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Revenue: $1.4 billion, an increase of 11.6% year-over-year.
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Organic Revenue Growth: 6.5% compared to the same period in the prior year.
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Adjusted EBITDAC Margin: Improved over 100 basis points to 38.1%.
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Adjusted Earnings Per Share: Grew over 13% to $1.29.
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Acquisitions: Completed 13 acquisitions with estimated annual revenues of $36 million.
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Retail Segment Organic Growth: 4.1%.
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Programs Segment Organic Growth: 13.6%.
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Wholesale Brokerage Organic Growth: 6.7%.
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Income Before Income Taxes: Increased by 17.4%.
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Effective Tax Rate: Increased to 21.8% from 19.5% in the prior year.
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Diluted Net Income Per Share: Increased 13.2% to $1.29.
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Dividends Paid Per Share: Increased by 15.4% compared to the first quarter of 2024.
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Cash Flow from Operations: Approximately $215 million, an increase of $200 million over the first quarter of 2024.
Release Date: April 29, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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Brown & Brown Inc (NYSE:BRO) reported strong financial performance with a revenue increase of 11.6% to $1.4 billion and organic growth of 6.5% compared to the previous year.
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The company's adjusted EBITDAC margin improved by over 100 basis points to 38.1%, and adjusted earnings per share grew by over 13% to $1.29.
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Brown & Brown Inc (NYSE:BRO) completed 13 acquisitions with estimated annual revenues of $36 million, showcasing robust M&A activity.
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The Programs segment delivered impressive organic growth of 13.6%, driven by new business, retention, and exposure unit expansion.
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The company generated approximately $215 million of cash flow from operations, a significant increase from the previous year, indicating strong cash management.
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Uncertainty related to tariffs, inflation, and interest rates is causing some business leaders to be more cautious, potentially impacting future economic expansion.
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The CAT property market experienced rate declines of 10% to 25%, which could impact revenue from this segment.
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The effective tax rate increased to 21.8% from 19.5% in the previous year, driven by less benefit from vesting of restricted stock awards.
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The Retail segment's organic growth was lower than other segments at 4.1%, partly due to shifting renewal dates and timing of nonrecurring business.
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There is ongoing pressure from rising medical and pharmacy costs, with pharmacy costs growing faster than medical, impacting the employee benefits consulting business.
Q: Andy, can you provide specific numbers on the Quintes impact on the retail margin and the timing shift on organic growth in Retail for the first quarter? A: R. Andrew Watts, CFO: About 60% of Quintes' revenues came in the first quarter, which naturally results in higher margins. This will serve as a drag in the out quarters for retail, but on a full-year basis, it should align with our original expectations. The first quarter for Retail was about 1% below the other quarters, as anticipated, and we remain confident in the out quarters for the year.
Q: What do you anticipate for earned premium in the captives this year? A: R. Andrew Watts, CFO: We expect it to be slightly up over last year. We've been writing up to a specific amount of premium to cap the risk profile, and we've reached that in the first quarter. We don't anticipate much incremental organic growth in the following quarters in the captives, barring any significant changes in CAT property pricing.
Q: Is there a downward impact on Programs' organic growth due to CAT property pricing being down? A: R. Andrew Watts, CFO: The downward trend is not solely due to CAT property. Our lender-placed business has been performing well, and while CAT property grew during the quarter, it wasn't at the same levels as previous years. The hurricane season's impact on claims revenue will also affect organic growth in the fourth quarter.
Q: How did employee benefits impact Retail organic growth this quarter, and what is the seasonality effect? A: J. Powell Brown, CEO: Employee benefits are front-loaded in terms of revenue recognition, particularly in the first quarter. We were pleased with Retail's organic growth, considering some shifting and nonrecurring revenue, and we expect it to be higher later in the year.
Q: Can you update us on the impact of economic growth versus rate increases on your business? A: J. Powell Brown, CEO: Historically, our business is 2/3 to 3/4 exposure unit and the remaining rate. Recently, rate increases have had a higher impact, particularly in CAT property. We expect it to return closer to the historical 2/3, 1/3 ratio. Business leaders have a more moderated view of the economy, but we feel good about Retail and overall business performance.
Q: What is the outlook for the flood business given the changing dynamics in Washington, D.C.? A: J. Powell Brown, CEO: The flood program is critical for homeowners, and while long-term reauthorization is unlikely soon, we believe the government supports the program. We write about 1/3 of all right-run flood premiums in the U.S., and we feel confident about its continuation.
Q: Is the cost of risk going down in Florida, and how does it impact pricing compared to the national economy? A: J. Powell Brown, CEO: While CAT property rates are decreasing, overall risk costs are rising due to increased construction costs and uninsured motorists. Florida's growth is expected to continue due to people moving from high-tax states, despite rising home and land prices.
Q: Are standard insurers returning to the CAT property market, bypassing wholesale brokerage? A: J. Powell Brown, CEO: Generally, no. Standard markets are not re-entering at higher rates. Some grandfathered standard market business exists, but we're not seeing a significant return to the market.
Q: What is the outlook for the MGA business given carrier demand and rate reductions in E&S property? A: J. Powell Brown, CEO: Carriers are interested in MGAs for large premium chunks and quality underwriting. We don't expect decreased interest in MGAs. Rate pressures will vary by program, but we feel confident about our diversified MGA, MGU business.
Q: How did Q1 margins compare to expectations, and what is the full-year margin outlook? A: J. Powell Brown, CEO: Q1 margins met expectations, and we anticipate higher expenses in Q2, 3, and 4 due to Quintes. We are pleased with our margins and maintain our full-year outlook as previously communicated.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
