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BRO 2019-03-31

Part I - Financial Information

Item 1 - Financial Statements (Unaudited)

Note 1· Nature of Operations

Note 2· Basis of Financial Reporting

Note 3· Revenues

Note 4· Net Income per Share

Note 5· Business Combinations

Note 6· Goodwill

Note 7· Amortizable Intangible Assets

Note 8· Long-Term Debt

Note 9· Leases

Note 10· Supplemental Disclosures of Cash Flow Information and Non-Cash Financing and Investing Activities

Note 11· Legal and Regulatory Proceedings

Note 12· Segment Information

Note 13· Investments

Note 14· Reinsurance

Note 15· Statutory Financial Data

Note 16· Subsidiary Dividend Restrictions

Note 17· Shareholders' Equity

Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Item 4. Controls and Procedures

Part II

Item 1. Legal Proceedings

Item 1A. Risk Factors

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Item 6. Exhibits

EX-31.1	exhibit311q12019.htm
EX-31.2	exhibit312q12019.htm
EX-32.1	exhibit321q12019.htm
EX-32.2	exhibit322q12019.htm

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•	Future prospects;

•	Premium rates set by insurance companies and insurable exposure units, which have traditionally varied and are difficult to predict;

•	Material adverse changes in economic conditions in the markets we serve and in the general economy;

•	Future regulatory actions and conditions in the states in which we conduct our business;

•	The occurrence of adverse economic conditions, an adverse regulatory climate, or a disaster in Arizona, California, Florida, Georgia, Illinois, Indiana, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Texas, Virginia, Washington and Wisconsin, because a significant portion of business written by us is for customers located in these states;

•	Our ability to attract, retain and enhance qualified personnel and to maintain our corporate culture;

•	Competition from others in or entering into the insurance agency, wholesale brokerage, insurance programs and related service business;

•	Disintermediation within the insurance industry, including increased competition from insurance companies, technology companies and the financial services industry, as well as the shift away from traditional insurance markets;

•	The integration of our operations with those of businesses or assets we have acquired, including our November 2018 acquisition of The Hays Group, Inc. and certain of its affiliates (collectively, “Hays Companies”), or may acquire in the future and the failure to realize the expected benefits of such integration;

•	Risks that could negatively affect our acquisition strategy, including continuing consolidation among insurance intermediaries and the increasing presence of private equity investors driving up valuations;

•	Our ability to forecast liquidity needs through at least the end of 2019;

•	Our ability to renew or replace expiring leases;

•	Outcomes of existing or future legal proceedings and governmental investigations;

•	Policy cancellations and renewal terms, which can be unpredictable;

•	Potential changes to the tax rate that would affect the value of deferred tax assets and liabilities and the impact on income available for investment or distribution to shareholders;

•	The inherent uncertainty in making estimates, judgments, and assumptions in the preparation of financial statements in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”);

•	Our ability to effectively utilize technology to provide improved value for our customers or carrier partners as well as applying effective internal controls and efficiencies in operations; and

•	Other risks and uncertainties as may be detailed from time to time in our public announcements and Securities and Exchange Commission (“SEC”) filings.

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PART I — FINANCIAL INFORMATION

ITEM 1 — Financial Statements (Unaudited)

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NOTE 1· Nature of Operations

NOTE 2· Basis of Financial Reporting

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of recurring accruals) necessary for a fair presentation have been included. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the Notes thereto set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

The preparation of these financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as disclosures of contingent assets and liabilities, at the date of the Condensed Consolidated Financial Statements, and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.

Recently Issued Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-15, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract,” which provides guidance for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). ASU 2018-15 will take effect for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently evaluating the impact of this pronouncement.

