three quarters of the year?
So, let's see, more than at least see if we can take a few of those pieces there. Let's see. So, on the first one on the GRP and then the 40 basis points is yes, that will reverse in the back end of the year and it's relatively evenly spread, not perfect. So, if not 25% each quarter, but pretty even through the year.
would recur in future quarters that are out there. And then is the Q1 investment income, right? I think it's trending better than what you guys had provided last quarter. I think you had said 14 to 17 million for the full year. Is the Q1 a good run rate level for investment income?
Yeah, probably someone that range all depends upon what the balances are on cash, which can move up and down. But that's probably a reasonable number when you think about it from an absolute. What you wouldn't want to do is put that on incremental year over a year. Remember because rates were going up last year as the year was coming along.
Q1, anything one off or anything you guys want to highlight as we think about just to go forward on organic growth of that segment?
No, I wouldn't say anything that we haven't said, at least. We're really pleased with.
how retail is performing. And as I like to say, we continue to hire talented teammates to help us service the market and produce and the business that we're bringing on and those customers that we already have are just in cuts.
to acquisitions, not just like last year in GRP, but in Ireland and excited about Canada as well.
not just like last year in GRP, but in Ireland and excited about Canada as well. Thank you.
Thank you. Your next question is from the line of Gregory Peters from Raymond James. Please ask your question.
Yeah, good morning, Powell and Andy. I guess I'm going to go back to your comments about the impact of all of the challenges in Florida.
It's my impression that if there's a migration to citizens that might be some pressure on commission rates for the company, and so maybe you could spend a minute and just talk to us about the economic conditions in Florida, considering what's going on in the property insurance market. Are you seeing any other pressures?
economically with any of the business development, et cetera, and then talk about the migration to citizens and its impact on your business. Sure. So first of all, I'd like to clarify that in a business that's $2 plus billion a revenue, the impact of Florida today.
versus the impact of Florida 15 years ago is much different. So I think it's important to start there. The second thing that I would tell you is that from an economic standpoint, generally speaking in our with our customer base in Florida, they seem to be doing quite well.
And what I mean by that is the construction is booming. You know, people are growing. That does not mean that their margins are necessarily growing because they different industries are having different levels of...
inflation and impact on cost into their P&Ls. But I would tell you that, and if you go to dinner, if you go out to dinner, it's packed.
So it's still the economy is doing well in Florida. As it relates to citizens, I'd like to talk about kind of two scenarios.
Because there are some similarities and some differences for those of you that have been around since 2007. I'd like to talk about that. So here's basically the parallels.
In 2007 and today, citizens is deemed as the market of last resort.
Okay, so let's start there and we're going to start in retail and that's where the sort of similarities end. So in 2007...
If in fact, and these are just examples, this is not, it's a hypothetical example, so just bear with me.
If the market was bearing an 85 cent rate on a condominium
And citizens being the market of last resort was quoting a dollar rate and the then governor implemented wind mitigation credits that took that rate from
a dollar in citizens down to 50 cents. So effectively, the buyer was going from 85 cents to 50 cents per in terms of insured values.
in citizens down to 50 cents. So effectively, the buyer was going from 85 cents to 50 cents per in terms of insured values. That action, in and of itself,
took us to negative organic growth in 2007 as an organization, much different concentration in Florida, all that stuff. The final thing is citizens was the market of last resort. They would write anything.
anything. Okay, so now Fast Forward to 2023 and citizens has underwriting guidelines.
And there's not a rate cut. So if in fact, I'm just going to use the same scenario that we just had there. If they were at 85 cents.
And citizens was at a buck or a buck 25 and the general market is at a buck 75 or a buck 50. Then there are undergriding criteria.
Construction, all kinds of things where citizens is actually trying to qualify accounts.
So remember, it's much different. It doesn't mean it's not complex. It is complex.
So it takes a lot of time to get through a government entity to get the but that's the difference now in retail
If you've taken account that's from the E&S market and you bring it over into citizens, the commission level would be let's say flat to down slightly to up slightly, but let's just call it flatish.
taken account that's from the E&S market and you bring it over into citizens, the commission level would be let's say flat to down slightly to up slightly, but let's just call it flat-ish, but it has a lot more work.
That said, in the wholesale segment, it has the potential to one an account can move. So you could go in the ENS market and they lose the entire account because it goes to citizens with the retailer. There was a better report. They trouble your employer.
Or you can have a scenario where citizens quote the wind only and we quote an X wind quote and remember the example is it was 85 cents on and it's superior construction. The wind only rate, I mean the X wind rate might be 7 cents or 10 cents.
So all of a sudden the premiums gone down substantially and we get paid commission on that much lower rate.
