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, 2025, and the two discussions should be read together. GENERAL Company Overview — First Quarter of 2026 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 regarding important information on non-GAAP financial measures contained in our discussion and analysis. We are a diversified insurance agency, wholesale brokerage, insurance programs, specialty insurance business and service 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 participate in captive insurance facilities for the purpose of having additional capacity to place coverage, driving additional revenues and to participate in underwriting results, and to limit the Company's exposure to claims expenses through reinsurance or by only participating in certain tranches of the underwriting. We also operate registered insurance companies to support our national flood insurance program and to support our cross-collateralized segregated captive cell businesses. We do not participate in earnings of the collateralized segregated captive cells. 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 in the value of insurable exposure units or a general decline in economic activity, could increase or decrease the value of insurable exposure units. Furthermore, 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 Contingents; 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: (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 Contingents, 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 underwriting year, based upon the prior year(s) underwriting results, but may differ from the amount estimated and accrued due to the lack of complete visibility regarding loss information until it is received. Over the last three years, annual Contingents have averaged approximately 4.4% of total commissions and fee revenues. 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 Specialty Distribution segment, which earns 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. Annual fee revenues as a percentage of our total commissions and fees, represented 22.2% in 2025 and 21.1% in 2024. For the three months ended March 31, 2026, our total commissions and fees growth rate was 35.7%. Our consolidated Organic Revenue growth rate was flat and our Organic Revenue with Contingents growth rate was 2.2%. 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. Investment income also includes gains and losses realized from the sale of investments. Other income primarily reflects other miscellaneous revenues. 24 Income before income taxes for the three months ended March 31, 2026 increased from the first quarter of 2025 by $106 million or 24.8%, driven by increased Contingents, leveraging our expense base, acquisitions completed in the past twelve months and the change in mark-to-market of escrow liability. This growth was partially offset by Acquisition/Integration Costs 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, Organic Revenue with Contingents, 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. 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. 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 (including Organic Revenue with Contingents and its growth) as important indicators when assessing and evaluating our performance on a consolidated basis and for each of our two 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. 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); (iii) Foreign Currency Translation (as defined below) and (iv) the Litigation-Related Impact. The term “core commissions and fees” excludes Contingents; and therefore, represents the revenues earned directly from specific insurance policies sold and specific fee-based services rendered. Growth of Organic Revenue can be expressed as a dollar amount or a percentage rate. • Organic Revenue with Contingents is Organic Revenue plus Organic Contingents (as defined below). Growth of Organic Revenue with Contingents can be expressed as a dollar amount or a percentage rate. 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 (as defined below), (ii) Acquisition/Integration Costs (as defined below) and (iii) mark-to-market of escrow liability (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; costs for third-party professional services, including legal, accounting, consulting, financial advisory and due diligence; costs and fees associated with entry into the bridge financing commitment; costs of integrating or streamlining processes and information technology systems, including data migration and system integration; costs associated with optimizing vendor agreements and leased office space, including exit costs related to location combinations; and employment-related costs, including severance payments, costs associated with the transition of certain legacy compensation programs, retention-related compensation expenses, and incentive payments) arising out of our acquisition of Accession and acquisitions previously completed by Accession, which are not considered to be normal, recurring or part of ongoing operations. 