• Fourth Quarter Revenue: $1.4 billion, 15% total growth, 14% organic growth over Q4 2023.
• Adjusted EBITDAC Margin: Improved by 200 basis points to 33%.
• Adjusted Earnings Per Share: Grew 24.5% to $0.86.
• Full Year 2024 Revenue: $4.8 billion, 13% total growth, over 10% organic growth.
• Full Year Adjusted EBITDAC Margin: Over 35%, increased by more than 100 basis points.
• Full Year Diluted Net Income Per Share: Grew over 18% to $3.84.
• Cash from Operations: Nearly $1.2 billion generated.
• M&A Activity: 10 acquisitions with estimated annual revenues of $137 million in Q4; $174 million for the full year.
• Retail Segment Organic Growth: 4.4% in Q4; 5.8% for the full year.
• Programs Segment Organic Growth: 38.6% in Q4; 22.4% for the full year.
• Wholesale Brokerage Organic Growth: 7.1% in Q4; 9.1% for the full year.
• Fourth Quarter Income Before Income Taxes: Increased by 27.2%.
• Fourth Quarter EBITDAC Growth: 22.6% increase.
• Fourth Quarter Effective Tax Rate: 24.7%.
• Dividends Paid Per Share: Increased by 15.4% compared to Q4 2023.
• Cash Flow from Operations: $1.174 billion for the full year, 16.2% growth over prior year.

• Warning! GuruFocus has detected 8 Warning Sign with BRO.

Release Date: January 28, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Brown & Brown Inc (NYSE:BRO) reported a strong fourth quarter with revenues of $1.4 billion, growing 15% in total and 14% organically over Q4 of 2023.
• The company achieved a significant improvement in its adjusted EBITDAC margin, which increased by almost 200 basis points to 33%.
• For the full year of 2024, Brown & Brown Inc (NYSE:BRO) delivered revenues of $4.8 billion, growing 13% in total and over 10% organically.
• The company completed 10 acquisitions in the fourth quarter with estimated annual revenues of $137 million, enhancing its market position.
• Brown & Brown Inc (NYSE:BRO) generated nearly $1.2 billion of cash from operations, demonstrating strong cash flow management.

Negative Points

• The company anticipates contingent commissions for the full year of 2025 to be down slightly compared to 2024, which could impact profitability.
• There is ongoing downward pressure on CAT property rates, with rates decreasing by 10% to 20%, which may affect revenue from this segment.
• The retail segment's organic growth was partially impacted by the timing of new business and certain nonrecurring revenue, affecting quarterly performance.
• Brown & Brown Inc (NYSE:BRO) faces fierce competition in the M&A market, with increased activity from financial sponsors for smaller and midsized deals.
• The company expects adjusted EBITDAC margins for 2025 to be relatively flat, indicating potential challenges in achieving margin expansion.

Q & A Highlights

Q: Can you provide some perspective on the drivers of net new business and the outlook for 2025, especially in California? A: J. Powell Brown, President and CEO, explained that in 2024, Brown & Brown wrote more new business than ever across all divisions. The company anticipates continuing this trend due to its capabilities and investments. Regarding California, the situation is complex, with potential impacts on the fair plan and the number of carriers in the state. There might be a significant expansion in the E&S market, influenced by demand surge and the need for quality contractors.

Q: What is the current run rate for the retail segment, and how did nonrecurring items impact organic growth this quarter? A: R. Andrew Watts, CFO, noted that the retail segment's organic growth was impacted by 40 to 60 basis points due to timing issues, which will balance out over the coming quarters. The company feels positive about the momentum heading into 2025.

Q: Can you discuss the sustainability of organic growth in the programs segment and the outlook for contingent commissions? A: J. Powell Brown stated that while there is rate pressure in some areas, the programs business remains strong due to successful results for carrier partners. R. Andrew Watts added that there might be downward pressure on contingents in 2025 due to adjustments and potential impacts from California losses.

Q: Could you expand on the M&A environment and Brown & Brown's appetite for larger acquisitions? A: J. Powell Brown emphasized the importance of cultural fit and financial sense in acquisitions. The company is prepared to make significant investments if the right opportunity arises, having maintained a conservative financial position to enable such moves.

Q: How does the decelerating property pricing affect customer shopping and property account migration to wholesale markets? A: J. Powell Brown explained that despite downward pressure on rates, the market remains highly competitive, with property owners seeking savings after years of premium increases. The company continues to face competition and earn customer trust in this environment.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.