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” The new guidance eliminates Step 2 of the goodwill impairment test. The updated guidance requires an entity to perform its annual or interim goodwill impairment test by comparing the fair value of the reporting unit to its carrying value, and recognizing a non-cash impairment charge for the amount by which the carrying value exceeds the reporting unit’s fair value with the loss not exceeding the total amount of goodwill allocated to that reporting unit. ASU 2017-04 will take effect for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 and will be applied prospectively. The Company is currently evaluating the impact of this guidance on future interim or annual goodwill impairment tests performed.

Recently Adopted Accounting Standards

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (“Topic 842”), which provides guidance for accounting for leases. Under Topic 842, all leases are required to be recorded on the balance sheet and are classified as either operating leases or finance leases. Effective as of January 1, 2019, the Company adopted Topic 842, and all related amendments, which established Accounting Standards Codification (“ASC”) Topic 842. The Company adopted these standards by the recognition of right-of-use assets and related lease liabilities on the balance sheet. As permitted by Topic 842, the Company elected the transition practical expedient to adopt as of January 1, 2019, the date of initial application under the modified retrospective approach for leases existing at that date, with an adjustment to retained earnings. As a result, the Consolidated Balance Sheet at December 31, 2018 was not restated and continues to be reported under ASC Topic 840 (“Topic 840”) which did not require the recognition of operating lease liabilities on the balance sheet, and thus is not comparative. For the three months ended March 31, 2019, all of the Company's leases are classified as operating leases, which are primarily real estate leases for office space. The expense recognition for operating leases under Topic

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842 is substantially consistent with Topic 840, where operating lease charges are recorded entirely in operating expenses. As a result, there is no significant difference in the Company's results of operations presented in the Company's Condensed Consolidated Statements of Income for each period presented.

The adoption of Topic 842 had a significant impact on the Company's balance sheet with the recognition of the operating lease right-of-use asset and the liability for operating leases. Upon adoption, leases that were classified as operating leases under Topic 840 were classified as operating leases under Topic 842. For the adoption of Topic 842, the Company recorded an adjustment of $202.9 million to operating lease right-of-use asset and the related lease liability, with no impact to retained earnings. The lease liability is the present value of the remaining minimum lease payments, determined under Topic 840, discounted using the Company's incremental borrowing rate at the effective date of January 1, 2019. As permitted under Topic 842, the Company elected practical expedient that permit the Company to not reassess whether a contract is or contains a lease, the classification of the Company's existing operating leases, and initial direct costs for any existing leases. The Company did not elect the practical expedient to use hindsight in determining the lease term (when considering lessee options to extend or terminate the lease and to purchase the underlying asset) and in assessing impairment of the Company's right-of-use assets. The application of the practical expedient did not have a significant impact on the measurement of the operating lease liability.

The impact of the adoption of Topic 842 on the balance sheet at January 1, 2019 was (in thousands):

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(in thousands)	Balance at December 31, 2018			Adjustments due to Topic 842			Balance at January 1, 2019
Balance Sheet
Assets:
Other current assets	128,716			(3,004	)		125,712
Operating lease assets	—			178,304			178,304
Total Assets	6,688,668			175,300			6,863,968
Liabilities:
Accrued expenses and other liabilities	279,310			13,836			293,146
Operating lease liabilities	—			161,464			161,464
Total Liabilities	3,688,100			175,300			3,863,400

For contracts entered into on or after the January 1, 2019, at the inception of a contract the Company assesses whether the contract is, or contains, a lease. This assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether the Company obtains the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether the Company has the right to direct the use of the asset. Leases entered into prior to January 1, 2019 are accounted for under Topic 840 and were not reassessed. For real estate leases that contain both lease and non-lease components, the Company elected to account the lease components together with non-lease components (e.g., common-area maintenance).

Leases are classified as either finance leases or operating leases. A lease is classified as a finance lease if any one of the following criteria are met: the lease transfers ownership of the asset by the end of the lease term, the lease contains an option to purchase the asset that is reasonably certain to be exercised, or the lease term is for a major part of the remaining useful life of the asset or the present value of the lease payments equals or exceeds substantially all of the fair value of the asset. A lease is classified as an operating lease if it does not meet any one of these criteria. All of the Company's real estate leases for office space do not meet the definition of a finance lease. The Company's policy is to own, rather than lease, equipment.