25 • “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. • “(Gain)/loss on disposal” is a caption on our consolidated statements of income which reflects net proceeds received as compared to the net book value related to sales of books of business and other divestiture transactions. • “ Mark-to-market of escrow liability ” is a caption on our consolidated statements of income which reflects the non-cash change in the fair value associated with certain shares of the Company’s common stock held in escrow. The change is driven by fluctuations in our stock price between the beginning of the quarter and the end of the quarter. These escrowed shares represent a portion of the merger consideration payable in connection with our acquisition of Accession. The escrowed shares secure certain indemnification obligations of the Accession equity holders related to businesses that are in run-off or discontinued. • “ Litigation-Related Impact ” means the core commissions and fees attributable to (i) the loss of specifically identified customer accounts and (ii) new business generated in the prior year by certain former employees, in each case in connection with the conduct of a competitor that is the subject of pending litigation in multiple jurisdictions. • “ Organic Contingents ” are Contingents, less (i) Contingents earned for the first twelve months by newly acquired stand-alone operations and (ii) Contingents earned from divested stand-alone operations (Contingents generated from stand-alone operations sold or terminated during the comparable period). 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 first quarter of 2026, we acquired 725 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, 2025. 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, 2025 for details regarding our critical and significant accounting policies. 26 RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025 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 March 31, (in millions, except percentages) 2026 2025 % Change REVENUES Core commissions and fees $ 1,783 $ 1,342 32.9 % Profit-sharing contingent commissions 97 43 125.6 % Investment and other income 21 19 10.5 % Total revenues 1,901 1,404 35.4 % EXPENSES Employee compensation and benefits 907 683 32.8 % Other operating expenses 289 186 55.4 % (Gain)/loss on disposal (1 ) 2 (150.0 %) Amortization 116 53 118.9 % Depreciation 17 11 54.5 % Interest 99 46 115.2 % Change in estimated acquisition earn-out payables 5 (4 ) NMF Mark-to-market of escrow liability (64 ) — NMF Total expenses 1,368 977 40.0 % Income before income taxes 533 427 24.8 % Income taxes 106 93 14.0 % Net income before non-controlling interests 427 334 27.8 % Less: Net income attributable to non-controlling interests 1 3 Net income attributable to the Company $ 426 $ 331 28.7 % Income Before Income Taxes Margin (1) 28.0 % 30.4 % EBITDAC - Adjusted (2) $ 731 $ 535 36.6 % EBITDAC Margin - Adjusted (2) 38.5 % 38.1 % Organic Revenue growth rate (2) 0.0 % 6.5 % Organic Revenue with Contingents growth rate (2) 2.2 % 5.9 % Employee compensation and benefits relative to total revenues 47.7 % 48.6 % Other operating expenses relative to total revenues 15.2 % 13.2 % (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 Commissions and Fees Commissions and fees, including Contingents and earned premiums, for the three months ended March 31, 2026 increased $495 million to $1,880 million, or 35.7%, over the same period in 2025. Core commissions and fees revenue for the first quarter of 2026 increased $441 million or 32.9%, composed of: (i) $435 million from acquisitions that had no comparable revenues in the same period of 2025; (ii) an increase from the impact of Foreign Currency Translation of $19 million and an offsetting decrease from (iii) $3 million related to commissions and fees revenue from businesses or books of business divested in the preceding twelve months and (iv) $10 million related to the Litigation-Related Impact. Contingents for the first quarter of 2026 increased by $54 million, or 126%, compared to the same period in 2025. This increase was driven primarily by (i) improved underwriting results for our carrier partners, growth in premium volume and qualifying for certain Contingents that we did not qualify for in the prior year and (ii) recent acquisitions. The Organic Revenue with Contingents growth rate was 2.2% driven by the increase in Organic Contingents. 