BROWN & BROWN, INC. 10-Q

ITEM 2 — Management’s Discussion and Analysis o f Financial Condition and Results of Operations The following discussion updates the Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and the two discussions should be read together. GENERAL Company Overview — Third Quarter of 2024 The following discussion should be read in conjunction with our Condensed Consolidated Financial Statements and the related Notes to those Financial Statements included elsewhere in this Quarterly Report on Form 10-Q. In addition, please see “Information Regarding Non-GAAP Financial Measures” below concerning important information on non-GAAP financial measures contained in our discussion and analysis. Effective for fiscal year 2024, in conjunction with the divestiture of certain businesses within our Services segment in the fourth quarter of 2023, we aligned our business from four to three segments, and we now report our financial results in the following three reportable segments: Retail, Programs (formerly National Programs) and Wholesale Brokerage. See Note 12 of the Notes to Condensed Consolidated Financial Statements for further information. We are a diversified insurance agency, wholesale brokerage and insurance programs organization headquartered in Daytona Beach, Florida. As an insurance intermediary, our principal sources of revenue are commissions paid by insurance companies and, to a lesser extent, fees paid directly by customers. Commission revenues 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, sales or 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 we control. We also operate capitalized captive insurance facilities (the "Captives") for the purpose of having additional capacity to place coverage, drive additional revenues and to participate in underwriting results. The Captives focus on property insurance for earthquake and wind exposed properties underwritten by certain of our MGUs and limit the Company's exposure to claims expenses through reinsurance or by only participating in certain tranches of the underwriting. The volume of business from new and existing customers, fluctuations in insurable exposure units, changes in premium rate levels, changes in general economic and competitive conditions, a reduction of purchased limits, or the occurrence of catastrophic weather events all affect our revenues. For example, higher levels of inflation, an increase the value of insurable exposure units or a general decline in economic activity, could decrease the value or amount of insurable exposure units. Conversely, increasing costs of litigation settlements and/or awards could cause some customers to seek higher levels of insurance coverage. Historically, we have grown our revenues as a result of our focus on new business, customer retention and acquisitions. We foster a strong, decentralized sales and service culture, which enables responsiveness to changing business conditions and drives accountability for results. The term “core commissions and fees” excludes profit-sharing contingent commissions, and therefore represents the revenues earned directly from specific insurance policies sold, and specific fee-based services rendered. The net change in core commissions and fees reflects the aggregate changes attributable to: (i) net new and lost accounts; (ii) net changes in our customers’ exposure units, deductibles or insured limits; (iii) net changes in insurance premium rates or the commission rate paid to us by our carrier partners; (iv) the net change in fees paid to us by our customers and (v) any businesses acquired or disposed of. We also earn profit-sharing contingent commissions, which are commissions based primarily on underwriting results, but in select situations may reflect additional considerations for volume, growth and/or retention. These commissions, which are included in our commissions and fees in the Consolidated Statements of Income, are estimated and accrued throughout the year based on actual premiums written and knowledge, to the extent it is available, of losses incurred. Payments are primarily received in the first and second quarters of each subsequent year, based upon the aforementioned considerations for the prior year(s), but may differ from the amount estimated and accrued due to the lack of complete visibility regarding loss information until they are received. Over the last three years, profit-sharing contingent commissions have averaged approximately 3.3% of commissions and fees revenue. Fee revenues primarily relate to services other than securing coverage for our customers, and for fees negotiated in lieu of commissions. Fee revenues are generated by: (i) our Programs and Wholesale Brokerage segments, which earn fees primarily for the issuance of insurance policies on behalf of insurance carriers and (ii) our Retail segment in our large-account customer base, where we primarily earn fees for securing insurance for our customers, in our automobile dealer services (“F&I”) businesses where we earn fees for assisting our customers with creating and selling warranty and service risk management programs and fees for Medicare Set-aside services, Social Security disability services and Medicare benefits advocacy services. Fee revenues as a percentage of our total commissions and fees, were 23.9% in 2023 and 25.8% in 2022. For the three months ended September 30, 2024, our total commissions and fees growth rate was 10.1%, and our consolidated Organic Revenue growth rate was 9.5%. 24 Historically, investment income has consisted primarily of interest earnings on operating cash and where permitted, on premiums collected and held in a fiduciary capacity before being remitted to insurance companies. Our policy as it relates to the Company’s capital is to invest available funds in high-quality, short-term money-market funds and fixed income investment securities. Investment income also includes gains and losses realized from the sale of investments. Other income primarily reflects other miscellaneous revenues. Income before income taxes for the three months ended September 30, 2024 increased from the third quarter of 2023 by $75 million or 31.0%, driven by Organic Revenue growth, leveraging our expense base, net new business, increased investment income, acquisitions completed in the past twelve months and the change in estimated acquisition earn-out payables. Information Regarding Non-GAAP Financial Measures In the discussion and analysis of our results of operations, in addition to reporting financial results in accordance with generally accepted accounting principles (“GAAP”), we provide references to the following non-GAAP financial measures as defined in Regulation G of the SEC rules: Organic Revenue, EBITDAC, EBITDAC Margin, EBITDAC - Adjusted and EBITDAC Margin - Adjusted. We present these measures because we believe such information is of interest to the investment community and because we believe it provides additional meaningful methods to evaluate the Company’s operating performance from period to period on a basis that may not be otherwise apparent on a GAAP basis due to the impact of certain items that have a high degree of variability, that we believe are not indicative of ongoing performance and that are not easily comparable from period to period. This non-GAAP financial information should be considered in addition to, not in lieu of, the Company’s consolidated income statements and balance sheets as of the relevant date. Consistent with Regulation G, a description of such information is provided below and tabular reconciliations of this supplemental non-GAAP financial information to our most comparable GAAP information are contained in this Quarterly Report on Form 10-Q under “Results of Operations - Segment Information.” We view Organic Revenue and Organic Revenue growth as important indicators when assessing and evaluating our performance on a consolidated basis and for each of our three segments, because they allow us to determine a comparable, but non-GAAP, measurement of revenue growth that is associated with the revenue sources that were a part of our business in both the current and prior year and that are expected to continue in the future. We also view EBITDAC, EBITDAC - Adjusted, EBITDAC Margin and EBITDAC Margin - Adjusted as important indicators when assessing and evaluating our performance, as they present more comparable measurements of our operating margins in a meaningful and consistent manner. As disclosed in our most recent proxy statement, we use Organic Revenue growth, and EBITDAC Margin - Adjusted