For leases at the lease commencement date, a right-of-use asset and a lease liability are recognized. The right-of-use asset represents the right to use the leased asset for the lease term. The right-of-use asset is initially measured at cost, which primarily comprises the initial amount of the lease liability, plus any initial direct costs incurred, less any lease incentives received. The lease liability is initially measured at the present value of the lease payments under the lease. For the Company's operating leases, the lease payments are discounted using an incremental borrowing rate, which approximates the rate of interest that would be paid on a secured borrowing in an amount equal to the lease payments for the underlying asset under similar terms.

Lease payments included in the measurement of the lease liability comprise the following: the fixed noncancelable lease payments, payments for optional renewal periods where it is reasonably certain the renewal period will be exercised, and payments for early termination options unless it is reasonably certain the lease will not be terminated early. Some of the Company's real estate leases contain variable lease payments, including payments based on an index or rate. Variable lease payments based on an index or rate are initially measured using the index or rate in effect at lease commencement and based on the minimum amount stated in the lease. Lease components are included in the measurement of the initial lease liability. Additional payments based on the change in an index or rate, or payments based on a change in the Company's portion of the operating expenses, including real estate taxes and insurance, are

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recorded as a period expense when incurred. Lease modifications result in remeasurement of the right-of-use assets and the lease liability.

Lease expense for operating leases consists of the lease payments, inclusive of lease incentives, plus any initial direct costs, and is recognized on a straight-line basis over the lease term. Included in lease expense are any variable lease payments incurred in the period that were not included in the initial lease liability.

NOTE 3· Revenues

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	Three months ended March 31, 2019
(in thousands)	Retail				National Programs				Wholesale Brokerage				Services				Other				Total
Base commissions(1)	$	287,200			$	77,178			$	54,173			$	—			$	(12	)		$	418,539
Fees(2)	43,877				30,246				12,510				49,444				(288		)		135,789
Incentive commissions(3)	42,775				919				373				—				111				44,178
Profit-sharing contingent commissions(4)	11,547				860				2,915				—				—				15,322
Guaranteed supplemental commissions(5)	3,240				4				391				—				—				3,635
Investment income(6)	—				316				40				48				677				1,081
Other income, net(7)	592				37				107				—				—				736
Total Revenues	$	389,231			$	109,560			$	70,509			$	49,492			$	488			$	619,280

(1)

Base commissions generally represent a percentage of the premium paid by an insured and are affected by fluctuations in both premium rate levels charged by insurance companies and the insureds’ underlying “insurable exposure units,” which are units that insurance companies use to measure or express insurance exposed to risk (such as property values, or sales and payroll levels) to determine what premium to charge the insured. Insurance companies establish these premium rates based upon many factors, including loss experience, risk profile and reinsurance rates paid by such insurance companies, none of which the Company controls.

(2)	Fee revenues relate to fees for services other than securing coverage for the Company's customers and fees negotiated in lieu of commissions.

(3)	Incentive commissions include additional commissions over base commissions received from insurance carriers based on predetermined production levels mutually agreed upon by both parties.

(4)	Profit-sharing contingent commissions are based primarily on underwriting results, but may also reflect considerations for volume, growth and/or retention.

(5)	Guaranteed supplemental commissions represent guaranteed fixed-base agreements in lieu of profit-sharing contingent commissions.

(6)	Investment income consists primarily of interest on cash and investments.

(7)	Other income consists primarily of legal settlements and other miscellaneous income.

