Q3 2024 Brown & Brown Inc Earnings Call

And the slide presentation posted in connection with this call and included including answers given in response to your questions may relate to future results and events or otherwise before looking in nature such statements reflect our current views with respect to the future events, including those relating to the company's anticipated financial results for the third quarter and our.

Are intended to fall within the Safe Harbor provisions of the securities laws actual results or events in the future are subject to risks to a certain 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 such as a result of a number of factors such.

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Speaker Change: Good morning and welcome to the Brown and Brown A. 3rd quarter earnings call. Today's call is being recorded.

Speaker Change: Please note that certain information discussed during this call, including information contained in the slide presentation posted in connection.

Factors in the company's determination as it finalizes its financial results for the third quarter that is 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 and uncertainties.

Speaker Change: with this call and including answers given in response to your questions may relate to future results and events.

Speaker Change: or otherwise before looking in nature.

Speaker Change: Such statement reflects our current views from the spec to the future events, including those relating to the companies anticipated financial results for the third quarter.

Tommy.

Speaker Change: and are intended to fall within the safe harbor revisions of the security laws. Actual results are events in the future are subject to subjects with a number of risk and uncertainties. It may differ materially from those currently anticipated or desired or referenced in any forward-looking statements made. As such,

Additional discussion of these and other factors affecting the company's 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 in the company's filings with the Securities and Exchange Commission, we disclaim any intention or obligation.

Speaker Change: As a result of a number of factors such.

Date or revise any forward looking statements, whether as a result of new information future events or otherwise.

Speaker Change: Factors in the company's...

Speaker Change: the termination as it finalizes its finance the result of the third quarter.

In addition, there are certain non-GAAP financial measures used in this conference call a reconciliation of non-GAAP financial measures to the most comparable GAAP financial measures can be found in the company's earnings press release or the investor presentation for this call on the company's website at Www Dot BB insurance dot com by clicking on Investor Relations and then calendar of events.

Speaker Change: that is financial results differ from the current.

Speaker Change: Poliminary Unautited Numbers Set 4th in the press release issued yesterday. Other factors that the company may not have currently identified or qualified and those risks and uncertainties identified from time to time in the company's reports about the security and exchange commission.

Speaker Change: A digital discussion of these and other factors affecting a couple of these businesses and prospects, as well as additional information regarding forward-looking statements.

Speaker Change: With that said I'll now turn the call over to Paolo Brown.

Speaker Change: President and Chief Executive Officer, you may begin.

Paolo Brown: Thanks, Kevin Good morning, everybody and welcome to our Q3 earnings call first we'd like to state that our Hearts go out to all of them.

Speaker Change: is contained in the slide presentation posted in connection with this call and in the company smallings with the security and the state's commission. We disclank many intention or obligation update or advise any forward-looking statements whether as a result of new information, future events or otherwise.

Speaker Change: Goodbye.

Speaker Change: Yeah.

Speaker Change: Good morning.

Speaker Change: Unprecedented in many ways and resulted in significant depth and destruction throughout the southeastern United States. We are committed to helping communities impacted by these events recover and return to normalcy over the coming weeks months and years.

Speaker Change: and a decent there are certain non-get financial measures.

Speaker Change: Use in this conference call a reconciliation of non-get financial measures to the most comparable Gat financial measures can be founded the company's earliest press release or the investor presentation for this call on the company's website at www.bbinsherst.com by clicking on investor relations and then calendar events.

Speaker Change: With that let's transition to our performance for the quarter, we had an outstanding top and bottom line results. Our team continues to deliver for our customers, resulting in strong net new business organic growth and margin expansion I'll provide some high level comments regarding our performance along with updates on the insurance market and the M&A land.

Speaker Change: with that said I'll now turn the call over to Powell Brown. President Chief Executive Officer, you may begin.

Powell Brown: Thanks Kevin, good morning everybody and welcome to our Q3 earnings call.

Powell Brown: First, we like state that our hearts go out to all those impacted by hurricanes, Heline and Milton. These back-to-back storms were unprecedented in many ways and resulted in signifying it death and destruction throughout the Southeast United States.

Gape, Andy will then discuss our financial performance in more detail and lastly, I'll wrap up with some closing thoughts before we go to Q&A now as a result.

Speaker Change: Slide four.

Powell Brown: We're committed to helping communities impact it by these events recover and returned in normalcy over the coming weeks and months.

Okay.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Got it.

Speaker Change: Okay.

Powell Brown: and years with that let's transition to our performance for the quarter.

Speaker Change: Great.

Speaker Change: 23.

Speaker Change: Yeah.

Powell Brown: We have an outstanding top and bottom line adults. Our team continues to deliver for our customers resulting in strong net new business, organic growth and margin expansion.

Speaker Change: Okay.

Speaker Change: Okay I.

Speaker Change: Appreciate it.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Alright.

Speaker Change: Right.

Powell Brown: I'll provide some high-level comments regarding our performance along with the updates on the insurance market and the M&A landscape. Andy will then discuss our financial performance in more detail and lastly, I'll wrap up with some closing thoughts before we go to Q&A. Now let's discuss our results.

Speaker Change: He had a great quarter as our team is focused on delivering the best solutions for our customers and strong results.

Speaker Change: I'm on slide number five.

Speaker Change: In the countries, where we primarily operate there were no major changes in the economic conditions versus the first half of this year consumers are still spending and driving demand as a result businesses are continuing to hire and invest albeit at a more moderate pace as compared to the last few years here in the U S. We're seeing a bit more caution due to the uncertainty around.

Powell Brown: I'm on slide four. We delivered nearly $1.2 billion a revenue growing 11% in total and 9.5% organically over 3rd quarter of 2023.

Powell Brown: are adjusted to EVIDAC margin improved by 30 base points to 34.9 and are adjusted earnings for shared 12.3% to 91 cents.

Speaker Change: Around the presidential election.

Speaker Change: From an insurance pricing standpoint rates for many lines continued to increase but at a slightly slower pace versus what we experienced in the first half of this year in the third quarter of last year.

Powell Brown: On the M&A front we completed four acquisitions with estimated annual revenues of 8 million. Overall it was another great quarter as our team is focused on delivering the best solutions for our customers and strong results.

Speaker Change: The line that had the largest change for the quarter was E&S property, which we'll talk about in more detail in just a moment.

Powell Brown: I'm on slide number five

Speaker Change: Pricing for employee benefits was similar to prior quarters with medical and primary cost trends up 7% to 9% for commission based accounts, the continual upward rate pressure and the complexity of healthcare are driving strong demand for our employee benefits consulting businesses.

Powell Brown: In the countries where we primarily operate there are no major changes in the economic conditions versus the first half of this year. Consumers are still spending and driving demand. As a result businesses are continuing to hire an invest, I'll be at a more moderate pace as compared to the last few years.

Based on our historical and ongoing investments to expand our capabilities, we are well positioned to help companies of any size navigate in this challenging market.

Powell Brown: here in the U.S. We're seeing a bit more caution due to the uncertainty around the presidential election.

Powell Brown: For insurance pricing standpoint rates for many lines continue to increase but at a slightly slower pace versus what we experienced in the first half of this year and the third quarter of last year.

Speaker Change: Raising the admitted P&C markets were up 2% to 7% for most lines down.

Speaker Change: Downward trend for workers compensation remained but there was moderation as we realize decreases of down 1% to 5% in most states.

Powell Brown: The line at the largest change for the quarter was the NS property which we'll talk about in more detail in just a moment.

Powell Brown: Pricing for Employee Benefits with similar to prior quarters with medical and primary costs, trends up 7% and 9% for commission-based accounts. The continual upward rate pressure and the complexity of healthcare are driving strong demand for our employee benefits consulting businesses.

Speaker Change: With the high level of employment, we expect this range to continue over the coming quarters for the third quarter rate increases for non cat property moderated and more in the range of flat to up five.

Speaker Change: For properties and convective storm zones, we did not see the same rate increases that we experienced in the first half of the year.

Powell Brown: They thorn historical and ongoing investments to expand our capabilities. We are well positioned to help companies of any size navigate this challenging market.

Speaker Change: For casualty, we continue to see rate increases for primary layers due to ongoing size of legal judgments in the U S and to a lesser extent higher levels of inflation.

Powell Brown: Rates in the admitted P&C markets were up to to 7% for most lines. Downward trend for workers compensation remained, but there was moderation as we realized decreases of down 1 to 5% in most states.

Consistent with the last few quarters rates for excess casualty continued to increase between 1% and 10% or even more in some instances professional liability we saw rates flat to up 5%.

Speaker Change: Shifting to the E&S markets as you notice this year, some carriers and facilities have been willing to put up incremental limits on existing insureds and new business.

Powell Brown: With the high level of employment, we expect this range to continue over the coming quarters. For the third quarter, rating creases for non-cat property moderated and we're in the range of flat to up five.

Speaker Change: While cat property rates continue to increase.

Powell Brown: For properties and convective storm zones, we did not see the same rate increases that we experienced in the first half of the year. For casualty, we continue to see rate increases for primary layers due to ongoing size of legal judgments in the US and to a lesser extent higher levels inflation.

Speaker Change: Excuse me slightly in the first quarter of this year, we started to see decreases later in the second quarter and into the third quarter on average rate decrease between 10, and 20% as compared to the third quarter of last year.

Speaker Change: As a result, some customers increased their limits or modified deductibles and some just capture the savings.

Powell Brown: Consistent with the last B-quarters rates for excess casually continue to increase due to 1 in 10% or even more in some instances. Professional liability we saw rates flat up 5.

Speaker Change: As we mentioned before moderate rate increases or decreases for one line of business will generally not have a material impact on the results of our company in total in order to deliver consistently strong and industry, leading financial performance, we focus on diversification across lines of coverage geography.

Powell Brown: Schiffing to the E&S markets, as you know this year some carries and facilities have been willing to put up incremental limits on existing insurers and new business.

Powell Brown: While Kat property rates continue to increase, excuse me, slightly in the first quarter of this year, we started to see decreases later in the second quarter and into the third quarter. On average, rate decrease between 10 and 20 percent as compared to the third quarter of last year.

Speaker Change: Industry and customer segment.

Speaker Change: On the M&A front competition for high quality businesses remained consistent with the first half of the year, while the number of acquisitions by private equity backers decreased as interest rates Rose. We're now starting to see our higher levels of activity as interest rates are beginning to decrease for.