27 Investment and Other Income Investment and other income for the three months ended March 31, 2026 increased $2 million from the same period in 2025. The increase was driven primarily by acquisitions that had no comparable investment and other income in the same period of 2025, substantially offset 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 47.7% for the three months ended March 31, 2026 as compared to 48.6% for the three months ended March 31, 2025, an increase of 32.8%, or $224 million. This increase included $241 million of compensation costs related to acquisitions that had no comparable costs in the same period of 2025. Therefore, employee compensation and benefits expense attributable to those offices that existed in the same time periods of 2026 and 2025 decreased by $17 million. This underlying employee compensation and benefits expense decrease was primarily related to: (i) lower non-cash stock-based compensation expense driven by the company's performance; (ii) a decrease in claims costs within our self-insured health plan; (iii) a decrease in commissions, base compensation and bonuses driven by the Litigation-Related Impact; partially offset by (iv) an increase in staff costs attributable to new hires and annual compensation increases. Other Operating Expenses Other operating expenses represented 15.2% of total revenues for the first quarter of 2026, as compared to 13.2% for the first quarter of 2025. Other operating expenses for the first quarter of 2026 increased $103 million, or 55.4%, from the same period of 2025. This change includes: (i) $95 million of other operating expenses related to acquisitions that had no comparable costs in the same period of 2025; (ii) $26 million of Acquisition/Integration Costs associated with the Transaction, $20 million of which is included in the $95 million related to acquisitions that had no comparable costs in the same period of 2025; and (iii) increased information technology-related costs. (Gain)/Loss on Disposal Gain on disposal for the first quarter of 2026 increased $3 million from the first quarter of 2025. 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 first quarter of 2026 increased $63 million, or 118.9%, compared to the first quarter of 2025. 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 first quarter of 2026 increased $6 million, or 54.5%, compared to the first quarter of 2025. 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 first quarter of 2026 increased $53 million, or 115.2%, compared to the first quarter of 2025. The increase is due to higher debt balances resulting from debt issuance in the second quarter of 2025 to fund the Transaction, which was partially offset by decreases in the floating rate benchmark used on our adjustable-rate debt. 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. 28 As of March 31, 2026 and 2025, 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 March 31, (in millions) 2026 2025 Change in fair value $ (1 ) $ (6 ) Interest expense accretion 6 2 Net change in earnings from estimated acquisition earn-out payables $ 5 $ (4 ) For the three months and three months ended March 31, 2026, the fair value of estimated earn-out payables was re-evaluated and resulted in decreases of $1 million and $6 million, respectively, which resulted in credits to the Condensed Consolidated Statements of Income. As of March 31, 2026, estimated acquisition earn-out payables totaled $393 million, of which $193 million was recorded as accounts payable and $200 million was recorded as other non-current liabilities. Income Taxes The effective tax rate on income from operations for the three months ended March 31, 2026 and 2025 was 19.9% and 21.8%, respectively. The decrease for the three months ended March 31, 2026 was primarily driven by the non-taxable treatment of the mark-to-market of escrow liability. 29 RESULTS OF OPERATIONS — SEGMENT INFORMATION As discussed in Note 12 to the Condensed Consolidated Financial Statements, we operate two reportable segments: Retail and Specialty Distribution. 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, it can fluctuate between comparable periods. As such, management primarily focuses on Organic Revenue growth, the growth in Contingents 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 and Organic Revenue with Contingents, both non-GAAP financial measures, for the three months ended March 31, 2026 and 2025, and the growth rates for Organic Revenue and Organic Revenue with Contingents for the three months ended March 31, 2026, including by segment, are as follows: 2026 Retail (1) Specialty Distribution Total (in millions) 2026 2025 2026 2025 2026 2025 Commissions and fees $ 1,203 $ 904 $ 677 $ 481 $ 1,880 $ 1,385 Total change $ 299 $ 196 $ 495 Total growth % 33.1 % 40.7 % 35.7 % Contingents $ (30 ) $ (14 ) $ (67 ) $ (29 ) $ (97 ) $ (43 ) Core commissions and fees $ 1,173 $ 890 $ 610 $ 452 $ 1,783 $ 1,342 Acquisitions (270 ) (165 ) (435 ) Dispositions (1 ) (2 ) (3 ) Foreign Currency Translation 15 4 19 Litigation-Related Impact (10 ) — (10 ) Organic Revenue (2) $ 903 $ 894 $ 445 $ 454 $ 1,348 $ 1,348 Organic Revenue growth (2) $ 9 $ (9 ) — Organic Revenue growth rate (2) 1.0 % (2.0 )% 0.0 % Organic Contingents $ 17 $ 14 $ 57 $ 29 $ 74 $ 43 Organic Revenue with Contingents (2) $ 920 $ 908 $ 502 $ 483 $ 1,422 $ 1,391 Organic Revenue with Contingents growth (2) $ 12 $ 19 $ 31 Organic Revenue with Contingents growth rate (2) 1.3 % 3.9 % 2.2 % (1) The Retail segment includes commissions and fees reported as “Other” in the Segment Information table in Note 12 of the Notes to the Condensed Consolidated Financial Statements, which includes corporate and consolidation items. (2) A non-GAAP financial measure. 30 The reconciliation of commissions and fees included in the Condensed Consolidated Statements of Income to Organic Revenue and Organic Revenue with Contingents, both non-GAAP financial measures, for the three months ended March 31, 2025 and 2024, including by segment, and the growth rates for Organic Revenue and Organic Revenue with Contingents for the three months ended March 31, 2025, including by segment, are as follows: 2025 Retail (1) Specialty Distribution Total (in millions) 2025 2024 2025 2024 2025 2024 Commissions and fees $ 904 $ 804 $ 481 $ 433 $ 1,385 $ 1,237 Total change $ 100 $ 48 $ 148 Total growth % 12.4 % 11.1 % 12.0 % Contingents $ (14 ) $ (14 ) $ (29 ) $ (32 ) $ (43 ) $ (46 ) Core commissions and fees $ 890 $ 790 $ 452 $ 401 $ 1,342 $ 1,191 Acquisitions (72 ) (7 ) (79 ) Dispositions (3 ) — (3 ) Foreign Currency Translation (1 ) (1 ) (2 ) Litigation-Related Impact — — — Organic Revenue (2) $ 818 $ 786 $ 445 $ 400 $ 1,263 $ 1,186 Organic Revenue growth (2) $ 32 $ 45 $ 77 Organic Revenue growth rate (2) 4.1 % 11.3 % 6.5 % Organic Contingents $ 13 $ 14 $ 29 $ 32 $ 42 $ 46 Organic Revenue with Contingents (2) $ 831 $ 800 $ 474 $ 432 $ 1,305 $ 1,232 Organic Revenue with Contingents growth (2) $ 31 $ 42 $ 73 Organic Revenue with Contingents growth rate (2) 3.9 % 9.7 % 5.9 % (1) The Retail segment includes commissions and fees reported as “Other” in the Segment Information table in Note 12 the Notes to the Condensed Consolidated Financial Statements, which includes corporate and consolidation items. (2) A non-GAAP financial measure. ` 31 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, 2026, including by segment, is as follows: (in millions) Retail Specialty Distribution Other Total Total Revenues $ 1,210 $ 682 $ 9 $ 1,901 Income before income taxes 317 221 (5 ) 533 Income Before Income Taxes Margin (1) 26.2 % 32.4 % NMF 28.0 % Amortization 73 43 — 116 Depreciation 10 6 1 17 Interest 8 8 83 99 Change in estimated acquisition earn-out payables 11 (6 ) — 5 EBITDAC (2) 419 272 79 770 EBITDAC Margin (2) 34.6 % 39.9 % NMF 40.5 % (Gain)/loss on disposal (1 ) — — (1 ) Acquisition/Integration Costs 18 6 2 26 Mark-to-market of escrow liability — — (64 ) (64 ) EBITDAC - Adjusted (2) $ 436 $ 278 $ 17 $ 731 EBITDAC Margin - Adjusted (2) 36.0 % 40.8 % NMF 38.5 % (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 March 31, 2025, including by segment, is as follows: (in millions) Retail Specialty Distribution Other Total Total Revenues $ 907 $ 487 $ 10 $ 1,404 Income before income taxes 284 166 (23 ) 427 Income Before Income Taxes Margin (1) 31.3 % 34.1 % NMF 30.4 % Amortization 37 16 — 53 Depreciation 6 4 1 11 Interest 15 9 22 46 Change in estimated acquisition earn-out payables (6 ) 2 — (4 ) EBITDAC (2) 336 197 — 533 EBITDAC Margin (2) 37.0 % 40.5 % NMF 38.0 % (Gain)/loss on disposal 2 — — 2 Acquisition/Integration Costs — — — — Mark-to-market of escrow liability — — — — EBITDAC - Adjusted (2) $ 338 $ 197 $ — $ 535 EBITDAC Margin - Adjusted (2) 37.3 % 40.5 % NMF 38.1 % (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 77% of the Retail segment’s commissions and fees revenue is commission based. 32 Financial information relating to our Retail segment is as follows: Three months ended March 31, (in millions, except percentages) 2026 2025 % Change REVENUES Core commissions and fees $ 1,173 $ 891 31.6 % Profit-sharing contingent commissions 30 14 114.3 % Investment and other income 7 2 250.0 % Total revenues 1,210 907 33.4 % EXPENSES Employee compensation and benefits 614 447 37.4 % Other operating expenses 178 122 45.9 % (Gain)/loss on disposal (1 ) 2 150.0 % Amortization 73 37 97.3 % Depreciation 10 6 66.7 % Interest 8 15 (46.7 %) Change in estimated acquisition earn-out payables 11 (6 ) NMF Total expenses 893 623 43.3 % Income before income taxes $ 317 $ 284 11.6 % Income Before Income Taxes Margin (1) 26.2 % 31.3 % EBITDAC - Adjusted (2) $ 436 $ 338 29.0 % EBITDAC Margin - Adjusted (2) 36.0 % 37.3 % Organic Revenue growth rate (2) 1.0 % 4.1 % Organic Revenue with Contingents growth rate (2) 1.3 % 3.9 % Employee compensation and benefits relative to total revenues 50.7 % 49.3 % Other operating expenses relative to total revenues 14.7 % 13.5 % (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 March 31, 2026 increased 33.4%, or $303 million, as compared to the same period in 2025, to $1,210 million. The $282 million increase in core commissions and fees revenue was driven by: (i) approximately $270 million related to the core commissions and fees revenue from acquisitions that had no comparable revenues in the same period of 2025; (ii) an increase of $9 million related to net new and renewal business; (iii) an increase from the impact of Foreign Currency Translation of $15 million; (iv) an offsetting decrease of $1 million related to commissions and fees recorded in 2025 from businesses since divested; and (v) an offsetting decrease of $10 million related to the Litigation-Related Impact. Contingents for the first quarter of 2026 increased $16 million to $30 million, as compared to the same period in 2025. This increase was due to acquisitions completed within the last twelve months. The Retail segment’s total commissions and fees increased by 32.9%. The Organic Revenue growth rate was 1.0% and the Organic Revenue with Contingents growth rate was 1.3% for the first quarter of 2026. The Organic Revenue growth rate was driven by net new business written during the preceding twelve months and growth on renewals of existing customers. Growth for renewal business was moderated by slowing rate increases, rate decreases for certain lines of coverage, and a change to the revenue model in our specialty pharmacy consulting business. Income before income taxes for the three months ended March 31, 2026 increased 11.6%, or $33 million, as compared to the same period in 2025, to $317 million. The primary factors driving this increase were: (i) a decrease in intercompany interest expense and (ii) the profit associated with the net increase in revenue as described above, partially offset by (iii) an increase in estimated acquisition earn-out payables, (iv) an increase in amortization expense; and (v) Acquisition/Integration Costs. EBITDAC - Adjusted for the three months ended March 31, 2026 increased 29.0%, or $98 million, as compared to the same period in 2025, to $436 million. EBITDAC Margin - Adjusted for the three months ended March 31, 2026 decreased to 36.0% from 37.3% in the same period in 2025. The decrease in EBITDAC Margin - Adjusted was primarily driven by:(i) the timing of revenues and profit associated with certain recent acquisitions which was partially offset by; (ii) leveraging our expense base; and (ii) lower compensation as a result of teammate defections associated with our pending litigation with a start-up US broker. 33 Specialty Distribution Segment The Specialty Distribution Segment is composed of three divisions; our programs business, known as Arrowhead Programs; our wholesale brokerage business, known as Bridge Specialty Group; and our specialty program business, known as Arrowhead Specialty . Arrowhead Programs manages a diverse portfolio of professional liability, personal lines, commercial lines, public entity and specialty programs supported by over 100 well-capitalized insurance carriers. In most cases, the insurance carriers that support these programs have delegated underwriting and, in many instances, claims-handling authority. These programs are generally distributed through a global network of independent agents and brokers, including Brown & Brown retail agents, and offer targeted products and services designed for businesses, individuals, specific industries, trade groups, professions, public entities, municipalities, and niche markets. This division also operates our write-your-own flood insurance carrier, WNFIC and participates in a quota share captive and an excess of loss layer captive. 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. Bridge Specialty Group offers global wholesale brokerage and delegated binding/underwriting capabilities across multiple lines, to independent agents and brokers, including Brown & Brown retail agents. Our teams across the globe provide industry knowledge and expertise, for placements across multiple lines of coverage based on access to admitted, excess and surplus lines carriers, as well as the Lloyd’s markets in the United Kingdom. Arrowhead Specialty offers solutions across affinity organizations, administrative services, captives, reinsurance, travel/accident, warranty, and life & health. Arrowhead Programs' and Arrowhead Specialty's captives businesses provide additional underwriting capacity that enables 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 Contingents. These captives purchase reinsurance or participate in limited tranches of the underwriting risk in order to limit the Company's exposure to claims expenses. Approximately 81% of the Specialty Distribution segment’s commissions and fees revenue is commission based. Financial information relating to our Specialty Distribution segment is as follows: Three months ended March 31, (in millions, except percentages) 2026 2025 % Change REVENUES Core commissions and fees $ 610 $ 452 35.0 % Profit-sharing contingent commissions 67 29 131.0 % Investment and other income 5 6 (16.7 )% Total revenues 682 487 40.0 % EXPENSES Employee compensation and benefits 273 199 37.2 % Other operating expenses 137 91 50.5 % (Gain)/loss on disposal — — — % Amortization 43 16 168.8 % Depreciation 6 4 50.0 % Interest 8 9 (11.1 )% Change in estimated acquisition earn-out payables (6 ) 2 400.0 % Total expenses 461 321 43.6 % Income before income taxes $ 221 $ 166 33.1 % Income Before Income Taxes Margin (1) 32.4 % 34.1 % EBITDAC - Adjusted (2) $ 278 $ 197 41.1 % EBITDAC Margin - Adjusted (2) 40.8 % 40.5 % Organic Revenue growth rate (2) (2.0 %) 11.3 % Organic Revenue with Contingents growth rate (2) 3.9 % 9.7 % Employee compensation and benefits relative to total revenues 40.0 % 40.9 % Other operating expenses relative to total revenues 20.1 % 18.7 % 34 (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 Specialty Distribution segment’s total revenues for the three months ended March 31, 2026 increased 40.0%, or $195 million, as compared to the same period in 2025, to $682 million. The $158 million increase in core commissions and fees revenue was driven by: (i) approximately $165 million related to the core commissions and fees revenue from acquisitions that had no comparable revenues in the same period of 2025; and (ii) an increase from the impact of Foreign Currency Translation of $4 million; partially offset by: (iii) a $9 million decrease in net new business, renewal business, and fee revenues; and (iv) a $2 million decline in core commission and fees revenue from dispositions that had no comparable revenues in the same period of 2026. Contingents for the first quarter of 2026 increased approximately $38 million as compared to the first quarter of 2025. This increase is a result of favorable loss ratios, increased premiums, and to a lesser extent acquisitions completed in the past twelve months. The Organic Revenue with Contingents growth rate was 3.9% driven by the increase in Organic Contingents. The Specialty Distribution segment’s total commissions and fees increased by 40.7%, with Organic Revenue decreasing 2.0% and Organic Revenue with Contingents increasing 3.9% for the three months ended March 31, 2026. The Organic Revenue with Contingents growth rate was driven by: (i) increased Contingents; (ii) net new and retained business; (iii) and exposure unit expansion; partially offset by (iv) declining rates on catastrophe ("CAT") property. Income before income taxes for the three months ended March 31, 2026 increased 33.1%, or $55 million, as compared to the same period in 2025, to $221 million due to: (i) the growth of EBITDAC – Adjusted described below; (ii) a decrease in estimated acquisition earn-out payables; partially offset by: (iii) increased amortization expense; and (iv) Acquisition/Integration Costs. EBITDAC - Adjusted for the three months ended March 31, 2026 increased 41.1%, or $81 million, from the same period in 2025, to $278 million. EBITDAC Margin - Adjusted for the three months ended March 31, 2026 increased to 40.8% from 40.5% in the same period in 2025. EBITDAC Margin - Adjusted increased due to: (i) the increase in Contingents (ii) the timing of revenues associated with recent acquisitions; and (iii) disciplined expense management. Other As discussed in Note 12 of the Notes to Condensed Consolidated Financial Statements, the “Other” line items 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 under the Second Amended and Restated Credit Agreement (the “Second Amended and Restated Credit Agreement”), which as of March 31, 2026 provided additional capacity for up to $475 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 twelve 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. 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 $1,375 million of incremental borrowing capacity as of March 31, 2026. Cash and cash equivalents totaled $1,003 million at March 31, 2026 reflecting a decrease of $76 million from the $1,079 million balance at December 31, 2025. This decrease is primarily due to the payment of annual bonus compensation and deferred contingent consideration paid during the quarter offset by our cash generated. 35 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, mark-to-market escrow liability 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 was 1.02 and 1.04 for March 31, 2026 and December 31, 2025, respectively. Cash flows generated from operating activities totaled $262 million and $213 million for the three months ended March 31, 2026 and 2025, respectively, representing an increase of $49 million. Operating cash flows generated in 2026 included $427 million from net income before non-controlling interests with $167 million of non-cash adjustments, offset by $332 million from changes in working capital. The growth in cash from operations is primarily due to recent acquisitions. Investing Cash Flows Cash flows used for investing activities were $38 million and $79 million for the three months ended March 31, 2026 and 2025, respectively, a decrease of $41 million. Acquisitions During the three months ended March 31, 2026, the Company completed eight acquisitions (including book purchases) and paid $17 million, net of cash, and cash and cash equivalents held in a fiduciary capacity acquired. Net cash paid for acquisitions decreased $50 million in the three months ended March 31, 2026, down from $67 million during the same period in 2025. Dispositions The Company received minimal cash proceeds from the sale of businesses, fixed assets and customer accounts during the three months ended March 31, 2026, compared to $9 million proceeds received in the same period in 2025. The decrease is attributed to smaller sales of businesses in the current period. Capital Expenditures Capital expenditures amounted to $21 million and $17 million in the three months ended March 31, 2026 and 2025, 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 Net cash flows used by financing activities totaled $354 million and $218 million in the three months ended March 31, 2026 and 2025, respectively, an increase of $136 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 $76 million and $90 million in the three months ended March 31, 2026 and 2025, respectively, related to fiduciary receivables and liabilities. Acquisition Earn-outs Payments on acquisition earn-outs related to the original acquisition date estimates totaled $150 million and $26 million in the three months ended March 31, 2026 and 2025, respectively. Dividends During the three months ended March 31, 2026 and 2025, the Company paid cash dividends of $57 million and $43 million, respectively, an increase of $14 million, or 32.6%. On April 27, 2026, the board of directors approved a quarterly cash dividend of $0.165 per share to be paid on May 20, 2026. 36 Debt Net cash proceeds from long term debt totaled $206 million in the three months ended March 31, 2026, compared to net cash use of $19 million in the same period of 2025. Total debt at March 31, 2026 was $7,822 million net of unamortized discount and debt issuance costs, which was an increase of $209 million compared to December 31, 2025. The increase includes the drawdown of $225 million on the Revolving Credit Facility and the amortization of discounted debt related to our various unsecured senior notes and debt issuance cost amortization of $3 million, offset by $19 million of payments on outstanding term loan balances. During the three months ended March 31, 2026, the Company repaid $6 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 $163 million as of March 31, 2026. The Company's next scheduled principal payment is due in June 2026 and is equal to $6 million. During the three months ended March 31, 2026, the Company repaid $13 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 $350 million as of March 31, 2026. The Company’s next scheduled principal payment is $13 million due in June 2026. During the first quarter, the Company drew $225 million on the Revolving Credit Facility in connection with a share repurchase program. There is an outstanding balance of $325 million on the Revolving Credit Facility as of March 31, 2026. Common Stock On February 12, 2026, the Company entered into accelerated share repurchase agreement ("ASR") with an investment bank to purchase an aggregate $250 million of the Company's common stock. The program ended on March 9, 2026 and during the period, the Company received a total of 3,574,890 shares of the Company's common stock. At March 31, 2026, the remaining amount authorized by our board of directors for share repurchases was approximately $1,150 million. Contractual Cash Obligations As of March 31, 2026, 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 $ 7,888 $ 1,238 $ 850 $ 1,500 $ 4,300 Other liabilities (1) 852 43 602 37 170 Operating leases 366 72 126 87 81 Interest obligations 4,091 373 637 547 2,534 Maximum future acquisition contingent payments (2) 689 303 386 — — Total contractual cash obligations (3) $ 13,886 $ 2,029 $ 2,601 $ 2,171 $ 7,085 (1) Includes the escrow liability which is included within “Other Long-Term Liabilities” issued in connection with the Transaction. The liability reflects the fair value of shares and cash held in escrow to secure certain indemnification obligations of the Accession equityholders related to businesses that are in run-off or discontinued. Once all claims related to certain indemnification matters described in the Merger Agreement are resolved, the remaining amount in the escrow account will be released to the equityholders. The Company believes this escrow, plus other available funds, is sufficient to cover any potential costs associated with those specified matters subject to indemnification under the Merger Agreement. The fair value of the escrow liability is remeasured at each reporting date, with changes recognized in earnings. The timing and amount of any future settlement remains subject to the achievement of contractual milestones and may vary from the amounts disclosed. The value as of March 31, 2026, was $552 million. (2) Includes $393 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. Certain acquisition agreements include provisions with no maximum potential earn-out amount. The amount recorded for these acquisitions as of March 31, 2026 is $248 million. (3) Does not include approximately $56 million of current liability for a dividend of $0.1650 per share approved by the board of directors on April 27, 2026 to be paid on May 20, 2026. 37 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 duration fixed income funds. These investments are subject to interest rate risk. The fair value of our invested assets at March 31, 2026 and December 31, 2025 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 March 31, 2026, we had $838 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 translation exchange rate risk having businesses operating outside of the U.S. in the following functional currencies, British pounds, Canadian dollar, euros and, to a lesser extent, other currencies. Based upon our foreign currency rate exposure as of March 31, 2026, an immediate 10% hypothetical change of foreign currency exchange rates would not have a material effect on our Condensed Consolidated Financial Statements.