BROWN & BROWN, INC. [BRO] Filings

10-Q 1 bro-20240630.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-13619

BROWN & BROWN, INC.

(Exact name of Registrant as specified in its charter)


Florida				59-0864469
(State or other jurisdiction of incorporation or organization)				(I.R.S. Employer Identification Number)
300 North Beach Street, Daytona Beach, FL				32114
(Address of principal executive offices)				(Zip Code)

Registrant’s telephone number, including area code: (386) 252-9601

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.10 Par Value	BRO	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the Registrant’s common stock, $0.10 par value, outstanding as of July 19, 2024 was 285,260,996.

BROWN & BROWN, INC.

INDEX





		PAGE NO.
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited):
	Condensed Consolidated Statements of Income for the three and six months ended June 30, 2024 and 2023	5
	Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2024 and 2023	6
	Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023	7
	Condensed Consolidated Statements of Equity for the three and six months ended June 30, 2024 and 2023	8
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023	9
	Notes to Condensed Consolidated Financial Statements	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4.	Controls and Procedures	40

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 5.	Other Information	41
Item 6.	Exhibits	42
SIGNATURE		43

Disclosure Regarding Forward-Looking Statements

Brown & Brown, Inc., together with its subsidiaries (collectively, “we,” “Brown & Brown” or the “Company”), makes “forward-looking statements” within the “safe harbor” provision of the Private Securities Litigation Reform Act of 1995, as amended, throughout this report and in the documents we incorporate by reference into this report. You can identify these statements by forward-looking words such as “may,” “will,” “should,” “expect,” “anticipate,” “believe,” “intend,” “estimate,” “plan” and “continue” or similar words. We have based these statements on our current expectations about potential future events. Although we believe the expectations expressed in the forward-looking statements included in this Quarterly Report on Form 10-Q and the reports, statements, information and announcements incorporated by reference into this report are based upon reasonable assumptions within the bounds of our knowledge of our business, a number of factors could cause actual results to differ materially from those expressed in any forward-looking statements, whether oral or written, made by us or on our behalf. Many of these factors have previously been identified in filings or statements made by us or on our behalf. Important factors which could cause our actual results to differ, possibly materially from the forward-looking statements in this report include but are not limited to the following items, in addition to those matters described in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”:

•

The inability to hire, retain and develop qualified employees, as well as the loss of any of our executive officers or other key employees;

•

A cybersecurity attack or any other interruption in information technology and/or data security that may impact our operations or the operations of third parties that support us;

•

Acquisition-related risks that could negatively affect the success of our growth strategy, including the possibility that we may not be able to successfully identify suitable acquisition candidates, complete acquisitions, successfully integrate acquired businesses into our operations and expand into new markets;

•

Risks related to our international operations, which may result in additional risks or require more management time and expense than our domestic operations to achieve or maintain profitability;

•

The requirement for additional resources and time to adequately respond to dynamics resulting from rapid technological change;

•

The loss of or significant change to any of our insurance company relationships, which could result in loss of capacity to write business, additional expense, loss of market share or material decrease in our commissions;

•

The effect of natural disasters on our profit-sharing contingent commissions, insurer capacity or claims expenses within our capitalized captive insurance facilities;

•

Adverse economic conditions, political conditions, outbreaks of war, disasters, or regulatory changes in states or countries where we have a concentration of our business;

•

The inability to maintain our culture or a significant change in management, management philosophy or our business strategy;

•

Fluctuations in our commission revenue as a result of factors outside of our control;

•

The effects of sustained inflation or higher interest rates;

•

Claims expense resulting from the limited underwriting risk associated with our participation in capitalized captive insurance facilities;

•

Risks associated with our automobile and recreational vehicle dealer services (“F&I”) businesses;

•

Changes in, or the termination of, certain programs administered by the U.S. federal government from which we derive revenues;

•

The limitations of our system of disclosure and internal controls and procedures in preventing errors or fraud, or in informing management of all material information in a timely manner;

•

The significant control certain shareholders have over the Company;

•

Changes in data privacy and protection laws and regulations or any failure to comply with such laws and regulations;

•

Improper disclosure of confidential information;

•

Our ability to comply with non-U.S. laws, regulations and policies;

•

The potential adverse effect of certain actual or potential claims, regulatory actions or proceedings on our businesses, results of operations, financial condition or liquidity;

•

Uncertainty in our business practices and compensation arrangements with insurance carriers due to potential changes in regulations;

•

Regulatory changes that could reduce our profitability or growth by increasing compliance costs, technology compliance, restricting the products or services we may sell, the markets we may enter, the methods by which we may sell our products and services, or the prices we may charge for our services and the form of compensation we may accept from our customers, carriers and third parties;

•

Increasing scrutiny and changing laws and expectations from regulators, investors and customers with respect to our environmental, social and governance practices and disclosure;