Contract Assets and Liabilities

The balances of contract assets and contract liabilities arising from contracts with customers as of March 31, 2019 and December 31, 2018 were as follows:

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(in thousands)	March 31, 2019				December 31, 2018
Contract assets	$	311,137			$	265,994
Contract liabilities	$	57,283			$	53,496

Unbilled receivables (contract assets) arise when the Company recognizes revenue for amounts which have not yet been billed in the Company's systems and are reflected in premiums, commissions and fee receivable in the Company's Condensed Consolidated Balance Sheet. Deferred revenue (contract liabilities) relates to payments received in advance of performance under the contract before the transfer of a good or service to the customer. Deferred revenue is reflected within accrued expenses and other liabilities for those to be recognized in less than 12 months and in other liabilities for those to be recognized more than twelve months from the date presented in the Company's Condensed Consolidated Balance Sheet.

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As of March 31, 2019, deferred revenue consisted of $39.6 million as current portion to be recognized within one year and $17.7 million in long term to be recognized beyond one year. As of December 31, 2018, deferred revenue consisted of $37.0 million as current portion to be recognized within one year and $16.5 million in long-term deferred revenue to be recognized beyond one year.

During the three months ended March 31, 2019, the amount of revenue recognized related to performance obligations satisfied in a previous period, inclusive of changes due to estimates, was not significant.

Other Assets and Deferred Cost

Incremental cost to obtain - The Company defers certain costs to obtain customer contracts primarily as they relate to commission-based compensation plans in the Retail Segment, in which the Company pays an incremental amount of compensation on new business. These incremental costs are deferred and amortized over a 15-year period. The cost to obtain balance within the other assets caption in the Company's Condensed Consolidated Balance Sheet was $16.3 million and $13.2 million as of March 31, 2019 and December 31, 2018, respectively. For the three months ended March 31, 2019, the Company deferred $3.4 million of incremental cost to obtain customer contracts. The Company expensed $0.3 million of the incremental cost to obtain customer contracts for the three months ended March 31, 2019.

NOTE 4· Net Income Per Share

NOTE 5· Business Combinations

During the three months ended March 31, 2019, Brown & Brown acquired the assets and assumed certain liabilities of seven insurance intermediaries and all of the stock of one insurance intermediary. Additionally, miscellaneous adjustments were recorded to the purchase price allocation of certain prior acquisitions completed within the last 12 months as permitted by Accounting Standards Codification Topic 805 — Business Combinations (“ASC 805”). Such adjustments are presented in the “Other” category within the following two tables. The recorded purchase price for all acquisitions includes an estimation of the fair value of liabilities associated with any potential earn-out provisions. Subsequent changes in the fair value of earn-out obligations will be recorded in the Condensed Consolidated Statements of Income when incurred.

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The fair value of earn-out obligations is based on the present value of the expected future payments to be made to the sellers of the acquired businesses in accordance with the provisions outlined in the respective purchase agreements. In determining fair value, the acquired business’s future performance is estimated using financial projections developed by management for the acquired business and reflects market participant assumptions regarding revenue growth and/or profitability. The expected future payments are estimated on the basis of the earn-out formula and performance targets specified in each purchase agreement compared to the associated financial projections. These payments are then discounted to present value using a risk-adjusted rate that takes into consideration the likelihood that the forecasted earn-out payments will be made.

Based on the acquisition date and the complexity of the underlying valuation work, certain amounts included in the Company’s Condensed Consolidated Financial Statements may be provisional and thus subject to further adjustments within the permitted measurement period, as defined in ASC 805. For the three months ended March 31, 2019, adjustments were made within the permitted measurement period that resulted in a decrease in the aggregate purchase price of the affected acquisitions of $6.8 million relating to the assumption of certain liabilities. These measurement period adjustments have been reflected as current period adjustments in the three months ended March 31, 2019 in accordance with the guidance in ASU 2015-16 “Business Combinations.” The measurement period adjustments primarily impacted goodwill, with no effect on earnings or cash in the current period.