Powell Brown: has a result. Some customers increase their limits or modify these octobles and some just capture the savings.

Speaker Change: <unk> for the quarter, we continue to build relationships with many companies and remain focused on our disciplined M&A approach to identify great organizations with July and culturally and makes sense financially.

Powell Brown: As we've mentioned before, moderate rating creases are decreases for one line of business. We'll generally not have a material impact on the results of our company in total.

Speaker Change: I'm on slide six lets transition to the performance of our three segments retail deliver three 9% organic growth for the quarter with most lines of business performing well, we had another strong quarter for net new business, but realize the impact of moderating rates for most lines as well as slightly lower growth in <unk>.

Powell Brown: In order to deliver consistently strong and industry leading financial performance, we focus on diversification across lines of coverage, geography, industry and customer segment.

Powell Brown: On the M&A front, competition for high quality businesses remain consistent with the first half of the year. While the number of acquisitions by private equity backers, decreased as interest rates rose, we're now starting to see our higher levels of activity as interest rates are beginning to decrease.

Speaker Change: Suppose your units.

Speaker Change: In addition, our organic growth was negatively impacted by over 100 bps, resulting from the year to date true up of certain incentive commissions as well as quarterly volatility and bond or nonrecurring revenue. Our team is performing really well and had good momentum going into Q4.

Powell Brown: For the quarter we continue to build relationships with many companies and remain focused on our disciplined M&A approach to identify great organizations which align culturally and makes sense financially.

Speaker Change: Programs delivered an outstanding results with organic growth of 22, 8%. This growth was driven by a number of programs, resulting from new business and expansion of existing customers, our lender placed business and captives performed very well and our cat programs continue to grow it was another great quarter due to the diversity.

Powell Brown: I'm on slide six. Let's transition to the performance of our three segments.

Powell Brown: Re-tailed deliver 3.9% organic growth for the core with most lines of business performing well. We had another strong quarter for net new business but realized the impact of moderating rates for most lines as well as slightly lower growth in exposure units.

Speaker Change: Of our programs.

Speaker Change: Wholesale brokerage delivered another good quarter with organic revenue growth of eight 4%. This performance was driven by a combination of net new business and rate increases our open brokerage business continued to grow nicely, but at a slower pace due to the decline in cat property rates are delegated authority business performed well again this quarter.

Powell Brown: In addition, our organic growth was negatively impacted by over 100 BIPs.

Powell Brown: Resulting from the year-to-date true up of certain incentive commissions, as well as quarterly volatility in bond or non-recurring revenue. Our team is performing really well and had good momentum going into Q4.

Speaker Change: Personal lines grew nicely driven by California, and Texas, we're very pleased that our balanced mix between brokerage and delegated authority <unk>.

Powell Brown: Programs delivered an outstanding results with organic growth of 22.8%. This growth was driven by a number of programs resulting from new business and expansion of existing customers.

<unk> continues to drive strong and stable performance now I'll turn it over to Andy to getting more results are our financial results. Thank you Bill good morning, everyone.

Powell Brown: Our lender place business and captives perform very well and our cap programs continue to grow. It was another great quarter due to the diversity of our programs.

Andy: To review, our financial results and some additional detail when we refer to EBITDAX EBITDAX margin income before income taxes were diluted net income per share we're referring to those measures on an adjusted basis. The reconciliation of our GAAP to non-GAAP financial measures can be found either in the appendix of this presentation and the press release, we issued yesterday.

Powell Brown: Ocell Brokeries delivered another good quarter with organic revenue growth of 8.4%. This performance was driven by a combination of net new business and rate increases.

Powell Brown: Our open brokerage business continued to grow nicely, but at a slower pace due to the clot is a client in cat property race.

Andy: Your day, we're over on slide number seven we delivered total revenues of $1 billion $186 million growing 11% as compared to the third quarter of 2023.

Powell Brown: Our delegated authority business performed well again this quarter. Personalized group Nicely Dr. Um, by California in Texas, we're very pleased that our balance mix between brokerage and delegated authority.

Andy: Income before income taxes increased by 13, 1% and EBITDA grew by 11, 9%.

Powell Brown: Continues to drive strong and stable performance. Now I'll turn over to Andy to get in more results.

Andy: our financial results.

Andy: Our EBITDA margin was 34, 9% expanding by 30 basis points over the third quarter of the prior year.

Andy: [inaudible]

Andy: You know review our financial results in some additional detail. When we refer to EBITDAQ, EBITDAQ, margin and income before income taxes were deluded net income for share, we're referring to those measures on an adjusted basis. The reconciliation of our gap to non-gap financial measures can be found either in the appendix of this presentation or the press release we issued yesterday. We're over on slide number seven.

Andy: Effective tax rate for the quarter decreased to 24, 6% versus the third quarter of the prior year, which was 25, 6%.

Andy: Okay.

Andy: I would like to start with.

Andy: Okay.

Andy: Okay.

Andy: Okay.

Okay.

Andy: Sure.

Andy: We deliver total revenues of 1.186 million growing 11% as compared to the third quarter of 2023. Income before income taxes increase by 13.1% and even that grew by 11.9%.

Andy: 2012.

Andy: Makes sense.

Andy: Sure.

Andy: Okay.

Andy: Okay.

Andy: Okay.

Andy: Yes.

Andy: Please proceed.

Andy: Okay.

Andy: Part of that margin was 34.9% expanding by 30 basis points over the third quarter of the prior year.

Andy: Third quarter 2023.

I'm wondering directors approved a 15% increase to our projected dividend payments for the fourth quarter of 2024. This represents our 30 <unk> consecutive annual increase overall, we are very pleased with our performance for the quarter and the strong results our team delivered.

Andy: The effect attacks rate for the quarter being increased to 24.6% versus the third quarter of the prior year, which was 25.6%. The decrease was driven primarily by certain one-time items in the prior year, and the impact of changes in the market value or company-owned life insurance.

Speaker Change: We're over on slide number eight.

Speaker Change: The retail segment with total revenue.

Andy: Deluded net income for share increased in 91 cents or 12.3%. Our way to average shares outstanding increased slightly as compared to last year as we continue to prioritize Pinging down our floating rate debt.

Speaker Change: Percentage.

Speaker Change: Thanks.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Acquisition activity.

Speaker Change: Yes.

Speaker Change: Yes.

Andy: Our dividends pay for share increased by 13% as compared to the third quarter of 2023. Last week, our Board of Directors approved a 15% increase to our projected dividend payments for the fourth quarter of 2024.

Speaker Change: Two questions.

Speaker Change: Yes.

Speaker Change: Thank you.

Speaker Change: Yes.

Speaker Change: To drive and support.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Excellent quarter with total revenues, increasing 15, 7%.

Andy: This represents our 31st consecutive annual increase. Overall, we are very pleased with our performance for the quarter and the strong results our team delivers.

Speaker Change: And organic growth of 22, 8% our organic growth was benefited by approximately $15 million associated with Onboarding of new customers within our lender placed business. This revenue will be recognized more evenly throughout 2025.

Speaker Change: Rule Run Flight Number 8.

Speaker Change: The retail segment, Grutotal Revenue, is by 6.5% with organic growth at 3.9%. The difference between Total Revenue and Organic Revenue with driven substantially by acquisition activity over the past year.

Growth in total revenues was lower than organic due to net acquisition and disposition activity as well as lower contingent commissions.

Speaker Change: Ebedak decreased due to lower contingent and incentive commissions.

Speaker Change: Higher NonCast Doc-based compensation, as well as investments and teammates to drive and support our current and future growth.

Speaker Change: Our EBITDA margin expanded by 360 basis points to 48, 2% driven by leveraging of our expense base and the sale of certain claims administration adjusting services businesses in the fourth quarter of 2023.

Speaker Change: Ron 5.9. Programme has another excellent quarter with total revenues increasing 15.7%.

Speaker Change: Regarding the impact of the Hurricanes, there's still a lot of unknowns, primarily associated with Hurricane Milton Our best estimate is that we anticipate recording flood claims processing revenue associated with the recent hurricanes of approximately $12 million to $15 million in the fourth quarter, and then 18% to 22.

Speaker Change: and organic growth of 22.8%. Our organic growth was benefited by approximately 15 million associated with onboarding new customers within our lender-place business.

Speaker Change: This revenue will be recognized more evenly throughout 2025.

Speaker Change: Groath and Total Revenue was lower than organic due to net acquisition and disposition activity as well as lower contingent commissions.

Speaker Change: In the first half of 2025 with the majority of that revenue being recorded in the first quarter as of now we're anticipating claims cost of $5 million to $10 million within our captives associated with Hurricane Milton.

Speaker Change: We're going to be a number of questions that we've been through. Our EBITEC margin expanded by 360 basis points to 48.2% driven by leveraging our expense space and the sale of certain claims and administration and justing services businesses in the fourth quarter of 2023.

Speaker Change: We are over on the slide number 10, our wholesale brokerage segment delivered another great quarter with total revenues, increasing 14% and organic growth of eight 4% the incremental expansion in total revenues in excess of organic was driven by acquisitions completed over the last 12 months and higher contingent commissions associated with finalizing.

Speaker Change: who are going the impact of the hurricanes. There are still a lot of unknowns primarily associated with hurricane Milton.

Speaker Change: Our best estimate is that we anticipate recording blood claims processing revenue associated with the recent hurricanes of approximately 12.

Speaker Change: Estimates recorded in the prior year, our EBITDA margin increased by 130 basis points to 38, 6%, primarily due to higher contingent commissions and leveraging our expense base we.

Speaker Change: to 15 million in the Ford Quarter.

Speaker Change: and then 18 to 22 million in the first half of 2025 with the majority of that revenue being recorded in the first quarter. As of now, we're anticipating claims cost of five to ten million dollars within our captors associated with hurricane Milton.

Speaker Change: A few comments regarding our capital structure cash generation and outlook.

Speaker Change: In the third quarter, we paid off $500 million of our inaugural 10 year bonds with the proceeds from our issuance completed in the second quarter of this year with our continued deleveraging our balance sheet is in a great position as our gross debt to EBITDA ratio on a trailing 12 month basis is in line with our 10 year average.

Speaker Change: Robron, slide and return. Our wholesale broker segment deliver another great quarter with total revenues increasing 14% and organic growth of 8.4%.

Speaker Change: The incremental expansion in total revenues and excess of organic, withdrawn by acquisitions completed over the last 12 months.