•

A decrease in demand for liability insurance as a result of tort reform legislation;

•

Our failure to comply with any covenants contained in our debt agreements;

•

The possibility that covenants in our debt agreements could prevent us from engaging in certain potentially beneficial activities;

•

Changes in the U.S.-based credit markets that might adversely affect our business, results of operations and financial condition;

•

Changes in current U.S. or global economic conditions, including an extended slowdown in the markets in which we operate;

•

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;

•

Conditions that result in reduced insurer capacity;

•

Quarterly and annual variations in our commissions that result from the timing of policy renewals and the net effect of new and lost business production;

•

Intangible asset risk, including the possibility that our goodwill may become impaired in the future;

•

Future pandemics, epidemics or outbreaks of infectious diseases, and the resulting governmental and societal responses;

•

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

•

Other factors that the Company may not have currently identified or quantified.

Assumptions as to any of the foregoing, and all statements, are not based upon historical fact, but rather reflect our current expectations concerning future results and events. Forward-looking statements that we make or that are made by others on our behalf are based upon a knowledge of our business and the environment in which we operate, but because of the factors listed above, among others, actual results may differ from those in the forward-looking statements. Consequently, these cautionary statements qualify all of the forward-looking statements we make herein. We cannot assure you that the results or developments anticipated by us will be realized, or even if substantially realized, that those results or developments will result in the expected consequences for us or affect us, our business or our operations in the way we expect. We caution readers not to place undue reliance on these forward-looking statements. All forward-looking statements made herein are made only as of the date of this filing, and the Company does not undertake any obligation to publicly update or correct any forward-looking statements to reflect events or circumstances that subsequently occur or of which the Company hereafter becomes aware.

PART I — FINANCIAL INFORMATION

ITEM 1 — Financial Statements (Unaudited)

BROWN & BROWN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)


	Three months ended June 30,					Six months ended June 30,
(in millions, except per share data)	2024			2023		2024			2023
REVENUES
Commissions and fees	$	1,154		$	1,036	$	2,390		$	2,144
Investment income		22			10		40			17
Other income, net		2			1		5			2
Total revenues		1,178			1,047		2,435			2,163
EXPENSES
Employee compensation and benefits		585			530		1,216			1,101
Other operating expenses		173			162		334			322
Gain on disposal		(31	)		—		(29	)		(6	)
Amortization		44			41		86			83
Depreciation		11			10		21			20
Interest		49			48		97			95
Change in estimated acquisition earn-out payables		1			2		(2	)		—
Total expenses		832			793		1,723			1,615
Income before income taxes		346			254		712			548
Income taxes		87			64		159			122
Net income before non-controlling interests		259			190		553			426
Less: Net income attributable to non-controlling interests		2			—		3			—
Net income attributable to the Company	$	257		$	190	$	550		$	426
Net income per share:
Basic	$	0.90		$	0.67	$	1.93		$	1.50
Diluted	$	0.90		$	0.67	$	1.92		$	1.50

See accompanying Notes to Condensed Consolidated Financial Statements.

BROWN & BROWN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)


	Three months ended June 30,				Six months ended June 30,
(in millions)	2024		2023		2024			2023
Net income attributable to the Company	$	257	$	190	$	550		$	426
Foreign currency translation gain/(loss)		4		51		(28	)		98
Comprehensive income attributable to the Company	$	261	$	241	$	522		$	524

See accompanying Notes to Condensed Consolidated Financial Statements.

BROWN & BROWN, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


(in millions, except per share data)	June 30, 2024			December 31, 2023
ASSETS
Current Assets:
Cash and cash equivalents	$	1,107		$	700
Fiduciary cash		1,867			1,603
Short-term investments		9			11
Commission, fees and other receivables		930			790
Fiduciary receivables		1,275			1,125
Reinsurance recoverable		100			125
Prepaid reinsurance premiums		483			462
Other current assets		318			314
Total current assets		6,089			5,130
Fixed assets, net		290			270
Operating lease assets		192			199
Goodwill		7,431			7,341
Amortizable intangible assets, net		1,565			1,621
Investments		22			21
Other assets		355			301
Total assets	$	15,944		$	14,883
LIABILITIES AND EQUITY
Current Liabilities:
Fiduciary liabilities	$	3,142		$	2,727
Losses and loss adjustment reserve		108			131
Unearned premiums		603			462
Accounts payable		313			459
Accrued expenses and other liabilities		500			608
Current portion of long-term debt		725			569
Total current liabilities		5,391			4,956
Long-term debt less unamortized discount and debt issuance costs		3,391			3,227
Operating lease liabilities		180			179
Deferred income taxes, net		614			616
Other liabilities		331			326
Equity:
Common stock, par value $0.10 per share; authorized 560 shares; issued 305 shares and outstanding 285 shares at 2024, issued 304 shares and outstanding 285 shares at 2023, respectively		30			30
Additional paid-in capital		1,027			1,027
Treasury stock, at cost 20 shares at 2024 and 2023		(748	)		(748	)
Accumulated other comprehensive loss		(47	)		(19	)
Non-controlling interests		11			—
Retained earnings		5,764			5,289
Total equity		6,037			5,579
Total liabilities and equity	$	15,944		$	14,883

See accompanying Notes to Condensed Consolidated Financial Statements.