as key performance metrics for our short-term and long-term incentive compensation plans for executive officers and other key employees. Beginning January 1, 2024, we no longer exclude Foreign Currency Translation from the calculation of EBITDAC - Adjusted and EBITDAC Margin - Adjusted. Prior periods are presented on the same basis so that the calculations of EBITDAC - Adjusted and EBITDAC Margin - Adjusted are comparable for both periods. We no longer exclude Foreign Currency Translation from the calculation of these earnings measures because fluctuations in Foreign Currency Translation affect both our revenues and expenses, largely offsetting each other. Therefore, excluding Foreign Currency Translation from these earnings measures provides no meaningful incremental value in evaluating our financial performance. Non-GAAP Revenue Measures • Organic Revenue is our core commissions and fees less: (i) the core commissions and fees earned for the first twelve months by newly acquired operations; (ii) divested business (core commissions and fees generated from offices, books of business or niches sold or terminated during the comparable period) and (iii) Foreign Currency Translation (as defined below). The term “core commissions and fees” excludes profit-sharing contingent commissions and therefore represents the revenues earned directly from specific insurance policies sold and specific fee-based services rendered. Organic Revenue can be expressed as a dollar amount or a percentage rate when describing Organic Revenue growth. Non-GAAP Earnings Measures • EBITDAC is defined as income before interest, income taxes, depreciation, amortization and the change in estimated acquisition earn-out payables. • EBITDAC Margin is defined as EBITDAC divided by total revenues. • EBITDAC - Adjusted is defined as EBITDAC, excluding (i) (gain)/loss on disposal, (ii) for 2022 and 2023, Acquisition/Integration Costs (as defined below) and (iii) for 2023, the 1Q23 Nonrecurring Cost (as defined below). • EBITDAC Margin - Adjusted is defined as EBITDAC - Adjusted divided by total revenues. Definitions Related to Certain Components of Non-GAAP Measures • “Acquisition/Integration Costs” means the acquisition and integration costs (e.g., costs associated with regulatory filings, legal/accounting services, due diligence and the costs of integrating our information technology systems) arising out of our 25 acquisitions of GRP (Jersey) Holdco Limited and its business, Orchid Underwriters Agency and CrossCover Insurance Services, and BdB Limited companies, which are not considered to be normal, recurring or part of the ongoing operations. • “Foreign Currency Translation” means the period-over period impact of foreign currency translation, which is calculated by applying current-year foreign exchange rates to the various functional currencies in our business to our reporting currency of U.S. dollars for the same period in the prior year. • “1Q23 Nonrecurring Cost” means approximately $11.0 million expensed and substantially paid in the first quarter of 2023 to resolve a business matter, which is not considered to be normal, recurring or part of the ongoing operations. • “(Gain)/loss on disposal” a caption on our consolidated statements of income which reflects net proceeds received as compared to net book value related to sales of books of business and other divestiture transactions, such as the disposal of a business through sale or closure. Our industry peers may provide similar supplemental non-GAAP information with respect to one or more of these measures, although they may not use the same or comparable terminology and may not make identical adjustments and, therefore comparability may be limited. This supplemental non-GAAP financial information should be considered in addition to, and not in lieu of, the Company ' s Condensed Consolidated Financial Statements. Acquisitions Part of our business strategy is to attract high-quality insurance intermediaries and service organizations to join our operations. From 1993 through the third quarter of 2024, we acquired 664 insurance intermediary operations. Critical Accounting Policies We have had no changes to our Critical Accounting Policies as described in our most recent Form 10-K for the year ended December 31, 2023. We believe that of our significant accounting and reporting policies, the more critical policies include our accounting for revenue recognition, business combinations and purchase price allocations, intangible asset impairments, non-cash stock-based compensation and reserves for litigation. In particular, the accounting for these areas is subject to uncertainty because it requires significant use of judgment to be made by management. Different assumptions in the application of these policies could result in material changes in our consolidated financial position or consolidated results of operations. Refer to Note 1 in the “Notes to Consolidated Financial Statements” in our Annual Report on Form 10-K for the year ended December 31, 2023 for details regarding our critical and significant accounting policies. 26 RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 The following discussion and analysis regarding results of operations and liquidity and capital resources should be considered in conjunction with the accompanying Condensed Consolidated Financial Statements and related Notes. Financial information relating to our condensed consolidated financial results is as follows: Three months ended September 30, Nine months ended September 30, (in millions, except percentages) 2024 2023 % Change 2024 2023 % Change REVENUES Core commissions and fees $ 1,128 $ 1,022 10.4 % $ 3,435 $ 3,105 10.6 % Profit-sharing contingent commissions 27 27 — % 110 88 25.0 % Investment income 31 17 82.4 % 71 34 108.8 % Other income, net — 2 (100.0 )% 6 4 50.0 % Total revenues 1,186 1,068 11.0 % 3,622 3,231 12.1 % EXPENSES Employee compensation and benefits 607 532 14.1 % 1,823 1,633 11.6 % Other operating expenses 165 168 (1.8 )% 499 490 1.8 % Gain on disposal (1 ) (3 ) (66.7 )% (30 ) (9 ) NMF Amortization 45 41 9.8 % 131 123 6.5 % Depreciation 11 10 10.0 % 33 30 10.0 % Interest 50 48 4.2 % 147 143 2.8 % Change in estimated acquisition earn-out payables (8 ) 30 (126.7 )% (9 ) 30 (130.0 )% Total expenses 869 826 5.2 % 2,594 2,440 6.3 % Income before income taxes 317 242 31.0 % 1,028 791 30.0 % Income taxes 78 66 18.2 % 237 189 25.4 % Net income before non-controlling interests 239 176 35.8 % 791 602 Less: Net income attributable to non-controlling interests 5 — 8 — Net income attributable to the Company $ 234 $ 176 33.0 % $ 783 $ 602 30.1 % Income Before Income Taxes Margin (1) 26.7 % 22.7 % 28.4 % 24.5 % EBITDAC - Adjusted (2) $ 414 $ 370 11.9 % $ 1,300 $ 1,127 15.4 % EBITDAC Margin - Adjusted (2) 34.9 % 34.6 % 35.9 % 34.9 % Organic Revenue growth rate (2) 9.5 % 9.6 % 9.4 % 11.0 % Employee compensation and benefits relative to total revenues 51.2 % 49.8 % 50.3 % 50.5 % Other operating expenses relative to total revenues 13.9 % 15.7 % 13.8 % 15.2 % Capital expenditures $ 23 $ 14 64.3 % $ 62 $ 38 63.2 % Total assets at September 30, $ 17,525 $ 13,983 25.3 % (1) "Income Before Income Taxes Margin" is defined as income before income taxes divided by total revenues. (2) A non-GAAP financial measure. NMF = Not a meaningful figure Commissions and Fees Commissions and fees, including profit-sharing contingent commissions and earned premiums, for the three months ended September 30, 2024 increased $106 million to $1,155 million, or 10.1%, over the same period in 2023. Core commissions and fees revenue for the third quarter of 2024 increased $106 million or 10.4%, composed of: (i) approximately $95 million of net new and renewal business, which reflects an Organic Revenue growth rate of 9.5%; (ii) $35 million from acquisitions that had no comparable revenues in the same period of 2023; (iii) an increase from the impact of Foreign Currency Translation of $2 million and (iv) an offsetting decrease of $26 million related to commissions and fees revenue from businesses or books of business divested in the preceding twelve months. Profit-sharing contingent commissions for the third quarter of 2024 were flat when compared to the same period in 2023. 