What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-04-28 compared with 2024-10-28 · 143 added, 294 removed, 293 unchanged (60% of the section changed)

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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, 2024, and the two discussions should be read together.

Company Overview — Third Quarter of 2024

Company Overview — First Quarter of 2025

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, which are prepared in accordance with accounting principles generally accepted in the United States ("GAAP").

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.

We are a diversified insurance agency, wholesale brokerage, insurance programs and services 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.

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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.

We also participate in 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.

For example, higher levels of inflation, an increase in the value of insurable exposure units, or a general decline in economic activity, could increase or decrease the value of insurable exposure units.

Conversely, increasing costs of litigation settlements and 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 term “core commissions and fees” excludes profit-sharing contingent commissions, and therefore, it 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:

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(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.

(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.

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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%.

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.

(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 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, represented 21.1% in 2024 and 23.9% in 2023.

For the three months ended March 31, 2025, our total commissions and fees growth rate was 12.0%, and our consolidated Organic Revenue growth rate was 6.5%.

Historically, investment and other 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.

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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.

Income before income taxes for the three months ended March 31, 2025 increased from the first quarter of 2024 by $63 million or 17.3%, driven by Organic Revenue growth, leveraging our expense base, net new business, lower interest expense and acquisitions completed in the past twelve months.

Information Regarding Non-GAAP Financial Measures

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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.

We present these measures because we believe such information is of interest to the investment community.

We believe they provide 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.

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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

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• 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 - Adjusted is defined as EBITDAC, excluding (gain)/loss on disposal.

• 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

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.

• “(Gain)/loss on disposal” is 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.

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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.

From 1993 through the first quarter of 2025, we acquired 687 insurance intermediary operations.

Critical Accounting Policies

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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, 2024 for details regarding our critical and significant accounting policies.

RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024

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,

Three months ended March 31,

(in millions, except percentages)

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Profit-sharing contingent commissions

Investment income

Other income, net

Investment and other income

Total revenues

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to total revenues

Capital expenditures

Total assets at September 30,

(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.

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:

Commissions and fees, including profit-sharing contingent commissions and earned premiums, for the three months ended March 31, 2025 increased $148 million to $1,385 million, or 12.0%, over the same period in 2024.

Core commissions and fees revenue for the first quarter of 2025 increased $151 million or 12.7%, composed of:

(i) approximately $77 million of net new and renewal business, which reflects an Organic Revenue growth rate of 6.5%;

(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 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.

(ii) $79 million from acquisitions that had no comparable revenues in the same period of 2024 and offsetting decreases from;

(iii) the impact of Foreign Currency Translation of $2 million and (iv) $3 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 first quarter of 2025 decreased by $3 million, or 6.5%, compared to the same period in 2024.

Investment and Other Income

Investment and other income for the three months ended March 31, 2025 decreased $2 million from the same period in 2024.

The decrease was primarily driven by lower average interest rates as compared to the prior year.

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.

Employee compensation and benefits expense as a percentage of total revenues was 48.6% for the three months ended March 31, 2025 as compared to 50.2% for the three months ended March 31, 2024, an increase of 8.2%, or $52 million.

This increase included $30 million of compensation costs related to stand-alone acquisitions that had no comparable costs in the same period of 2024.

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(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.

(iii) an increase in non-cash stock-based compensation driven by the strong financial performance of the Company and partially offset by (iv) the year-over-year decrease of approximately $13 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.

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.

Other operating expenses represented 13.2% of total revenues for the first quarter of 2025, as compared to 12.8% for the first quarter of 2024.

Other operating expenses for the first quarter of 2025 increased $25 million, or 15.5%, from the same period of 2024.

This change includes:

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(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.

and (iii) the year-over-year increase of approximately $13 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.

(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.

(Gain)/Loss on disposal for the first quarter of 2025 was unchanged from the first quarter of 2024 at $2 million.

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 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.

Amortization expense for the first quarter of 2025 increased $10 million, or 23.3%, compared to the first quarter of 2024.

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 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.