BROWN & BROWN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)


	Common Stock
(in millions, except per share data)	Shares Outstanding			Par Value		Additional Paid-In Capital			Treasury Stock			Accumulated Other Comprehensive Loss			Retained Earnings			Non-Controlling Interest		Total
Balance at December 31, 2023		285		$	30	$	1,027		$	(748	)	$	(19	)	$	5,289		$	—	$	5,579
Net income																293					293
Foreign currency translation													(32	)							(32	)
Shares issued - employee stock compensation plans:
Employee stock purchase plan							4														4
Stock incentive plans		1					25														25
Net non-controlling interest acquired (disposed)							1												9		10
Repurchase shares to fund tax withholdings for non-cash stock-based compensation		(1	)				(54	)													(54	)
Cash dividends paid ($0.1300 per share)																(38	)				(38	)
Balance at March 31, 2024		285		$	30	$	1,003		$	(748	)	$	(51	)	$	5,544		$	9	$	5,787
Net income																257			2		259
Foreign currency translation													4								4
Shares issued - employee stock compensation plans:
Employee stock purchase plan							3														3
Stock incentive plans							20														20
Directors							1														1
Cash dividends paid ($0.1300 per share)																(37	)				(37	)
Balance at June 30, 2024		285		$	30	$	1,027		$	(748	)	$	(47	)	$	5,764		$	11	$	6,037

Balance at December 31, 2022		283		$	30	$	920		$	(748	)	$	(148	)	$	4,553		$	—	$	4,607
Net income																236					236
Foreign currency translation													47								47
Shares issued - employee stock compensation plans:
Employee stock purchase plan							3														3
Stock incentive plans		1					21														21
Repurchase shares to fund tax withholdings for non-cash stock-based compensation							(36	)													(36	)
Cash dividends paid ($0.1150 per share)																(33	)				(33	)
Balance at March 31, 2023		284		$	30	$	908		$	(748	)	$	(101	)	$	4,756		$	—	$	4,845
Net income																190					190
Foreign currency translation													51								51
Shares issued - employee stock compensation plans:
Employee stock purchase plan							2														2
Stock incentive plans							19														19
Directors							1														1
Repurchase shares to fund tax withholdings for non-cash stock-based compensation							(3	)													(3	)
Cash dividends paid ($0.1150 per share)																(32	)				(32	)
Balance at June 30, 2023		284		$	30	$	927		$	(748	)	$	(50	)	$	4,914		$	—	$	5,073

See accompanying Notes to Condensed Consolidated Financial Statements.

BROWN & BROWN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Six months ended June 30,
(in millions)	2024			2023
Cash flows from operating activities:
Net income before non-controlling interests	$	553		$	426
Adjustments to reconcile net income before non-controlling interests to net cash provided by operating activities:
Amortization		86			83
Depreciation		21			20
Non-cash stock-based compensation		52			45
Change in estimated acquisition earn-out payables		(2	)		—
Deferred income taxes		(3	)		2
Amortization of debt discount		2			2
Net gain on sales/disposals of investments, fixed assets and customer accounts		(29	)		(5	)
Payments on acquisition earn-outs in excess of original estimated payables		(31	)		(18	)
Changes in operating assets and liabilities, net of effect from acquisitions and divestitures:
Commissions, fees and other receivables (increase) decrease		(140	)		(103	)
Reinsurance recoverable (increase) decrease		26			644
Prepaid reinsurance premiums (increase) decrease		(21	)		(58	)
Other assets (increase) decrease		(80	)		(56	)
Losses and loss adjustment reserve increase (decrease)		(23	)		(642	)
Unearned premiums increase (decrease)		140			75
Accounts payable increase (decrease)		(54	)		101
Accrued expenses and other liabilities increase (decrease)		(109	)		(100	)
Other liabilities increase (decrease)		(15	)		(28	)
Net cash provided by operating activities		373			388
Cash flows from investing activities:
Additions to fixed assets		(39	)		(25	)
Payments for businesses acquired, net of cash acquired		(98	)		(115	)
Proceeds from sales of businesses, fixed assets and customer accounts		58			6
Purchases of investments		(2	)		(6	)
Proceeds from sales of investments		4			6
Net cash used in investing activities		(77	)		(134	)
Cash flows from financing activities:
Fiduciary receivables and liabilities, net		248			224
Payments on acquisition earn-outs		(65	)		(46	)
Proceeds from long-term debt		599			—
Payments on long-term debt		(175	)		(229	)
Borrowings on revolving credit facility		150			170
Payments on revolving credit facility		(250	)		(70	)
Repurchase shares to fund tax withholdings for non-cash stock-based compensation		(54	)		(39	)
Cash dividends paid		(75	)		(65	)
Other financing activities		(3	)		1
Net cash provided by/(used in) financing activities		375			(54	)
Effect of foreign exchange rate changes on cash and cash equivalents inclusive of fiduciary cash		—			30
Net increase in cash and cash equivalents inclusive of fiduciary cash		671			230
Cash and cash equivalents inclusive of fiduciary cash at beginning of period		2,303			2,033
Cash and cash equivalents inclusive of fiduciary cash at end of period	$	2,974		$	2,263