27 Commissions and fees, including profit-sharing contingent commissions and earned premiums, for the nine months ended September 30, 2024, increased $352 million to $3,545 million, or 11.0%, over the same period in 2023. Core commissions and fees revenue for the nine months ended September 30, 2024 increased $330 million or 10.6%, composed of: (i) approximately $284 million of net new and renewal business, which reflects an Organic Revenue growth rate of 9.4%; (ii) $120 million from acquisitions that had no comparable revenues in the same period of 2023; (iii) an increase from the impact of Foreign Currency Translation of $7 million and (iv) an offsetting decrease of $81 million related to commissions and fees revenue from businesses or books of business divested in the preceding twelve months. Profit-sharing contingent commissions for the nine months ended September 30, 2024 increased by $22 million, or 25.0%, compared to the same period in 2023. This increase was driven primarily by (i) improved underwriting results and qualifying for certain profit-sharing contingent commissions that we did not qualify for in the prior year and (ii) recent acquisitions. Investment Income Investment income for the three months ended September 30, 2024 increased $14 million from the same period in 2023. Investment income for the nine months ended September 30, 2024 increased $37 million, from the same period in 2023. The increases were primarily driven by higher average interest rates and cash balances compared to the prior year. Other Income Other income for the three months ended September 30, 2024 decreased $2 million from the same period in 2023, and other income for the nine months ended September 30, 2024 increased by $2 million, or 50.0%, as compared to the same period in 2023. Other income consists primarily of miscellaneous income and therefore can fluctuate between comparable periods. Employee Compensation and Benefits Employee compensation and benefits expense as a percentage of total revenues was 51.2% for the three months ended September 30, 2024 as compared to 49.8% for the three months ended September 30, 2023, an increase of 14.1%, or $75 million. This increase included $20 million of compensation costs related to stand-alone acquisitions that had no comparable costs in the same period of 2023. Therefore, employee compensation and benefits expense attributable to those offices that existed in the same time periods of 2024 and 2023 increased by $55 million, or 10.6%. This underlying employee compensation and benefits expense increase was primarily related to: (i) an increase in staff costs attributable to new hires; (ii) an increase in producer compensation associated with revenue growth; (iii) an increase in non-cash stock-based compensation driven by the strong financial performance of the Company and (iv) the year-over-year increase of approximately $18 million in the value of deferred compensation liabilities driven by changes in the market prices of our deferred compensation plan, with such amount substantially offset within other operating expenses as we hold assets to fund these liabilities, partially offset by (v) employee compensation and benefits associated with businesses divested in the fourth quarter of 2023. Employee compensation and benefits expense as a percentage of total revenues was 50.3% for the nine months ended September 30, 2024 as compared to 50.5% for the nine months ended September 30, 2023, and increased 11.6%, or $190 million. This increase included $55 million of compensation costs related to stand-alone acquisitions that had no comparable costs in the same period of 2023. Therefore, employee compensation and benefits expense attributable to those offices that existed in the same time periods of 2024 and 2023 increased by $135 million, or 8.3%. This underlying employee compensation and benefits expense increase was primarily related to: (i) an increase in staff costs attributable to new hires; (ii) an increase in producer compensation associated with revenue growth; (iii) an increase in non-cash stock-based compensation driven by the strong financial performance of the Company and (iv) the year-over-year increase of approximately $19 million in the value of deferred compensation liabilities driven by changes in the market prices of our deferred compensation plan, with such amount substantially offset within other operating expenses as we hold assets to fund these liabilities, partially offset by (v) employee compensation and benefits associated with businesses divested in the fourth quarter of 2023. Other Operating Expenses Other operating expenses represented 13.9% of total revenues for the third quarter of 2024, as compared to 15.7% for the third quarter of 2023. Other operating expenses for the third quarter of 2024 decreased $3 million, or 1.8%, from the same period of 2023. This change includes: (i) the year-over-year decrease of approximately $18 million in the value of assets held to fund the associated liabilities within our deferred compensation plan, which was substantially offset within employee compensation and benefits, as noted above and (ii) other operating expenses associated with businesses divested in the fourth quarter of 2023, offset by (iii) $8 million of other operating expenses related to stand-alone acquisitions that had no comparable costs in the same period of 2023; (iv) increased information technology related costs; (v) and to a lesser extent, increased variable costs associated with revenue growth. Other operating expenses represented 13.8% of total revenues for the nine months ended September 30, 2024, as compared to 15.2% for the nine months ended September 30, 2023. Other operating expenses for the first nine months of 2024 increased $9 million, or 1.8%, from the same period of 2023. This change includes: (i) $24 million of other operating expenses related to stand-alone acquisitions that had no comparable costs in the same period of 2023; (ii) increased information technology related costs; (iii) and to a lesser extent, increased variable costs associated with revenue growth, offset by (iv) the 1Q23 Nonrecurring Cost (v) other operating expenses associated with businesses divested in the fourth quarter of 2023 and (vi) the year-over-year decrease of approximately $19 million in the value of assets held to fund the associated liabilities within our deferred compensation plan, which was substantially offset within employee compensation and benefits, as noted above. 28 (Gain)/Loss on Disposal Gain on disposal for the third quarter of 2024 decreased $2 million from the third quarter of 2023. Gain on disposal for the nine months ended September 30, 2024 increased $21 million from the nine months ended September 30, 2023. Activity for (Gain)/Loss on disposal for the nine months ended September 30, 2024 was primarily attributable to finalization of the gain associated with selling certain third-party claims administration and adjusting services businesses in the fourth quarter of 2023. Although we do not routinely sell businesses or customer accounts, we periodically sell an office or a book of business (one or more customer accounts) that we believe does not produce reasonable margins or demonstrate a potential for adequate growth, or because doing so is in the Company’s best interest. Amortization Amortization expense for the third quarter of 2024 increased $4 million, or 9.8%, compared to the third quarter of 2023. Amortization expense for the nine months ended September 30, 2024 increased $8 million, or 6.5%, compared to the nine months ended September 30, 2023. This change reflects the amortization of new intangibles from businesses acquired within the past twelve months, net of certain intangible assets becoming fully amortized or written off in the (Gain)/Loss on disposal. Depreciation Depreciation expense for the third quarter of 2024 increased $1 million, or 10.0%, compared to the third quarter of 2023. Depreciation expense for the nine months ended September 30, 2024 increased $3 million, or 10.0%, compared to the nine months ended September 30, 2023. Changes in depreciation expense reflect net additions of fixed assets resulting from businesses acquired in the past twelve months and the addition of fixed assets resulting from business initiatives, partially offset by the impact of fixed assets that became fully depreciated or written off in the gain or loss on disposal. Interest Expense Interest expense for the third quarter of 2024 increased $2 million, or 4.2%, compared to the third quarter of 2023. Interest expense for the nine months ended September 30, 2024 increased $4 million, or 2.8%, compared to the first nine months of 2023. Change in Estimated Acquisition Earn-Out Payables Accounting Standards Codification (“ASC”) Topic 805 - Business Combinations is the authoritative guidance requiring an acquirer to recognize 100% of the fair value of acquired