Depreciation expense for the first quarter of 2025 remained flat at $11 million as compared to the first quarter of 2024.

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.

Interest expense for the first quarter of 2025 decreased $2 million, or 4.2%, compared to the first quarter of 2024.

The decrease was primarily driven by lower total debt outstanding as compared to the prior year.

Change in Estimated Acquisition Earn-Out Payables

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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.

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.

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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 .

As of March 31, 2025 and 2024, 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,

Three months ended March 31,

(in millions)

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Net change in earnings from estimated acquisition earn-out payables

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.

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.

For the three months ending March 31, 2025 and 2024, the fair value of estimated earn-out payables was re-evaluated and resulted in decreases of $6 million and $4 million, respectively, which were credits to the Condensed Consolidated Statements of Income.

As of March 31, 2025, estimated acquisition earn-out payables totaled $143 million, of which $51 million was recorded as accounts payable and $92 million was recorded as other non-current liabilities.

The effective tax rate on income from operations for the three months ended March 31, 2025 and 2024 was 21.8% and 19.5%, respectively.

The increase was driven primarily by the lower tax benefit associated with vesting of restricted stock awards in the first quarter of 2025 as compared to the first quarter of 2024.

RESULTS OF OPERATIONS — SEGMENT INFORMATION

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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:

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 March 31, 2025 and 2024, and the growth rates for Organic Revenue for the three months ended March 31, 2025, including by segment, are as follows:

Wholesale Brokerage

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Organic Revenue growth rate (2)

(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.

(1) The Retail segment includes commissions and fees reported as “Other” in the Segment Information table in Note 12 of this Quarterly Report on Form 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:

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 March 31, 2024 and 2023, including by segment, and the growth rates for Organic Revenue for the three months ended March 31, 2024, including by segment, are as follows:

Wholesale Brokerage

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Organic Revenue growth rate (2)

(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, 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:

Wholesale Brokerage

(in millions)

Commissions and fees

Total growth %

Profit-sharing contingent

Core commissions and fees

Foreign Currency Translation

Organic Revenue (2)

Organic Revenue growth (2)

Organic Revenue growth % (2)

(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:

Wholesale Brokerage

(in millions)

Commissions and fees

Total growth %

Profit-sharing contingent

Core commissions and fees

Acquisition revenues

Foreign Currency Translation

Organic Revenue (2)

Organic Revenue growth (2)

Organic Revenue growth % (2)

(2) A non-GAAP financial measure.

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)

Total Revenues

Income before income taxes

Income Before Income Taxes Margin (1)

Change in estimated acquisition

earn-out payables

EBITDAC Margin (2)

(Gain)/loss on disposal

EBITDAC - Adjusted (2)

EBITDAC Margin - Adjusted (2)

(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

(in millions)

Wholesale Brokerage

Total Revenues

Income before income taxes

Income Before Income Taxes Margin (1)

Change in estimated acquisition

earn-out payables

EBITDAC Margin (2)

(Gain)/loss on disposal

Acquisition/Integration Costs

EBITDAC - Adjusted (2)

EBITDAC Margin - Adjusted (2)

(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:

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 March 31, 2025, including by segment, is as follows:

(in millions)

Wholesale Brokerage

Total Revenues

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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:

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 March 31, 2024, including by segment, is as follows:

(in millions)

7 unchanged sentences

(Gain)/loss on disposal

Acquisition/Integration Costs

1Q23 Nonrecurring Cost

EBITDAC - Adjusted (2)

7 unchanged sentences

Financial information relating to our Retail segment is as follows:

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

(in millions, except percentages)

1 unchanged sentence

Profit-sharing contingent commissions

Investment income

Other income, net

Investment and other income

Total revenues

14 unchanged sentences

to total revenues

Capital expenditures

Total assets at September 30,

(1) "Income Before Income Taxes Margin" is defined as income before income taxes divided by total revenues.

1 unchanged sentence

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:

The Retail segment’s total revenues for the three months ended March 31, 2025 increased 12.5%, or $101 million, as compared to the same period in 2024, to $907 million.