See accompanying Notes to Condensed Consolidated Financial Statements. Refer to Note 10 for the reconciliations of cash and cash equivalents inclusive of fiduciary cash.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 Nature of Operations

Brown & Brown, Inc., a Florida corporation, and its subsidiaries (collectively, “Brown & Brown” or the “Company”) is a diversified insurance agency, wholesale brokerage, insurance programs and service organization that markets and sells insurance products and services, primarily in the property, casualty and employee benefits areas. Brown & Brown’s business is divided into three reportable segments. The Retail segment provides a broad range of insurance products and services to commercial, public and quasi-public entities, professional and individual insured customers, and non-insurance risk-mitigating products through our automobile and recreational vehicle dealer services (“F&I”) businesses. The Programs segment, which acts as a managing general underwriter (“MGU”), provides professional liability and related package products for certain professionals, a range of insurance products for individuals, flood coverage, and targeted products and services designated for specific industries, trade groups, governmental entities and market niches, all of which are delivered through a nationwide network of independent agents, including Brown & Brown retail agents. The Wholesale Brokerage segment markets and sells excess and surplus commercial and personal lines insurance, primarily through independent agents and brokers, as well as Brown & Brown retail agents.

The Company primarily operates as an agent or broker not assuming underwriting risks. However, we operate a write-your-own flood insurance carrier, Wright National Flood Insurance Company (“WNFIC”). WNFIC’s underwriting business consists of policies written pursuant to the National Flood Insurance Program (“NFIP”), the program administered by the Federal Emergency Management Agency (“FEMA”) to which premiums and underwriting exposure are ceded, and excess flood policies which are fully reinsured in the private market. The Company also operates two capitalized captive insurance facilities (the "Captives") for the purpose of facilitating additional underwriting capacity, generating incremental revenues and participating in underwriting results.

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, 2023.

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.

Business Realignment

In conjunction with the divestiture of certain businesses within the Company’s former Services segment in the fourth quarter of 2023, the Company aligned its business from four to three segments beginning in fiscal year 2024. As a result of the segment reorganization, the Services segment was eliminated as a business segment. The Company now reports its financial results in the following three reportable segments: Retail, Programs and Wholesale Brokerage. The historical results, discussion and presentation of our business segments as set forth in the accompanying Condensed Consolidated Financial Statements and these Notes reflect the impact of these changes for all periods presented in order to present segment information on a comparable basis. The results of the businesses sold in the fourth quarter of 2023 are presented within the Programs segment. There is no impact on our previously reported consolidated statements of income, balance sheets, statements of cash flows, statements of comprehensive income or statements of equity resulting from these changes. See Note 12 of these Notes to Condensed Consolidated Financial Statements for further information.

Pursuant to the sale of certain third-party claims administration and adjusting services businesses in the fourth quarter of 2023, the Company is entitled to future consideration payments upon achievement of certain conditions in accordance with the terms of the sale agreement. During the second quarter of 2024, the conditions associated with one of the contingent payments were achieved which resulted in the Company recognizing a gain of $29 million within the Programs segment.

Recently Issued Accounting Pronouncements

On November 27, 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, "Improvements to Reportable Segment Disclosures." This ASU requires additional reportable segment disclosures, primarily through enhanced disclosures about significant segment expenses. In addition, the ASU enhances interim disclosure requirements effectively making the current annual requirements a requirement for interim reporting. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating these new disclosure requirements.

On December 14, 2023, the FASB issued ASU 2023-09, "Improvements to Income Tax Disclosures." This ASU improves the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction. This ASU is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating these new disclosure requirements.

Recently Adopted Accounting Standards

None

NOTE 3 Revenues

The following tables present the revenues disaggregated by revenue source:


	Three months ended June 30, 2024
(in millions)	Retail		Programs		Wholesale Brokerage		Other (8)		Total
Base commissions (1)	$	449	$	243	$	129	$	—	$	821
Fees (2)		156		61		24		(