assets, including goodwill, and assumed liabilities (with only limited exceptions) upon initially obtaining control of an acquired entity. Additionally, the fair value of contingent consideration arrangements (such as earn-out purchase price arrangements) at the acquisition date must be included in the purchase price consideration. The recorded purchase price for acquisitions includes an estimation of the fair value of liabilities associated with any potential earn-out provisions. Subsequent changes in these earn-out obligations are required to be recorded in the Condensed Consolidated Statements of Income when incurred or reasonably estimated. Estimations of potential earn-out obligations are typically based upon future earnings of the acquired operations or entities, usually for periods ranging from one to three years. The net charge or credit to the Consolidated Statements of Income for the period is the combination of the net change in the estimated acquisition earn-out payables liability, and the accretion of the present value discount on those liabilities. As of September 30, 2024 and 2023, the fair values of the estimated acquisition earn-out payables were re-evaluated based upon projected operating results and measured at fair value on a recurring basis using unobservable inputs (Level 3) as defined in ASC 820- Fair Value Measurement . The resulting net changes, as well as the interest expense accretion on the estimated acquisition earn-out payables were as follows: Three months ended September 30, Nine months ended September 30, (in millions) 2024 2023 2024 2023 Change in fair value of estimated acquisition earn-out payables $ (9 ) $ 28 $ (15 ) $ 23 Interest expense accretion 1 2 6 7 Net change in earnings from estimated acquisition earn-out payables $ (8 ) $ 30 $ (9 ) $ 30 For the three months and nine months ended September 30, 2024, the fair value of estimated earn-out payables was re-evaluated and resulted in decreases of $9 million and $15 million, respectively, which resulted in credits to the Condensed Consolidated Statements of Income. As of September 30, 2024, estimated acquisition earn-out payables totaled $137 million, of which $73 million was recorded as accounts payable and $64 million was recorded as other non-current liabilities. 29 Income Taxes The effective tax rate on income from operations for the three months ended September 30, 2024 and 2023 was 24.6% and 27.3%, respectively. The decrease in the effective tax rate for the quarter was primarily impacted by the change in the market value of Company-owned life insurance associated with our deferred compensation plan and certain prior year nonrecurring items. The effective tax rate on income from operations for the nine months ended September 30, 2024 and 2023 was 23.1% and 23.9%, respectively. 30 RESULTS OF OPERATIONS — SEGMENT INFORMATION As discussed in Note 12 to the Condensed Consolidated Financial Statements, we operate three reportable segments: Retail, Programs and Wholesale Brokerage. On a segmented basis, changes in amortization, depreciation and interest expenses generally result from activity associated with acquisitions. Likewise, other income consists primarily of miscellaneous income and therefore can fluctuate between comparable periods. As such, management primarily focuses on the Organic Revenue growth rate and EBITDAC Margin when evaluating the operational efficiency of a segment. The reconciliation of commissions and fees included in the Condensed Consolidated Statements of Income to Organic Revenue, a non-GAAP financial measure, for the three months ended September 30, 2024 and 2023, and the growth rates for Organic Revenue for the three months ended September 30, 2024, including by segment, are as follows: 2024 Retail (1) Programs Wholesale Brokerage Total (in millions) 2024 2023 2024 2023 2024 2023 2024 2023 Commissions and fees $ 639 $ 599 $ 347 $ 301 $ 169 $ 149 $ 1,155 $ 1,049 Total change $ 40 $ 46 $ 20 $ 106 Total growth % 6.7 % 15.3 % 13.4 % 10.1 % Profit-sharing contingent commissions (8 ) (9 ) (7 ) (12 ) (12 ) (6 ) (27 ) (27 ) Core commissions and fees $ 631 $ 590 $ 340 $ 289 $ 157 $ 143 $ 1,128 $ 1,022 Acquisitions (16 ) (17 ) — (2 ) — (35 ) — Dispositions — — (26 ) — — — (26 ) Foreign Currency Translation 2 — — 2 Organic Revenue (2) $ 615 $ 592 $ 323 $ 263 $ 155 $ 143 $ 1,093 $ 998 Organic Revenue growth (2) $ 23 $ 60 $ 12 $ 95 Organic Revenue growth rate (2) 3.9 % 22.8 % 8.4 % 9.5 % (1) The Retail segment includes commissions and fees reported in the “Other” column of the Segment Information in Note 12 of this 10-Q of the Notes to the Condensed Consolidated Financial Statements, which includes corporate and consolidation items. (2) A non-GAAP financial measure. The reconciliation of commissions and fees included in the Condensed Consolidated Statements of Income to Organic Revenue, a non-GAAP financial measure, for the three months ended September 30, 2023 and 2022, including by segment, and the growth rates for Organic Revenue for the three months ended September 30, 2023, including by segment, are as follows: 2023 Retail (1) Programs Wholesale Brokerage Total (in millions) 2023 2022 2023 2022 2023 2022 2023 2022 Commissions and fees $ 599 $ 544 $ 301 $ 255 $ 149 $ 126 $ 1,049 $ 925 Total change $ 55 $ 46 $ 23 $ 124 Total growth % 10.1 % 18.0 % 18.3 % 13.4 % Profit-sharing contingent commissions (9 ) (11 ) (12 ) 6 (6 ) (3 ) (27 ) (8 ) Core commissions and fees $ 590 $ 533 $ 289 $ 261 $ 143 $ 123 $ 1,022 $ 917 Acquisition revenues (17 ) — (1 ) — (4 ) — (22 ) — Dispositions (5 ) — (5 ) — (1 ) — (11 ) Foreign Currency Translation 5 — 1 6 Organic Revenue (2) $ 573 $ 533 $ 288 $ 256 $ 139 $ 123 $ 1,000 $ 912 Organic Revenue growth (2) $ 40 $ 32 $ 16 $ 88 Organic Revenue growth rate (2) 7.5 % 12.5 % 13.0 % 9.6 % (1) The Retail segment includes commissions and fees reported in the “Other” column of the Segment Information in Note 12 of the Notes to the Condensed Consolidated Financial Statements, which includes corporate and consolidation items. (2) A non-GAAP financial measure. 31 The reconciliation of commissions and fees included in the Condensed Consolidated Statements of Income to Organic Revenue, a non-GAAP financial measure, for the nine months ended September 30, 2024 and 2023, including by segment, and the growth rates for Organic Revenue for the nine months ended September 30, 2024, including by segment, are as follows: 2024 Retail (1) Programs Wholesale Brokerage Total (in millions) 2024 2023 2024 2023 2024 2023 2024 2023 Commissions and fees $ 2,086 $ 1,919 $ 991 $ 863 $ 468 $ 411 $ 3,545 $ 3,193 Total change $ 167 $ 128 $ 57 $ 352 Total growth % 8.7 % 14.8 % 13.9 % 11.0 % Profit-sharing contingent commissions (30 ) (40 ) (58 ) (35 ) (22 ) (13 ) (110 ) (88 ) Core commissions and fees $ 2,056 $ 1,879 $ 933 $ 828 $ 446 $ 398 $ 3,435 $ 3,105 Acquisitions (55 ) — (58 ) — (7 ) — (120 ) — Dispositions — (3 ) — (79 ) — 1 — (81 ) Foreign Currency Translation — 6 — — — 1 — 7 Organic Revenue (2) $ 2,001 $ 1,882 $ 875 $ 749 $ 439 $ 400 $ 3,315 $ 3,031 Organic Revenue growth (2) $ 119 $ 126 $ 39 $ 284 Organic Revenue growth % (2) 6.3 % 16.8 % 9.8 % 9.4 % (1) The Retail segment includes commissions and fees reported in the “Other” column of the Segment Information in Note 12 of the Notes to the Condensed Consolidated Financial Statements, which includes corporate and consolidation items. (2) A non-GAAP financial measure. The reconciliation of commissions and fees included in the Condensed Consolidated Statements of Income to Organic Revenue, a non-GAAP financial measure, for the nine months ended September 30, 2023 and 2022, including by segment, and the growth rates for Organic Revenue for the nine months ended September 30, 2023, including by segment, are as follows: 2023 Retail (1) Programs Wholesale Brokerage Total (in millions) 2023 2022 2023 2022 2023 2022 2023 2022 Commissions and fees $ 1,919 $ 1,636 $ 863 $ 692 $ 411 $ 341 $ 3,193 $ 2,669 Total change $ 283 $ 171 $ 70 $ 524 Total growth % 17.3 % 24.7 % 20.5 % 19.6 % Profit-sharing contingent commissions (40 ) (38 ) (35 ) (12 ) (13 ) (9 ) (88 ) (59 ) Core commissions and fees $ 1,879 $ 1,598 $ 828 $ 680 $ 398 $ 332 $ 3,105 $ 2,610 Acquisition revenues (183 ) — (29 ) — (32 ) — (244 ) — Dispositions — (19 ) — (14 ) — (5 ) — (38 ) Foreign Currency Translation — 5 — (1 ) — 1 — 5 Organic Revenue (2) $ 1,696 $ 1,584 $ 799 $ 665 $ 366 $ 327 $ 2,861 $ 2,577 Organic Revenue growth (2) $ 112 $ 134 $ 39 $ 284 Organic Revenue growth % (2) 7.1 % 20.2 % 11.9 % 11.0 % (1) The Retail segment includes commissions and fees reported in the “Other” column of the Segment Information in Note 12 of the Notes to the Condensed Consolidated Financial Statements, which includes corporate and consolidation items. (2) A non-GAAP financial measure. 