The $102 million increase in core commissions and fees revenue was driven primarily by:

(i) approximately $72 million related to the core commissions and fees revenue from acquisitions that had no comparable revenues in the same period of 2024;

(ii) an increase of $32 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.

and (iii) an offsetting decrease of $3 million related to commissions and fees recorded in 2024 from businesses since divested.

Profit-sharing contingent commissions for the first quarter of 2025 remained flat at $14 million as compared to the same period in 2024.

The Retail segment’s total commissions and fees increased by 12.7%, and the Organic Revenue growth rate was 4.1% for the first quarter of 2025.

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.

Renewal business was impacted by timing of certain nonrecurring revenue and rate and exposure unit growth.

Income before income taxes for the three months ended March 31, 2025 increased 19.3%, or $46 million, as compared to the same period in 2024, to $284 million.

The primary factors driving this increase were:

1 unchanged sentence

(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.

EBITDAC - Adjusted for the three months ended March 31, 2025 increased 16.2%, or $47 million, as compared to the same period in 2024, to $338 million.

EBITDAC Margin - Adjusted for the three months ended March 31, 2025 increased to 37.3% from 36.1% in the same period in 2024.

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.

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.

(i) the net increase in revenue as described above;

(ii) the timing of revenues associated with recent acquisitions;

(iii) leveraging our expense base, which was partially offset by;

(iv) higher non-cash stock-based compensation.

Programs Segment

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Financial information relating to our Programs segment is as follows:

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

(in millions, except percentages)

1 unchanged sentence

Profit-sharing contingent commissions

Investment income

Other income, net

Investment and other income

Total revenues

14 unchanged sentences

to total revenues

Capital expenditures

Total assets at September 30,

(1) "Income Before Income Taxes Margin" is defined as income before income taxes divided by total revenues.

1 unchanged sentence

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:

The Programs segment’s total revenues for the three months ended March 31, 2025 increased 10.1%, or $30 million, as compared to the same period in 2024, to $328 million.

The $37 million increased in core commissions and fees revenue was driven primarily by:

(i) approximately $2 million related to the core commissions and fees revenue from acquisitions that had no comparable revenues in the same period of 2024;

(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

$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.

and (ii) approximately $36 million of net new business, renewal business, and fee revenues.

Profit-sharing contingent commissions for the first quarter of 2025 decreased approximately $6 million as compared to the first quarter of 2024.

This decrease is a result of the prior year including approximately $7 million resulting from the finalization of the calculation of profit-sharing contingent commissions that were estimated and accrued in 2023.

The Programs segment’s total commissions and fees increased by 10.6%, and the Organic Revenue growth rate was 13.6% for the three months ended March 31, 2025.

The Organic Revenue growth was driven by hurricane claims revenue, good retention, and exposure unit expansion, but was partially offset by declining rates on catastrophe ("CAT") property.

Income before income taxes for the three months ended March 31, 2025 increased 20.8%, or $21 million, as compared to the same period in 2024, to $122 million.

Income before income taxes increased due to the drivers of EBITDAC - Adjusted described below as well as lower year over year interest expense and depreciation.

EBITDAC - Adjusted for the three months ended March 31, 2025 increased 15.9%, or $20 million, from the same period in 2024, to $146 million.

EBITDAC Margin - Adjusted for the three months ended March 31, 2025 increased to 44.5% from 42.3% in the same period in 2024.

EBITDAC Margin - Adjusted increased due to strong Organic Revenue growth and leveraging our expense base.

Wholesale Brokerage Segment

2 unchanged sentences

Financial information relating to our Wholesale Brokerage segment is as follows:

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

(in millions, except percentages)

1 unchanged sentence

Profit-sharing contingent commissions

Investment income

Other income, net

Investment and other income

Total revenues

14 unchanged sentences

total revenues

Capital expenditures

Total assets at September 30,

(1) "Income Before Income Taxes Margin" is defined as income before income taxes divided by total revenues.

