Q1 2025 Brown & Brown Inc Earnings Call
In the slide presentation posted in connection 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 such statements reflect our current views with respect to future events, including those relating to the company's anticipated.
Financial results for the first quarter 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 currently anticipated or desired or referenced if any forward looking statements made as a result of a number of factors such factors include the comps.
His determination as it finalizes its financial results for the first quarter that is.
Finalists. This is Vance financial results for the first quarter that its financial results differ from the current preliminary unaudited numbers set forth in the press release issued yesterday.
Other factors that the company may not have currently identified or quantified and those risks and uncertainties identified from time to time in the company's reports filed with the Securities and Exchange Commission.
Additional discussion of those and other factors affecting the company's business prospects as well as additional information regarding forward looking statements is contained in the slide presentation posted on posted in connection with this call. It 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.
As a result of new information future events or otherwise. In addition, there are certain non-GAAP financial measures used in this conference call. A reconciliation of any GAAP of any non-GAAP financial measures to the most comparable GAAP financial measures measure can be found in the company's earnings press release or in the Investor presentation for this call on the company's website at www.
Speaker Change: Dot P B insurance dot com by clicking on the Investor Relations and then calendar of events with that said I'll now turn the call over to Powell Brown, President and Chief Executive Officer, you may begin.
Yeah.
Speaker Change: Thanks, Kevin and good morning, everyone and welcome to our first quarter earnings call. Once again, our team delivered strong top and bottom line results I'll provide some high level comments regarding this performance along with updates on in the insurance market.
Speaker Change: And the M&A landscape and he will then discuss our financial performance in more detail and lastly, I'll wrap up with some closing thoughts before we open up to Q&A.
Speaker Change: So now let's get into the results I'm on slide four for the first quarter. We delivered revenues of $1 4 billion growing 11, 6% in total and six 5% organically as compared to the same period in the prior year, our adjusted EBIT margin improved over 100 basis points to 38, 1% and our adjusted earnings per share.
Speaker Change: <unk> grew over 13% $1 29.
Speaker Change: On the M&A front, we completed 13 acquisitions with estimated annual revenues of $36 million.
Speaker Change: This consistently strong performance is a direct result of the dedication of our team of nearly 18000 teammates.
Speaker Change: On slide five main topics for the quarter was uncertainty related to tariffs inflation and interest rates and how they might impact economic expansion. Overall, we did not see the buyers of insurance materially changed their outlook, but we did see some business leadership to being more cautious generally companies are still hiring in <unk>.
Speaker Change: Vesting in their businesses. However in certain cases, you are seeing some new projects put on hold for a few months due to these uncertainties.
Speaker Change: Presently we would say the level of the levels of investment in people and assets are fairly consistent with the past few quarters. We view this as a positive overall the economies in which we operate are relatively stable and business owners remain optimistic but had a tempered view regarding the level of growth over the coming quarters.
Speaker Change: From an insurance pricing standpoint rate increases for most lines continued.
Speaker Change: Continued and were fairly consistent with the prior few quarters, however, they're moderating downward slightly as compared to last year. The outliers continue to be auto in casualty that are increasing in cat property continued to soften during the quarter, we will get into more detail on the cat property in a couple of minutes.
Speaker Change: Pricing for U S employee benefits in the first quarter was similar to prior quarters as medical and pharmacy costs remain up 7% to 9%. The outlier continues to be pharmacy, which is growing faster than medical this ongoing upward pressure in the complexity of healthcare continue to drive strong demand for our employees.
Speaker Change: Benefits consulting businesses.
Speaker Change: Right and admitted P&C market moderated slightly as compared to last quarter and were up 2% to 7% for most lines versus the prior year.
Speaker Change: The downward trend for workers compensation remain in most states and they were flat to down 5% for.
Speaker Change: For the first quarter rate increases for non cat property, where in the range of flat to up 5%, which is similar to the prior few quarters for casualty, we continue to see rate increases for primary and excess layers.
Speaker Change: Consistent with the last few quarters right for excess casualty increased in the range of 5%.
Speaker Change: Sorry, 5% to 10%.
Speaker Change: Placing higher limits or layers continues to be very challenging both from a pricing perspective, and the availability of limits for.
Speaker Change: Professional liability rates were flat to up 5% as compared to last year.
Speaker Change: Shifting to the E&S property market as we entered the first quarter, we anticipated rates for cat property with declined 10% to 20% with.
Speaker Change: With the availability of capital rates during the quarter decline a bit faster and we're down 10% to 25% and we saw outliers based on the quality of construction claims experience and new versus renewal business in some cases rates were down in excess of 25%.
Speaker Change: With the decline in rates some buyers chose to increase the limits or modify their deductibles, while others realize the savings. These savings also enabled some companies to increase their limit on other lines of coverage as we've mentioned in the past buyers will manage their overall insurance spend and focus on the combination of rates limit.
Speaker Change: <unk> ended up <unk>.
Speaker Change: On the M&A front, we had another good quarter and acquired 13, great companies with $36 million of annual revenue from an overall market perspective competition for high quality businesses remain.
Speaker Change: Let's go to slide six.
Unknown Executive: Such statements reflect our current views with respect to future events, including those relating to the company's anticipated financial results for the first quarter and are intended to fall within the safe harbor provisions of the Security Solutions Act. Actual results or events in the future are subject to a number of risks and uncertainties and may differ materially from those currently anticipated or desired or references any forward-looking statements For more information visit www.fema.gov as a result of a number of factors. Such factors include the company's determination as it finalizes its financial results for the first quarter that is Financial Results for the First Quarter that its financial results differ from the current preliminary unaudited numbers set forth in the press release issued yesterday.
Speaker Change: And transition to the performance of our three segments retail delivered four 1% organic growth, which was in line with our expectations and was driven by good performance in all lines of business. As a reminder, we expected the first quarter to be lower than the others. This year due to the shifting of renewal dates and timing of certain non.
Speaker Change: Recurring businesses.
Speaker Change: Program delivered another good quarter with organic growth of 13, 6%. This performance was driven by a number of our programs with good new business retention and exposure unit expansion as well as claims revenue associated with the 24 Hurricanes.
Speaker Change: Our cat programs, our cat property programs grew for the quarter slightly even with the impact from rate decreases.
Unknown Executive: Other factors that the company may not have currently identified are 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: Wholesale brokerage had a strong quarter with organic revenue growth of six seven.
Unknown Executive: Additional discussion of those and other factors affecting the company's business prospects, as well as additional information regarding forward-looking statements is contained in the slide presentation posted on posted in connection with this call it in the company's funds for the securities and exchange.
Speaker Change: Six 7%. This performance was driven by growth across all lines through a combination of net new business and exposure unit increases with the growth partially offset by the continued downward pressure on an open brokerage cat property rates now I'll turn it over to Andy to give you more details regarding our financial results. Thanks.
Unknown Executive: 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.
Unknown Executive: In addition, there are certain non-GAAP financial measures used in this conference call. A reconciliation of any non-GAAP financial measures to the most comparable GAAP financial measure can be found in the company's earnings press release or in the investor presentation for this call on the company's website at www.bbinsurance.com by clicking on the investor relations and then calendar of events.
Andy: Good morning, everybody.
Andy: Im going to review our financial results in additional detail when we refer to EBITDA EBITDA margin income before income taxes or diluted net income per share, we're referring to those measures on an adjusted basis. The reconciliations of our GAAP to non-GAAP financial measures can be found either in the appendix of this presentation or in the press release we.
Andy: Yesterday, we will we're on slide number seven we delivered total revenues of $1 $404 million growing 11, 6% as compared to the first quarter of 2020 for income before income taxes increased by 17, 4% and EBITDA grew by 14, 8%.
Powell Brown: With that said, I will now turn the call over to Powell Brown, President and Chief Executive Officer. Thanks, Kevin. Good morning, everyone, and welcome to our first quarter earnings call. Once again, our team delivered strong top and bottom-line results.
Powell Brown: I'll provide some high-level comments regarding this performance, along with updates in the insurance market and the M&A landscape.
Andy: Our EBITDA margin was 38, 1% expanding by 110 basis points over the first quarter of the prior year.
Andy: Andy will then discuss our financial performance in more detail.
Powell Brown: And lastly, I'll wrap up with some closing thoughts before we open up to Q&A. So now let's get into the results. I'm on growing 11.6% in total and 6.5% organically, as compared to the same period in the prior year. Our adjusted EBITDAC margin improved over 100 basis points to 38.1%. And our adjusted earnings per share grew over 13% to $1.29. On the M&A front, we completed 13 acquisitions, with estimated annual revenues of $36 million.
Andy: Higher growth in income before income taxes was due to lower interest expense associated with debt repayments.
Andy: Our effective tax rate for the quarter increased slightly to 21, 8% versus 19, 5% in the first quarter of the prior year.
Andy: The increased tax rate was driven by having less benefit associated with vesting of restricted stock awards as compared to the first quarter of last year. As a reminder, most of our restricted shares vest in the first quarter. So we can have variations in our quarterly tax rate depending on the number of <unk>.
Powell Brown: This consistently strong performance is a direct result of the dedication of our team of nearly 18,000 teammates.
Andy: Shares that vest and the change in share price.
Powell Brown: I'm on slide five. Main topic for the quarter was uncertainty related to tariffs, inflation and interest rates and how they might impact economic expansion. Overall, we did not see buyers of insurance materially change their outlook, but we did see some business leaders shift to being more cautious. Generally, companies are still hiring and investing in their businesses.
Andy: Diluted net income per share increased 13, 2% to $1 29.
Andy: Our weighted average shares outstanding increased slightly compared to last year, and we continue to prioritize paying down our floating rate debt is this is a higher impact on the growth of earnings per share lastly, our dividends paid per share increased by 15, 4% as compared to the first quarter of 2024 over.
Powell Brown: However, in certain cases, you're seeing some new projects put on hold for a few months due to these uncertainties. For more information visit www.FEMA.gov Presently, we would say the levels of investment in people and assets are fairly consistent with the past few quarters. We view this as a positive.