32 The reconciliation of income before income taxes, included in the Condensed Consolidated Statements of Income, to EBITDAC, a non-GAAP measure, and EBITDAC - Adjusted, a non-GAAP measure, and Income Before Income Taxes Margin to EBITDAC Margin, a non-GAAP measure, and EBITDAC Margin - Adjusted, a non-GAAP measure, for the three months ended September 30, 2024, including by segment, is as follows: (in millions) Retail Programs Wholesale Brokerage Other Total Total Revenues $ 641 $ 353 $ 171 $ 21 $ 1,186 Income before income taxes 120 154 56 (13 ) 317 Income Before Income Taxes Margin (1) 18.7 % 43.6 % 32.7 % NMF 26.7 % Amortization 29 13 3 — 45 Depreciation 6 4 1 — 11 Interest 18 7 3 22 50 Change in estimated acquisition earn-out payables (2 ) (8 ) 3 (1 ) (8 ) EBITDAC (2) 171 170 66 8 415 EBITDAC Margin (2) 26.7 % 48.2 % 38.6 % NMF 35.0 % (Gain)/loss on disposal (1 ) — — — (1 ) EBITDAC - Adjusted (2) $ 170 $ 170 $ 66 $ 8 $ 414 EBITDAC Margin - Adjusted (2) 26.5 % 48.2 % 38.6 % NMF 34.9 % (1) “Income Before Income Taxes Margin” is defined as income before income taxes divided by total revenues. (2) A non-GAAP financial measure. NMF = Not a meaningful figure The reconciliation of income before income taxes, included in the Condensed Consolidated Statements of Income, to EBITDAC, a non-GAAP measure, and EBITDAC - Adjusted, a non-GAAP measure, and Income Before Income Taxes Margin to EBITDAC Margin, a non-GAAP measure, and EBITDAC Margin - Adjusted, a non-GAAP measure, for the three months ended September 30, 2023, including by segment, is as follows: (in millions) Retail Programs Wholesale Brokerage Other Total Total Revenues $ 602 $ 305 $ 150 $ 11 $ 1,068 Income before income taxes 112 115 24 (9 ) 242 Income Before Income Taxes Margin (1) 18.6 % 37.7 % 16.0 % NMF 22.7 % Amortization 28 10 3 — 41 Depreciation 5 3 1 1 10 Interest 22 8 3 15 48 Change in estimated acquisition earn-out payables 5 — 25 — 30 EBITDAC (2) 172 136 56 7 371 EBITDAC Margin (2) 28.6 % 44.6 % 37.3 % NMF 34.7 % (Gain)/loss on disposal (3 ) — — — (3 ) Acquisition/Integration Costs 2 — — — 2 EBITDAC - Adjusted (2) $ 171 $ 136 $ 56 $ 7 $ 370 EBITDAC Margin - Adjusted (2) 28.4 % 44.6 % 37.3 % NMF 34.6 % (1) “Income Before Income Taxes Margin” is defined as income before income taxes divided by total revenues. (2) A non-GAAP financial measure. NMF = Not a meaningful figure The reconciliation of income before income taxes, included in the Condensed Consolidated Statements of Income, to EBITDAC, a non-GAAP measure, and EBITDAC - Adjusted, a non-GAAP measure, and Income Before Income Taxes Margin to EBITDAC Margin, a non-GAAP measure, and EBITDAC Margin - Adjusted, a non-GAAP measure, for the nine months ended September 30, 2024, including by segment, is as follows: 33 (in millions) Retail Programs Wholesale Brokerage Other Total Total Revenues $ 2,093 $ 1,010 $ 472 $ 47 $ 3,622 Income before income taxes 488 439 145 (44 ) 1,028 Income Before Income Taxes Margin (1) 23.3 % 43.5 % 30.7 % NMF 28.4 % Amortization 86 36 9 — 131 Depreciation 15 11 3 4 33 Interest 56 23 9 59 147 Change in estimated acquisition earn-out payables (2 ) (7 ) — — (9 ) EBITDAC (2) 643 502 166 19 1,330 EBITDAC Margin (2) 30.7 % 49.7 % 35.2 % NMF 36.7 % (Gain)/loss on disposal (2 ) (28 ) — — (30 ) EBITDAC - Adjusted (2) $ 641 $ 474 $ 166 $ 19 $ 1,300 EBITDAC Margin - Adjusted (2) 30.6 % 46.9 % 35.2 % NMF 35.9 % (1) “Income Before Income Taxes Margin” is defined as income before income taxes divided by total revenues. (2) A non-GAAP financial measure. NMF = Not a meaningful figure The reconciliation of income before income taxes, included in the Condensed Consolidated Statements of Income, to EBITDAC, a non-GAAP measure, and EBITDAC - Adjusted, a non-GAAP measure, and Income Before Income Taxes Margin to EBITDAC Margin, a non-GAAP measure, and EBITDAC Margin - Adjusted, a non-GAAP measure, for the nine months ended September 30, 2023, including by segment, is as follows: (in millions) Retail Programs Wholesale Brokerage Other Total Total Revenues $ 1,926 $ 870 $ 412 $ 23 $ 3,231 Income before income taxes 432 314 93 (48 ) 791 Income Before Income Taxes Margin (1) 22.4 % 36.1 % 22.6 % NMF 24.5 % Amortization 84 32 9 (2 ) 123 Depreciation 15 9 3 3 30 Interest 66 27 9 41 143 Change in estimated acquisition earn-out payables 4 — 23 3 30 EBITDAC (2) 601 382 137 (3 ) 1,117 EBITDAC Margin (2) 31.2 % 43.9 % 33.3 % NMF 34.6 % (Gain)/loss on disposal (3 ) (6 ) — — (9 ) Acquisition/Integration Costs 8 — — — 8 1Q23 Nonrecurring Cost — — — 11 11 EBITDAC - Adjusted (2) $ 606 $ 376 $ 137 $ 8 $ 1,127 EBITDAC Margin - Adjusted (2) 31.5 % 43.2 % 33.3 % NMF 34.9 % (1) “Income Before Income Taxes Margin” is defined as income before income taxes divided by total revenues. (2) A non-GAAP financial measure. NMF = Not a meaningful figure Retail Segment The Retail segment provides a broad range of insurance products and services to commercial, public and quasi-public, professional and individual insured customers, and non-insurance risk-mitigating products through our F&I businesses. Approximately 78% of the Retail segment’s commissions and fees revenue is commission based. 34 Financial information relating to our Retail segment is as follows: Three months ended September 30, Nine months ended September 30, (in millions, except percentages) 2024 2023 % Change 2024 2023 % Change REVENUES Core commissions and fees $ 631 $ 591 6.8 % $ 2,057 $ 1,882 9.3 % Profit-sharing contingent commissions 8 9 (11.1 %) 30 40 (25.0 %) Investment income 2 — NMF 3 — NMF Other income, net — 2 (100.0 %) 3 4 (25.0 )% Total revenues 641 602 6.5 % 2,093 1,926 8.7 % EXPENSES Employee compensation and benefits 364 331 10.0 % 1,118 1,017 9.9 % Other operating expenses 107 102 4.9 % 334 311 7.4 % (Gain)/loss on disposal (1 ) (3 ) (66.7 %) (2 ) (3 ) (33.3 %) Amortization 29 28 3.6 % 86 84 2.4 % Depreciation 6 5 20.0 % 15 15 (— %) Interest 18 22 (18.2 %) 56 66 (15.2 %) Change in estimated acquisition earn-out payables (2 ) 5 (140.0 %) (2 ) 4 (150.0 %) Total expenses 521 490 6.3 % 1,605 1,494 7.4 % Income before income taxes $ 120 $ 112 7.1 % $ 488 $ 432 13.0 % Income Before Income Taxes Margin (1) 18.7 % 18.6 % 23.3 % 22.4 % EBITDAC - Adjusted (2) $ 170 $ 171 (0.6 %) $ 641 $ 606 5.8 % EBITDAC Margin - Adjusted (2) 26.5 % 28.4 % 30.6 % 31.5 % Organic Revenue growth rate (2) 3.9 % 7.5 % 6.3 % 7.1 % Employee compensation and benefits relative to total revenues 56.8 % 55.0 % 53.4 % 52.8 % Other operating expenses relative to total revenues 16.7 % 16.9 % 16.0 % 16.1 % Capital expenditures $ 16 $ 9 77.8 % $ 44 $ 23 91.3 % Total assets at September 30, $ 8,617 $ 8,101 6.4 % (1) "Income Before Income Taxes Margin" is defined as income before income taxes divided by total revenues. (2) A non-GAAP financial measure. NMF = Not a meaningful figure The Retail segment’s total revenues for the three months ended September 30, 2024 increased 6.5%, or $39 million, as compared to the same period in 2023, to $641 million. The $40 million increase in core commissions and fees revenue was driven by: (i) approximately $16 million related to the core commissions and fees revenue from acquisitions that had no comparable revenues in the same period of 2023; (ii) an increase of $23 million related to net new and renewal business; and (iii) an increase from the impact of Foreign Currency Translation of $2 million. Profit-sharing contingent commissions for the third quarter of 2024 decreased 11.1%, or $1 million, as compared to the same period in 2023, to $8 million. This decrease was primarily the result of not qualifying for certain profit-sharing contingent commissions in 2024, due to higher loss ratios experienced by our insurance carrier partners. The Retail segment’s total commissions and fees increased by 6.5%, and the Organic Revenue growth rate was 3.9% for the third quarter of 2024. The Organic Revenue growth rate was driven by net new business written during the preceding twelve months and growth on renewals of existing customers. Renewal business was impacted by timing of certain nonrecurring revenue adjustments to incentive commissions and moderating rates and exposure unit growth. Income before income taxes for the three months ended September 30, 2024 increased 7.1%, or $8 million, as compared to the same period in 2023, to $120 million. The primary factors driving this increase were: (i) a decrease in intercompany interest expense; (ii) a