Cash paid for acquisitions was $98.3 million in the three-month period ended March 31, 2019. The Company completed eight acquisitions (excluding book of business purchases) in the three-month period ended March 31, 2019. The Company completed two acquisitions (excluding book of business purchases) in the three-month period ended March 31, 2018.

The following table summarizes the purchase price allocations made as of the date of each acquisition for current year acquisitions and adjustments made during the measurement period for prior year acquisitions. During the measurement periods, the Company will adjust assets or liabilities if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of those assets and liabilities as of that date. These adjustments are made in the period in which the amounts are determined and the current period income effect of such adjustments will be calculated as if the adjustments had been completed as of the acquisition date.

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(in thousands)
Name	Business segment		Effective date of acquisition		Cash paid				Other payable				Recorded earn-out payable				Net assets acquired				Maximum potential earn- out payable
Smith Insurance Associates, Inc. (Smith)	Retail		February 1, 2019		$	20,129			$	—			$	2,704			$	22,833			$	4,550
Donald P. Pipino Company, LTD (Pipino)	Retail		February 1, 2019		16,420				135				9,821				26,376				12,996
Cossio Insurance Agency (Cossio)	Retail		March 1, 2019		13,990				10				1,710				15,710				2,000
Medval LLC (Medval)	Services		March 1, 2019		29,106				—				1,684				30,790				2,500
Other	Various		Various		18,654				463				2,236				21,353				5,475
Total					$	98,299			$	608			$	18,155			$	117,062			$	27,521

The following table summarizes the estimated fair values of the aggregate assets and liabilities acquired as of the date of each acquisition and adjustments made during the measurement period of the prior year acquisitions.

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(in thousands)		Smith				Pipino				Cossio				Medval				Other				Total
Cash		$	—			$	—			$	—			$	3,218			$	—			$	3,218
Other current assets		588				194				—				1,708				(6,835		)		(4,345		)
Fixed assets		40				114				29				50				$	(121	)		$	112
Goodwill		16,031				18,146				11,336				19,008				15,911				80,432
Purchased customer accounts		6,500				11,360				4,324				7,300				6,298				35,782
Non-compete agreements		41				11				21				1				64				138
Other assets		—				—				—				14				302				316
Total assets acquired		23,200				29,825				15,710				31,299				15,619				115,653
Other current liabilities		(367		)		(3,449		)		—				(480		)		5,734				1,438
Other liabilities		—				—				—				(29		)		—				(29		)
Total liabilities assumed		(367		)		(3,449		)		—				(509		)		5,734				1,409
Net assets acquired		$	22,833			$	26,376			$	15,710			$	30,790			$	21,353			$	117,062

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The weighted average useful lives for the acquired amortizable intangible assets are as follows: purchased customer accounts, 15 years; and non-compete agreements, 5 years.

Goodwill of $80.4 million, which is net of any opening balance sheet adjustments within the allowable measurement period, was allocated to the Retail, Wholesale Brokerage and Services Segments in the amounts of $55.1 million, $6.1 million and $19.2 million, respectively. Of the total goodwill of $80.4 million, the amount currently deductible for income tax purposes is $62.2 million and the remaining $18.2 million relates to the recorded earn-out payables and will not be deductible until it is earned and paid.

For the acquisitions completed during 2019, the results of operations since the acquisition dates have been combined with those of the Company. The total revenues from the acquisitions completed through March 31, 2019, included in the Condensed Consolidated Statement of Income for the three months ended March 31, 2019, was $4.8 million. The income before income taxes, including the intercompany cost of capital charge, from the acquisitions completed through March 31, 2019, included in the Condensed Consolidated Statement of Income for the three months ended March 31, 2019, was $1.0 million. If the acquisitions had occurred as of the beginning of the respective periods, the Company’s results of operations would be as shown in the following table. These unaudited pro forma results are not necessarily indicative of the actual results of operations that would have occurred had the acquisitions actually been made at the beginning of the respective periods.