Andy: We are very pleased with the performance for the first quarter.
Andy: We'll move over to slide number eight.
Andy: The retail segment grew total revenues 12, 5% with organic growth of four 1%.
Powell Brown: Overall, the economies in which we operate are relatively stable and business owners remain optimistic, but have a tempered view regarding the level of growth over the coming quarters. From an insurance pricing standpoint, rate increases for most lines continued, continued and were fairly consistent with the prior few quarters. However, they're moderating downwards slightly as compared to last year. The outliers continue to be auto and casualty that are increasing and cap property continues to soften during the quarter.
Andy: The difference between total revenues and organic revenue was driven substantially by acquisition activity over the past year.
Andy: Our EBITDA margin expanded by 120 basis points to 37, 3% due to managing our expenses and the positive impact of the seasonality of revenue and profit for the Quin test acquisition.
Andy: Both were partially offset by higher noncash stock based compensation.
Andy: As we mentioned previously approximately 60% of the revenues for Quinn tests are Rick and recognized in the first quarter.
Powell Brown: We'll get into more detail about the cap property in a couple minutes. Pricing for U.S. employee benefits in the first quarter was similar to prior quarters as medical and pharmacy costs remain up 7-9%. The outlier continues to be pharmacy, which is growing faster than medical.
Andy: Therefore, we have higher margins in the first quarter and lower margins in the others. This is very similar to the profile for employee benefits in the United States from a full year perspective, we continue to anticipate Quinn tests to perform within the revenue and EBITDA ranges that we previously communicated.
Powell Brown: This ongoing upward pressure and the complexity of health care continue to drive strong demand for our employee benefits consulting business. rates in the admitted PNC market moderated slightly as compared to last quarter and we're up two to 7% for most lines versus the prior year. The downward trend for workers' compensation remained in most states, and they were flat to down 5%. For the first quarter rate increases for non cat property were in the range of flat to up 5%, which is similar to the prior few quarters. For casualty, we continue to see rate increases for primary and excess layers.
Andy: We're on slide number nine programs had another strong quarter with total revenues, increasing 10, 1%.
Andy: Organic growth of 13, 6%.
Andy: In comparison to prior year, our profit sharing contingent commissions decreased about $6 million due to positive adjustments recorded in Q1 of 24 Lastly, we recognized approximately $12 million of Hurricane claims processing revenue, which is in line with our expectations, our EBITDA margin expanded by two.
Andy: 220 basis points to 44, 5%, primarily driven by strong organic revenue growth and managing our expenses.
Powell Brown: consistent with the last few quarters rates for excess casualty increased in the range of five to sorry, five to 10% Placing higher limits or layers continues to be very challenging both from a pricing perspective and the availability of limits. For professional liability rates were flat up 5% as compared to last year.
Andy: We're moving over to slide number 10.
Andy: Our wholesale brokerage segment had another strong quarter with total revenues, increasing 12% and organic growth of six 7% the incremental expansion in total revenues in excess of organic was driven by acquisitions completed in the last 12 months and higher contingent commissions.
Powell Brown: Shifting to the E&S property market. As we entered the first quarter, we anticipated rates for cap property would decline 10 to 20%. With availability of capital, rates during the quarter declined a bit faster and were down 10 to 25%. And we saw outliers based on the quality of construction, claims experience, and new versus renewal business. In some cases, rates were down in excess of 25%. For more information, visit www.fema.gov With the decline in rates, some buyers chose to increase their limits or modify deductibles, while others realized the savings. These savings also enabled some companies to increase their limits on other lines of As we've mentioned in the past, buyers will manage their overall insurance spend and focus on the combination of rates, limits, and deductibles.
Andy: Our EBITDA margin decreased by 30 basis points to 32, 1% due to higher noncash stock based compensation and the impact of foreign exchange isolating. These changes the underlying margin increase year over year due to managing our expenses and higher profit sharing contingent commissions.
Andy: Lastly from a cash perspective, we generated approximately $215 million of cash flow from operations, which was an increase of $200 million over the first quarter of 2024.
Andy: This improvement was due to incremental taxes of approximately $120 million paid in the first quarter of 2024, which were which were deferred from 2023. In addition, we continue to manage our working capital and expand our margins during the quarter.
Powell Brown: On the M&A front, we had another good quarter and acquired 13 great companies with 36 million of annual revenue. From an overall market perspective, competition for high quality businesses remains.
Andy: As previously noted we deferred the payment of approximately $90 million of federal income taxes for the third and fourth quarters of <unk> 24 related to IRS tax relief associated with the prior year Hurricanes. These taxes will be paid in the second quarter of this year and will impact our cash flow conversion with that let me turn it back.
Powell Brown: Let's go to slide six and transition to the performance of our three segments. Retail delivered 4.1% organic growth, which was in line with our expectations, and was driven by good performance in all lines of business.
Speaker Change: Over to Powell for closing comments, Thanks, Andy Great report from an economic standpoint, we believe the main driver of expansion over the coming quarters will be the outcome of inflation tariffs and changes in interest rates.
Powell Brown: As a reminder, we expected the first quarter to be lower than the others this year due to the shifting of renewal dates and timing of certain non-recurring business. Programs delivered another good quarter with organic growth of 13.6%. This performance was driven by a number of our programs with good new business retention and exposure unit expansion, as well as claims revenue associated with the 24 hurricanes. Our cat programs or cat property programs grew for the quarter slightly even with the impact from rate decrease.
Powell Brown: Leaders as you know can generally deal with most changes, but until there's a resolution regarding the extent and breath of tariffs and inflation companies will more than likely have a cautious bias. This does not mean that we think leaders having negative outlook rather they may change the level of investment over the coming quarters.
Powell Brown: With some quarters higher or lower than prior quarters. We continue to believe there's a positive backdrop for economic expansion and growth is moderating back to more traditional levels.
Powell Brown: Wholesale Brokerage had a strong quarter with organic revenue growth of 6.7%. This performance was driven by growth across all lines through a combination of net new business and exposure unit increases, with the growth partially offset by the continued downward pressure on open brokerage cap property rates.
Powell Brown: From a pricing standpoint other than cat property, we do not expect any material changes in rates for admitted and non admitted lines for cat property. We believe rates will continue to decrease in the second quarter and could be down in the range of 10% to 30% due to the availability of capital one of the topics that still needs to be resolved as the <unk>.
Andy: Now I'll turn it over to Andy to get in more details regarding our financial results. Thanks, Powell. Good morning, everybody. I'm going to review our financial results in additional detail. When we refer to EBITDAC, EBITDAC margin, income before income taxes, or diluted net income per share, we're referring to those measures on an adjusted basis. The reconciliations of our gap to non-gap financial measures can be found either in the appendix of this presentation or in the press release we issued yesterday. Over on slide number seven, we deliver total revenues of $1,404,000,000, growing 11.6% as compared to the first quarter of 2024.
Powell Brown: Pact of the wildfires on the standard market for property coverage in California.
Powell Brown: On the M&A front, we continue to feel good we have a strong pipeline both domestically and internationally and are building relationships with many firms as we've spoken about cultural alignment is the most critical factor to the success of acquisitions at Brown <unk> Brown, we have a strong balance sheet outstanding cash flow conversion in <unk>.
Powell Brown: Two additional capital when we need it.
Powell Brown: We're in a great position as a company our team continues to execute at a high level each of our divisions are performing well and have good momentum heading into the second quarter, there'll probably be some ups and downs in the economic outlook, but with our broad diversification across geographies customer size lines of coverage and capabilities.
Andy: Income before income taxes increased by 17.4%, and EBITDAC grew by 14.8%. Our EBITDAC margin was 38.1%, expanding by 110 basis points over the first quarter of the prior year. The higher growth in income before income taxes was due to lower interest expense associated with debt repayment. Our effective tax rate for the quarter increased slightly to 21.8% versus 19.5% in the first quarter of the prior year. The increased tax rate was driven by having less benefit associated with vesting of restricted stock awards as compared to the first quarter of last year. As a reminder, most of our restricted shares vest in the first quarter, so we can have variations in our quarterly tax rate depending on the number of shares that vest and the change in share price.
Powell Brown: We are well positioned to capture the opportunities that are on the horizon. As we've said before we are a solutions provider and during times of volatility being a great partner for our customers is critical to helping them manage uncertainty. We believe the second quarter will be a good one for the Brown <unk> Brown.
Speaker Change: Team with that let's turn it back to Kevin and open it up for Q&A.
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 or you wish to move yourself from the queue. Please press star one again and we also ask that you limit yourself to one question, but feel free to jump back into queue for any follow ups, we will pause for a moment, while we compile the Q&A roster.
Andy: diluted net income per share increased 13.2% to $1.29. Our weighted average shares outstanding increased slightly compared to last year, and we continue to prioritize paying down our floating rate debt, as this has a higher impact on the growth of earnings per share. Lastly, our dividends paid per share increased by 15.4% as compared to the first quarter of 2024.
Mark Hughes: Our first question comes from Mark Hughes with <unk> Securities. Your line is open.
Mark Hughes: Yes, Thank you and good morning.
Mark Hughes: Andy.
Mark Hughes: <unk> impact on the retail margin.
Mark Hughes: And this timing shift in organic also in retail.
Andy: Overall, we are very pleased with the performance for the first quarter.
Speaker Change: Specific numbers, you might be able to share with us about what the effect was in the.
Andy: We're going to move over to slide number eight. The retail segment grew total revenues 12.5% with organic growth of 4.1%. The difference between total revenues and organic revenue were driven substantially by acquisition activity over the past year. Our EBITDAC margin expanded by 120 basis points to 37.3% due to managing our expenses and the positive impact of the seasonality of revenue and profit for the Quintest acquisition. Both were partially offset by higher non-cash stock-based compensation. As we mentioned previously, approximately 60% of the revenues for Quintest are recognized in the first quarter. Therefore, we have higher margins in the first quarter and lower margins in the others.
Mark Hughes: The first quarter and then.