decrease in estimated acquisition earn-out payables, and (iii) the profit associated with the net increase in revenue as described above. EBITDAC - Adjusted for the three months ended September 30, 2024 decreased 0.6%, or $1 million, as compared to the same period in 2023, to $170 million. EBITDAC Margin - Adjusted for the three months ended September 30, 2024 decreased to 26.5% from 28.4% in the same period in 2023. The change in EBITDAC Margin - Adjusted was primarily driven by: (i) a decrease in profit-sharing contingent commissions, (ii) higher non-cash stock-based compensation (iii) the timing of certain nonrecurring revenue and adjustments to incentive commissions, (iv) higher compensation due to investments in employees which was partially offset by (v) the net increase in revenue as described above and (vi) leveraging our expense base. 35 The Retail segment’s total revenues for the nine months ended September 30, 2024 increased 8.7%, or $167 million, as compared to the same period in 2023, to $2,093 million. The $175 million increase in core commissions and fees revenue was driven by: (i) approximately $55 million related to the core commissions and fees revenue from acquisitions that had no comparable revenues in the same period of 2023; (ii) an increase of $119 million related to net new and renewal business and (iii) an offsetting decrease of $3 million related to commissions and fees recorded in 2023 from businesses since divested. Profit-sharing contingent commissions for the nine months of 2024 decreased 25.0%, or $10 million, as compared to the same period in 2023, to $30 million. This decrease was primarily the result of not qualifying for certain profit-sharing contingent commissions in 2024, due to higher loss ratios experienced by our insurance carrier partners. The Retail segment’s total commissions and fees increased by 8.6%, and the Organic Revenue growth rate was 6.3% for the first nine months of 2024. The Organic Revenue growth rate was driven by net new business written during the preceding twelve months and growth on renewals of existing customers. Renewal business was impacted by moderating rates and growth of exposure units. Income before income taxes for the nine months ended September 30, 2024 increased 13.0%, or $56 million, as compared to the same period in 2023, to $488 million. The primary factors driving this increase were: (i) a decrease in intercompany interest expense; (ii) a decrease in estimated acquisition earn-out payables, and (iii) the profit associated with the net increase in revenue as described above. EBITDAC - Adjusted for the nine months ended September 30, 2024 increased 5.8%, or $35 million, as compared to the same period in 2023, to $641 million. EBITDAC Margin - Adjusted for the nine months ended September 30, 2024 decreased to 30.6% from 31.5% in the same period in 2023. The decrease in EBITDAC Margin - Adjusted was primarily driven by: (i) a decrease in profit-sharing contingent commissions and, (ii) higher non-cash stock-based compensation and (iii) higher compensation due to investments in employees, which was partially offset by, (iv) the net increase in revenue as described above and (v) leveraging our expense base. Programs Segment The Programs segment manages over 60 programs supported by over 100 well-capitalized carrier partners. In most cases, the insurance carriers that support these programs have delegated underwriting and, in many instances, claims-handling authority to our programs' operations. These programs are generally distributed through a nationwide network of independent agents and Brown & Brown retail agents, and offer targeted products and services designed for specific industries, trade groups, professions, public entities and market niches. This segment also operates our write-your-own flood insurance carrier, WNFIC and operates two Captives. WNFIC’s underwriting business consists of policies written on behalf of and fully ceded to the NFIP, as well as excess flood policies, which are fully reinsured in the private market. The Captives provide additional underwriting capacity that enable growth in core commissions and fees, and allow us to participate in underwriting results with limited exposure to claims expenses. The Company has traditionally participated in underwriting profits through profit-sharing contingent commissions. These Captives give us another way to continue to participate in underwriting results while limiting exposure to claims expenses. The Captives focus on property insurance for earthquake and wind exposed properties underwritten by certain of our MGUs. The Captives limit the Company's exposure to claims expenses either through reinsurance or by participating in limited tranches of the underwriting risk. The Programs segment operations can be grouped into five broad categories: Professional Programs, Personal Lines Programs, Commercial Programs, Public Entity-Related Programs and Specialty Programs. Approximately 76% of the Programs segment’s commissions and fees revenue is commission based. 36 Financial information relating to our Programs segment is as follows: Three months ended September 30, Nine months ended September 30, (in millions, except percentages) 2024 2023 % Change 2024 2023 % Change REVENUES Core commissions and fees $ 340 $ 289 17.6 % $ 933 $ 828 12.7 % Profit-sharing contingent commissions 7 12 (41.7 )% 58 35 65.7 % Investment income 6 4 50.0 % 17 7 142.9 % Other income, net — — — % 2 — NMF Total revenues 353 305 15.7 % 1,010 870 16.1 % EXPENSES Employee compensation and benefits 112 106 5.7 % 331 310 6.8 % Other operating expenses 71 63 12.7 % 205 184 11.4 % (Gain)/loss on disposal — — — % (28 ) (6 ) NMF Amortization 13 10 30.0 % 36 32 12.5 % Depreciation 4 3 33.3 % 11 9 22.2 % Interest 7 8 (12.5 )% 23 27 (14.8 )% Change in estimated acquisition earn-out payables (8 ) — NMF (7 ) — NMF Total expenses 199 190 4.7 % 571 556 2.7 % Income before income taxes $ 154 $ 115 33.9 % $ 439 $ 314 39.8 % Income Before Income Taxes Margin (1) 43.6 % 37.7 % 43.5 % 36.1 % EBITDAC - Adjusted (2) $ 170 $ 136 25.0 % $ 474 $ 376 26.1 % EBITDAC Margin - Adjusted (2) 48.2 % 44.6 % 46.9 % 43.2 % Organic Revenue growth rate (2) 22.8 % 12.5 % 16.8 % 20.2 % Employee compensation and benefits relative to total revenues 31.7 % 34.8 % 32.8 % 35.6 % Other operating expenses relative to total revenues 20.1 % 20.7 % 20.3 % 21.1 % Capital expenditures $ 4 $ 3 33.3 % $ 14 $ 11 27.3 % Total assets at September 30, $ 6,558 $ 3,884 68.8 % (1) "Income Before Income Taxes Margin" is defined as income before income taxes divided by total revenues. (2) A non-GAAP financial measure. NMF = Not a meaningful figure The Programs segment’s total revenues for the three months ended September 30, 2024 increased 15.7%, or $48 million, as compared to the same period in 2023, to $353 million. The $51 million increase in core commissions and fees revenue was driven by: (i) approximately $17 million related to the core commissions and fees revenue from acquisitions that had no comparable revenues in the same period of 2023; (ii) approximately $60 million of net new business, renewal business, and fee revenues and (iii) an offsetting decrease of $26 million related to commissions and fees revenue from businesses divested in the preceding twelve months. Profit-sharing contingent commissions for the third quarter of 2024 decreased approximately $5 million as compared to the third quarter of 2023. This decrease was driven by the expected claims costs associated with Hurricane Helene. The Programs segment’s total commissions and fees increased by 15.3%, and the Organic Revenue growth rate was 22.8% for the three months ended September 30, 2024. The Organic Revenue growth was driven by good new business and retention as well as exposure unit expansion. Income before income taxes for the three months ended September 30, 2024 increased 33.9%, or $39 million, as compared to the same period in 2023, to $154 million. Income before income taxes increased due to the drivers of EBITDAC - Adjusted described below along with the decrease in estimated acquisition earn-out payables. EBITDAC - Adjusted for the three months ended September 30, 2024 increased 25.0%, or $34 million, from the same period in 2023, to $170 million. EBITDAC Margin - Adjusted for the three months ended September 30, 2024 increased to 48.2% from 44.6% in the same period in 2023. EBITDAC Margin - Adjusted increased due to leveraging our expense base and the sale of certain third-party claims administration and adjusting services businesses in the fourth quarter