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(UNAUDITED)	Three months ended   March 31,
(in thousands, except per share data)	2019				2018
Total revenues	$	624,219			$	512,730
Income before income taxes	$	149,863			$	121,469
Net income	$	114,926			$	93,150
Net income per share:
Basic	$	0.41			$	0.34
Diluted	$	0.41			$	0.33
Weighted average number of shares outstanding:
Basic	272,679				270,172
Diluted	275,014				275,714

As of March 31, 2019 and 2018, the fair values of the estimated acquisition earn-out payables were re-evaluated and measured at fair value on a recurring basis using unobservable inputs (Level 3) as defined in ASC 820-Fair Value Measurement. The resulting additions, payments, and net changes, as well as the interest expense accretion on the estimated acquisition earn-out payables, for the three months ended March 31, 2019 and 2018, were as follows:

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	Three months ended   March 31,
(in thousands)	2019				2018
Balance as of the beginning of the period	$	89,924			$	36,175
Additions to estimated acquisition earn-out payables	18,155				4,524
Payments for estimated acquisition earn-out payables	(579		)		(2,565		)
Subtotal	107,500				38,134
Net change in earnings from estimated acquisition earn-out payables:
Change in fair value on estimated acquisition earn-out payables	50				2,062
Interest expense accretion	1,160				404
Net change in earnings from estimated acquisition earn-out payables	1,210				2,466
Balance as of March 31,	$	108,710			$	40,600

NOTE 6· Goodwill

Goodwill is subject to at least an annual assessment for impairment by applying a fair value-based test. The Company completed its most recent annual assessment as of November 30, 2018, and identified no impairment as a result of the evaluation.

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NOTE 7· Amortizable Intangible Assets

Amortizable intangible assets at March 31, 2019 and December 31, 2018 consisted of the following:

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	March 31, 2019														December 31, 2018
(in thousands)	Gross carrying value				Accumulated amortization				Net carrying value				Weighted average life (years)(1)		Gross carrying value				Accumulated amortization				Net carrying value				Weighted average life (years)(1)
Purchased customer accounts	$	1,838,732			$	(934,756	)		$	903,976			14.9		$	1,804,404			$	(909,415	)		$	894,989			14.9
Non-compete agreements	33,607				(29,945		)		3,662				4.5		33,469				(29,651		)		3,818				4.5
Total	$	1,872,339			$	(964,701	)		$	907,638					$	1,837,873			$	(939,066	)		$	898,807

(1)	Weighted average life calculated as of the date of acquisition.

NOTE 8· Long-Term Debt

Long-term debt at March 31, 2019 and December 31, 2018 consisted of the following: 

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(in thousands)	March 31, 2019				December 31, 2018
Current portion of long-term debt:
Current portion of 5-year term loan facility expires 2022	$	40,000			$	35,000
Current portion of 5-year term loan facility expires 2023	15,000				15,000
Total current portion of long-term debt	55,000				50,000
Long-term debt:
Note agreements:
4.200% senior notes, semi-annual interest payments, net of the unamortized discount, balloon due 2024	$	499,140			$	499,101
4.500% senior notes, semi-annual interest payments, net of the unamortized discount, balloon due 2029	349,443				—
Total notes	848,583				499,101
Credit agreements:
5-year term-loan facility, periodic interest and principal payments, LIBOR plus up to 1.750%, expires June 28, 2022	320,000				330,000
5-year revolving-loan facility, periodic interest payments, LIBOR plus up to 1.500%, plus commitment fees up to 0.250%, expires June 28, 2022	—				350,000
5-year term-loan facility, periodic interest and principal payments, LIBOR plus up to 1.750%, expires December 21, 2023	281,250				285,000
Total credit agreements	601,250				965,000
Debt issuance costs (contra)	(9,835		)		(7,111		)
Total long-term debt less unamortized discount and debt issuance costs	1,439,998				1,456,990
Current portion of long-term debt	55,000				50,000
Total debt	$	1,494,998			$	1,506,990