Speaker Change: Kind of what that means for the balance of the year.
Mark Hughes: So morning Mark.
Speaker Change: To utilize the guidance that we provided before on Quinn tests about 60% of those revenues came in the first quarter. So again think about the the margin again has a pretty similar profile of what employee benefits does in the first quarter. So it's just naturally going to be higher so that will pull that will serve as a bit of a <unk>.
Speaker Change: <unk> in the out quarters for for retail, but on a full year basis, it'll work out it should be right in line with.
Speaker Change: Where we were thinking originally on the <unk> acquisition. That's in there and then the other piece you had asked about was just kind of shifting of renewals and some of the onetime business as we mentioned before we anticipated that the first quarter would be about 1% below the other quarters. The first quarter for retail was pretty much right on exactly what.
Andy: This is very similar to the profile for employee benefits in the United States. From a full year perspective, we continue to anticipate Quintest to perform within the Revenue and EBITDAC ranges that we previously communicated.
Speaker Change: We thought it was going to be.
Speaker Change: So we continue to have good confidence in the out quarters.
Andy: We're on slide number nine. Programs had another strong quarter with total revenues increasing 10.1% and organic growth of 13.6%.
Speaker Change: For the year kind of tied back to the comments that we made earlier about just economic backdrop, and where buyers are right now so feel real good about the business.
Andy: In comparison to prior year, our profit sharing contingent commissions decreased about $6 million due to positive adjustments recorded in Q1 of 24.
Speaker Change: Very good and then.
Speaker Change: What do you anticipate for earned premium and the captives this year.
Speaker Change: It will probably be up a little bit over last year on it mark.
Andy: Lastly, we recognize approximately $12 million of hurricane claims processing revenue, which is in line with our expectations. Our EBITDA margin expanded by 220 basis points to 44.5%, primarily driven by strong organic revenue growth and managing our expenses.
Speaker Change: The pieces I think you picked up on it in your research notes.
Speaker Change: We talked about this in a couple of previous calls is we're writing up to a specific amount of premium and that's our way of capitation the risk profile inside of them and we pretty much hit that in the first quarter, we've been kind of climbing that over the past few years.
Andy: We're moving over to slide number 10. Our wholesale brokerage segment had another strong quarter with total revenues increasing 12% and organic growth of 6.7%. The incremental expansion in total revenues in excess of organic was driven by acquisitions completed in the last 12 months and higher contingent commissions. Our EBITDA margin decreased by 30 basis points to 32.1% due to higher non-cash stock-based compensation and the impact of foreign exchange. Isolating these changes, the underlying margin increased year-over-year due to managing our expenses and higher profit-sharing contingent commissions. Lastly, from a cash perspective, we generated approximately $215 million of cash flow from operations, which was an increase of $200 million over the first quarter of 2024.
Speaker Change: So we would not anticipate much incremental organic growth in the following quarters in the captain's now that might move around a little bit dependent upon what happens with cat property pricing back and forth, but we wouldn't anticipate anything material plus or minus versus last year, our second too.
Speaker Change: The fourth quarter.
Speaker Change: I appreciate it. Thank you okay, great. Thank you.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from Mike Zaremski with BMO. Your line is open.
Mike Zaremski: Hey, good morning. Thanks.
Speaker Change: Okay.
Speaker Change: Thanks for all the color.
Andy: This improvement was due to incremental taxes of approximately $120 million paid in the first quarter of 2024, which were deferred from 2023. In addition, we continue to manage our working capital and expand our margins during the quarter.
Speaker Change: Kind of.
Speaker Change: Property rates and.
Cat exposed.
Speaker Change: There's plenty of capacity there.
Speaker Change: I guess just.
Speaker Change: Is it.
Speaker Change: It looks like if we try to dissect some of the programs organic growth there does seem to be.
Speaker Change: A downwards impact, which could be coming from from cap property pricing being down is it is it is.
Andy: As previously noted, we deferred the payment of approximately $90 million of federal income taxes for the third and fourth quarters of 2024 related to IRS tax relief associated with the prior year hurricanes. These taxes will be paid in the second quarter of this year and will impact our cash flow conversion.
Let me think about.
Speaker Change: The rest of the year or just is it fair.
Speaker Change: Okay.
Speaker Change: Put in a bit of.
The headwind from towers property pricing.
Speaker Change: I think Brian is a bit overweight, Florida versus peers.
Powell Brown: With that, let me turn it back over to we believe the main driver of expansion over the coming quarters will be the outcome of inflation, tariffs, and changes in interest rates. We continue to believe there's a positive backdrop for economic expansion and growth is moderating back to more traditional levels. From a pricing standpoint, other than CAP property, we do not expect any material changes in rates for admitted and non-admitted lines. For CAP property, we believe rates will continue to decrease in the second quarter and could be down in the range of 10% to 30% due to the availability of capital.
Andy Powell: Good morning, Mike It's Andy here.
Speaker Change: Let's see if we can kind of put this into a few buckets because.
Andy Powell: We wouldn't want anybody to think that.
Speaker Change: The downward.
Speaker Change: Trend is all associated with cat property that that would not be a good.
Speaker Change: Proper conclusion remember the things that we've talked about.
Speaker Change: Over the past year, that's helped fuel the growth in programs, we've talked about our lender placed business has been performing really well with winning new business as well as we've had customers acquiring portfolios.
Speaker Change: We've had we've had outstanding growth over the past few years still expecting good growth this year, but not probably at the same level Mark asked earlier about the captives and so I think we've mentioned there again that has helped fuel organic growth that will start to level itself out in in 'twenty five.
Speaker Change: For the business and then cat property is a component it did grow during the quarter for us.
Powell Brown: One of the topics that still needs to be resolved is the impact of the wildfires on the standard market for property coverage in California. On the M&A front, we continue to feel good. We have a strong pipeline, both domestically and internationally, and are building relationships with many firms. As we've spoken about, cultural alignment is the most critical factor to the success of acquisitions at Brown & Brown. We have a strong balance sheet, outstanding cash flow conversion, and access to additional capital when we need it. We're in a great position as a company. Our team continues to execute at a high level.
Speaker Change: Not at the same levels that we've seen over the past few years, but we did still have good growth in there through the submission and everything that we've received in in.
Speaker Change: In the business and then the other piece to keep in mind in the back end of the year is we're not sure what's going to happen with the.
Speaker Change: The hurricane season, So remember we had a.
Speaker Change: A significant amount of claims revenue.
Speaker Change: In in the fourth quarter.
Speaker Change: We do not budget for can unknown storms, we just used kind of a 10 year average so depending upon what happens and if it is a relatively calm seasoned in the back end of the year.
Powell Brown: Each of our divisions are performing well and have good momentum heading into the second quarter. There will probably be some ups and downs in the economic outlook, but with our broad diversification across geographies, customer size, lines of coverage, and capabilities, we're well positioned to capture the opportunities that are on the horizon. As we've said before, we are a solutions provider, and during times of volatility, being a great partner for our customers is critical to helping them manage uncertainty. We believe the second quarter will be a good one for the Brown & Brown team.
Speaker Change: I think it probably realistically at least we would think realistic that the organic growth in the fourth quarter of programs could be around zero because of the very tough comp.
Speaker Change: With all the flood claim revenue okay.
Speaker Change: Okay, Thanks, Andy for impacting that.
Speaker Change: My follow up would be on probably at the retail segment, if I think about the commentary unemployed benefits in some.
Speaker Change: Upwards.
Speaker Change: Sure on inflation there.
Kevin: With that, let's turn it back to Kevin and open it up for Q&A. Thank you.
Speaker Change: Is that does that come through in there.
Speaker Change: On the retail.
Kevin: Ladies and gentlemen, if you have a question or a comment at this time, please press star 11 on your telephone. If your question has been answered and you're wishing to remove yourself from the queue, please press star 11 again. And we also ask that you limit yourself to one question, but feel free to jump back in the queue for any follow-up. Pause for a moment while we compile our Q&A.
Speaker Change: Organic this quarter.
Speaker Change: And maybe you can size up.
Speaker Change: How much seasonality there is I think in <unk> versus the rest of the year in terms of mix of benefits being higher I believe in the <unk>.
Mike Zaremski: So so remember that's a revenue recognition issue Mike.
Andy Powell: And so it's sort of front loaded that Andy sort of referred to.
Mark Hughes: Our first question comes from Mark Hughes with Truist Securities. Your line is open. Yeah, thank you. Good morning.
Andy Powell: So when I say that that makes the assumption if.
Andy Powell: Your thought process that all of those accounts are either on commission not a per head per month or a fee. So most of our business is on commission, but I just want to clarify that that and some of the smaller business or fully insured, it's going to be there's going to be honest.
Mark Hughes: We're on Andy, the Quintez impact on the retail large. and this timing shift in organic also in retail.
Andy: Any specific numbers you might be able to share with us about what the effect was in the first quarter and then kind of what that means for the balance of the year. So more in Mark is that if you utilize the guidance that we provided before on Quinn tests, about 60% of those revenues came in the first quarter. So again, think about the margin again has a pretty similar profile to what employee benefits does in the first quarter. So it's just naturally going to be higher. So that'll pull that'll serve as a bit of a drag in the out quarters for for retail, but on a full year basis, it'll work out it should be right in line with where we were thinking originally on the Quinn test acquisition that's in there.
Andy Powell: Per head per month that we get paid and on our larger business. Many times those are on fees.
Andy Powell: As it relates to the organic growth in retail.
Andy Powell: We were very pleased with the organic growth in retail, particularly in light of what we said at the end of Q4 and in our remarks about some shifting of some things and some nonrecurring revenue so.
Andy Powell: And we anticipate it to be a little bit higher later in the year and so we felt good about it and continue to feel good about it.
Andy Powell: Okay.
Andy Powell: Thank you.
Andy: And then the other piece you'd ask about was just kind of shifting renewals and some of the one time business. As we mentioned before, we anticipated that the first quarter would be about 1% below the other quarters. The first quarter for retail was pretty much right on exactly what we thought it was going to be. So we continue to have good confidence in the out quarters for the year kind of tied back to the comments that we made earlier about just economic backdrop and where buyers are right now. So feel real good about the business.
Andy Powell: Okay. Thank you one of them for our next question.
Gregory Peters: Our next question comes from Gregory Peters of Raymond James Your line is open.
Speaker Change: Well good morning, everyone.
Gregory Peters: Morning.
Gregory Peters: Paul.
Speaker Change: In your closing comments, you talked about growth returning to.
Gregory Peters: More normal level.
Gregory Peters: And.
Speaker Change: Im reminded of comment you used to make about the impact our weighting of economic growth.
Mark Hughes: Very good.
Mark Hughes: And then what do you anticipate for earned premium in the captives this year? It will probably be up a little bit over last year. On it, Mark. The piece is, I think you, you picked up on it in your research notes. And, you know, we talked about this in a couple previous calls is, you know, we're writing up to a specific amount of premium. And that's our way of capitating the risk profile inside of them. And we pretty much hit that in the first quarter. We've been kind of climbing that over the past few years.
Gregory Peters: <unk> impact from rate increases.
Gregory Peters: And.
Speaker Change: I think in the last couple of years, you seem to and I don't want to put words in your mouth, but you seem to indicate that you were getting a little bit heavier weighting from rate increases versus economic versus the traditional averages maybe.
Gregory Peters: Maybe you can update us because.
Gregory Peters: In the slide presentation. There is a couple of slides, where you talk about property cat being down.
Gregory Peters: <unk> have a law an offset on the organic.
Speaker Change: And when you talk about the other rate environment. So just can you provide us some updated perspective on how youre thinking about that.
Mark Hughes: So we would not anticipate much incremental organic growth in the following quarters in the captives. Now, that might move around a little bit, depending upon what happens with cap property pricing back and forth, but wouldn't anticipate anything material plus or minus versus last year, a second through the fourth quarter. Appreciate it. Thank you. Okay, great. Thank you.
Greg: Sure. Good morning, Gregg So first of all what Greg is referring to is historically I would say that our business is.
Speaker Change: Two thirds to three quarters.
Speaker Change: Exposure unit and the remaining would be rate, that's how I've always sort of said that.
Speaker Change: And we've alluded to the fact that with the transition, particularly in cat property, but it could be in some heavy casualty lines into unusual umbrellas and other things.
Mike Zaremski: Our next question comes from Mike Zaremski with VMO. Your line is open. Good morning, thanks. Thanks for all the color on kind of property rates and especially cat expos and you know, there's plenty of capacity there. I guess just, you know, is it Looks like if we try to dissect some of the program's organic growth, there does seem to be a downwards impact, which could be coming from from cap property pricing being down. Is it is it, you know, as we think about the rest of the year, or just is it fair to kind of put in a bit of headwind from downwards property price.
Speaker Change: It has gone up or had a little bit higher impact on rate and the growth. So that's the first thing the second thing that I would like to sort of clarify for everybody is.
Speaker Change: I find it very interesting how you all are sort of surprised by the rate decreases in cat property.
Speaker Change: Would have said I thought this was going to happen a year ago.
Speaker Change: So cat property historically goes up faster than you anticipate and it comes down faster than you anticipate.
Speaker Change: So it's all about the availability.
Andy: I think Brown is a bit overweight, Florida versus Pierce. Yeah, good morning, Mike, it's Andy here.
Speaker Change: <unk> limits out there, whether it'd be through a traditional insurance company or through our MGA or some combination thereof.
Andy: Let's see if we can kind of put this into a few buckets, because we wouldn't want anybody to think that the downward trend is all associated with cap property that would that would not be a good or a proper conclusion. Remember the things that we've talked about over kind of the past year that's helped fuel the growth in programs. We've talked about our lender place business has been performing really well with winning new business, as well as we've had customers acquiring portfolios. And we've had just we've had outstanding growth over the past few years, still expecting good growth this year, but not probably at the same level.
Speaker Change: So.
Speaker Change: I think.
Speaker Change: From a standpoint of our retail business, but it affects the whole business. We are writing a lot of new business Greg.
Speaker Change: Our our goal is to get the best program at the most competitive program with the most comprehensive price.
Speaker Change: Comprehensive coverage for our customers.
Speaker Change: And so.
Speaker Change: Today I do believe that what if you believe what I, just said, which I view.
Speaker Change: Is that it would go back more closer to the two thirds, one third or three quarters, one quarter, but I usually use two thirds, one third and.
Andy: Mark asked earlier about the captives. And so I think we've mentioned there again, that has helped fuel organic growth that will start to level itself out in in 25 for the business. And then, you know, cap property is a component, it did grow during the quarter force, not at the same levels that we've seen over the past few years, but we did still have good growth in there through the submissions, everything that that we've received in, in the business. And then the other piece to keep in mind in the back end of the year is, we're not sure what's going to happen with the hurricane season.
Speaker Change: Again as I said.
Speaker Change: I believe that if you talk to people.
Speaker Change: The person on the street, they have a little bit more negative.
Speaker Change: View of the economy than people that run and owned businesses I believe that depending on the industry that you're in depending on.
Speaker Change: <unk> your supply chain. Some of these other things you're view is slightly different and maybe more moderated.
Mike Zaremski: So remember, we had a significant amount of claims revenue in in the fourth quarter. We do not budget for can unknown storms we just use kind of a 10 year average so depending upon what happens and if it's a relatively calm season in the back end of the year. I think it's probably realistically at least we would think realistic that the organic growth in the fourth quarter of programs could be around zero because of very tough comp. With all the flood claim revenue. Okay. Okay, thanks, Sandy, for unpacking that.
Speaker Change: So.
Speaker Change: We feel good about retail and as I said, that's a long winded answer on two thirds one third.
Speaker Change: Hey, Greg.
Speaker Change: The thing to keep in mind.
Speaker Change: I've mentioned this a bunch over the over the.
Speaker Change: Past few years is our diversification.
Speaker Change: And again, if you go way back in history, yes.
Speaker Change: More weighted to Florida, and potential cat property, but with the.
Speaker Change: The industries that we serve the lines of coverage geographies across the business.
Mike Zaremski: My follow-up would be on probably the retail segment. If I think about the commentary on employee benefits and some upwards pressure on inflation there, is that, did that come through in the retail or organic this quarter?
Speaker Change: The cat property can have a move with maybe on offices in certain locations.
Speaker Change: But the ability to have.
Speaker Change: Material impact on our numbers across the board is much less than what it was years ago and that's all been done with kind of purpose for the strategy on how we diversify the organization.
Powell Brown: And maybe you can size up how much seasonality there is, I think, in OneQ versus the rest of the year in terms of mix of benefits being higher, I believe, in OneQ. So, so remember, that's a revenue recognition issue, Mike, and so it's sort of front-loaded that Andy sort of referred to. So when I say that, that makes the assumption if, you know, your thought process that all of those accounts are either on commission, not a per head per month or a fee. So most of our business is on commission, but I just want to clarify that, that in some of the smaller business or fully insured, it's going to be, there's going to be on a per head per month that we get paid and on our larger business, many times those are on fees.
Speaker Change: Great.
Speaker Change: Okay.
Speaker Change: Moderators instructions said, one question, but everyone seems to be asking a follow up so.
Speaker Change: I, just slip and my follow up which would be.
Speaker Change: Can you talk about the outlook for the flood business.
Speaker Change: The federal government the federal government program.
Speaker Change: And.
Speaker Change: <unk> seem odd.
Speaker Change: It's unclear it sits inside of FEMA. So it's unclear what's going to happen with the flood program and I'm just curious about your perspectives given all the changing dynamics happening in Washington D C.
Speaker Change: So Greg, let's let's look at our historical perspective of flood and then put that kind of an overlay the current <unk>.
Powell Brown: As it relates to the organic growth in retail, we were very pleased with the organic growth in retail, particularly in light of what we said at the end of Q4 and in our remarks about some shifting of some things and some non-recurring revenue. So, and we anticipated to be a little bit higher later in the year. And so we felt good about it and continue to feel good about it.
Speaker Change: Environment.
Speaker Change: As you probably know.
Speaker Change: The flood program has not been reauthorized for an extended period of time, meaning something like a five year traditional reauthorization or something in a long time. So basically they have been reauthorizing for shorter periods of time, because they can't get the.
Speaker Change: Paul.
Speaker Change: Authorization through.
Mike Zaremski: Thank you.
Speaker Change: And so I use that as a backdrop to say this.
Gregory Peters: Our next question comes from Gregory Peters with Redmond James, your line is open. Good morning, everyone. Paul, in your closing comments, you talked about growth returning to a more normal level. and I'm reminded of a comment you used to make about the impact or weighting of economic growth versus the impact from rate increases. And I think in the last couple of years, you seem to and I don't want to put words in your mouth, but you seem to indicate that you're getting a little bit heavier weighting from rate increases versus economic versus the traditional averages.
Speaker Change: We believe that the flood program is a critical program in the United States for homeowners.
Speaker Change: And I believe the government and everything that we hear would lead us to.
Speaker Change: Feel that way.
Speaker Change: That said I think the likelihood of having a longer term reauthorization in the next year to several year is probably lower because it just seems to be getting kicked down the kick the can down the road and that's what our team says and we're very.
Speaker Change: Close.
Speaker Change: To the people involved in Washington.
Speaker Change: But as you know we write about a third of all the right around flood premiums in the United States.
Powell Brown: Maybe you can update us because, you know, in the slide presentation, there's a couple slides there where you talk about PropertyCat being down. affecting, you know, having an offset on organic. and and we talked about the other rate environment. So it's just can you provide us some updated perspective on how you're thinking about that? Sure. Good morning, Greg. So first of all, what Greg is referring to is historically, I would say that our business is two thirds to three quarters exposure unit, and the remaining would be rate. That's how I've always sort of said that.
Speaker Change: And so.
Speaker Change: That's kind of how we feel that.
Speaker Change: Got it thanks for the answers.
Speaker Change: Thank you.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from Josh Shanker with Bank of America. Your line is open.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Yes, Josh for taking my question good morning to everybody how are you doing.
Speaker Change: Good morning.
Speaker Change: Critical.
Speaker Change: We want to focus on cash and I just have more general question about the state of Florida seems like after 837, a lot of the lawyers lost a lot of revenue and a lot of different kinds of risk is the cost of risk going down and the state of Florida broadly and what impacts should we have an on Florida.
Powell Brown: And we've alluded to the fact that with a transition, particularly in cat property, but it could be in some heavy casualty lines into unusual umbrellas and other things, it has gone up or had a little bit higher impact on rate and the growth. So that's the first thing. The second thing that I'd like to sort of clarify for everybody is, I find it very interesting how you all are sort of surprised by the rate decreases in cat property. I would have said, I thought this was gonna happen a year ago. And so cat property historically goes up faster than you anticipate and it comes down faster than you anticipate.
Speaker Change: Pricing broadly compared to the national economy over the next couple of years should Florida growth be lower than the rest of the country.
Speaker Change: Okay. So interesting question Josh <unk>.
Speaker Change: First of all is the cost of risk going down in the state of Florida, and I would I have to temper. This statement. If you are in cat property and it went really high your cost of risk is coming down.
Speaker Change: I'm talking about the rate on that however.
Speaker Change: The overall cost of risk in the sense that what a person is paying to ensure that similar property I E. Let's say their home is actually going up still because you have increased cost of construction.
Powell Brown: And so it's it's all about the availability of limits out there, whether it be through a traditional insurance company or through a MGA or some combination thereof. So I think. From a standpoint of our retail business, but it affects the whole business, we are writing a lot of new business, Greg. And our, you know, our goal is to get the best program that's the most competitive program with the most comprehensive price, comprehensive coverage for our customers. And so today, I do believe that what if you believe what I just said, which I do, is that it would go back more closer to the two-thirds, one-third, or three-quarters, one-quarter, but I usually use two-thirds, one-third.
Speaker Change: So you have insurance to value and insurance increased cost of construction issues.
Speaker Change: So somebody's home might have been let's say on a replacement cost that I'll make this up $200 a square foot.
Speaker Change: And in the event that there is a loss it will cost them $300, a square foot to replace that house and like kind or quality.
Speaker Change: So that's number one number two if you think about it particularly in certain areas of the state is more pronounced but if you go to southeast Florida. There are a number of uninsured motorists on the highways and so the cost of liability insurance.
Speaker Change: And physical damage for the auto whether it's personal or commercial continues to go up.
Powell Brown: And again, as I said, I believe that if you talk to people, just the person on the street, they have a little bit more negative Review of the Economy than people that run and own businesses. I believe that depending on the industry that you're in, depending on, you know, your supply chain, some of these other things, your view is slightly different, and maybe more moderated. So we feel good about retail. And as I said, that's long-winded answer on two-thirds, one-third. Hey Greg, the other thing to keep in mind, and we've mentioned this a bunch over the past few years, is our diversification.
Speaker Change: And it is highlighted by these very large awards.
Speaker Change: That the plaintiffs bar usually highlights but.
Speaker Change: There are a lot of fairly large awards and so you have to keep that in mind.
Speaker Change: As it relates to growth in the state of Florida.
Speaker Change: What's happening in my opinion is this florida used to be a very inexpensive place to live relatively speaking other than barring south, Florida, beating southwest and southeast, Florida today, there has been an escalation in home prices and land values.
Speaker Change: So it's not as inexpensive as it once was.
Speaker Change: So it's a transition ARY market and there are more and more people that are coming here.
Powell Brown: And again, if you if you go way back in history, yes, we were probably more related to Florida and potentially cap property. But with the The industries that that we serve the lines of coverage, geographies across the business, the cap property, you know, can have a movement maybe on offices in certain locations. But the ability to have a material impact on our numbers across the board is much less than what it was years ago. And that's all been done with kind of purpose for the strategy on how we diversify the organization.
Speaker Change: Fleeing high tax states like to state that you live in and they're coming here and they think it's wonderful.
Speaker Change: So we believe that there is going to be continued growth in the economy in Florida in the near to intermediate and long term.
Speaker Change: And what about the price of a liability court costs legal fees.
Speaker Change: On the on the capacity side.
Speaker Change: Is there any change going on there.
Speaker Change: Yeah. So the answer to the question is I think it will.
Speaker Change: Make it very simple I think that even with.
Speaker Change: The tort reform that has occurred and that seems to point in the right direction that is overshadowed by the size and frequency of larger settlements and so it's a very difficult push pull environment and I would say that.
Unknown Executive: Great.
Unknown Executive: The moderator's instruction said one question, but everyone seems to be asking a follow up.
Gregory Peters: So I just slip in my follow up, which would be Um, can you talk about the outlook for the flood business? You know, um, the federal government, the federal government program, and, you know, um, FEMA, it's unclear, it sits inside of FEMA, so it's unclear what's going to happen with the flood program. And I'm just curious about your perspectives, given all the changing dynamics happening in Washington, D.C.
Speaker Change: There is more push on rates up then pull on rates down due to reform.
Speaker Change: Welcome good answers. Thank you very much and I appreciate the color.
Speaker Change: Thanks, Josh Yep.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from Meyer Shields with <unk>. Your line is open.
Powell Brown: So, Greg, let's, let's look at a historical perspective of flood and then put that kind of an overlay the current environment. So, as you probably know, the flood program has not been reauthorized for an extended period of time, meaning something like a 5 year traditional reauthorization or something in a long time. So, basically, they have been reauthorizing for shorter periods of time because they can't get the full reauthorization through. And so I use that as a backdrop to say this. We believe that the flood program is a critical program in the United States for homeowners.
Meyer Shields: Great. Thanks, so much and good morning, I was hoping that you can.
Speaker Change: To clarify I think Andy you mentioned that there is.
Speaker Change: That without flood revenues in the fourth quarter organic could be zero is that there are no flood revenues or is that at the 10 year average.
Speaker Change: So let's.
Speaker Change: Say it again, we're re clarify on that one.
Speaker Change: Is if there is minimal.
Speaker Change: Flood claims revenue in the fourth quarter, the organic is probably closer to zero.
Okay.
Speaker Change: <unk> worse than what you're budgeting using the average.
Speaker Change: That is if you pull it down on the averages will be.
Speaker Change: Too far off there if you use the 10 year average.
Speaker Change: Okay, that's very helpful.
Powell Brown: And I believe the government and everything that we hear would lead us to feel that way. That said, I think the likelihood of having a longer term reauthorization in the next year to several years is probably lower because it just seems to be getting kicked down the road, kicked the can down the road. And that's what our team says. And we're very close to the people involved in Washington. But, as you know, we write about a third of all the write your own flood premiums in the United States. And so that's kind of how we feel about it.
Speaker Change: The second question with regard to Cat property I guess the key question I'm hearing a lot is are we seeing signs of any standard insurers or admitted insurers coming back in sort of cutting out the wholesale brokerage entirely for cat property.
Speaker Change: Well generally speaking the answer is no.
Speaker Change: And so here's here's what I would.
Speaker Change: I'll give you. An example, if you have a property in Miami.
Speaker Change: And it's if it's.
Speaker Change: I'm going to I'm going to flip it around Myers. So you can see this example, if it's in a standard market.
Speaker Change: And the rate is let's say.
Gregory Peters: Got it. Thanks for the answer. Yeah, thank you.
Speaker Change: 60, <unk>, so I just made that up.
Speaker Change: And the standard market wants a 10% increase of 5% to 10% increase on that property.
Joshua Shanker: Unknown Speaker Our next question comes from Josh Shanker with Bank of America, your line is open. Good morning to everybody. How you doing? Good.
Speaker Change: The lowest rate they might get on that same property in the E&S market is a buck.
Speaker Change: Having said that very few standard markets would right, it's Dave grandfathered that property and so what I'm, saying is is if you have a if it's at a buck and they don't want to write it in the standard market, they're not coming back in in a block.
Joshua Shanker: You know, we want to focus on on cash.
Joshua Shanker: And I just have more general question about the state of Florida. It seems like after 837, a lot of the lawyers lost a lot of revenue in a lot of different kinds of risk is the cost of risk going down in the state of Florida broadly. And what impact should we have on on Florida pricing broadly compared to the national economy over the next couple of years? Should Florida growth be lower than the rest of the country?
Speaker Change: So they have there are some old grandfathered standard market business that permeates in southeast, Florida in particular does not exclusively it could be other places.
Speaker Change: But.
Speaker Change: The answer is no we're not seeing that right yet.
Powell Brown: Okay, so interesting question, Josh. First of all, is the cost of risk going down in the state of Florida. And I would I have to temper this statement. If you are on cat property, and it went really high, your cost of risk is coming down. Okay, I'm talking about the rate. on that. However, The overall cost of risk in the sense that what a person is paying to ensure the similar property, i.e. let's say their home, is actually going up still because you have increased cost of construction. So you have insurance to value and insurance, increased cost of construction issues.
Speaker Change: Okay. That's very helpful. Thank you so much.
One moment for our next question.
Speaker Change: Okay.
Speaker Change: Our next question comes from Andrew Henderson with Jefferies. Your line is open.
Charlie: Hi, everybody. Good morning, this is Charlie on for Andrew.
Speaker Change: Just have one question on lender placed business, which I know you guys touched on a little bit earlier on the call but.
Speaker Change: Was there any incremental benefit or headwind from lender placed insurance and 125 within programs.
Speaker Change: I think previously you guys may have mentioned that there was.
Speaker Change: Going to be that more of a return to our regular seasonal cadence there, but I guess any color would be helpful.
Andy Powell: Hi, Good morning, Charlie It's Andy here.
Powell Brown: So somebody's home might have been, let's say, on a replacement cost at, I'll make this up, $200 a square foot. And in the event that there is a loss, it will cost them $300 a square foot to replace that house in like kind or quality. So that's number one. Number two, if you think about it, particularly in certain areas of the state, this is more pronounced, but if you go to Southeast Florida, there are a number of uninsured motorists on the highways. And so the cost of liability insurance and physical damage for the auto, whether it's personal or commercial, continues to go up, and it is highlighted by these very large awards.
Speaker Change: No there are no headwinds year over year in the business. It just didn't grow at the same pace that it did a year ago.
Speaker Change: And just we want to make sure we clarify the growth that we're seeing in the business is due to us winning new accounts or customers buying portfolios. The actual lender placed ratio is not materially changing.
Speaker Change: Which that's always to us a good indicator to the health of the economy that means people are still in a good financial position that they are able to pay their insurance.
Speaker Change: Just want to make sure that we clarified that.
Speaker Change: Okay, Yeah, and then I guess just on the seasonality there just no material changes I guess it sounds like.
Speaker Change: Net that won that business doesn't really have a seasonality to it Charlie just because there again it primarily is placing coverage on homeowners and thats just kind of throughout the entire year.
Powell Brown: The Plaintiff's Bar usually highlights, but there are a lot of fairly large awards, and so you have to keep that in mind.
Speaker Change: You'll get different seasonality is when we bring on a new account is.
Powell Brown: As it relates to growth in the state of Florida, what's happening, in my opinion, is this. Florida used to be a very inexpensive place to live, relatively speaking, other than barring South Florida, beating Southwest and Southeast Florida. Today, there has been an escalation in prices and land values, so it's not as inexpensive as it once was. And so it's a transitionary market, and there are more and more people that are coming here that are fleeing high-tax states, like the state that you live in, and they're coming here, and they think it's wonderful. So we believe that there's going to be continued growth in the economy in Florida in the near to intermediate and long term.
Speaker Change: You'll have a bump of multiple months of revenue through a transition when you have got to get letters back out to the to the homeowners. So that's the one that really causes and wouldn't call. It seasonality. That's just you're onboarding a new account you will pick up an extra two to three months of revenue and then when you make a lap you lose it on <unk>.
Speaker Change: Operability, but thats just kind of how the business works in there.
Speaker Change: Okay got it I appreciate the color. Thanks, guys yeah. Thank you.
Speaker Change: One moment for our next question.
Speaker Change: Yes.
Our next question comes from Brian Meredith with UBS. Your line is open.
Brian Meredith: Yes, Thanks, a couple of them here for you.
Brian Meredith: First one I know theres some legislation actually in Florida trying to turn back some of the reforms that happened.
Brian Meredith: I'm not sure if you've got any updates on where that is and do you think that may reverse the course of kind of the pricing pressure that we're seeing right now.
Powell Brown: And what about the price of liability court costs legal fees, you know, on the on the on the Cassie side of the coin? Is there any change going on there? Yeah, so the answer to the question is, I think, if we make it very simple, I think that even with the tort reform that has occurred, and that seems to point in the right direction, that is overshadowed by the size and frequency of larger settlements. And so it's a very difficult push-pull environment. And I would say that there's more push on rates up than pull on rates down due to reform.
Speaker Change: The answer to the question is.
Speaker Change: We know that there is not a lot of interest in the state Senate or in the Governor's office to have proposed legislation as written.
Speaker Change: Implemented.
Speaker Change: Okay. That's helpful.
Speaker Change: Thanks, and then second question I was just wondering.
Speaker Change: MGA business I'm just curious.
Speaker Change: Right now it appears that carriers are.
Speaker Change: I have a lot of demand and appetite for MJ type business I'm curious what your outlook is for the MTA business do you think that is.
Speaker Change: Continuing.
Speaker Change: Here for a while or do you think maybe we start to see some of that slow at some point from a carrier appetite perspective, particularly with some of the big rate reductions, we're seeing in call it E&S property and stuff.
Joshua Shanker: Okay, good answers. Thank you very much and appreciate the color. Thanks, Josh. Yep.
Speaker Change: Yes, so I think lets backup Brad in and talk about why there is that interest in the MGA business I think it's a combination of things number one the carriers believe it's a way for them to get large chunks of premium.
Meyer Shields: Our next question comes from Meyer Shields with KBW, your line is Great, thanks so much.
Meyer Shields: And good morning. I was hoping that you could clarify, I think, Andy, you mentioned that there's a that without flood revenues in the fourth quarter, organic could be zero. Is that there are no flood revenues or is that at the 10 year average? Now, so let's see, again, we'll reclarify on that one is, if there is minimal flood claim revenue in the fourth quarter, then the organic is probably closer to zero. Okay, but that's worse than what you're budgeting using the average That is, yeah, if you pull it down on the averages, it won't be too far off there if you use a 10-year average.
Speaker Change: Potentially if someone moves a program to them. So there is an appeal of that.
Speaker Change: In terms of trying to grow their business. That's number one number two the quality of the underwriting in a number of the MGA is quite good.
Speaker Change: So the days if you go back 15 years ago, the carriers viewed underwriting our MGA space as a little bit like the wild west and they were Cowboys and maybe not as.
Speaker Change: Detailed or the data was not as good and today the carriers don't support Cowboys.
Meyer Shields: Okay, that's very helpful.
Meyer Shields: Second question, with regard to cat property, I guess a key question I'm hearing a lot is are we seeing signs of any standard insurers or admitted insurers coming back in sort of cutting out the wholesale brokerage entirely for cat property? Well, generally speaking, the answer is no. And so here's here's what I would I'll give you a an example. If you have a property in Miami and it's if it I'm gonna I'm going to flip it around Meyer so you can see this example. If it's in a standard market And the rate is, let's say 60 Cents.
Speaker Change: You actually cut him off.
Speaker Change: And so you have to have a system of process that works you have got to show good results over time.
Speaker Change: It's more of a true partnership so do I think there will be a decreased interest and MGA is from carriers in the near to intermediate term no I think it will be the contrary.
Speaker Change: As it relates to pressure on rates, depending on the line of business I think that they will mirror the market.
Speaker Change: And in some instances be more pronounced in the market and it just depends because if <unk> got a casualty program for liability on law enforcement officials that could have upward pressure versus cat property versus an automobile program versus.
Powell Brown: I just made that up. And the standard market wants a 10% increase, a 5 to 10% increase on that property. The lowest rate they might get on that same property in the ENS market is a buck. Having said that, very few standard markets would write it's Dave grandfathered that property in. So what I'm saying is, is if you have a if it's at a buck, and they don't want to write it in the standard market, they're not coming back in at a So they have there's some old grandfathered standard market business that permeates in southeast Florida, in particular, that's not exclusively, it could be other places.
Speaker Change: Contractor program. So it's very program specific and as it relates to us.
Speaker Change: We feel really good about our <unk> business, because it's so diversified.
Speaker Change: And P&L recognized go.
Brian Meredith: Go ahead, sorry, Brian.
Speaker Change: Keep your own I'm sorry.
Brian Meredith: No I mean, I, just think the carriers recognize quality and they want to associate with people that can actually bring them quality business and have an appropriate partnership over a long period of time.
Speaker Change: Makes sense. Thank you.
Powell Brown: The answer is no, we're not seeing that right yet.
Thanks, Brian Thank you.
Speaker Change: For our next question.
Meyer Shields: Okay, that's very helpful. Thank you so much.
Speaker Change: Our next question comes from Elyse Greenspan with Wells Fargo. Your line is open.
Elyse Greenspan: Hi, Thanks. Good morning. My first question is just on the margin outlook.
Andrew Anderson: Our next question comes from Andrew Anderson with Jeffries, your line is open. Hi, everybody. Good morning.
Charlie: This is Charlie on for Andrew. I just have one question and it was on lender place business, which I know you guys touched on a little bit earlier in the call. Unknown Speaker Was there any incremental either benefit or headwind from lender placed insurance in 1Q25 within Previously, you guys made going to be like more of a.
Elyse Greenspan: I know last year, you guys last quarter, sorry, you guys said you were looking for margins to be roughly flat in 'twenty five versus <unk> 24.
Elyse Greenspan: I was just hoping you can comment where.
Elyse Greenspan: How Q1 shook out relative to expectations I know there were some pushes and pulls with the segments, the Quintus seasonality et cetera and.
Elyse Greenspan: And what's your current view.
Andy: cadence there, but I guess any Hi, good morning, Charlie. It's Andy here. No, no headwinds, year over year to the business, it just didn't grow at the same pace that it did a year ago. And just we want to make sure we clarify, the growth that we're seeing in the business is due to us winning new accounts or customers buying portfolios, the actual lender placed ratio is not materially changing, which that's always to us a good indicator to the health of the economy. That means people are still in a good financial position that they're able to pay their insurance.
Elyse Greenspan: For your full year margin and how that might have changed over the last three months.
Elyse Greenspan: So good morning Elyse.
Elyse Greenspan: And it Hasnt changed its exactly what we described in the Q4 call it would be a little bit higher in Q1, which was met our expectations and you have the.
Elyse Greenspan: Expense.
Elyse Greenspan: More loaded in Q2, three and four and Quinn test as an example, but we don't have a modification and quite honestly, we are very pleased with our margin.
Elyse Greenspan: And so yes, we feel good about it.
Elyse Greenspan: Hope you do actually.
Andy: So just want to make sure that we clarify that. Um, okay. Yeah.
Tom: Yes, Thanks, Tom and then my second question is on.
Tom: Just retail right you guys had guided to the Q1 being about 1% lower than the full year, which based on the prepared commentary it sounds like it was in line with expectations.
Andy: And then I guess on the seasonality. Material changes, I guess. Yeah, that one, that business doesn't really have a seasonality to it, Charlie, just because they're, again, it primarily is placing coverage on on homeowners, and that's just kind of throughout the entire year, where you'll get different seasonality is when we bring on a new account is, you'll have a bump of multiple months of revenue through a transition when you've got to get letters back out to the to the homeowners. So that's the one that really causes what we call that seasonality. That's just you're onboarding a new account, you'll pick up an extra two or three months of revenue.
Tom: Obviously as you pointed out there is just some uncertainty with tariffs et cetera, right now.