1 unchanged sentence

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 Wholesale Brokerage segment’s total revenues for the three months ended March 31, 2025 increased 12.0%, or $17 million, as compared to the same period in 2024, to $159 million.

The $14 million net increase in core commissions and fees revenue was driven primarily by:

(i) $9 million related to net new and renewal business and (ii) $5 million related to the core commissions and fees revenue from acquisitions that had no comparable revenues in the same period of 2024.

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.

Profit-sharing contingent commissions for the first quarter of 2025 increased $3 million compared to the first quarter of 2024, 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 12.1%, and the Organic Revenue growth rate was 6.7% for the first quarter of 2025.

The Organic Revenue growth rate was driven by net new business and exposure unit increases, which was partially offset by rate decreases for CAT property.

Income before income taxes for the three months ended March 31, 2025 increased 7.3%, or $3 million, as compared to the same period in 2024, to $44 million due primarily to the growth of EBITDAC - Adjusted described below.

EBITDAC - Adjusted for the three months ended March 31, 2025 increased 10.9%, or $5 million, as compared to the same period in 2024, to $51 million.

EBITDAC Margin - Adjusted for the three months ended March 31, 2025 decreased to 32.1% from 32.4%, as compared to the same period in 2024.

EBITDAC Margin - Adjusted decreased due to:

(i) a higher impact of foreign exchange rate changes;

and (ii) higher non-cash stock-based compensation, which were partially offset by leveraging our expense base.

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.

2 unchanged sentences

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.

We have the ability to utilize our Revolving Credit Facility under the Second Amended and Restated Credit Agreement (the “Second Amended and Restated Credit Agreement”), which as of March 31, 2025 provided up to $400 million in available cash.

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 and the Loan Agreement, dated March 31, 2022, which provided term loan capacity of $800 million (the “Loan Agreement”), will be sufficient to satisfy its normal liquidity needs, including principal payments on our long-term debt, for the next 12 months and in the long term.

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.

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.

Including the expansion options under all existing credit agreements, the Company has access to up to $1,300 million of incremental borrowing capacity as of March 31, 2025.

Cash and cash equivalents totaled $669 million at March 31, 2025 reflecting a decrease of $6 million from the $675 million balance at December 31, 2024.

Operating Cash Flows

Our operating cash flows are primarily derived from the net income generated during the period adjusted for non-cash expenses, which include depreciation, amortization, changes in estimated earnout payables, non-cash stock based compensation and deferred income taxes while excluding gains and losses on sales/disposals of investments, businesses, fixed assets and customer accounts, payments on acquisition earn-outs in excess of original estimated payables and changes in working capital which relate primarily to the timing of payments of accrued liabilities and receipts of receivables from commissions and fees related to our revenues.

Our ratio of current assets to current liabilities (the “current ratio”) was 1.20 and 1.10 for March 31, 2025 and December 31, 2024, respectively.

Cash flows generated from operating activities totaled $213 million and $13 million for the three-month periods ended March 31, 2025 and 2024, respectively, representing an increase of $200 million.

Operating cash flows generated in 2025 included $334 million from net income before non-controlling interests with $83 million of non-cash adjustments, offset by $204 million from changes in working capital.

The growth in cash from operations is primarily due to higher operating margins resulting from strong Organic Revenue growth and a $120 million reduction in our taxes paid, net of refunds related to the 2023 deferral of $121 million related to certain federal income tax payments due to Hurricane Idalia tax relief, which was announced by the Internal Revenue Service ("IRS") on August 30, 2023.

These deferred income tax payments were paid by the IRS deadline of February 15, 2024.

Investing Cash Flows

Cash flows used for investing activities were $79 million and $88 million for the three-month periods ended March 31, 2025 and 2024, respectively, a decrease of $9 million, or 10.2%.

During the three-month period ended March 31, 2025, the Company completed 13 acquisitions (including book purchases) and paid $67 million, net of cash, and cash and cash equivalents held in a fiduciary capacity acquired, most notably for the purchase of NBS Insurance Agency for $54 million.