of 2023. The Programs segment’s total revenues for the nine months ended September 30, 2024 increased 16.1%, or $140 million, as compared to the same period in 2023, to $1,010 million. The $105 million increase in core commissions and fees revenue was driven by: (i) approximately 37 $126 million of net new renewal business and fee revenues; (ii) an offsetting decrease of $79 million related to commissions and fees revenue from business divested in the preceding twelve months and (iii) $58 million from acquisitions that had no comparable revenues in the same period of 2023. Profit-sharing contingent commissions for the nine months ended September 30, 2023 increased approximately $23 million, or by 65.7%, as compared to the same period in 2023. This increase was driven by qualifying for certain contingent commissions that we did not qualify for in the prior year, favorable loss ratios, prior year adjustments and acquisitions partially offset due to the impact related to expected insured losses resulting from Hurricane Helene. The Programs segment’s total commissions and fees increased by 14.8%, and the Organic Revenue growth rate was 16.8%, for the nine months ended September 30, 2024. The Organic Revenue growth was driven primarily by strong net new business across most of our Programs and good retention, a growth incentive received for one of our programs and partially offset by nonrecurring claims revenue in the prior year. Income before income taxes for the nine months ended September 30, 2024 increased 39.8%, or $125 million, from the same period in 2023, to $439 million. Income before income taxes increased due to the drivers of EBITDAC - Adjusted described below along with the gain on disposal of certain businesses. EBITDAC - Adjusted for the nine months ended September 30, 2024 increased 26.1%, or $98 million, as compared to the same period in 2023, to $474 million. EBITDAC Margin - Adjusted for the nine months ended September 30, 2024 increased to 46.9% from 43.2% in the same period in 2023. EBITDAC Margin - Adjusted increased due to leveraging our expense base and the sale of certain third-party claims administration and adjusting services businesses in the fourth quarter of 2023. Wholesale Brokerage Segment The Wholesale Brokerage segment markets and sells excess and surplus commercial and personal lines insurance, primarily through independent agents and brokers, including Brown & Brown retail agents. Approximately 86% of the Wholesale Brokerage segment’s commissions and fees revenue is commission based. Financial information relating to our Wholesale Brokerage segment is as follows: Three months ended September 30, Nine months ended September 30, (in millions, except percentages) 2024 2023 % Change 2024 2023 % Change REVENUES Core commissions and fees $ 157 $ 143 9.8 % $ 446 $ 398 12.1 % Profit-sharing contingent commissions 12 6 100.0 % 22 13 69.2 % Investment income 2 1 100.0 % 4 1 NMF Other income, net — — — % — — — % Total revenues 171 150 14.0 % 472 412 14.6 % EXPENSES Employee compensation and benefits 81 73 11.0 % 239 212 12.7 % Other operating expenses 24 21 14.3 % 67 63 6.3 % (Gain)/loss on disposal — — — % — — — % Amortization 3 3 — % 9 9 (— %) Depreciation 1 1 — % 3 3 (— %) Interest 3 3 — % 9 9 — % Change in estimated acquisition earn-out payables 3 25 (88.0 %) — 23 (100.0 %) Total expenses 115 126 (8.7 %) 327 319 2.5 % Income before income taxes $ 56 $ 24 133.3 % $ 145 $ 93 55.9 % Income Before Income Taxes Margin (1) 32.7 % 16.0 % 30.7 % 22.6 % EBITDAC - Adjusted (2) $ 66 $ 56 17.9 % $ 166 $ 137 21.2 % EBITDAC Margin - Adjusted (2) 38.6 % 37.3 % 35.2 % 33.3 % Organic Revenue growth rate (2) 8.4 % 13.0 % 9.8 % 11.9 % Employee compensation and benefits relative to total revenues 47.4 % 48.7 % 50.6 % 51.5 % Other operating expenses relative to total revenues 14.0 % 14.0 % 14.2 % 15.3 % Capital expenditures $ 1 $ 1 NMF $ 2 $ 2 — % Total assets at September 30, $ 1,633 $ 1,489 9.7 % 38 (1) "Income Before Income Taxes Margin" is defined as income before income taxes divided by total revenues. (2) A non-GAAP financial measure. NMF = Not a meaningful figure The Wholesale Brokerage segment’s total revenues for the three months ended September 30, 2024 increased 14.0%, or $21 million, as compared to the same period in 2023, to $171 million. The $14 million net increase in core commissions and fees revenue was driven primarily by: (i) $12 million related to net new and renewal business and (ii) $2 million related to the core commissions and fees revenue from acquisitions that had no comparable revenues in the same period of 2023. Profit-sharing contingent commissions for the third quarter of 2024 increased $6 million compared to the third quarter of 2023, driven by improved underwriting results, increased written premium and finalization of prior year estimates of profit-sharing contingent commissions. The Wholesale Brokerage segment’s growth rate for total commissions and fees was 13.4%, and the Organic Revenue growth rate was 8.4% for the third quarter of 2024. The Organic Revenue growth rate was driven by net new business and a combination of rate and exposure unit increases. Income before income taxes for the three months ended September 30, 2024 increased 133.3%, or $32 million, as compared to the same period in 2023, to $56 million due to: (i) the growth of EBITDAC - Adjusted described below and (ii) a decrease in the change in estimated acquisition earn-out payables. EBITDAC - Adjusted for the three months ended September 30, 2024 increased 17.9%, or $10 million, as compared to the same period in 2023, to $66 million. EBITDAC Margin - Adjusted for the three months ended September 30, 2024 increased to 38.6% from 37.3%, as compared to the same period in 2023. EBITDAC Margin - Adjusted increased due to: (i) total revenues growth and (ii) leveraging our expense base. The Wholesale Brokerage segment’s total revenues for the nine months ended September 30, 2024 increased 14.6%, or $60 million, as compared to the same period in 2023, to $472 million. The $48 million net increase in core commissions and fees revenue was driven primarily by: (i) $39 million related to net new and renewal business; (ii) $7 million related to core commissions and fees revenue from acquisitions and dispositions that had no comparable revenues in the same period of 2023; and (iii) an increase from the impact of Foreign Currency Translation of $1 million. Profit-sharing contingent commissions for the first nine months of 2024 increased approximately $9 million compared to the same period of 2023 driven by improved underwriting results, increased written premium, finalization of prior-year estimates and acquisitions completed in the past twelve months. The Wholesale Brokerage segment’s growth rate for total commissions and fees was 13.9%, and the Organic Revenue growth rate was 9.8% for the first nine months of 2024. The Organic Revenue growth rate was driven by strong new business and good retention, as well as a combination of rate and exposure unit increases. Income before income taxes for the nine months ended September 30, 2024 increased 55.9%, or $52 million, as compared to the same period in 2023, to $145 million due to: (i) the growth of EBITDAC - Adjusted described below and (ii) a decrease in the change in estimated acquisition earn-out payables. EBITDAC - Adjusted for the nine months ended September 30, 2024 increased 21.2%, or $29 million, as compared to the same period in 2023, to $166 million. EBITDAC Margin - Adjusted for the nine months ended September 30, 2024 increased to 35.2% from 33.3% in the same period in 2023 due to: (i) total revenues growth; (ii) certain nonrecurring operating expenses in the prior year; and (iii) leveraging our expense base. Other As discussed in Note 12 of the Notes to Condensed Consolidated Financial Statements, the “Other” column in the Segment Information table includes any revenue and expenses not allocated to reportable segments, and corporate-related items, including the intercompany interest expense charges to reporting segments. LIQUIDITY AND CAPITAL RESOURCES The Company seeks to maintain a conservative balance sheet and strong liquidity profile. Our capital requirements to operate as an insurance intermediary are low and we have been able to grow and invest in our business through a combination of cash that has been generated from operations, the disciplined use of debt and the issuance of equity as part of the purchase price consideration to acquire certain businesses. We have the ability to utilize our Revolving Credit Facility, which as of September 30, 2024 provided up to $800 million in available cash. The Revolving Credit Facility contains an expansion option for up to an additional $500 million of borrowing capacity, subject to the approval of participating lenders. On March 31, 2022, the Company entered into a Loan Agreement (the “Loan Agreement") which provided term loan capacity of $800 million. Additionally, the Company may, subject to satisfaction of certain conditions, including receipt of additional term loan commitments by new or existing lenders, increase either Term Loan Commitment under the existing Loan Agreement or the term loans issued thereunder or issue new tranches of term loans in an aggregate additional amount of up to $400 million. Including the expansion options under all existing credit agreements, the Company has access to up to $1,700 million of incremental borrowing capacity as of September 30, 2024. 