Tom: Just based on how you see everything developing it sounds like you guys still think the full year it could be around 5%, maybe a little bit above given what you had highlighted with the Q1 I was hoping you could just.
Tom: Expand upon.
Tom: That as well.
Elyse Greenspan: Okay Elyse, so let's let's go back to we're very consistent at Brown <unk> Brown, you may not like the consistency, but we're consistent and we say, it's a low to mid single digit organic growth business and so we have not changed our position on the growth guidance.
Charlie: And then when you make a lap, you lose it on comparability. But that's just kind of how the business works in there. Okay, got it.
Charlie: Well, appreciate the color. Yeah, thank you.
Elyse Greenspan: Even though we really don't give growth guidance, we had to give you that in Q1.
Brian Meredith: Our next question comes from Brian Meredith of DBS, your line is open. Yeah, thanks. A couple of them here for you.
Elyse Greenspan: We are very pleased with the way retail is performing because of the breadth of our capabilities.
Brian Meredith: First one, I know there's some legislation actually in Florida trying to turn back some of the reforms that happened. I'm not sure if you got any updates on where that is. And do you think that may reverse the course of kind of the pricing pressure that we're seeing right now?
Elyse Greenspan: And our market relationships and I find it interesting at least if I may take a moment.
Powell Brown: Unknown Speaker The answer to the question is, we know that there is not a lot of interest in the state senate or in the governor's office to have proposed legislation as written implemented. Good, that's helpful. Thanks.
Elyse Greenspan: That.
Elyse Greenspan: There are some people out there that thought six 5% organic growth was.
Elyse Greenspan: Not that good a quarter.
Elyse Greenspan: And I'm surprised because we think it's a good quarter.
Elyse Greenspan: And if you think about historically, which what people are saying is there is a movement back to more traditional organic growth levels and as you've seen by the other firms that you <unk>.
Brian Meredith: And then second question, I was just wondering, MGA business, I'm just curious, you know, right now, it appears that carriers are, you know, have a lot of demand and appetite for MGA type business. I'm curious what your outlook is for the MGA business. Do you think that, you know, is continuing, you know, here for a while? Or do you think maybe we start to see some of that slow at some point from a carrier appetite perspective, particularly with some of the big rate reductions we're seeing in call it ENS properties?
Elyse Greenspan: Cover it seems to be occurring.
Elyse Greenspan: It's an interesting perspective and so.
Elyse Greenspan: Depending on who you are in your case you didn't see it exactly the way we did this quarter, but we feel good not only about retail, but about wholesale and programs and we also feel good about the rest of the year.
Elyse Greenspan: Yes.
Powell Brown: Yeah, so I think let's back up, Brad and and talk about why there is that interest in the MGA business. I think it's a combination of things. Number one, the carriers believe it's a way for them to get large chunks of premium, potentially, if someone moves a program to them. So there's an appeal of that in terms of trying to grow their business. That's number one. Number two, the quality of the underwriting in a number of the MGAs is quite good. And so the days, you know, if you go back 15 years ago, the carriers viewed the underwriting or MGA space as a little bit like the Wild West.
Speaker Change: If you would this morning is Andy here.
Speaker Change: If you go back to our prepared comments the thing that we said inside of there is we're not seeing the buyers of insurance materially changed their level of investments.
Speaker Change: At this stage doesn't mean that things can't go positive or negative.
Speaker Change: On that one, but we still feel good with the backdrop right now and continue honestly from where we were three months ago to now we're not materially changing our outlook.
Speaker Change: Yes.
Speaker Change: Okay. That's helpful. Thanks. Thanks, Paul Thanks. Thank you. Thank you both.
Speaker Change: One moment for our next question.
Mark Hughes: Our next question comes from Mark Hughes with true Securities. Your line is open.
Mark Hughes: Yeah. Thanks, just a couple of quick ones on property I think youre non cat property pricing.
Powell Brown: and they were cowboys and maybe not as detailed or the data was not as good. And today the carriers don't support cowboys. They actually cut them off. And so, you know, you have to have a system, a process that works. You've got to show good results over time. You know, it's more of a true partnership. So do I think there will be a decreased interest in MGAs from carriers in the near to intermediate term? No, I think it would be the contrary. As it relates to pressure on rates, depending on the line of business, I think that they will mirror the market, and in some instances, be more pronounced on the market.
Mark Hughes: Description was flat to up 5% I think that's pretty consistent with <unk> do you think is noncash property at a pretty good equilibrium do you think it stays at this level.
Mark Hughes: I think mark that's hard to tell right now and the reason I say that is.
Mark Hughes: Although there's not as much chaos in that segment right now.
Mark Hughes: That assumes that we have maybe a light.
Mark Hughes: Hurricane season if.
Mark Hughes: If we have a active hurricane season, where theres landfall in significant damage I do believe that that definitely impacts.
Mark Hughes: Standard market pricing. The other thing is let's not lose sight of there are other areas that are dealing with things that maybe we don't talk as much about I E.
Powell Brown: And it just depends because if you've got a casualty program for liability on law enforcement officials, that could have upward pressure versus cat property versus an automobile program versus a contractor program. So it's very program specific.
Mark Hughes: Storms and tornadoes in places, where deductibles are changing very significantly.
Mark Hughes: And just.
Mark Hughes: I know it's.
Mark Hughes: Obvious, but the wildfire exposure and just fires in general and so you have all these dynamics that are going on at once.
Powell Brown: And as it relates to us, you know, we feel really good about our MGA MGU business because it's so diversified. and People Recognized.
Mark Hughes: So.
Mark Hughes: So long winded answer of saying hard to say I think it's probably pretty good right now, but we are in a wait and see relative to the storms. This year and those are across all segments.
Powell Brown: Go ahead. Sorry, Brad. No, that was good. Keep going. Sorry. No, I mean, I just think the carriers recognize quality, and they want to associate with people that can actually bring them quality business and have an appropriate partnership over a long period of time. Thanks. Thank you.
Mark Hughes: Wind hail and tornados fire et cetera.
Mark Hughes: Very good and then on the Cat property and your experience you've talked about how it runs up and that runs back down.
Mark Hughes: Would it usually be kind of.
Mark Hughes: <unk> done you get that down 30, or what have you.
Mark Hughes: Thats.
Elyse Greenspan: Our next question comes from Elyse Greenspan with Wells Fargo. Your line is open. Hi, thanks. Good morning. My first question is just on the margin outlook. I know last year, you guys, last quarter, sorry, you guys said you were looking for, you know, margins to be roughly flat in 25 versus 24. I was just hoping you can comment, you know, where, how Q1 shook out, you know, relative to expectations. I know there were some pushes and pulls with the segments, the quinta seasonality, etc. And, and what's your, you know, current view, you know, for your full year margin and how that might have changed over the last three months.
Mark Hughes: <unk> tended to stabilize or do you.
Mark Hughes: I think thats, a multi year process.
Mark Hughes: Net.
Mark Hughes: The decrease this year and then maybe decreases.
Mark Hughes: Next year as well what would your experience.
Mark Hughes: So let's back up and say that this particular period of time has been different.
Mark Hughes: Then in the past so historically I would think that it would go up for one or two years, and then come down for one or two years or a little more and then it would sort of.
Mark Hughes: Do its thing in this case, we went up for an extended period of time, let's say it was five years and the pricing as you know typically is never exactly perfect. So those cat prices if you looked at them.
Andy: So good morning, Elyse. And it hasn't changed. It's exactly what we described in the Q4 call. It would be a little bit higher in Q1, which was met our expectations. And you have the expense, you know, more loaded in Q2, 3, and 4 in Quintest, as an example. But we don't have a modification. And quite honestly, we are very pleased with our margin. And so, yeah, we feel good about it. And I hope you do, actually.
Mark Hughes: Actuarially are probably a little higher.
Mark Hughes: In some cases than they should be and as a result, theres going to be downward pressure. This year and then the question is what happens if there is a storm or not if there is not an active storm season, we will see additional pressure next year.
Mark Hughes: If there is a storm then that changes that statement, but I don't believe that it will go down as rapidly for as many years as it has gone up that is an important distinction because there is some level of discipline I, just don't know where that.
Elyse Greenspan: Yes, thanks.
Powell Brown: And then my second question is on just retail, right? You know, you guys had guided to the Q1 being about 1% lower than the full year, which, you know, based on the prepared commentary, it sounds like it was in line with expectations. You know, obviously, you know, as you pointed out, you know, there's just some uncertainty with tariffs, etc. right now. You know, just based on, you know, how you see, you know, everything developing, it sounds like you guys still think, right, the full year could be, you know, around 5%, maybe a little bit above given what you had highlighted with the Q1.
Mark Hughes: Floor is.
Mark Hughes: And so it's a very interesting time.
Mark Hughes: And it's opportunistic.
Mark Hughes: And once again it depends on.
Mark Hughes: The hurricane season, which by the way starts and just over a month.
Powell Brown: I was hoping you could just, you know, expand upon that, that as well, Powell.
Mark Hughes: Very helpful. Thank you.
Speaker Change: Thanks, Mark we're going to have two more questions. If we can one of them.
Powell Brown: Okay, Elyse. So let's let's go back to we're very consistent at Brown & Brown, you you may not like the consistency, but we're consistent. And we say it's a low to mid single digit organic growth business. And so we have not changed our position on the growth guidance, even though we really don't give growth guidance, we had to give you that in Q1. We are very pleased with the way retail is performing because of the breadth of our capabilities and our market relationships. And I find it interesting, Elyse, if I may take a moment, that there are some people out there that thought 6.5% organic growth was not that good a quarter.
Mark Hughes: Yeah.
Speaker Change: Our next question comes from Alex Scott with Barclays. Your line is open.
Alex Scott: Hey, good morning.
Speaker Change: Question I have is on this dynamic between some of the large.
Speaker Change: Large into the market pricing trends, we are seeing versus.
Speaker Change: I'd say more stable or still increasing.
Speaker Change: The small to medium into the market.