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On June 28, 2017, the Company entered into an amended and restated credit agreement (the “Amended and Restated Credit Agreement”) with the lenders named therein, JPMorgan Chase Bank, N.A. as administrative agent and certain other banks as co-syndication agents and co-documentation agents. The Amended and Restated Credit Agreement amended and restated the credit agreement dated April 17, 2014, among such parties (the “Original Credit Agreement”). The Amended and Restated Credit Agreement extends the applicable maturity date of the existing revolving credit facility (the “Revolving Credit Facility”) of $800.0 million to June 28, 2022 and re-evidences unsecured term loans at $400.0 million while also extending the applicable maturity date to June 28, 2022. The quarterly term loan principal amortization schedule was reset. At the time of the execution of the Amended and Restated Credit Agreement, $67.5 million of principal from the original unsecured term loans was repaid using operating cash balances, and the Company added an additional $2.8 million in debt issuance costs related to the Revolving Credit Facility to the Condensed Consolidated Balance Sheet. The Company also expensed to the Condensed Consolidated Statements of Income $0.2 million of debt issuance costs related to the Original Credit Agreement due to certain lenders exiting prior to execution of the Amended and Restated Credit Agreement. The Company also carried forward $1.6 million on the Condensed Consolidated Balance Sheet the remaining unamortized portion of the Original Credit Agreement debt issuance costs, which will be amortized over the term of the Amended and Restated Credit Agreement. On March 31, 2019, the Company made a scheduled principal payment of $5.0 million per the terms of the Amended and Restated Credit Agreement. As of March 31, 2019, there was an outstanding debt balance issued under the term loan of the Amended and Restated Credit Agreement of $360.0 million with no borrowings outstanding against the Revolving Credit Facility. As of December 31, 2018, there was an outstanding debt balance issued under the term loan of the Amended and Restated Credit Agreement of $365.0 million with $350.0 million in borrowings outstanding against the Revolving Credit Facility. The Company had borrowed approximately $600.0 million under its Revolving Credit Facility on November 15, 2018 in connection with the closing of the acquisition of certain assets and assumption of certain liabilities of the Hays Companies. Per the terms of the Amended and Restated Credit Agreement, a scheduled principal payment of $10.0 million was due March 31, 2019.

On September 18, 2014, the Company issued $500.0 million of 4.200% unsecured Senior Notes due in 2024. The Senior Notes were given investment grade ratings of BBB-/Baa3 with a stable outlook. The notes are subject to certain covenant restrictions and regulations which are customary for credit rated obligations. At the time of funding, the proceeds were offered at a discount of the original note amount which also excluded an underwriting fee discount. The net proceeds received from the issuance were used to repay the outstanding balance of $475.0 million on the Revolving Credit Facility and for other general corporate purposes. As of March 31, 2019 and December 31, 2018, there was an outstanding debt balance of $500.0 million exclusive of the associated discount balance.

On December 21, 2018, the Company entered into a term loan credit agreement (the “Term Loan Credit Agreement”) with the lenders named therein, Wells Fargo Bank, National Association, as administrative agent, and certain other banks as co-syndication agents and as joint lead arrangers and joint bookrunners. The Term Loan Credit Agreement provides for an unsecured term loan in the initial amount of $300.0 million, which may, subject to lenders’ discretion, potentially be increased up to an aggregate amount of $450.0 million (the “Term Loan”). The Term Loan is repayable over the five-year term from the effective date of the Term Loan Credit Agreement, which was December 21, 2018. Based on the Company’s net debt leverage ratio or a non-credit enhanced senior unsecured long-term debt rating as determined by Moody’s Investor Service and Standard & Poor’s Rating Service, the rates of interest charged on the term loan are 1.00% to 1.75%, above the adjusted 1-Month LIBOR rate. On December 21, 2018, the Company borrowed $300.0 million under the Term Loan Credit Agreement and used $250.0 million of the proceeds to reduce indebtedness under the Company’s Amended and Restated Credit Agreement, dated June 28, 2017, with the lenders named therein, JPMorgan Chase Bank, N.A., as administrative agent, and certain other banks as co-syndication agents and co-documentation agents (the “Revolving Credit Facility”). As of March 31, 2019, there was an outstanding debt balance issued under the Term Loan of $296.3 million. As of December 31, 2018, there was an outstanding debt balance issued under the Term Loan of $300.0 million. Per the terms of the Term Loan Credit Agreement, a scheduled principal payment of $3.8 million is due June 30, 2019.