Speaker Change: For the first nine months of this year, we had strong cash generation of over $810 million, increasing our ratio of cash flow from operations as a percentage of revenue to 22, 4%.

Speaker Change: and Higher Contingent Commissions associated with finalizing estimates, recording the prior year.

Speaker Change: are even at margin increase by 130 basis points to 38.6% primarily do a higher contingent commissions and leveraging our expense base.

Speaker Change: As it pertains to full year cash generation, we feel really good we want to highlight there is U S. Federal tax relief associated with the recent hurricanes as a result payments for the third and fourth quarters of this year are permissible to be deferred until the second quarter of next year. Therefore, our full year ratio of cash flow from ops.

Speaker Change: We have a few comments regarding our capital structure, cash generation and outlook.

Speaker Change: In the third quarter we pay off 500 million of our inaugural 10-year bonds with the proceeds from our issuance completed in the second quarter of this year.

Speaker Change: with our continued delivery gene, our balance sheet is in a great position as our gross debt to EBITDA ratio on a trail in 12 month basis is in line with our tenure average.

Speaker Change: <unk> as a percentage of total revenue for 2024 should be in the range of 24% to 26%.

Based on our strong year to date performance and taking into consideration the potential impact from Hurricane Helena Milton We anticipate our full year EBITDA margin will be up at least 100 basis points for 2024 as compared to 2023 with that let me turn it back over to Powell for closing comments. Thanks, Andy Great report from an economic.

Speaker Change: For the first nine months of this year, we had strong cash generation of over $810 million, increasing our ratio of cash flow from operations as a percentage of revenue to 22.4%.

Speaker Change: and it pertains to full-year cast generation. We feel really good.

Speaker Change: We want to highlight that there is U.S. Federal Tax Relief associated with the recent hurricanes.

Powell: Standpoint, we do not anticipate material changes from what we experienced through the first nine months of this year. The biggest questions that seem to be on the minds of business leaders here in the states, which may impact our level of investment or the outcome of the U S presidential election, geopolitical matters and the timing and magnitude.

Speaker Change: As a result, payments for the third and fourth quarters of this year are permissible to be deferred until the second quarter of next year. Therefore, our full year ratio of cash flow from operations as per Senate's total revenue for 2020-4 should be in the range of 24-26 percent.

Powell: Future interest rate reductions and inflation.

Speaker Change: Based on our strong, irrigate performance and taking into consideration the potential impact.

Powell: From an admitted lines rate perspective, we anticipate rates in the fourth quarter and early 'twenty five to be relatively similar or moderate moderate downward slightly versus the third quarter of this year for the E&S market casualty and professional liability should be similar to what was experienced during the third quarter of 2024 for cat property.

Speaker Change: from Hurricane Helena Milton. We anticipate our full-year EBITDAQ margin will be up at least 100 basis points for 2024.

Speaker Change: has compared to 2023.

Speaker Change: with that when we turn it back over to Tyler for closing comments. Thanks Andy, a great report. From an economic standpoint, we do not anticipate material changes from what we experienced for the first nine months of this year. The biggest questions that seem to be on the minds of business leaders here in the states.

It'll come down to ultimate paid losses associated with Helene and Milton we anticipate rate decreases from flat to down 10% going into the fourth quarter.

Speaker Change: which may impact their level of investment or the outcome of the U.S.

On the M&A front, we continue to feel good about our pipeline both domestically and internationally, we're always building relationships with a lot of companies and we have strong a strong capital position.

Speaker Change: Presidential election, geopolitical matters and the timing and magnitude of future interest rate reductions and inflation.

Speaker Change: from an admitted lines rate perspective we anticipate rates in the fourth quarter and early 25 to be relatively similar or moderate, moderate downward slightly versus the third quarter of this year. For the ENS market, casualty and professional liability should be similar to what?

Powell: We will continue our disciplined approach has worked very well to help us acquire great companies that enhance.

Powell: Our capabilities and drive profitable growth lastly, we're excited to have the quintet team joined Brown <unk> Brown and anticipate a closing in the fourth quarter.

Speaker Change: was experienced during the third quarter of 2024. For cat property it'll come down to ultimate paid losses associated with Heline and Milton. We anticipate rate decreases from flat to down 10% going into the fourth quarter.

As we head into the fourth quarter, our team continues to be well positioned and is leveraging the power of <unk> to win more net new business, we have great momentum across the company and feel good about our prospects for the fourth quarter and finishing the year strong with that I will turn it back over to Kevin and open up for Q&A.

Speaker Change: On the M&A front we continue to feel good about our pipeline, both domestically and internationally. We're always building relationships with a lot of companies. We have strong, a strong capital position.

Speaker Change: Thank you ladies and gentlemen, if you have a question or a comment at this time. Please press star one on your telephone. If your question has been answered you were seeing with yourself from the queue. Please press star one again and we ask that you limit yourself to one question. If you have other questions feel free to jump back in the queue, we will pause for a moment, while we compile our Q&A roster.

Speaker Change: We'll continue our discipline approach as it's worked very well to help us acquire great companies that enhance our capabilities and drive profitable growth Lastly, we're excited to have the quintess team join Brown and anticipate a closing in the fourth quarter

Okay.

Speaker Change: As we head into the fourth quarter, our team continues to be well positioned and is leveraging the power of lead to win more net new business. We have great momentum across the company and feel good about our prospects for the fourth quarter and finishing the year's strong. With that, we'll turn it back over to Kevin and it'll open up for Q&A.

Our first question comes from Gregory Peters with Raymond James Your line is open.

Gregory Peters: Well good morning, everyone.

Gregory Peters: I guess the instruction set I'm supposed to only ask one question so I.

Gregory Peters: I guess I'm going to focus my my only question on the retail segment.

Speaker Change: Thank you ladies and gentlemen if you have a question or a comment at this time please for a star one one on your telephone If your question has been answered you were seeing we just left from the queue please for a star one and one again And we have to chill in with yourself to one question if you have other questions feel free to jump back in the queue We'll pause for a moment while we compile our queue and a roster

Speaker Change: Paul and Andy ran through.

Speaker Change: Some variables that affected the organic in the third quarter I'm wondering if you could provide some more detail on that and if theres any read through we should be thinking about as we look forward.

Speaker Change: Okay.

Speaker Change: Greg Good morning, and we appreciate your one question.

Speaker Change: The End

Actually we're not going to break it down into the specific details, but what I would say is as we said in the organic growth there is really incentives.

Speaker Change: A first question comes from Greg repeaters with Raven James your line is open.

Greg repeaters: Well, good morning everyone. I guess the instruction said I'm still still only ask one question. So I guess I'm going to focus my only question on the retail segment.

Speaker Change: Incentive commissions that are down and we talked a little bit about nonrecurring onetime revenue that didnt occur like bonds and other related matters. So from a standpoint of we feel good about our retail business I think that's the important thing I do not believe that one quarter.

Greg repeaters: Paul and Andy ran through some variables that affected the organic in the third quarter. I'm wondering if you could provide some more detail on that and if there's any read through, we should be thinking about as we look forward.

Speaker Change: The trend.

Speaker Change: And so I.

Speaker Change: I think you should take from that what you want but we feel really good about our retail business.

Speaker Change: Greg, good morning and we appreciate your one question. Actually, we're not going to break it down into specific details, but what I would say is as we said in the organic growth.

Speaker Change: And then Greg the other thing.

For everybody else keep in mind remember, we've we've said in the past that.

Speaker Change: Normally our business will grow faster than the retail business will grow faster than the first half of the year than the second half of the year.

Speaker Change: There is

Speaker Change: Really incentives, incentives commissions that are down and we talked a little bit about non-recurring one time Revenue that didn't occur like bonds and other related matters. So from a standpoint of we feel good about our retail business

Speaker Change: Last year was a little bit different just because the timing of some.

Speaker Change: And bonds and some surety work inside every if you look kind of back over historically normally grows faster in the first half and second primarily due to the amount of employee benefits business that is recorded in the first quarter.

Speaker Change: I think that's the important thing. I do not believe that one quarter creates a trend and so I think you should take from that what you want but we feel really good about our retail business.

Speaker Change: Got it thanks for the answer.

Speaker Change: Great. Thanks, Greg one of them for our next question.

Speaker Change: and then Greg the other day just I guess for everybody else keep in mind remember we've said in the past that

Speaker Change: Hey, thanks.

Speaker Change: Normally our business will grow faster. The retail business will grow faster in the first half of the year than the second half of the year. Last year was a little bit different just because of the time you've some of.

Gregory Peters: I appreciate the flat to down 10 guide for property Cat rates I was just curious if the product mix and wholesale is built to sustain nice growth and that type of environment or are we going to start seeing that show up a little bit more in the organic.

Speaker Change: and Bond and some surety work inside of it. If you look back over historically, it didn't normally grow faster in the first half. The second primarily due to the amount of employee benefits business that is recorded in the first quarter.

Speaker Change: Alright so.

Speaker Change: Good morning, Rob and let me make one other clarifying comment on what I said I believe that.

Speaker Change: Got it, thanks for the answer

Speaker Change: There is great interest by the risk bearers, particularly domestically to hold rates more closer to flat.

Speaker Change: The End

Speaker Change: Our next question comes from Rob Cox with Goldman Sachs your line is open.

Speaker Change: Having said that there are new new.

Speaker Change: Participants there are other markets, specifically on London, which is very aggressive and thats going to put additional pressure on that so.

Rob Cox: Hey, thanks. I appreciate the flat to down 10 guides for property cat rates. I was just curious that the products mix and wholesale is built to sustain nice growth in that type of environment or we're going to start seeing that show up a little bit more in the organic.

Speaker Change: Having said that interestingly enough are Q3 is not an inordinately heavy.

Speaker Change: Property.

Speaker Change: Quarter. The property is typically in Q1 and Q2 out of hurricane season.

Speaker Change: Alright, so the Good Morning Rob and let me make one other clarifying comment on what I said. I believe that...

Speaker Change: So again it depends on the mix, but we have quite malon.

Speaker Change: There is a great interest by the risk bearers, particularly domestically, to hold rates more closer to flat.

Speaker Change: Brokerage and binding authority businesses and what we're talking about is in brokerage not necessarily in binding so.

Speaker Change: Having said that, there are new participants, there are other markets specifically London, which is very aggressive and that's going to put additional pressure on that.

Speaker Change: What I would say is anytime you have rate decreases it can but from a standpoint of we're going to see what kind of discipline in the markets will.

