Executive Summary / Key Takeaways

• Diversified Growth Engine: Brown & Brown, Inc. ($BRO) continues its disciplined growth strategy, marked by robust organic expansion and strategic acquisitions, notably the pending Accession deal, which is set to significantly enhance its capabilities and market diversification.
• Solid Financial Performance: The company delivered strong financial results in Q2 2025, with total revenues increasing 9.1% and adjusted diluted net income per share growing 10.8% to $1.03, supported by effective expense management and strong cash flow generation.
• Adapting to Market Dynamics: While facing moderating insurance rates, particularly in CAT property, and fluctuating new business, BRO's diversified segments and proactive approach to market softening demonstrate its resilience and ability to maintain profitability.
• Strategic Capital Deployment: A conservative balance sheet and strong cash flow conversion enable disciplined capital deployment for M&A and shareholder returns, including a 31st consecutive annual dividend increase.
• Competitive Edge through Specialization: BRO's deep regional expertise, MGA/MGU leadership, and strategic investments in technology and talent position it strongly against larger, more generalized competitors, driving long-term value.

The Enduring Foundation: Diversification and Disciplined Growth

Brown & Brown, Inc. has forged an 86-year legacy as a diversified insurance agency, wholesale brokerage, insurance programs, and service organization. Founded in 1939, the company's journey has been characterized by a relentless focus on strategic expansion, evidenced by over 700 acquisitions since 1993. This history of inorganic growth has been instrumental in building a highly diversified business across lines of coverage, geography, industry, and customer segments, underpinning its consistent financial performance.

The company's core strategy revolves around a decentralized, sales-and-service-driven culture that fosters responsiveness and accountability. This approach has allowed BRO to cultivate deep regional expertise and strong customer relationships, which are critical differentiators in a competitive industry. While primarily operating as an agent or broker, not assuming underwriting risks, BRO strategically participates in the underwriting process through its Wright National Flood Insurance Company (WNFIC) and two capitalized captive insurance facilities. These captives provide additional underwriting capacity, generate incremental revenues, and allow the company to participate in underwriting results with limited exposure, primarily in property insurance for earthquake and wind-exposed properties.

BRO's commitment to operational excellence is further supported by ongoing investments in technology. While the company does not disclose proprietary product technologies, its strategic focus on information technology is evident through increased IT-related costs and continuous investments aimed at enhancing capabilities and streamlining processes. This commitment to leveraging technology for operational efficiency and client solutions has been recognized externally, with an InsurTech leader honoring Brown & Brown for its "enduring impact on the independent insurance channel." Such recognition underscores the company's ability to integrate technology effectively to serve its customers and partners, contributing to its competitive moat through enhanced service delivery and operational resilience.

Business Segments: Pillars of Performance

Brown & Brown operates through three primary reportable segments: Retail, Programs, and Wholesale Brokerage. Each segment contributes uniquely to the company's diversified revenue stream and overall profitability. Starting in Q3 2025, the Programs and Wholesale Brokerage segments will be combined into a new "Specialty Distribution" division, reflecting an ongoing strategic alignment.

The Retail segment serves a broad spectrum of commercial, public, professional, and individual clients, offering property, casualty, and employee benefits insurance products. In Q2 2025, Retail revenues reached $697.00 million, with organic growth of 3.0%. This growth was primarily driven by net new and renewal business, though it experienced moderation due to slowing admitted and CAT property rates, as well as lower new business production in the quarter. The segment's adjusted EBITDAC margin was 27.50% in Q2 2025, impacted by the seasonality of the Quintes acquisition (acquired Q4 2024), which recognizes approximately 60% of its annual revenues in Q1. Management anticipates a good new business pipeline for Q3, expecting fluctuations but overall positive momentum.

The Programs segment acts as a managing general underwriter (MGU), offering specialized insurance products and services through a network of independent agents. This segment's unique value proposition lies in its delegated underwriting authority from carriers, enabling it to serve niche markets and participate in underwriting results. In Q2 2025, Programs generated $381.00 million in total revenues, achieving 4.6% organic growth. This performance was bolstered by strong contributions from lender-placed business and favorable contingent commissions, which increased by $5.00 million due to improved underwriting results. The segment's adjusted EBITDAC margin expanded significantly to 52.80% in Q2 2025, driven by organic revenue growth, incremental contingent commissions, and effective expense management.

The Wholesale Brokerage segment specializes in excess and surplus (E&S) commercial and personal lines insurance, distributed primarily through independent agents and brokers. This segment provides access to markets for harder-to-place risks. In Q2 2025, Wholesale Brokerage reported total revenues of $182.00 million, with organic growth of 3.9%. Growth was broad-based across most lines, though partially offset by rate declines and property renewal seasonality. Profit-sharing contingent commissions for the segment increased by $4.00 million, reflecting improved underwriting results and increased written premium. The adjusted EBITDAC margin for Wholesale Brokerage increased to 34.10% in Q2 2025, benefiting from higher contingent commissions and expense leveraging, despite some impact from a recent lower-margin acquisition.

Financial Performance: A Story of Consistent Strength

Brown & Brown's financial performance reflects its strategic execution and operational discipline. For the six months ended June 30, 2025, the company reported total revenues of $2.689 billion, an increase of 10.4% over the same period in 2024. Net income attributable to the company for this period was $563.00 million, up 2.4% year-over-year. Adjusted EBITDAC for the six months reached $1.005 billion, growing 13.6%, with an adjusted EBITDAC margin of 37.4%, expanding by 110 basis points compared to the prior year.