So that's how it manifests itself, Greg, and maybe a little more than you wanted, but I think it's important for people to understand the difference.
today between 2007 because it's a big difference.
And it's important to understand that. Yeah, that's that's great color. Just just a point of clarification. Is it fair to sort of get I'm guessing right now, but is it when I look at your Florida residential book of property? Is it fair to say that citizens is about 20% of that book? Or do you think it is a lower or higher percentage? Or higher percentage?
I think now I want to make sure that you when you say residential are you talking about residential homes or you're talking about condos and apartments as well.
I want to make sure that when you say residential, are you talking about residential homes or are you talking about condos and apartments as well? Yes.
Got residential homes condos and apartments. Okay, so short answer is no, I don't think it's 20% presently. And what you find is there's a lot of activity in the residential, specifically condos and apartments.
in the first half of the year. So there's a lot of activity right now going on. And as I said, there are properties, not only where you live, but up and down the west coast and the east coast that are currently in the EMS market that have been submitted to citizens.
I think the limit I might be off on this just by a little bit. I think the limit is 999,000, I believe, is the number. So if you think about how many homes are below 999,000 in Tri-County.
not a lot of them. It's a very expensive real estate market down there. And then the rest of the state, believe it, 700,000, it is the limit. So not everything can actually go into citizens. So there's a lot of press around all of it, but only certain things go into that box. And then there's a lot of limitations as to what they will take in the way of quality. So the reason why we added all that color.
is the market's very different today than what it was in 2007. So there's been a lot of speculation regarding what this does to our numbers. And we've talked a lot about diversification of our organization and that we're not a Florida-based organization the way we were, or at least waited 15, 20 years ago.
But our Florida businesses performed really well in the first quarter. We're very, very pleased both in retail as well as wholesale and programs.
That's excellent detail and I feel like we could probably have an hour-long conversation just on this topic alone. But I'm going to pivot and my last question just will focus on inside your commentary around GRP. You commented about how they're making acquisitions and...
And I guess I haven't really seen any press releases come out from Brown. So, how are, you know, how is that, how is that coming through in the reported numbers? Or where are we, where do we see the acquisition activity inside GRP? Is this reported through Brown Brown's consolidated statements?
Greg, you should see those on our IR website. We tag them inside there. They come out underneath of a GRP, personally since it's got brown and brown in the footer, but we pull all those over into our normal IR website. So they should all be there.
Got it. And then just on that point, you know, your approach to organic has been pretty pretty well you've sent a benchmark on trying to, you know, not include acquisitions as part of organic. I assume you're taking the same conservative approach and applying it to how you count in GRP organic is that correct?
Correct. Yes. Got it. Thanks for your answers.
Yes. Thanks for your answers. Thank you.
Your next question comes from the line of Robert Cox from Goldman Sachs. Your line is now open. Hey, thanks for taking my question. So broadly across the business and maybe specifically to employ benefits, I was curious on your expectations for exposure growth for the duration of the year, just considering your outlook for the economy to continue to moderate.
Yeah, so I think the way we look at it is we still have a positive outlook on exposure growth not so much inside of existing clients but the growth in number of clients.
So we do believe that our customer base on a net basis will actually expand in terms of adding new people to their plans, but the big the biggest part of the growth will be new benefits plans where we're helping people.
manage their costs and the delivery of what they want to their employee base. Great, thank you. And this is a follow-up. The pressure in professional lines...
Did the DNO pressure, which I think is most acute in the E&S market, accelerate this quarter? And do you see any signs of stabilization in DNO rates?
Yeah, the short answer is did we see an acceleration in the decline and yes we saw a little bit. That's correct. And remember I would and I don't have this right off the tip of my tongue but remember Deano rates were going up.
more quickly and sooner than this property trend. So they had gotten to a level that the marketplace felt as though it was appropriate or high and then people started piling back in. Now one, Robert, could make the argument. I am not making this argument, but I'm pointing it out.
assets and they're redeploying those assets in a place like professional liability. Thus, we're having price decreases or continued price decreases in professional liability. So, some people have taken that position. I'm not necessarily trying to imply that. I'm just trying to give that to you so you can kind of.
Jeff Feast your lines open.
Thank you. Good morning. My first question goes to the retail segment and employee benefits. I think the last couple of quarters, he called out the potential for some pressure on organic growth from employee benefits. Yet, I think numbers actually came at quite strong. Can maybe talk about what change or what actually happened this quarter.
the first part, but you're on it. If you go back to what we said, there was one particular business that had an impact in Q4 in terms of a headwind and that business, that individual business.