39 We believe that we have access to additional funds, if needed, through the capital markets or private placements to obtain further debt financing under the current market conditions. The Company believes that its existing cash, cash equivalents, short-term investment portfolio and funds generated from operations, together with the funds available under the Revolving Credit Facility, will be sufficient to satisfy its normal liquidity needs, including principal payments on our long-term debt, for at least the next twelve months and in the long-term. Subsequent to September 30, 2024, the Company exercised a draw down on the Revolving Credit Facility for $350 million in connection with the pending acquisition of Quintes Holding B.V. that is expected to close in the fourth quarter of 2024. Contractual Cash Obligations As of September 30, 2024, our contractual cash obligations were as follows: Payments Due by Period (in millions) Total Less than 1 year 1-3 years 4-5 years After 5 years Long-term debt $ 3,625 $ 225 $ 550 $ 350 $ 2,500 Other liabilities 243 12 23 21 187 Operating leases (1) 254 51 88 56 59 Interest obligations 1,599 165 288 234 912 Maximum future acquisition contingent payments (2) 461 188 268 5 — Total contractual cash obligations (3) $ 6,182 $ 641 $ 1,217 $ 666 $ 3,658 (1) Includes $1.0 million of future lease commitments expected to commence later in 2024. (2) Includes $137 million of current and non-current estimated acquisition earn-out payables. Earn-out payables for acquisitions not denominated in U.S. dollars are measured at the current foreign exchange rate. Six of the estimated acquisition earn-out payables assumed included provisions with no maximum potential earn-out amount. The amount recorded for these acquisitions as of September 30, 2024 is $4 million. The Company deems a significant increase to this amount to be unlikely. (3) Does not include approximately $43 million of current liability for a dividend of $0.1500 per share approved by the Board of Directors on October 23, 2024. Debt Total debt at September 30, 2024 was $3,592 million net of unamortized discount and debt issuance costs, which was a decrease of $204 million compared to December 31, 2023. The decrease includes: the repayment of $800 million in senior notes and floating-rate debt balances net of Revolving Credit Facility activity and the addition of deferred financing costs and discount on debt of $7 million; offset by the issuance of $600 million senior notes and the amortization of discounted debt related to our various unsecured senior notes and debt issuance cost amortization of $3 million. During the nine months ended September 30, 2024, the Company repaid $19 million of principal related to the Second Amended and Restated Credit Agreement term loan through the quarterly scheduled principal payments. The Second Amended and Restated Credit Agreement term loan had an outstanding balance of $200 million as of September 30, 2024. The Company's next scheduled principal payment is due in December 2024 and is equal to $6 million. During the nine months ended September 30, 2024, the Company repaid $31 million of principal related to the Term Loans issued under the Term A-2 Loan Commitment (“Term A-2 Loans”) through quarterly scheduled principal payments. The Term A-2 Loans had an outstanding balance of $425 million as of September 30, 2024. The Company’s next scheduled principal payment is due in December 2024 and is equal to $13 million. During the nine months ended September 30, 2024, the Company repaid $150 million of principal related to the Term Loans issued under the Term A-1 Loan Commitment (“Term A-1 Loans”). The Term A-1 Loans had an outstanding balance of $150 million as of September 30, 2024. On February 13, 2024, the Company drew down on the Revolving Credit Facility $150 million, and the proceeds were used for general corporate purposes. During the nine months ended September 30, 2024, the Company repaid $250 million of the outstanding balance on the Revolving Credit Facility. The Revolving Credit Facility had no outstanding balance as of September 30, 2024. On June 11, 2024, the Company completed the issuance of $600 million aggregate principal amount of 5.650% Senior Notes due 2034 (the “2034 Senior Notes”). The net proceeds to the Company from the issuance of the 2034 Senior Notes, after deducting underwriting discounts and estimated offering expenses, were approximately $593 million. The 2034 Senior Notes were given investment grade ratings of BBB- stable outlook and Baa3 positive outlook. The 2034 Senior Notes will mature in June 2034. Interest on the 2034 Senior Notes will be payable semi-annually in arrears. The 2034 Senior Notes are senior unsecured obligations of the Company and will rank equal in right of payment to all of the Company’s existing and future senior unsecured indebtedness. The Company may redeem the 2034 Senior Notes in whole or in part at any time and from time to time, at the “make whole” redemption prices specified in the prospectus supplement for the 2034 Senior Notes being redeemed, plus accrued and unpaid interest thereon. In September 2024, the Company used a portion of the proceeds from the 40 2034 Senior Notes to repay $500 million of the 4.200% senior notes due September 2024. In June 2024, the Company also used $100 million of the proceeds to repay a portion of an outstanding term loan balance. As of September 30, 2024 there was a total outstanding debt balance of $600 million exclusive of the associated discount balance on the 2034 Senior Notes. 41 ITEM 3. Quantitative and Qualita tive Disclosures About Market Risk Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates, foreign exchange rates and equity prices. We are exposed to market risk through our investments, revolving credit line, term loan agreements and international operations. Our invested assets are held primarily as cash and cash equivalents, restricted cash, available-for-sale marketable debt securities, non-marketable debt securities, certificates of deposit, U.S. Treasury securities, and professionally managed short-term duration fixed income funds. These investments are subject to interest rate risk. The fair value of our invested assets at September 30, 2024 and December 31, 2023 approximated their respective carrying values due to their short-term duration and therefore, such market risk is not considered to be material. We do not actively invest or trade in equity securities. In addition, we generally dispose of any significant equity securities received in conjunction with an acquisition shortly after the acquisition date. As of September 30, 2024, we had $775 million outstanding under the Second Amended and Restated Credit Agreement and the Loan Agreement tied to the Secured Overnight Financing Rate (“SOFR”). These agreements bear interest on a floating basis and are therefore subject to changes in the associated interest expense. The effect of an immediate hypothetical 10% change in interest rates would not have a material effect on our Condensed Consolidated Financial Statements. The majority of our international operations do not have material transactions in currencies other than their functional currency which would expose the Company to transactional currency rate risk. We are subject to translational exchange rate risk having businesses operating outside of the U.S. in the following functional currencies, British pounds, Canadian dollar, and euros. Based upon our foreign currency rate exposure as of September 30, 2024, an immediate 10% hypothetical change of foreign currency exchange rates would not have a material effect on our Condensed Consolidated Financial Statements.