The company's cash flow generation remains a significant strength. For the first half of 2025, operating cash flow totaled $538.00 million, a substantial increase of $165.00 million over the first half of 2024. This improvement was driven by higher operating margins and continued improvements in working capital. The company maintains a robust liquidity profile, with cash and cash equivalents totaling $8.893 billion at June 30, 2025, largely augmented by the proceeds from its recent equity and debt issuances. This strong cash position supports its ongoing M&A strategy and commitment to shareholder returns, including a 31st consecutive annual dividend increase, with the latest quarterly cash dividend of $0.15 per share approved for payment on August 20, 2025.

Competitive Landscape and Strategic Positioning

Brown & Brown operates in a highly competitive insurance brokerage industry, vying with global giants and specialized regional players alike. Key competitors include Marsh & McLennan Companies, Inc. (MMC), Aon plc (AON), Arthur J. Gallagher & Co. (AJG), and Willis Towers Watson Public Limited Company (WTW).

When comparing financial performance, BRO demonstrates strong profitability. Its latest TTM Net Profit Margin stands at 20.34%, which is competitive with or superior to many peers (MMC: 17%, AON: 17%, AJG: 13%, WTW: -0.0099%). Similarly, BRO's TTM EBITDA Margin of 35.27% indicates robust operational efficiency. While larger competitors like MMC and AON may boast greater global scale and broader consulting services, BRO's strategic positioning emphasizes deep regional expertise, a decentralized operating model, and leadership in the MGA/MGU space. This focus allows BRO to deliver tailored solutions and foster strong client relationships, often leading to greater operational efficiency and customer loyalty in its core middle-market and upper-middle-market segments.

BRO's competitive advantages are rooted in its strong brand, extensive distribution network, and the regulatory licenses that grant it access to diverse markets. These factors contribute to pricing power and recurring revenue, fostering stable cash flows. While some competitors, like AON, emphasize advanced analytics and technology, BRO's strategic investments in IT aim to enhance its existing capabilities and streamline processes, rather than developing a distinct technology product. This approach allows BRO to maintain a lean operational structure while still leveraging technology for competitive impact, as evidenced by industry recognition for its influence in the independent insurance channel.

However, BRO faces vulnerabilities, including potential customer concentration in certain niches and a less pronounced emphasis on cutting-edge technological innovation compared to some rivals. The company's M&A strategy, while a core growth driver, also introduces integration risks. The competitive landscape is dynamic, with increasing activity from private equity-backed firms and aggressive pricing from certain markets, such as London in the E&S property space. Despite these challenges, BRO's balanced mix of brokerage and delegated authority businesses, coupled with its disciplined M&A approach, provides a resilient framework for sustained performance.

Outlook and Guidance: Navigating a Shifting Market

Management's outlook for the remainder of 2025 reflects a pragmatic view of evolving economic and insurance market conditions. They anticipate a generally stable economic backdrop, with continued job expansion and moderate growth, similar to the latter half of 2024. However, business leaders remain cautiously optimistic, with potential delays in investment decisions due to uncertainties surrounding tariffs, interest rates, inflation, and geopolitical matters.

In terms of insurance pricing, management expects admitted rates to continue moderating in the second half of 2025, returning to more "realistic ranges" after a period of elevated increases. CAT property rates are projected to continue decreasing in Q3 and Q4, subject to the outcome of the hurricane season, with Q2 2025 seeing a faster-than-expected decline (down 15-30%). Conversely, casualty rates (primary and excess layers) are expected to maintain their upward trend (5-10% increases), driven by ongoing large legal judgments and inflation. Professional liability rates are anticipated to remain relatively flat to slightly down.

For the full year 2025, Brown & Brown anticipates its adjusted EBITDAC margins to be "relatively flat" compared to 2024. This outlook considers potential headwinds from investment income and contingent commissions, which are expected to be "down slightly" compared to 2024, with the impact of California wildfires and the 2025 Atlantic hurricane season remaining unknown variables. Amortization expense is estimated to be $194.00 million in 2025. Interest expense is projected to be in the range of $170.00 million to $180.00 million, while interest income is expected to be between $65.00 million and $70.00 million. The effective tax rate is anticipated to remain consistent with 2024, in the 24% to 25% range.

The pending acquisition of Accession, expected to close in August 2025, is a cornerstone of the company's strategic future. This transformative deal, funded by a successful $4.4 billion equity issuance and $4.2 billion multi-tranche bond issuance in June 2025, is poised to further enhance BRO's diversification and specialization. Management expects to realize revenue and expense synergies from Accession over the next 3.5 years. While the acquisition introduces certain risks, including integration challenges and potential underwriting risks from Accession's captive insurance operations, BRO's historical discipline in M&A and strong balance sheet position it to manage these effectively.

Conclusion

Brown & Brown, Inc. stands as a testament to the power of a diversified business model, disciplined growth, and a deeply ingrained operating culture. The company's consistent financial performance, marked by robust revenue growth, expanding margins, and strong cash flow generation, underscores its ability to thrive in a dynamic insurance landscape. While the industry faces moderating rates in certain lines and persistent challenges like rising healthcare costs and legal judgments, BRO's strategic investments in talent, technology, and targeted acquisitions like Accession are designed to enhance its competitive standing and long-term profitability.

The company's commitment to disciplined capital deployment, evidenced by its conservative balance sheet and consistent dividend increases, provides a clear path for continued shareholder value creation. As the insurance market continues to evolve, Brown & Brown's blend of specialized expertise, operational efficiency, and strategic adaptability positions it as a compelling investment opportunity, poised for sustained success through its enduring market leadership.