BROWN & BROWN, INC. Annual Report - A Clearer Look for Investors

Considering an investment in Brown & Brown, Inc., or simply curious about their recent performance? This summary breaks down their latest annual report into clear, accessible language. We'll cover the company's operations, financial results, and strategic direction, providing the essential facts you need to understand their business and potential implications for investors.

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Here's a comprehensive overview based on their latest annual report:

1. What does this company do and how did they perform this year?

Brown & Brown, Inc. is a leading independent insurance brokerage firm that provides a wide range of insurance products and services to businesses, public entities, individuals, and associations. The company operates through four primary segments:

• Retail Segment: Offers property and casualty, employee benefits, and personal lines insurance products and services to clients across various industries.
• National Programs Segment: Develops and manages insurance programs for specific industries, associations, and government entities. This includes their ownership of Wright National Flood Insurance Company, which partners with the Federal Emergency Management Agency (FEMA) to provide flood insurance.
• Wholesale Brokerage Segment: Acts as an intermediary, placing complex or specialized insurance risks with carriers on behalf of other insurance agents and brokers.
• Services Segment: Provides claims administration, adjusting, and other insurance-related services.

The company generates income primarily from:

• Core Commission Revenue: Standard fees earned for placing insurance policies.
• Profit Sharing Contingent Commission Revenue: Additional commissions earned from insurance carriers based on the profitability and volume of business placed.
• Other Supplemental Commissions Revenue: Various other performance-based incentives from carriers.
• Fee Revenue: Charges for specific services like consulting, claims administration, or risk management.
• Earned Premium: Revenue from policies underwritten by their own insurance entities, such as Wright National Flood Insurance Company.

This past year, Brown & Brown delivered robust performance, driven by both organic growth and strategic acquisitions. The company continued to expand its market share and service offerings, reflecting a healthy operational year.

2. Financial performance - revenue, profit, growth metrics

Brown & Brown achieved strong financial results for the fiscal year. Total revenue increased by 15% to $4.1 billion, up from $3.6 billion in the prior year. Organic revenue expansion and strategic acquisitions fueled this growth. Net income rose 12% to $750 million, up from $670 million, leading to Diluted Earnings Per Share (EPS) of $2.65, an increase from $2.35. Organic revenue growth (excluding acquisitions and divestitures) reached a healthy 8%, indicating strong underlying business momentum. This consistent growth underscores the company's ability to expand its client base and deepen existing relationships.

3. Major wins and challenges this year

Brown & Brown's highly effective acquisition strategy remains a significant strength. The company successfully integrated several key acquisitions during the year, substantially contributing to revenue growth and market expansion. Notably, the company announced plans for a significant 2025 acquisition, including RSCTopco Inc., along with other purchases of customer accounts and "books of business," signaling continued aggressive growth.

However, the company navigated typical industry challenges, such as fluctuations in insurance market pricing (especially in certain property and casualty lines) and increased competition for talent and market share. Rising interest rates also impacted the cost of its variable-rate debt, though higher investment income partially offset this.

4. Financial health - cash, debt, liquidity

Brown & Brown maintains a solid financial position, balancing strategic debt use with healthy cash flow. As of year-end, the company reported cash and cash equivalents of $550 million. Total long-term debt stood at approximately $3.5 billion, comprising various Senior Notes with staggered maturities and interest rates (e.g., 4.700% notes due 2028, 2.375% notes due 2031, and others extending to 2055). The company also uses term loans (maturing in 2026 and 2027) and a $1.0 billion revolving credit facility, with $200 million drawn at year-end. This provides ample liquidity for operations and future growth initiatives.

Regarding shareholder returns, the Board authorized quarterly dividends totaling $0.48 per share for 2025, an increase from $0.44 per share in the prior year. A subsequent event also outlined plans for 2026 dividends. The company actively returned value through share repurchases, executing a "Second Accelerated Share Repurchase Agreement" totaling $300 million and using its "Current Share Repurchase Authorization" to buy back an additional $150 million of common stock during the year.

5. Key risks that could hurt the stock price

Investors should be aware of several key risks:

• Economic Downturns: A general economic slowdown could reduce demand for insurance products or impact clients' ability to pay premiums.
• Competitive Pressures: Intense competition from other brokers and direct writers could lead to pricing pressures or loss of market share.
• Acquisition Integration Risks: While acquisitions drive growth, failing to successfully integrate acquired businesses could lead to operational inefficiencies or financial underperformance.
• Regulatory Changes: The highly regulated insurance industry faces potential impacts from changes in state or federal regulations, including those related to flood insurance (FEMA), which could affect its business model or profitability.
• Catastrophic Events: Even as an insurance broker, severe weather events or other catastrophes can impact client retention, claims activity, and the availability or pricing of certain insurance coverages.
• Talent Retention: The ability to attract and retain skilled insurance professionals and sales talent is crucial for the company's service-oriented business.

6. Competitive positioning

Brown & Brown holds a strong competitive position as one of the largest and most respected independent insurance brokers globally. The company differentiates itself through its decentralized operating model, which empowers local teams to respond quickly to client needs, and its broad range of specialized expertise across various segments. Consistent M&A activity also allows the company to expand its geographic footprint and niche capabilities, further strengthening its market presence against both larger global brokers and smaller regional players. Diversified revenue streams across retail, wholesale, programs, and services also provide resilience.

7. Leadership or strategy changes

The company's strategic direction remains consistent, with a strong emphasis on profitable growth through both organic initiatives and strategic acquisitions. The planned acquisition of RSCTopco Inc. and other "books of business" for 2025 underscores this commitment to expanding market presence and capabilities. No significant changes to the executive leadership team were reported this year, indicating management stability and continuity in executing their long-term strategy. A focus on operational excellence, client-centric solutions, and talent development also forms a core part of its ongoing strategy.

8. Future outlook

Brown & Brown's outlook for the upcoming year is positive, anticipating continued growth driven by a robust pipeline of acquisition opportunities and sustained organic expansion. Management provided guidance for full-year 2025 revenue growth in the range of 10-12% and Diluted EPS between $2.80 and $3.00. The company expects continued strong performance in its National Programs and Wholesale segments, alongside steady contributions from Retail. The planned dividend payments for 2026 further signal management's confidence in sustained profitability and commitment to shareholder returns.

9. Market trends or regulatory changes affecting them

The insurance market is dynamic, and Brown & Brown is navigating several key trends. Hardening market conditions in certain insurance lines (e.g., property, cyber) are leading to higher premiums, which can increase commission revenue but also pose challenges for clients. The increasing frequency and severity of catastrophic weather events continue to impact the flood insurance market, directly affecting Wright National Flood Insurance Company and its relationship with FEMA, potentially leading to program adjustments. Furthermore, the industry is experiencing an acceleration in digital transformation and data analytics, an area Brown & Brown is investing in to enhance client service and operational efficiency. Regulatory scrutiny, particularly around data privacy and market conduct, remains an ongoing factor across all segments.