Speaker Change: And was just interested in your perspective on that.
Speaker Change: From your viewpoint whats driving.
Speaker Change: What seemingly are one of the bigger divergences.
Speaker Change: Seen there.
Speaker Change: And.
Speaker Change: How would you characterize brown sort of exposure to those.
Speaker Change: Over the next couple of years, if they persist.
Powell Brown: And I'm surprised because we think it's a good quarter. And if you think about historically, which what people are saying is there is a movement back to more traditional organic growth levels. And as you've seen by the other firms that you cover, it seems to be occurring. I think it's an interesting perspective. And so, you know, depending on who you are, and in your case, you didn't see it exactly the way we did this quarter, but we feel good, not only about retail, but about wholesale and programs. And we also feel good about the rest of the year.
Speaker Change: Okay. So.
Speaker Change: As I like to describe our firm we are.
Speaker Change: Truly middle and upper Middle market business that is the vast majority we have a good SME book and we do have some very large accounts too.
Speaker Change: And we're very strategic about how we work with those customers.
Speaker Change: So Alex what I think youre, referring to is that slipped paint the backdrop number one the most competitive environment on a rate standpoint per unit typically is in the largest accounts.
Speaker Change: And as a result.
Andy: Yeah, if you were this morning, Sandy here, if you if you go back to our prepared comments, the thing that we said inside of there is, we're not seeing the buyers of insurance materially change their level of investment. at this stage. Doesn't mean that things can't go positive or negative on that one, but we still feel good with the backdrop right now and continue, honestly, from where we were three months ago to now, we're not materially changing our outlook. Okay, that's helpful.
Speaker Change: The large account space historically has not made much money for the insurance carriers.
Speaker Change: These are broad generalizations.
Speaker Change: Conversely on the lower end.
Speaker Change: <unk> SME and in the middle market has been more profitable because the rates. If you look at the rate of a similar business and the very large account space and one in a smaller unit or smaller business that rate is going to be a little bit higher and the performance on those.
Elyse Greenspan: Thanks. Thanks, Paul. Thanks. Thank you.
Speaker Change: Accounts historically has been substantially better so.
Unknown Executive: Thank you both.
Unknown Executive: Unknown Speaker One moment for our next question.
Speaker Change: So the carriers right.
Speaker Change: And want to write that very profitable business.
Mark Hughes: Our next question comes from Mark Hughes with True Securities. Your line is open. Yeah, thanks. Just a couple quick ones on property. I think your non-CAT property pricing description was flat at 5%. I think that's pretty consistent with 4Q. Do you think non-CAT property at a pretty good equilibrium? Do you think it stays at this level? I think, Mark, that's hard to tell right now. And the reason I say that is, although there's not as much chaos in that segment right now, that assumes that we have maybe a light hurricane season. If we have an active hurricane season where there's landfall and significant damage, I do believe that that definitely impacts standard market pricing.
Speaker Change: So having said that remember the very large accounts in many instances are on fees.
Speaker Change: So it is not driven by commissions, where small medium and upper middle market accounts are typically on commissions. So if you were going to paint that picture and we will just compare it to cat property. If you get paid a commission on something that pays a $100000 and this year at 70000, then your revenue.
Speaker Change: Goes down Conversely, if they paid $7 million and it goes from seven to six youre fee very many instances stays the same so your revenue is generally the same.
Speaker Change: Does that answer your question Alex.
Alex Scott: Yes, that's very helpful.
Powell Brown: The other thing is, let's not lose sight of, there are other areas that are dealing with things that maybe we don't talk as much about, i.e. hailstorms and tornadoes in places where deductibles are changing very significantly. I know it's Obvious, but the wildfire exposure and just fires in general. And so you have all these dynamics that are going on at once. And so The long winded answer of saying hard to say, I think it's probably pretty good right now. But we're going to wait and see relative to the storms this year. And those are across all segments.
Speaker Change: My other questions were answered so thank you.
Mark Hughes: Thank you Alex we'll take one more.
Alex Scott: One moment.
Alex Scott: Our next question comes from Meyer Shields with <unk>. Your line is open.
Meyer Shields: Okay. Thank so much for fitting me in I, just wanted to check in and know that this is becoming more relevant to whether youre seeing a difference in economic growth expectations from clients outside of the U S. As you are domestically.
Meyer Shields: I think there is more questions about growth.
Meyer Shields: Overseas.
Meyer Shields: Then we find here in the United States, that's a very broad statement, but.
Meyer Shields: I think it would be moderated slightly and I think it depends on where you are.
Powell Brown: Wind, hail, tornadoes, fire, etc.
Meyer Shields: Okay.
Speaker Change: We're not seeing anything that is like this material change in outlook I think back to Lisa's comments, and we said it in the markets in which we participate in and Europe.
Mark Hughes: Very good. And then on the cat property, in your experience, you talked about how it runs up and then it runs back down. Would it usually be kind of a one and done you get that down 30 or what have you. And that tends to stabilize if you you think that's a multi year process, you get to decrease this year and then, you know, maybe decreases next year as well.
We're primarily in.
Meyer Shields: England and.
Meyer Shields: <unk> and <unk>.
Meyer Shields: In Ireland, the major markets for us and the backdrop. There is still good doesn't mean, there's not some pockets here and there, but theres pockets everywhere, there's pockets up in Canada et cetera. So.
Powell Brown: What would your experience So let's back up and say that this particular period of time has been different. than in the past. So historically, I would think that it would go up for one or two years, and then come down for one or two years or a little more. And then it would sort of kind of do its thing. In this case, we went up for an extended period of time, let's say it was five years, and the pricing, as you know, typically is never exactly perfect. So those cap prices, if you looked at them, actuarially are probably a little higher, you know, in some cases, than they should be.
Meyer Shields: No no changes materially on that front.
Meyer Shields: Okay perfect. Thank you very much.
Meyer Shields: Thank you.
Meyer Shields: Okay.
Speaker Change: Go ahead, Kevin I was just going to turn the call back to you. You've obviously you can Gordon with your closing remarks.
Yes. Thank you all very much as we said I think we had a really we feel we had a really good quarter and are excited about Q2 and beyond hope you all have a wonderful day and thank you for your time bye.
Speaker Change: Ladies and gentlemen, so that concludes today's presentation. You may now disconnect and have a wonderful day.
Powell Brown: And as a result, there's going to be downward pressure this year. And then the question is, what happens if there's a storm or not? If there is not an active storm season, we will see additional pressure next year. If there is a storm, then that changes that state. But I don't believe that it will go down as rapidly for as many years as it has gone up. That is an important distinction because there is some level of discipline. I just don't know where that floor is. And so it's a very interesting time. And it's opportunistic.
Powell Brown: And once again, it depends on the hurricane season, which by the way, starts in just over a month.
Mark Hughes: Very helpful. Thank you. Thanks, Mark.
Unknown Executive: We're going to have two more questions, if we can.
Alex Scott: Our next question comes from Alex Scott with Barclays. Your line is open. Hey, good morning. Question I have for you is on this dynamic between some of the large, you know, large end of the market pricing trends we're seeing versus, you know, I'd say, you know, more stable or still, you know, increasing, it's the small to medium end of the market. And, and was just interested in your perspective on that, you know, from from your viewpoint, you know, what what's driving, you know, I'd say, what's seemingly one of the bigger divergences that we've seen there.
Powell Brown: And, you know, what, how would you characterize Brown's sort of exposure to those, you know, trends over the next couple years, if they persist?
Powell Brown: Okay, so we as I like to describe our firm, we are a truly middle and upper middle market business that is the vast majority. We have a good SME book. And we do have some very large accounts too. And we're very strategic about how we work with those customers. So, Alex, what I think you're referring to is this. Let's paint the backdrop. Number one, the most competitive environment on a rate standpoint per unit typically is in the largest account. And as a result, the large account space historically has not made much money for the insurance carrier.
Powell Brown: These are broad generalizations. Conversely, on the lower end, the SME end and the middle market has been more profitable because the rates, if you look at the rate of a similar business in the very large account space and one in a smaller unit or smaller business, that rate is going to be a little bit higher, and the performance on those accounts historically has been substantially better. So the carriers write and want to write that very profitable business. So having said that, remember, the very large accounts, in many instances, are on fees. So it's not driven by commissions, where small, medium and upper middle market accounts are typically on commission.
Alex Scott: So if you were going to paint that picture, and we'll just compare it to cat property, if you get paid a commission on something that pays $100,000, and this year it's $70,000, then your revenue goes down. Conversely, if they pay $7 million, and it goes from 7 to 6, your fee, at many instances, stays the same, so your revenue is generally the same. Did that answer your question, Alan? Yep, that's very helpful. My other questions were answered. So thank you. Thank you, Alex.
Meyer Shields: We'll take one more.
Powell Brown: Our next question comes from Meyer Shields with KBW, your line is open. Okay, thanks so much for fitting me in. I just want to check in now that this is becoming more relevant, whether you're seeing a difference in economic growth expectations from clients outside of the US, as you are domestically. I think there's more questions about growth. Unknown Speaker overseas than we find here in the United States. That's a very broad statement, but I think it would be moderated slightly, and I think it depends on where you are.
Powell Brown: Okay, we're done. Yeah, we're not seeing anything that is like this material change in outlook. I think back to Elyse's comment. And, you know, we said in the markets in which we participate, I mean, in, in Europe, we're primarily in, you know, England and Netherlands and Ireland are the major markets for us. And the backdrop there is still good. Doesn't mean there's not some pockets here and there, but there's pockets everywhere. There's pockets up in Canada, etc. So, but no, no changes materially on that front.
Unknown Executive: Okay, perfect. Thank you very much. Thank you.
Kevin: Okay. Go ahead, Kevin.
Powell Brown: No, I was just going to turn the call back to you, pal, so you can go ahead with your closing. Yep, thank you all very much. As we said, I think we had a really, we feel we had a really good quarter and are excited about Q2 and beyond.
Powell Brown: Hope you all have a wonderful day and thank you for your time.
Unknown Executive: Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.