Speaker Change: Having said that, interestingly enough, RQ3 is not an inordinately heavy property quarter, the property is typically in Q1 and Q2 out of hurricane season.

Speaker Change: Adhere to in Q4 than what I'm about to say is purely spec with speculative.

Speaker Change: Remember prior to the storms, we were seeing down 20%, 30%.

Speaker Change: And so we don't anticipate that but anything is possible.

Speaker Change: So again, it depends on the mix but we have quite balanced.

It's a much higher probability of zero to 10.

Speaker Change: Brokerage and binding authority businesses and what we're talking about is in Brokerage not necessarily in binding.

Speaker Change: Thank you.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Yeah.

Speaker Change: So...

Speaker Change: What I would say is

Speaker Change: Our next question comes from Elyse Greenspan with Wells Fargo. Your line is open.

Speaker Change: Any time you have ready decreases it can but from a standpoint of we're going to see what kind of discipline the markets will It's here to and Q4 and and what I'm about to say is purely specular to

Elyse Greenspan: Hi, Thanks. Good morning, My question is going back to the retail segment. So I guess that incentive comp it sounds like a supplemental commission, which I think you guys started leaving an organic white like a couple of years ago. So I just want to confirm that and then given that the one off with a 100 basis points I know you guys don't typically.

Speaker Change: Remember, prior to the storms, we were seeing down 20 and 30 percent. And so we don't anticipate that, but anything is possible. I think it's a much higher probability is 0 to 10.

Speaker Change: I'd like to guide, but you did say right one quarter doesn't make a trend is the right way to think about it that some growth of around 5% is kind of like the baseline for the Q4 and beyond.

Speaker Change: Thank you.

Speaker Change: Andy you want to take that.

Speaker Change: So let me hit the first one because thats pretty easy yes, it's on the.

Speaker Change: A next question comes from a leaf screen span with both Fargo and your line is open.

Speaker Change: Gse's, so the guaranteed supplemental commissions and incentive commissions are inside of organic growth and as you know those can move up and down by quarters, just like the contingent commissions can can adjust themselves in inside of there.

Speaker Change: Hi, thanks. I'm good morning. My question is going back to the retail segment. So I guess that incentive calms, it sounds like a supplemental commission, which I think you guys started leaving in organic quite like a couple years ago.

Speaker Change: So I just want to confirm that and then given that the one off was a hundred basis points.

Speaker Change: As you know, we don't give guidance for organic growth for for the business.

Speaker Change: I know you guys don't typically like to guide but tell us you did say right one quarter doesn't make a trend.

Speaker Change: I think as we look into at least the fourth quarter is.

Speaker Change: is right way to think about it that some growth of around 5% is kind of like the baseline for the Q4 and beyond.

Speaker Change: We would at least think that one we feel really good about our business and the net performance and how we're bringing in new business lot of its going to come down to what happens to rates and then exposure units for for the economy. So less something does unusual there.

Speaker Change: Hey everyone it's like that. Yeah, it's more than always. So let me hit the first one because that's pretty easy. Yeah, it's on the GSC so the guaranteed supplement with commissions and then incentive commissions

Speaker Change: are inside of organic growth. And as you know, those can move up and down by cores just like the contingent commissions can adjust themselves inside of there. As you know, we don't give guidance for organic growth.

Speaker Change: We would expect those to be fairly similar to the third quarter.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Okay.

Speaker Change: for the business. I think as we look into at least the fourth quarter is, you know, we would at least think that one, we feel really good about our business and the net performance and how we're bringing in new business.

Speaker Change: Our next question comes from Euro <unk> with Jefferies. Your line is open.

Thank you good morning, everybody.

Speaker Change: So my question is in the programs business. So I think you sold a portion of the captives.

Speaker Change: Two it to a third party and it's coming.

Speaker Change: You know, a lot is going to come down to what happens to rates and then exposure units for the economy. So, unless something goes unusual there, we would expect those to would be fairly similar to the third quarter.

Speaker Change: Coming back into consolidated to Noncontrolling.

Speaker Change: Through NCI.

Speaker Change: Can you maybe walk us through the impact to the programs segment itself.

Speaker Change: At NCI.

Speaker Change: And the programs business, namely what would be adjusted margin be in or what the organic growth be for that segment.

Speaker Change: Thank you one more four next question.

Speaker Change: Well good morning, Eric It has no impact on the organic growth or the margins.

Speaker Change: Our next question comes from your Ryan Kinar with Jeff Rees your line is open.

Ryan Kinar: Thank you for the good morning everybody. So my question is in the program's business. So I think you sold a portion of the captives to a third party and it's now coming back and to consolidate it to non-controlling.

Speaker Change: The Noncontrolling interest is only on a pretax basis allocation over so.

Speaker Change: So we record all of the gross up above and then back out the minority interest below.

Speaker Change: Right. So so my question would be what would the impact of the <unk> had we adjusted that NCI at the segment level.

Ryan Kinar: through NCI. Can you maybe walk us through the impact to the program's segment itself where that NCI in the program specifically what would be a just margin be and what would be or get across be for that segment.

Speaker Change: I guess I would say, it's kind of irrelevant because the accounting rules don't allow you to do it anyway. We're following what the rules are you have to bring it on a gross basis.

Speaker Change: Okay. Thank.

Speaker Change: Thank you yes.

Speaker Change: One moment for our next question.

Speaker Change: Well, more and more it has no impact on the organic growth or the margins. The non-controlling interest is only on a pre-text basis allocation over.

Speaker Change: Our next.

Speaker Change: Comes from Michael Zaremski with BMO. Your line is open.

Speaker Change: Okay.

Speaker Change: Morning.

Speaker Change: Alright.

Michael Zaremski: I guess my one question I want to focus on the program segment.

Speaker Change: So we record all of the gross up above and then back up minority interest below.

Speaker Change: Right, so my question would be what would the impact of the site when B had we adjusted that NTI had to segment level?

Speaker Change: The growth has been exceptional for three years now and in the segment and I think you gave some color to that.

Speaker Change: I guess I would say it's kind of irrelevant because the accounting rules don't allow you to do it anyway We're fondly what the rules are. You have to bring it on a gross basis

Speaker Change: This quarter's outsized growth was coming from catastrophe programs.

Speaker Change: Maybe just curious is there.

Speaker Change: Thank you.

Speaker Change: When we think of like the wholesale marketplace. We we think about that marketplace over long periods of time, typically growing a bit faster than the standard market due to some.

Speaker Change: One moment for our next question.

Speaker Change: Next question comes from Michael's room ski with BMO, your line is open.

Speaker Change: Underlying kind of secular factors just curious in your programs business is there anything.

Speaker Change: Morning.

No structural or secular or you think this is just a.

Speaker Change: I guess for my one question I want to focus on the program segment.

Speaker Change: Should grow at a multiple of <unk>.

Speaker Change: It's a growth has been exceptional for years now in the segment. And I think you gave some color to that, maybe this quarter's outside growth was coming from the Cassery programs.

Speaker Change: The standard markets over time.

Alright, so good morning, Mike.

So let's think about that most of our programs. Many I shouldn't say most are admitted okay. So think of that as.

Speaker Change: Maybe just curious is there?

Speaker Change: You know, when we think of like the wholesale marketplace we we think about that marketplace over long project time typically growing a bit faster than the standard market. That due to some underlying kind of secular factors just currishing a program's business or anything.

Speaker Change: An extension of the specialty admitted market.

Speaker Change: As opposed to the traditional wholesale or non admitted market I think thats an important distinction upfront. That's number one number two I believe there will continue to be interest and emphasis on.

Speaker Change: Structural or Sackler, you think this is a should grow at a multiple of the standard markets over time.

Speaker Change: The programs business going forward, depending on what you read and what you believe the program space is somewhere between 85 and $100 billion of premium in United States.

Speaker Change: Alright, so good morning Mike. So let's think about that. Most of our programs, many-assions and most are admitted.

Speaker Change: And so we do continue to see that growing nicely into the future.

Speaker Change: Okay, so think of that as an extension of the specialty at mid-idd market.

Speaker Change: And there are number of very talented underwriters.

Speaker Change: That want to join us either from a risk bearer or sometimes from other programs.

Speaker Change: As opposed to the traditional wholesale or non-admitted market, I think that's an important distinction upfront. That's number one. Number two, I believe there will continue to be interest and emphasis on...

There is a dynamic.

Speaker Change: Environment here, where we are.

Speaker Change: Fostered great relationships with our carrier partners and remember we are underwriting on behalf of we are as we understand it the largest delegated underwriting authority entity in the United States and so they place carriers place enormous.

Speaker Change: The program is going forward depending on what you read and what you believe. The program space is somewhere in $8,500 billion of premium United States.

Speaker Change: Authority in our hands of which we take very seriously so.

Speaker Change: and so we do continue to see that growing nicely into the future.

Speaker Change: Is the growth going to continue in the 20% range that that's over a long period of time, that's quite high alright, let's let's call. It what it is but what I would say is we believe that the program space is a very nice consistent grower over a long period of time.

Speaker Change: and there are a number of very talented underwriters.

Speaker Change: that want to join us either from a risk bearer or sometimes from other programs.

Speaker Change: because there is a dynamic

Speaker Change: Environment here where we have fostered great relationships with our carrier partners. And remember, we are underwriting on behalf of we are, as we understand it, the largest delegated underwriting at 40.

Speaker Change: Our results would indicate as such.

Speaker Change: Yeah, and it's interesting because.

Speaker Change: And I know this isn't the case with you Mike, but there are some people out there that really don't I don't think.

Speaker Change: Institute in the United States. And so they place carriers, place enormous.

Speaker Change: Fully understand or give us credit for the other than retail part of our business, which is 40% of revenue.

Speaker Change: Authority in our hands of which we take very seriously. So, is the growth going to continue in the 20% range? That's...

Speaker Change: And as you know it is performing very nicely.

Speaker Change: Over a long period of time that's quite high. Alright, let's let's let's

Speaker Change: So if you want to look at it on a slightly different perspective.

Speaker Change: Call it what it is. But what I would say is we believe that the program space is a very nice, consistent bro or over a long period of time and our results would indicate it's such.

Speaker Change: And I know you've already thought about this but if you look at the performance of wholesale and programs together.

Speaker Change: That 40% grew at 17, 7% in Q3.

Speaker Change: And it's interesting because, and I know this isn't the case with you Mike, but there are some people out there that really don't, I don't think.

Speaker Change: Hum.