Still actually was encouraging headwinds in Q1, but the other businesses performed really, really well. And Adandia said before, remember we have a front-end loaded from a 6-6 revenue recognition standpoint.
in Q1 because of employee benefits, but that's a function of us writing a lot of new employee benefits business and all the other businesses performing that much better relative to an offsetting of that little bit of a headwind in that one particular business.
So we feel good about, I mean, I don't want to give you the impression that we only feel good about employee benefits. Please don't take that out of my comment. We feel really good about, you know, our PNC and we feel really good about our personalized businesses do in retail, but I just mention it because
You know, there were people on the call in Q4 that felt like the organic growth was a trend.
which it's not and we said that but we just wanted to kind of clarify that and we also clarified it because we did talk about a business that had a significant impact on the revenues in Q4 and there's still a bit of a headwind there but we've overcome that. Yeah, and I think we also, we made mention in the fourth clue one of our special
We are very, very pleased with 8.8. Organic still with those modest headwinds, and we don't see those headwinds as a material issue on those businesses on the future quarters.
Got it. Thanks. And then my second question is with regards to the captive revenues. Is it fair to think of them as kind of full margin revenues, at least in kind of the first half of the year until we hit storm season, barren and earthquake?
Yeah, I wouldn't call it full margin because we do have some operating expenses in there, but they are much higher margin in non storm periods when we have playing cost. Yes. And that's wind and quake. You're on. Make sure I want to make sure you know it is.
Yeah, okay, thank you very much. Thank you. Your next question is from the line of Michael Ward from City Group. Your line is open.
Thanks guys, good morning. Maybe just following up on that last one. I think you mentioned you had 10 million of earn premium for the captives in the quarter, but I think the guidance was 30 to 35 million. So just wondering what's in that guide for the year, does it assume some of all losses? Yeah, I think we're just trying to estimate right now. It'll
It'll move a little around a little bit by the quarter. That's how we took that into consideration. So you won't probably see it be exactly perfect by each of the quarters on an earned basis. It'll be down a little bit in the third quarter. Okay, that's helpful. Thank you. And then thinking about capital deployment, how much, or management, how much debt pay down.
Do you anticipate doing from here, and do you have a targeted leverage ratio that you're looking to get to? Well, we tackled the last one first. So what we have said publicly is on a gross basis, 0 to 3, we're very comfortable with that range, and 0 to 2.5 on a net basis. Michael, if you look back over time...
We traditionally will move on the higher end of that range around acquisitions and then we trend back down and We normally kind of operate in kind of that middle part of the range and both net and gross If you look at over cover longer period of time and that probably not unreasonable for our business That'll kind of continue to go down one as we repay
debt normal maturities that are coming along on a quarterly basis. And then as we just continue to grow the organization, if you look back, we normally will deliver about a quarter to half a turn per year. Is it pretty decent amount? That's also assuming if we, we're going to continue to invest in the business and we have to continue when measure M&A opportunities as they come along.
positions. Do they have a different to do sharing investment income profiles than legacy domestic businesses or investment income associated with their placements than the direct bill stuff we have in the US. Hey good morning Mayor. Um is now we don't earn as much on a fiduciary income.
internationally is what we do in the U.S. And again, keep in mind in the U.S. that there's still limitations even here. We have trust-respected states that only allow you to earn interest up to your bank fees. And then where we have relationships also with our carrier.
read that that was all benefit of GRP and O'Leary or anything about nature now.
Okay, and I just wanted to confirm something. I think you mentioned this in your recent comments, but one of the LPI insurance, I think, is tax fee losses in the quarter, and you're saying that there were no losses in the cap of re-interns.
Yeah, repeat that when you repeat the 1st, part of that question that you were breaking up or I didn't hear it. Exactly. I'm sorry, I just want to confirm that there were no losses in the layer of reinsurance that you funded for the captive. The reason I'm asking is because we did see some significant storm losses that impacted the lender place market.
Oh, no, no, there is it, but keep in mind the captives that we have are not, you know, they're not linked with our lender-place business. They're on large condominiums.
as well as on the quake side. So, wind and quake in there. And no, we did not have any storm related claim cost in the first quarter. Okay, thank you so much for the clarification.
Your next question is from the line of Mark Hughes from through his company. Your line is open. Thank you. Good morning.
You wanted to be a little more optimistic around the capacity for programs. I wonder, I think last quarter you suggested that might be something you would be keeping an eye on and that would be a potentially gating factor for organic. Have you seen that change over the last three months? No. I don't want to give you the impression that there's some like.
found new capacity. I wish I wish we could say that. But I think the issue is this, you know, every carrier or market participant is evaluating how they want to.
deploy their capacity. As I said earlier, carriers are looking for more protection against earnings volatility. Nothing new. They're looking for a balance of risk to the extent possible, where we have a very large
group of programs that are not just CAHP, so we're able to balance those with people. And so that's a very positive. And we've had really good results over a long period of time. So we feel like...