On March 11, 2019, the Company completed the issuance of $350.0 million aggregate principal amount of the Company's 4.500% Senior Notes due 2029. The Senior Notes were given investment grade ratings of BBB-/Baa3 with a stable outlook. The notes are subject to certain covenant restrictions, which are customary for credit rated obligations. At the time of funding, the proceeds were offered at a discount of the original note amount, which also excluded an underwriting fee discount. The net proceeds received from the issuance were used to repay a portion of the outstanding balance of $350.0 million on the Revolving Credit Facility, utilized in connection with financing related to the Hays Companies acquisition and for other general corporate purposes. As of March 31, 2019, there was an outstanding debt balance of $350.0 million exclusive of the associated discount balance.

The Amended and Restated Credit Agreement and Term Loan Credit Agreement require the Company to maintain certain financial ratios and comply with certain other covenants. The Company was in compliance with all such covenants as of March 31, 2019 and December 31, 2018.

NOTE 9· Leases

Substantially all of the Company's operating lease right-of-use assets and operating lease liabilities represent real estate leases for office space used to conduct the Company's business.

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The balances and classification of operating lease right-of-use assets and operating lease liabilities within the Condensed Consolidated Balance Sheet is as follows (in thousands):

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(in thousands)		March 31, 2019
Balance Sheet
Assets:
Operating lease right-of-use assets	Operating lease assets	$	174,580
Total Assets		174,580
Liabilities:
Current operating lease liabilities	Accrued expenses and other liabilities	39,015
Non-current operating lease liabilities	Operating lease liabilities	159,823
Total Liabilities		$	198,838

The components of lease cost for operating leases for the three months ended March 31, 2019 were (in thousands):

Operating leases:
Lease cost	$	12,088
Variable lease cost	713
Operating lease expense	$	12,801

The weighted average remaining lease term and the weighted average discount rate for operating leases as of March 31, 2019 were:

Weighted-average remaining lease term	5.73
Weighted-average discount rate	3.81

Maturities of the operating lease liabilities by fiscal year at March 31, 2019 for the Company's operating leases are as follows (in thousands):

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	Operating Leases
2019 (Remainder)	$	33,577
2020	44,573
2021	36,998
2022	29,940
2023	23,184
Thereafter	55,084
Total undiscounted lease payments	223,356
Less: Imputed interest	24,518
Present value of lease payments	$	198,838

At December 31, 2018, the aggregate future minimum lease payments under all non-cancelable lease agreements were as follows:

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	December 31, 2018
2019	$	48,292
2020	43,517
2021	34,836
2022	27,035
2023	19,981
Thereafter	36,349
Total minimum future lease payments	$	210,010

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Supplemental cash flow information for operating leases (in thousands):

NOTE 10· Supplemental Disclosures of Cash Flow Information and Non-Cash Financing and Investing Activities

Brown & Brown's cash paid during the period for interest and income taxes are summarized as follows: 

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	Three months ended   March 31,
(in thousands)	2019				2018
Cash paid during the period for:
Interest	$	20,127			$	14,472
Income taxes	$	3,120			$	3,179

Brown & Brown’s significant non-cash investing and financing activities are summarized as follows:

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	Three months ended   March 31,
(in thousands)	2019				2018
Other payable issued for purchased customer accounts	$	608