Pretty pretty impressive.

I do think people when they look at programs and wholesale data to look at.

Speaker Change: Orion has a comp.

Speaker Change: Fully Understand or give us credit for the other than retail part of our business, which is 40% of the revenue.

Speaker Change: Okay.

Speaker Change: I'll stick to my one question, but a follow up on on your answer on the same topic would it be a fair assumption to say that.

Speaker Change: And as you know it is performing very nicely.

Underwriters will come too.

Speaker Change: Brown or just a broker owned.

Speaker Change: So if you want to look at it on a slightly different perspective.

Speaker Change: Programs business are can be compensated more highly than.

Speaker Change: and I know you've already thought about this, but if you look at the performance of wholesale and programs together.

Speaker Change: Our carrier <unk> given valuation dynamics.

Speaker Change: That's 40% grew at 17.7% in Q3.

Speaker Change: You mean to the individual.

Speaker Change: Alright compensate.

Speaker Change: Well I think the compensation is typically different because it can be cash you know a base plus a bonus in many instances plus equity.

Speaker Change: Hmm, pretty impressive.

Speaker Change: I do think people when they look at programs and wholesale aids who look at Orion as a comp. But can I stick to my one question but a follow up on your answer on the same topic? Would it be a fair assumption to say that?

Speaker Change: So generally it's.

Speaker Change: I think that is a broad statement you could probably say yes.

Speaker Change: Thank you.

Speaker Change: One moment for our next question.

Speaker Change: Underwriters that come to Brown or just a broker owned program's business can be compensated more highly than what a carrier can pay given valuation dynamics.

Speaker Change: Okay.

Speaker Change: Our next question comes from Mark Hughes with <unk> Securities. Your line is open.

Mark Hughes: Yes, thanks, good morning.

Mark Hughes: Good morning, you had mentioned that you generated $15 million in revenue from Onboarding, new customers and programs and that would be spread more evenly across 2025.

Speaker Change: the individual to the compensation. Well, I think the compensation is typically different because it can be cash, you know, a base plus a bonus and many instances plus equity.

Mark Hughes: Is there any of that 15 million nonrecurring.

Mark Hughes: Can you give us a sense of when you say spread more evenly or are there any kind of bumps that are tough comps as we think about 2025 and lend.

Speaker Change: So generally it's, I think it has a broad statement you could probably say yes.

Mark Hughes: Lender placed business.

Speaker Change: Yes, good morning, Mark.

Speaker Change: Thank you.

Speaker Change: So how that works is when.

When we pick up a new account or we have a customer that buys a portfolio normally there is a lag of anywhere from 90 to 180 days.

Speaker Change: Our next question comes from Mark Hughes with the True Security, Sri Lanka's Open.

Speaker Change: Good morning.

Mark Hughes: Board. Andy, you mentioned that you've generated 15 million revenue from onboarding new customers and programs, and that would be spread more evenly throughout 2025. I think that's 15 million non-recurrent.

Speaker Change: From the previous servicer of actually sending out notifications everything so what happens is we generally will get two to three quarters of revenue.

Speaker Change: And kind of the first quarter that we onboard them then when it comes around to renewal or the ex date, then that revenue will fall accordingly, and that's really what we're saying is next year in the third quarter, we would not anticipate seeing that $15 million, but.

Mark Hughes: and can you give us a sense of when you say spread more evenly or are there any kind of bomb to your tough cops as we think about 2025 in that lender place business.

Speaker Change: But that will be spread out during 2005 with most of it in kind of the first half of the year does.

Speaker Change: Good morning Mark. So how that works is when when we pick up a new account or we have a customer that buys a portfolio Normally there is a lag of anywhere from 90 to 180 days

Speaker Change: Does that help kind of explain how that works.

It does.

Speaker Change: Second half of my one question is anything on the advocacy business give you in the.

Speaker Change: Social security administration will be a little more active on.

Speaker Change: from the previous service of actually sending out notification. So what happens is he generally will get two to three quarters of revenue.

Speaker Change: Adjudicating claims.

No everything's pretty similar to what we've been seeing over the last few years, we've got good inflow into our business.

Speaker Change: and kind of the first core that we onboard him. And then when it comes around to renewal or the ex-date, then that revenue will fall according. And that's really what we're saying is...

Speaker Change: But only so much comes out of the back of the funnel.

Speaker Change: Next year in the third quarter we would not anticipate seeing that 15 million but that would be spread out during 25 with most of it in kind of the first half of the year. We said help kind of explain how that works.

Speaker Change: Thank you.

Speaker Change: Yes, one of them for our next question.

Speaker Change: Okay.

Speaker Change: Our next question comes from Alex Scott with Barclays. Your line is open.

Hi, I wanted to.

Speaker Change: It does. The second half of my one question is anything on the advocacy business that you see in the social security administration be a little more active on the adjudicating claims.

Speaker Change: Ask you to provide more color on the M&A pipeline in particular the comments around.

Speaker Change: Interest rates, beginning to come down and more interest from private equity players.

Speaker Change: Could you talk about the potential size of those opportunities.

Speaker Change: Now everything's pretty similar to what we've been seeing over the last few years. We got good info over into our business, but only so much comes out of the back of the funnel.

Speaker Change: Where you're focused on growing it organically.

Speaker Change: Sure so as it relates to the first part of the comment.

Speaker Change: As interest rates.

Speaker Change: Thank you.

Speaker Change: Prior to interest rates going up there, where typically lots of private equity firms that expressed interest and obviously they think of it in a little different manner in terms of the way they account for it.

Speaker Change: Our next question comes from Alex Scott with Barclays Your Line is Open.

Alex Scott: Hi, I wanted to ask you to provide more color on the M&A pipeline in particular the comments around interest rates, beginning to come down and more interest for private equity players.

Speaker Change: And look at those investments.

Speaker Change: Than that and so there might have been 10 firms that were involved initially just as an example, and then as the interest rates ticked up that number being involved might've slowed to three firms. These are very hypothetical situations.

Alex Scott: You know, could you talk about, you know, the potential size of those opportunities and, you know, where you're focused on growing in or inacly

Speaker Change: And then today, there might be six or seven firms. So what I'm trying to give you in a sense of is that <unk>.

Speaker Change: Sure, so as it relates to the first part of the comment, you know, as interest rates prior to interest rates going up, there were typically lots of private equity firms that we expressed interest.

Speaker Change: As interest rates go down there are more interested parties that are short term in nature.

Speaker Change: In terms of the way they view it I E private equity.

Speaker Change: and obviously they think of it in a little different manner in terms of the way they account for it and look at those investments.

Speaker Change: As it relates to US we continue to look both here domestically, which we think there are some very good opportunities for us here in the future and in the international markets that we currently operate in and as evidenced by the fact that we anticipate closing Quinn tests in the Netherlands. This.

Speaker Change: Then that and so there might have been 10 firms that were involved initially just as an example and then as the Interst rates ticked up that number you being involved might have slowed to three firms. These are very hypothetical situations

Speaker Change: Quarter.

That's another market that we're excited.

Speaker Change: and then today there might be six or seven firms.

Speaker Change: About.

Speaker Change: Participating in on a go forward basis, so theres not one over another we stress the importance of cultural fit we think about capabilities, we think about either enhancing existing capabilities, adding new capabilities or or maybe a new geography.

Speaker Change: So what I'm trying to give you in a sense of is that as interest rates go down, there are more interested parties that are short-term in nature in terms of the way they view it, IE private equity.

Speaker Change: as it relates to us.

Speaker Change: We continue to look both here domestically which we think there are some very good opportunities for us here in the future.

Speaker Change: As long as it's consistent with the core which is one we wanted to fit culturally and makes sense financially and two we like to operating countries.

Speaker Change: and the international markets that we currently operate in and as evidenced by the fact that we anticipate closing quintess in the Netherlands this quarter, you know, that's another market that we're cited about, you know, participating in on a go forward basis.

Speaker Change: That we understand their governments, there's typically a rule of law there is generally a stable.

Speaker Change: Stable economy.

Speaker Change: And we're very pleased with the <unk>.

Speaker Change: Environment that we're currently operating in.

Speaker Change: Got it thanks for the clarification on the private equity piece.

Speaker Change: So there's not one over another. We stress the importance of cultural fit.

Speaker Change: Sure. Thank you.

One moment for our next question.

Speaker Change: We think about

Speaker Change: Capabilities, we think about either enhancing existing capabilities, adding new capabilities.

Speaker Change: Our next question comes from Meyer Shields with <unk>. Your line is open.

Speaker Change: or maybe a new geography.

Speaker Change: Great. Thanks, so much I just wanted to go back to the lender placed insurance and programs should we think of that $16 million. I think you said there was a 90 to 120 day lag. So it was the $15 million the equivalent of like three quarters of revenue or is that a full year and did that impact margins in the segment.

Speaker Change: As long as it's consistent with the core, which is one, we want to defeat culturally and make sense financially. And two, we like to operate in countries.

Speaker Change: that we understand their governments. There's typically a rule of law. There's generally a stable economy. And we're very pleased with the environments that we're currently operating in.

Speaker Change: So let's see the is it represents over about six months of revenue just a little bit more on that Mayer.

Speaker Change: The End

Speaker Change: Dad, thanks for the clarification on the private equity piece.

Speaker Change: Again, primarily in the in the first half of.

Ryan Kinar: Sure, thank you.

Speaker Change: 2025, some of it will reach into the fourth quarter as it kind of comes through just normal lag in processing taken over from the previous processor.

Speaker Change: And next question comes from my or sales with KBW your line is open.

Speaker Change: Great, thanks so much. I just wanted to go back to the Lenderplace Insurance in Programs. Should we think that 15 million? I think it said there was a 92, 120 day lag. So was it 15 million the equivalent of like three quarters in revenue or is that a full year? And did that impact margins in the segment?

Speaker Change: And then from a full year margin no it doesn't.

Speaker Change: Impact full year margins, it's just.

Speaker Change: The quarters.

Speaker Change: Okay perfect. Thank you so much.

Speaker Change: Yes, one moment for our next question.

Speaker Change: So let's see, it is it represents over about six months of revenue just a little bit more on that mayor.

Speaker Change: Our next question comes from Grace Carter with Bank of America. Your line is open.

Grace Carter: Hi, everyone. Good morning.

Grace Carter: I wanted to check you mentioned some pressure on contingent tend to retail from higher loss ratios at carrier partners. I think that this is the second quarter in a row that we've seen that could you elaborate on which lines caused.