Net cash paid for acquisitions decreased $9 million in the three-month period ended March 31, 2025, down from $76 million during the same period in 2024.

The Company received cash proceeds from the sale of businesses, fixed assets and customer accounts totaling $9 million during the three-month period ended March 31, 2025 compared to no proceeds received in the same period in 2024.

Capital Expenditures

Capital expenditures amounted to $17 million and $13 million in the three-month periods ended March 31 2025 and 2024, respectively, and included purchases of furniture and fixtures, leasehold improvements related to office moves and hardware and software purchases related to information technology investments.

Financing Cash Flows

Cash flows used in financing activities totaled $218 million and $67 million in the three-month periods ended March 31, 2025 and 2024, respectively, an increase of $151 million.

Fiduciary Receivables and Liabilities

Fiduciary cash represents funds in the Company's possession collected from customers to be remitted to insurance companies and funds from insurance companies to be distributed to insureds for the settlement of claims or refunds.

The net change in fiduciary cash is represented by the net change in fiduciary liabilities and fiduciary receivables and is presented as cash flows from financing activities in the statement of cash flows.

Financing cash flows reflect a decrease of $90 million and $26 million in the three-month periods ended March 31, 2025 and 2024, respectively, related to fiduciary receivables and liabilities.

Acquisition Earn-outs

Payments on acquisition earn-outs related to the original acquisition date estimates totaled $26 million and $39 million in the three-month periods ended March 31, 2025 and 2024, respectively.

During the three-month periods ended March 31, 2025 and 2024, respectively, the Company paid cash dividends of $43 million and $38 million, respectively, an increase of $5 million, or 13.2%.

On April 28, 2025, the board of directors approved a quarterly cash dividend of $0.15 per share to be paid on May 21, 2025.

Net payments from long term debt totaled $19 million in the three-month period ended March 31, 2025, compared to net cash proceeds of $87 million in the same period of 2024.

Total debt at March 31, 2025 was $3,806 million net of unamortized discount and debt issuance costs, which was a decrease of $18 million compared to December 31, 2024.

The decrease includes the repayment of $169 million of floating-rate debt balance, offset by $150 million of net additions to the Revolving Credit Facility and the amortization of discounted debt related to our various unsecured senior notes and debt issuance cost amortization of $1 million.

During the three months ended March 31, 2025, the Company repaid $7 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 $187 million as of March 31, 2025.

The Company's next scheduled principal payment is due in June 2025 and is equal to $6 million.

During the three months ended March 31, 2025, the Company repaid $12 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 $400 million as of March 31, 2025.

The Company’s next scheduled principal payment is $13 million due in June 2025.

During the three months ended March 31, 2025, the Company repaid the outstanding balance on the Term A-1 Loan Commitment (the “Term A-1 Loan Commitment”) of $150 million related to the Loan Agreement, in accordance with the terms of the Loan Agreement using proceeds from the Revolving Credit Facility in connection with the Second Amended and Restated Credit Agreement.

Contractual Cash Obligations

As of September 30, 2024, our contractual cash obligations were as follows:

As of March 31, 2025, our contractual cash obligations were as follows:

Payments Due by Period

6 unchanged sentences

Total contractual cash obligations (2)

(1) Includes $1.0 million of future lease commitments expected to commence later in 2024.

(1) Includes $143 million of current and non-current estimated acquisition earn-out payables.

1 unchanged sentence

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.

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

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.

Four 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 March 31, 2025 is $1 million.

The Company believes a significant increase in this amount is unlikely.

(2) Does not include approximately $43 million of current liability for a dividend of $0.15 per share approved by the Board of Directors on April 28, 2025.

Quantitative and Qualita tive Disclosures About Market Risk

4 unchanged sentences

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.

The fair value of our invested assets at March 31, 2025 and December 31, 2024 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”).

As of March 31, 2025, we had $987 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.

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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.

Based upon our foreign currency rate exposure as of March 31, 2025, an immediate 10% hypothetical change of foreign currency exchange rates would not have a material effect on our Condensed Consolidated Financial Statements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis