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Brown & Brown Inc (BRO) (Q1 2024) Earnings Call Transcript Highlights: Strong Performance ...

  • Revenue: $1.25 billion, a 12.7% increase year-over-year.

  • Organic Revenue Growth: 8.6% over the first quarter of 2023.

  • Adjusted EBITDAC Margin: Improved by 130 basis points to 37%.

  • Adjusted Earnings Per Share (EPS): Grew 18.8% to $1.14.

  • Acquisitions: Completed 6 with estimated annual revenue of $16 million.

  • Effective Tax Rate: Slightly decreased from the previous year.

  • Dividends Per Share: Increased by 13% compared to the first quarter of last year.

  • Segment Performance - Retail: Organic growth of 7.2%.

  • Segment Performance - Programs: Organic growth of 11.8%, total revenue growth of 16.9%.

  • Segment Performance - Wholesale Brokerage: Organic growth of 10.8%, total revenue growth of 15.4%.

  • Cash Position: Ended the quarter with approximately $580 million of operating cash.

Release Date: April 23, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Q & A Highlights

Q: Can you provide insights into the margin breakdown for this quarter and if this is indicative of the year's trend, particularly with National Programs leading? A: (R. Andrew Watts - Executive VP, CFO & Treasurer) Margins can fluctuate quarterly. The first quarter performance was strong, and while there might be ups and downs, the sale of certain services businesses will likely enhance the year-over-year margin increase.

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Q: With the moderation in property CAT pricing, how might increased demand for coverage impact Brown & Brown's organic growth in Q2 and beyond? A: (J. Powell Brown - CEO, President & Director) The market is experiencing pricing fatigue, and while there is potential for buying more limits due to increased capacity, the immediate likelihood is low due to this fatigue. However, if there are no significant storms, the downward pricing pressure may continue.

Q: Could you discuss the impact of different rate movements on your business, particularly the 2/3 to 1/3 ratio mentioned earlier? A: (J. Powell Brown - CEO, President & Director) The company writes a significant amount of CAT property and casualty, with the impact varying by account size and type. While specific business proportions aren't disclosed, the focus is on competitive programs for customers, balancing rate pressures across different lines.

Q: What was the one-time benefit in the Programs side mentioned in your comments, and how should we consider this for future modeling? A: (R. Andrew Watts - Executive VP, CFO & Treasurer) About $7 million of the contingent commissions recorded were related to finalizing prior year estimates, which are not expected to recur in Q1 of the next year.

Q: How does the contingent commission outlook for the year look, especially considering the first quarter performance? A: (R. Andrew Watts - Executive VP, CFO & Treasurer) The first quarter's performance suggests potentially qualifying for more than initially expected. The outlook remains generally positive, barring unforeseen impacts from storm seasons.

Q: Can you provide more details on the factors driving the strong growth in the Programs segment and expectations for the rest of the year? A: (J. Powell Brown - CEO, President & Director) The growth is driven by new business and strong underwriting performance, particularly in segments with significant wind or earthquake exposure. While competition is increasing, the outlook remains positive due to the company's disciplined underwriting and strong carrier relationships.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.