Speaker Change: We again primarily in the first half of 2025. Some of it will reach into the fourth quarter as it kind of comes around just normal lag and in processing taken over from the previous processor.

Grace Carter: The pressure in <unk> and how this compares to <unk> and just kind of any thoughts on whether you think that this will be an issue that recurs moving forward for the next few quarters.

Speaker Change: and then from a full year margin, it doesn't impact full year margins, it's just between the quarters.

Speaker Change: Thank you.

Speaker Change: Good morning Grace.

Speaker Change: Okay, perfect. Thank you so much.

Speaker Change: Talking about this over probably the last few quarters at least.

Speaker Change: We saw this starting back in 'twenty three it's primarily on the auto side.

Speaker Change: Next question comes from Grace Carter with Bank of America, your line is open.

Speaker Change: Both on personal as well as on commercial I think as you know well carriers have been pushing for rate in that space, just because of frequency and severity of the claims.

Grace Carter: Hi everyone, good morning.

Grace Carter: Um, uh, to thank you, mentioned some pressure on contingent and retail from higher loss ratio that carrier partners. I think that this is the second quarter in a row that

Speaker Change: That are that are out there, which is putting pressure on overall profitability in that so that's the main driver.

Grace Carter: We've seen that could you elaborate on which lines cause the pressure and three cue and how this compares to two cue and just kind of any thoughts on whether you think that this will be an issue that recurs moving forward for the next few quarters.

Speaker Change: I guess, we would say right now we don't see anything in the marketplace, yet that is changing that trend at this stage. So we would continue to expect some some pressure on those.

Grace Carter: The

Speaker Change: Good morning Grace. Yeah, we've been talking about this over probably the last few quarters at least We saw this starting you know back in in 23. It's primarily on the auto side

Speaker Change: Thank you.

Speaker Change: Thank you good morning.

Speaker Change: For our next question.

Speaker Change: Okay.

Speaker Change: Our next question comes from Scott <unk> with RBC capital markets. Your line is open.

Speaker Change: Both on personal as well as on commercial I think as you know well carriers have been pushing for rate in that space just because of frequency and severity of the claims.

Speaker Change: Yes. Thanks. Good morning, just wondering if you could expand on the employee benefits business. I know you gave some commentary on that it sounds like you're seeing some positive trends on health care.

Speaker Change: who is putting pressure on overall profitability. And that's the main driver. We would say right now, don't see anything in the marketplace yet that is changing that trend at this stage. So we can continue to expect some pressure on those.

Speaker Change: I was just wondering if you can just talk about the trends in Q3 versus the first half and just the opportunity for 2025, just organically and through M&A and what youre seeing in that business.

Speaker Change: So Scott what I would say is remember in the last.

Speaker Change: I'm, taking you back a little while but in the last 10 years.

Speaker Change: Thank you.

Speaker Change: Thank you.

Speaker Change: One moment for our next question.

Speaker Change: We have consciously invested in additional capabilities, which has enabled us as an organization to basically handle any size customer and employee benefits.

Speaker Change: and next question comes from Scott Heleniak with RBC Capital Markets, your line is open.

Scott Heleniak: Yeah thanks for just wondering if you could expand on the employee benefits business and you gave some commentary on that so I'm like you're seeing some positive trends on health care.

Speaker Change: So what that means is weakened brightest startup and if they grow one day to 100000 employees, we can actually handle them at 100000 employees and so remember our core business is middle market and upper middle market and the.

Scott Heleniak: So just wondering if you can just talk about the trends in Keith's reverse and the first half and just the opportunity for 2020-25 just organically and through M&A and what you're seeing in that business.

Speaker Change: <unk> that we bring to the table, we see lots of opportunities today and in the future and are very excited about the growth opportunities for us and so it's something that health care every CFO wants to talk about there.

Speaker Change: So Scott, what I would say is remember in the last

Speaker Change: I'm taking you back a little while but in the last 10 years we have consciously invested in additional capabilities which is enabled us as an organization to basically handle any size, customer and employee benefits.

Speaker Change: Cost of health care.

Speaker Change: And so what that means is we can write a start up and if they grow one day to 100,000 employees we can actually handle them at 100,000 employees.

Speaker Change: And there are lots of things that we are able to bring to our customers and prospects that will apps enable them to think differently and potentially realize different and in some instances outsized.

Speaker Change: And so remember our core business is middle market and upper middle market.

Speaker Change: Positive performance versus what they have been experiencing so we.

Speaker Change: and the capabilities that we bring to the table, we see lots of opportunities today and in the future.

Speaker Change: We are actively looking for additional firms to join the team.

Speaker Change: But even in light of if we did not do an acquisition.

Speaker Change: and are very excited about the growth opportunities for us.

With employee benefit capabilities in them in the next 12 months I don't think that in any way shape or form.

Speaker Change: and so it's something that health care every...

Speaker Change: Changes, our opinion on existing business and employee benefits.

Speaker Change: CFO wants to talk about their cost of healthcare.

Speaker Change: Andy and I and the entire operating team are very very pleased and and quite honestly very excited about our ability to write and service customers of all sizes.

Speaker Change: and there are lots of things that we are able to bring to our customers and prospects. They will absolutely enable them to think differently and potentially realize different and in some instances, outside positive performance.

Speaker Change: Great I appreciate the detail.

Yep.

Speaker Change: versus what they have been experiencing.

Speaker Change: One moment for our next question.

Speaker Change: So we are actively looking for additional firms to join the team.

Okay.

Speaker Change: Our next question comes from Brian Meredith with UBS. Your line is open.

Speaker Change: But even in light of if we did not do an acquisition with employee benefits capabilities in them in the next 12 months I don't think that in any way shape of form changes our opinion on existing business in employee benefits

Brian Meredith: Yes, Thanks, just a quick one for me.

Brian Meredith: But any impact on contingent commissions from Milton they'll lean in in the fourth quarter.

Speaker Change: Good morning, Brian.

Speaker Change: I think it's still kind of to be determined.

Speaker Change: Our earlier comments, we said, there's still a lot of moving parts on Milton we did have some adjustments in the third quarter for Helene.

Speaker Change: Andy and I and the entire operating team are very, very pleased and quite honestly, very excited about our ability to write and service customers of all sizes.

Speaker Change: Dissimilar to where back in 2002 with with Ian we take the best estimate that we can based on what we know at that at the time. So it would it would we expect some adjustments in the fourth quarter year that probably will occur now again keep in mind that we had we did have adjustments positively in.

Speaker Change: Great, appreciate the detail.

Speaker Change: Heleniak.

Speaker Change: Our next question comes from Brian Meredith if UBS your line is open.

Brian Meredith: Yes, thanks. Just a quick one for me. Just but any impact on continued commissions from Milton or Wayne in the fourth quarter.

Speaker Change: Q4 of last year because of low claim activity, so and that's primarily in the program space. So you will see probably some meaningful year over year change in there.

Speaker Change: I'm Warren. I think still kind of to be determined.

Speaker Change: and our earlier comments, we said there's still a lot of moving parts on Milton. We did have some adjustments in the third quarter for Colleen, not dissimilar to we're back in 22 with Ian. We take the best estimate that we can, based on what we know at that at the time.

Speaker Change: I don't know the magnitude of it right now just we need some claims development to occur.

Speaker Change: Hey, Brian I'd like to just point out two things that might not be.

Speaker Change: As immediately.

Speaker Change: It comes to mind number one we saw and I continue to see a lot of auto losses.

Speaker Change: So what do we expect from adjustments in the fourth quarter year that probably will occur?

Speaker Change: In.

Speaker Change: The storms, particularly Helene, but Milton as well so you've got a car in a garage and flood waters come up in the car dies. Okay. So it doesn't work anymore and I'm not even talking about electric vehicles, I'm, just saying that that's number one number two depending on where you are.

Speaker Change: Now again keep in mind that we had, we did have adjustments, partitively in.

Speaker Change: Q4 of last year because of low claim activity, so that's primarily in the program space.

Speaker Change: and we'll see probably some meaningful year over year change in there. I don't know the magnitude of it right now, just when it's in the plane's development to a firm.

Speaker Change: Is there is a very very distinct correlation between structures commercial and residential that are built after 2005.

Speaker Change: Hey Brian, I'd like to just point out two things that might not be as immediately comes to mind. Number one, we saw and I continue to see a lot of auto losses.

Speaker Change: And the amount of loss.

Speaker Change: So there are new codes as you know that were put in place quantity. They would go back to 1992 with Hurricane Andrew and then every couple of years. It seems that they kind of up them, but if you talk to people in the market about losses on properties those losses are.

Speaker Change: and the storms particularly Heline but Milton as well so you've got a car and a garage.

Speaker Change: and flood waters come up in the car dies.

Speaker Change: Okay, so it doesn't work anymore and I'm not even talking about electric vehicles. I'm just saying that that's number one number two depending on where you are There is a very very distinct correlation between structures

Speaker Change: Typically on structures that are there in the 90, <unk> and the <unk> and the <unk> and the <unk> you get into older homes in on the <unk> and the <unk>, they're not the ones haven't losses, they're actually very they're very.

Speaker Change: Very solid structures, but it's that kind of middle stop where the building codes, maybe werent as.

Speaker Change: Commercial and Residential that are built after 2005 and the amount of loss.

Speaker Change: So, you know, there are new codes as you know, that we're put in place.

Speaker Change: Stringent so just a little aside just to kind of give you a little color around your question. Thank you.

Speaker Change: quite honestly if you go back to 1992 with Hurricane Andrew and then every couple years it seems that they've kind of up them but if you talk to people in the market about losses on properties those losses are typically on structures.

Speaker Change: <unk>.

Speaker Change: One moment for our next question.

Speaker Change: Our next question comes from Gregory Peters with Raymond James Your line is open.

Speaker Change: Yes.

Gregory Peters: Okay, I guess my follow up question.

Speaker Change: that are in the 90s and the 80s and the 70s and the 60s. You get into older homes, you know, in the 30s and the 40s. They're not the ones having losses.

Gregory Peters: And your commentary on free cash flow.

Gregory Peters: You talked about some deferred tax payments that will help the free cash flow result for 'twenty four should we should we anticipate that because youre going to have additional tax payments from 24% and 25 on top of just the 25%.

Speaker Change: They're actually very, you know, they're very solid structures.

Speaker Change: But it's that kind of middle stop where the building code is maybe weren't as stringent. So just a little aside just to kind of give you a little color around your question.

Gregory Peters: Conversion rate on the 25 free cash flow will be lower.

Speaker Change: Thank you.

Speaker Change: Yes, yes, Greg that would be correct and.

Speaker Change: Thank you.

Speaker Change: As of right now the the rules by the IRS is those need to be paid in the second quarter. So when you're working on your projections.

Speaker Change: Our next question comes from Greg repeaters with Red Mejane for line is open.

Speaker Change: And you can get a pretty good idea of our taxes, they run somewhere between $90 million to $100 million per quarter.

Speaker Change: Okay, I get my follow-up question.

Speaker Change: and your commentary on free cash flow you talked about some deferred tax payments that will help.

Speaker Change: In there so just make sure you put those in the second quarter, so that will pull down our conversion.

Speaker Change: 425.

Speaker Change: the Free Cash Flow result for 24. Should we anticipate that because you're going to have additional tax payments from 24 and 25 on top of just the 25 that the conversion rate on the 25 Free Cash Flow will be lower.

Speaker Change: It's why we made the comment that we raise the conversion ratio for 24 up because of that that deferral.

Speaker Change: And conversion rate and.

Speaker Change: The conversion for 'twenty four is raised from two can you just remind me.

Speaker Change: Yes, Greg, that would be correct. As of right now, the rule by the IRS is those that will be paid in the second quarter. So when you're working on your projections,

Speaker Change: Yes, we said 22% to 24 previously so this will take it up by eight percentage points.

Speaker Change: <unk>.

Speaker Change: When we look at the business and if you recall a while back.

Speaker Change: When we were talking about conversion ratio and we talked about 2025 as we said we saw kind of a very clear path back to the 24 to 26 range.

Speaker Change: and you can get a pretty good idea of our tax if they run somewhere between 90 to 100 million per quarter.

Speaker Change: in there. So just make sure you put those in the second course. That'll pull down our conversion for 25. That is why we made the comment that we raised the conversion ratio for 24 up because of that deferral.

Speaker Change: That was prior to this storm coming through but when we look at the overall business itself.

Speaker Change: And how we're growing the business.

Speaker Change: The margins that we generate and our free cash flow conversion.

Speaker Change: and conversion rate.

Speaker Change: and the conversion of your 24s raised from to can you just remind me

Speaker Change: We feel really really good about the business and the trajectory it's just.

Speaker Change: The timing of items back and forth sometimes between years, but underlying business continues to be very very strong.

Speaker Change: Yeah, we said 22 to 24 previously.

Speaker Change: So this will take it up by at percentage points. But when we look at the business and if you recall all back,

Speaker Change: Great. Thanks for answering the question.

Speaker Change: when we were talking about conversion ratio and we talked about 2025 is we said we saw kind of a very clear path back to the 2024 to 26 range that was prior to this storm coming through. But when we look at the overall business itself.

Speaker Change: One moment for our next question.

Speaker Change: Yeah.

Speaker Change: Our next question comes from Elyse Greenspan with Wells Fargo. Your line is open.

Elyse Greenspan: Hi, Thanks, My follow up is actually on investment income that went up by good amount in the quarter and what drove that and then is that level like as rates move how should we think about I guess the level of NII that youre expecting in the Q4.

Speaker Change: and how we're growing the business of the margins that we generate in our free cash flow conversion.

Speaker Change: We feel really really good about the business and the trajectory it's just you have this timing of items back and forth sometimes between years but underlying business it continues to be very, very strong.

Speaker Change: And going forward.

Speaker Change: Sure.

Speaker Change: So one thing to keep in mind remember the $600 million of bonds that we issued back in the second quarter.

Speaker Change: So we were <unk>.

Speaker Change: Building that money until we had paid off the September bonds, so that drove somewhere an incremental $6 million to $7 million.

Speaker Change: Great thanks for entering the question

Speaker Change: Thanks for your next question.

Speaker Change: Interest income for the quarter, so don't use that $31 million or so that we had in the quarter as a run rate it will definitely come back down.

Speaker Change: An expression comes from a least green thread with Wells Fargo, you line it open.

Speaker Change: Hi, thanks. My follow up is actually on investment income. That went up by Goodamount in the quarter. And what drove that? And then is that level, like as rates move, how should we think about, I guess, level of NII that you're expecting in the Q4 and going forward?

Speaker Change: In the second quarter, and then assume in the fourth quarter.

Horse.

Speaker Change #100: I'd like to clarify something Elyse I would like to clarify something that you asked earlier.

Speaker Change #101: And you are correct in saying that we do not give organic growth guidance as you know however.

Speaker Change: Sure. So one thing keep in mind, remember that the 600 million of bonds that we issued back in the second quarter. So we were holding that money until we had paid off the September bonds.

Speaker Change #101: What we said was you had asked about a number in Q4.

Speaker Change #101: And what <unk>.

Andy.

Speaker Change: So that drove somewhere an incremental $6 to $7 million of interesting come for the quarter. So don't use the 31 million or so that we had an apporter as a run rate. It'll definitely come back down in the second quarter and then I'll see me in the fourth quarter.

Andy: Hi, we're implying or trying to say was if you look at.

Andy: The performance in Q3 and you.

Andy: Note the adjustments that we.

Andy: Maine, we believe that that is a good starting place for Q4.

Speaker Change: The Force

Speaker Change: I'd like to clarify something, at least I would like to clarify something that you asked earlier.

Andy: I wanted to make sure that was clear for you does that make sense.

Andy: Yes.

Speaker Change: and your correct in saying that we do not give organic growth guidance as you know.

Andy: The $3 nine plus the 100 basis points still around five is the Q4 starting point for retail.

Speaker Change: However, what we said was you would ask about a number in Q4 and what Andy and I were implying or trying to say was if you look at...

Andy: I was going to allow you to do the math and we don't give guidance, but I just wanted to clarify.

Speaker Change #102: Okay got it thank you Paolo.

Speaker Change #102: And then just kind of rounding out on the.

Speaker Change #102: The net investment income because that is probably also importantly, we talked about kind of the other side of that.

Speaker Change: The performance in Q3 and you note the adjustments that we made, we believe that that is a good starting place for Q4.

Speaker Change #102: And again, you can kind of get a feel for in modeling if rates drop by 1%.

Speaker Change #102: As to what it could mean on the net investment income now again keep in mind that as we continue to grow as an organization, there's more fiduciary cash so youre not going to see it on an exact ratio. If you do that right because you got to assume that fiduciary assets will continue to grow.

Speaker Change: I wanted to make sure that was clear for you. Does that make sense?

Speaker Change: Yes, so the three point nine plus the hundred basis points around five is the Q4 starting point for retail

Speaker Change: I was going to allow you to do the math and we don't give guidance but I just wanted to clarify

Speaker Change #102: But then also keep in mind on the other side of that is our floating rate debt. So as an organization.

Speaker Change: Okay, got it. Thank you Powell.

Speaker Change: and then, hey, at least just kind of rounding out on the net investment income because things probably are also important. We talk about kind of the other side of that. And again, you can kind of get a feel for, you know, in modeling, you know, if rates dropped by 1%.

Speaker Change #102: We built our capital structure to have somewhere around 25% of our debt to be floating rate has been extremely extremely beneficial for creating shareholder value over many years.

And so when we at the end of 930, we had just under 800 million on floating rate debt. So just make sure you grabbed on the other side of the equation, if youre doing your ups and downs on interest okay.

Speaker Change: and idea as to what it could mean on.

Speaker Change: the net investment income. Now again keep in mind that as we continue to grow as an organization there's more fiduciary cash so you're not going to see it on an exact ratio. I mean if you do that right because you've got to assume that.

Speaker Change #104: Okay. Thank you Paul.

Speaker Change #104: Thank you.

Speaker Change #104: One moment for our next question.

Speaker Change #104: Okay.

Speaker Change: the Nutrients. The Nutrients are a very important thing to do is to keep the Nutrients in place.

Speaker Change #107: Our next question comes from Mark Hughes with <unk> Securities. Your line is open.

Mark Hughes: Yes. Thank you you.

Mark Hughes: You mentioned the margin impact from investment in TMA.

Speaker Change: We build our capital structure to have somewhere around 25% of our get-to-be floating rain, but been extremely, extremely beneficial for creating a shareholder value over many years.

Mark Hughes: Given that the M&A market.

Mark Hughes: In Q3, you're.

Mark Hughes: Your activity was a little bit lower.

Mark Hughes: Deliberate plan to spend more money on he.

Speaker Change: and so when we, you know, at the end of 930 we had just under 800 million on floating rate debt. So just make sure you grab that on the other side of the equation if you're doing your ups and downs on interest, okay.

Speaker Change #108: Teammates or was that more opportunistic.

Speaker Change #109: I look at it as more opportunistic Mark and the reason I say that is.

Speaker Change #109: When we find the right people, we're going to invest in them and so that's why I always try to say that one quarter or doesn't make a trend.

Speaker Change: Okay, thank you both.

Speaker Change: Thank you.

Speaker Change: one moment for our next question.

Speaker Change: Next question comes from Mark Hughes and the Tristicurities your line is open.

Speaker Change #109: And when we make those investments we fully anticipate that we will grow into those investments in the coming quarters and years ahead.

Mark Hughes: Thank you. You mentioned the margin impact from the investment in T-Made.

Speaker Change #109: So.

Mark Hughes: I'm given that the M&A market has been at least in Q3, your activities a little bit lower, or is that a deliberate plan to spend more money on P-Makes or was that more opportunistic?

Speaker Change #109: If it were something.

Speaker Change #109: Very significant in terms of a number we would call it out and talk to you about it but from this standpoint. We this is what I call normal opportunistic investing we're not going to be some drama and say, we got some programming like that we're always looking for good people we believe.

Speaker Change: I look at it at more opportunistic mark and the reason I say that is when we find the right people we're going to invest in them.

Speaker Change #109: Culturally we will.

Speaker Change: and so that's why I always

Speaker Change #109: Attract a certain group of people that would like to work for a competitive collaborative high performing sales and service organization.

Speaker Change: try to say that.

Speaker Change: 1 quarter or doesn't make a trend. And when we make those investments, we fully anticipate.

Speaker Change: that we will grow into those investments in the coming quarters and years ahead.

Speaker Change #109: But theres not something you know.

Speaker Change #109: Got some secret initiatives going on that I don't want to give you that impression.

Speaker Change: and so if it were something you know very significant in terms of a number we would call it out and talk to you about it.

Yeah I appreciate that thank you.

Speaker Change #110: One moment for our next question.

Speaker Change: One.

Speaker Change #109: Okay.

Speaker Change: From this standpoint, we, you know, this is what I call normal opportunistic investing.

Speaker Change #111: Our last question comes from Michael Zaremski with BMO. Your line is open.

Speaker Change: We're not going to beat some drama and say we got some program and it's not like that. We're always looking for good people. We believe that culturally we will.

Speaker Change #109: Okay.

Speaker Change #112: Okay great.

Speaker Change #109: Great.

Speaker Change #109: Sure.

Michael Zaremski: Follow up on kind of teasing out what you all are seeing or projecting on the casualty side in terms of pricing power trends I know that.

Speaker Change: A track a certain group of people that would like to work for a competitive, collaborative, high-performing sales and service organization, but there's not something, you know, there's not some secret initiative going on. That's, I don't want to keep you that impression.

Michael Zaremski: I think last quarter, you all maybe many other stuff.

Michael Zaremski: Pricing would move up a bit.

Michael Zaremski: Has that changed at all I don't know if you want to.

Michael Zaremski: Bifurcate between E&S.

Michael Zaremski: <unk> admitted versus non admitted thanks.

Speaker Change: Thank you.

Speaker Change #113: Sure Alright, so Mike number one if you remember in the past I have sort of said in my career, which is only back to 1990 in the insurance business.

Speaker Change: Our last question comes from Michael Zarenski with BMO your line is open.

Speaker Change #113: There's always been an underlying tone that casualty has been underpriced, but I don't think theres been a discipline around pricing it.

Michael Zarenski: great um just up

Michael Zarenski: Follow up on kind of a teasing out what you all are seeing or projecting on the casualty side in terms of pricing power trends. I know that.

Speaker Change #113: By the carriers today that seems to be different so there seems to be a.

Speaker Change #113: Discipline around that and so I believe it's both in the primary and the excess I believe it's also an admitted and non admitted so it's not something that we are <unk>.

Michael Zarenski: I think last quarter you all and maybe many other stuff pricing would move up a bit. Is that changing at all and I don't know if you want to fire-for-cap between E and S or admitted version of the minute.

Speaker Change #113: Bifurcated that youre seeing more so in one versus the other.

Speaker Change: Sure. Alright, so Mike, number one, if you remember in the past I have sort of said in my career, which is only back to 1990 in the insurance business. There's always been an underlying tone that casualty has been underpriced, but I don't think there's been a discipline around pricing it.

Speaker Change #113: Not the case and so.

I think that we're going to continue to see rate pressure on casualty, so general liability excess liability and as Andy said earlier, an automobile both commercial and personal auto.

Speaker Change: by the carriers. Today that seems to be different.

Speaker Change #113: And for the time being I don't see that changing.

Speaker Change: So there seems to be a discipline around that.

Speaker Change #113: Depending on the carrier, they're going to tell you.

Speaker Change: and so I believe it's both in the primary and the excess. I believe it's also in admitted and non-admitted. So it's not something that we are bifurcating that you're seeing more so and one versus the other. That's not the case.

Speaker Change #113: Different trends, they're seeing in their books, but yes, there continues to be pressure on all of those segments.

Speaker Change #114: Helpful. Thank you.

Speaker Change #115: Uh huh.

Speaker Change #116: Ladies and gentlemen, this does conclude the Q&A portion of today's call I'd like to turn the conference back over to Paul for any closing remarks.

Speaker Change: and so I think that we're going to continue to see a rate pressure on...

Paul: Sure. Thanks, Kevin we really appreciate everybody's time today, we are very pleased with the performance in Q3, we're excited about Q4, ending the year strong and going into 2025, you all have a wonderful day. Thank you for your time.

Speaker Change: Cajutie, so general liability, excess liability, and as Andy said earlier in automobile both commercial and personal auto.

Speaker Change #117: Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.

Speaker Change: At four of the time being, I don't see that changing, you know, depending on the carrier, they're going to tell you different trends, they're seeing in their books, but yes, they're continues to be pressure on all of those segments.

Speaker Change: Thank you.

Speaker Change #100: Huh? The ladies and gentlemen, this has concluded the Q&A portion of today's call, I like turning the conference back over to Pal for any closing remarks.

Powell Brown: Sure, thank Kevin. We really appreciate every time today. We are very pleased with the performance in Q3. We're excited about Q4, ending the year from and going in at 2025. You all have a wonderful day. Thank you for your time. Ladies and gentlemen, this has conclude today's presentation. You may now disconnect and have a wonderful day.

Powell Brown: [inaudible]

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Speaker Change #105: Good morning and welcome to the Brown and Brown, Inc. Third Quarter Earnings Call. Today's call is being recorded.

Speaker Change #106: with this call and including answers given in response to your questions may relate to future results and events or otherwise before looking in nature.

Speaker Change #106: Such statement reflects our current views with respect to the future events, including those relating to the company's anticipated financial results for the third quarter.

Speaker Change #106: and are intended to fall within the safe harbor provisions of the securities laws. Actual results or events in the future are subject to a number of risks and uncertainties and may differ materially from those

Speaker Change #106: currently anticipated or desired or referenced in any forward-looking statements made.

Speaker Change #106: As such...

Speaker Change #106: as a result of a number of factors such as

Speaker Change #106: determination as it finalizes its financial results for the third quarter.

Speaker Change #106: that its financial results differ from the current.

Speaker Change #106: currently identified or quantified and those risks and uncertainties identified from time to time in the company's reports filed with the Securities and Exchange Commission.

Speaker Change #106: Additional discussion of these and other factors affecting the company's 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 in the company's 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.

Speaker Change #106: In addition, there are certain non-GAAP financial measures used in this conference call. A reconciliation of non-GAAP financial measures to the most comparable GAAP financial measures 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.

Speaker Change #107: With that said, I'll now turn the call over to Powell Brown, President and Chief Executive Officer. You may begin.

Powell Brown: Thanks Kevin. Good morning everybody and welcome to our Q3 earnings call. First, we'd like to state that our hearts go out to all those impacted by Hurricanes Helene and Milton. These back-to-back storms were unprecedented in many ways and resulted in significant death and destruction throughout the southeastern United States.

Powell Brown: We're committed to helping communities impacted by these events recover and return to normalcy over the coming weeks, months, and years. With that, let's transition to our performance for the quarter.

Powell Brown: We had an outstanding top and bottom line results. Our team continues to deliver for our customers, resulting in strong net new business, organic growth and margin expansion.

Powell Brown: I'll provide some high-level comments regarding our performance along with the updates on the insurance market and the M&A landscape. Andy will then discuss our financial performance in more detail. And lastly, I'll wrap up with some closing thoughts before we go to Q&A. Now let's discuss our results.

Powell Brown: I'm on slide four. We delivered nearly $1.2 billion of revenue, growing 11% in total and 9.5% organically over the third quarter of 2023. Our adjusted EBITDA margin improved by 30 basis points to 34.9 and our adjusted earnings per share grew 12.3% to 91 cents.

Powell Brown: On the M&A front, we completed four acquisitions with estimated annual revenues of $8 million. Overall, it was another great quarter as our team is focused on delivering the best solutions for our customers and strong results.

Powell Brown: I'm on slide number five.

Powell Brown: In the countries where we primarily operate, there are no major changes in the economic conditions versus the first half of this year. Consumers are still spending and driving demand. As a result, businesses are continuing to hire and invest, albeit at a more moderate pace as compared to the last few years.

Powell Brown: Here in the U.S. we're seeing a bit more caution due to the uncertainty around the presidential election.

Powell Brown: From an insurance pricing standpoint, rates for many lines continue to increase, but at a slightly slower pace versus what we experienced in the first half of this year and the third quarter of last year.

Powell Brown: The line that had the largest change for the quarter was ENF property, which we'll talk about in more detail in just a moment.

Powell Brown: Pricing for employee benefits was similar to prior quarters with medical and primary costs.

Powell Brown: trends up 7% and 9% for commission-based accounts.

Powell Brown: The continual upward rate pressure and the complexity of health care are driving strong demand for our employee benefits consulting businesses

Powell Brown: Based on our historical and ongoing investments to expand our capabilities, we are well-positioned to help companies of any size navigate this challenging market.

Powell Brown: Rates in the emitted PNC markets were up 2 to 7 percent for most lines. The downward trend for workers' compensation remained, but there was moderation as we realized decreases of down 1 to 5 percent in most states.

Powell Brown: With the high level of employment, we expect this range to continue over the coming quarters. For the third quarter, rate increases for non-CAT property moderated and we're in the range of flat to up five.

Powell Brown: For properties in convective storm zones, we did not see the same rate increases that we experienced in the first half of the year. For casualty, we continue to see rate increases for primary layers due to ongoing size of legal judgments in the U.S. and, to a lesser extent, higher levels of inflation.

Powell Brown: Consistent with the last few quarters, rates for excess casually continued to increase between 1 and 10 percent or even more in some instances. Professional liability we saw rates flat to up 5.

Powell Brown: Shifting to the ENS markets, as you know, this year some carriers and facilities have been willing to put up incremental limits on existing insurers and new business.

Powell Brown: While cat property rates continue to increase slightly in the first quarter of this year, we started to see decreases later in the second quarter and into the third quarter. On average, rates decreased between 10 and 20 percent as compared to the third quarter of last year.

Powell Brown: As a result, some customers increase their limits or modify deductibles and some just capture the savings.

Powell Brown: As we mentioned before, moderate rate increases or decreases for one line of business will generally not have a material impact on the results of our company in total.

Powell Brown: In order to deliver consistently strong and industry-leading financial performance, we focus on diversification across lines of coverage, geography, industry, and customer segment.

Powell Brown: On the M&A front, competition for high-quality businesses remained consistent with the first half of the year. While the number of acquisitions by private equity backers decreased as interest rates rose, we're now starting to see higher levels of activity as interest rates are beginning to decrease.

Powell Brown: For the quarter, we continue to build relationships with many companies and remain focused on our disciplined M&A approach to identify great organizations which align culturally and make sense financially.

Powell Brown: I'm on slide six. Let's transition to the performance of our three segments.

Powell Brown: Retail delivered 3.9 percent organic growth for the quarter with most lines of business performing well. We had another strong quarter for net new business but realized the impact of moderating rates for most lines as well as slightly lower growth in exposure units.