As I've said before, that we are effectively an outsourced insurance company. We can do everything other than bear the risk.
And as a result of that, and the results that we have delivered, if in fact someone is considering expanding or repositioning, which is a better thing, I don't think of it as expanding, but repositioning capacity, then we typically like to think that we're going to be near the top of that list.
because they've seen our results and they've seen the growth that we've had in the past. So there's no found bucket of gold under the rainbow. It's not that kind of deal, but I do feel like there's some really good discussions around
us being able to keep capacity, which is equally as important. I view that as a win, Mark, not just cutting capacity, because a lot of people have had a lot of capacity cut. And if we can keep our capacity at the win, and then we might get cut a little bit somewhere, but we get a little new and so on a net basis.
were about even or maybe up just slightly. Thank you for that. Then you mentioned the Florida construction sounds like it's good. How about nationally?
Yeah, what I would tell you, Mark, is if we go around the system and you look in places, it's remarkable. I mean, places that come to mind, I'll give you an example, Nashville, Tennessee, Atlanta.
You know you get up in the northeast in several areas Boston you get in Colorado. I mean Phoenix you get in all these places all around and you just got a lot going and so you know if you think about it the industry
The one industry that we're in that has got a fit headwind as a higher level and especially line business is auto dealers. We do some auto dealer work and auto dealer units are down, so think about it. Their pricing is coming back down to MSRP levels or below. There's an impact on use cars.
And so that's direct relation to our interest rate increases. So, having said that, at some point that's going to turn as well. So that's a slight headwind in our, but if you think about other industries, there's a lot of businesses that are looking for people. I think the restaurant business is tough, particularly anything that is not defined as
Seated doesn't have to be fine dining, but like a nicer Restaurant, they're having a hard time in terms of getting people to work because you know if it's a fast food. It's just tough Yeah, yeah, and then one final question And I don't know if you gave the revenue impact from the winter storm claims No, we didn't break it out, but we didn't
Okay. All right.
The next question is from the line of Elise Grinstein from Wells Fargo, your line is open.
Your next question is from the line of Elise Greenpan from Wells Fargo. Your line is open. Hello, Elise.
Hi, sorry I was on mute. Thanks for taking me back. I just had a follow up question. So just being through some of the stuff that came up early on the call in terms of just the captive and the Ian revenue and the margin. So I know you said the captive isn't 100% margin. So if I assume Ian and the captive, right, which I think was 18 million of revenue is 75% margin.
You know, you're a guide for margin improvement over the balance of the year. I, Elise. So I think maybe a couple things to think about. And we mentioned in the comments.
is there are some moving parts in there. We thought it was easier just to give everybody guidance on the full year, right? Because otherwise, there's always puts and takes, there's business mix inside, everything else. It's not as easy as just adding up a couple items. So what we're trying to do is just keep it relatively simple for everybody and give an idea as to what the full year would look like for the organization.
Okay, and then when thinking from here, I guess the only, I guess, one-off items embedded within the updated full year guide is just, right, programs will see, you know, some stronger revenue from the captive, right, until we kind of annualize that later in the year. So that could help margins, I guess, in the second quarter, and then also just the higher investment income. Plus theather fundraising, positive tree funding, and theDocs.org, or go check it out my website, or head to internationally-mentation.org. And the be-b frell
Are there any other like headwinds or tailwinds in that, you know, updated full year guide for the rest of the three quarters? Well, so I think in the second quarter, yeah, I think your comment would be fair. Now keep in mind that the revenue from the captives, right, will start to level out. So we're not going to get the benefit of organic lift each quarter going forward, like what we saw in the first quarter. Okay.
Because we'll be we're writing basically a specific amount of premium, right? Is what we committed to do. Inside of the captive, so that's limited in in nature. That's why you get basically to a level amount of revenue by the back end of of the year. Keep in mind. Also, we mentioned the 1 time bonus. In programs that we had in the 4th quarter of of last year, and also the 8 million of claims just take those into consideration when you're thinking about.
Organic in the back end of the year and what that might mean on margins. Okay, and then one last one, the 30 to 35 million of captive revenues this year. What was that last year in your full year? We said it was about 25 million last year.
Okay, thank you. Yes, thank you. Appreciate it. There are no further questions at this time. I'd turn the call over back to our speakers for closing remarks. Thank you very much, Mikey. We appreciate everybody's time and look forward to talking to you next quarter. Very pleased with the outcome and look forward to talking to you then. Thank you. This concludes today's conference call. Thank you all for participating. You may now disconnect.