Brown & Brown Inc (BRO) — Q1 2023 Earnings Call Transcript

Good morning, everybody, and welcome to our Q1 2023 earnings call. Before we get into any detail, Q1 was an outstanding quarter and we're very pleased with our results. I'll provide some high-level comments around our performance for the quarter, along with some updates on the insurance market and M&A landscape; then Andy will discuss our financial results in more detail. And lastly, I'll wrap up with some closing thoughts before we open it up to Q&A. I'm now on slide number four. We delivered over $1.1 billion of revenue, growing 23% in total and 12.6% organically. To put this in perspective, 11 years ago our total annual revenues were $1.1 billion. Our adjusted EBITDAC margin remained strong for the quarter at 35.7%. We delivered earnings per share of $0.83, growing 7.8% over the first quarter of 2022. On the M&A front, we completed seven acquisitions with estimated annual revenues of $11 million. We're very pleased to have delivered another outstanding quarter of good profitable growth. I'm on slide five. From an economic standpoint, most businesses continue to grow and companies are still looking to hire employees. Overall, business leaders are generally cautious about the future while managing the impacts of inflation and higher interest rates. We would say there's not been a material change for what we heard from our customers in the fourth quarter of 2022. The insurance marketplace is very challenging for customers in the first quarter. Across most lines of coverage, rate increases were similar to prior quarters with admitted markets up 5% to 7% and excess and surplus markets up 10% to 20%. However, there are exceptions. Workers' compensation rates continue to decline. E&S professional liability rates, primarily public company D&O continued to moderate with rates down 10% or more and in some cases they're up slightly. The areas that remain the most challenging are E&S property and excess liability due to losses and increased insured values. Carriers continue to evaluate their coastal property portfolios. These actions result in more participants generally on a property placement. We continue to see underwriters increase insured values per square foot, thus customers are seeing premiums rise based on rates and higher values. As a result, buyers are feeling exhausted with the premium increases and more customers are purchasing loss limits, increased deductibles and decreasing overall limits. Pertaining to the Florida insurance market everyone's watching to see the impact of the legal reforms late last year. Long-term we believe the changes will be positive. However, we think it will take some time to see improvement related to the legal changes. In the interim, more policies will continue to move into Citizens. Please remember, Citizens was created to be the market of last resort for residential homes, condominiums and apartments. Right now it's one of the most competitive and at times one of the only solutions for insureds. As it relates to the overall M&A market the level of deals primarily from financial backers has slowed. That does not mean high-quality businesses don't trade at similar multiples to what we've seen over the past year. But from our perspective, we remain active and GRP had another solid quarter of M&A transactions. We're very pleased with their success and the quality of the businesses they're adding to the Brown & Brown team. Our disciplined approach remains centered on identifying high-quality companies that fit culturally and make sense financially. I'm now on slide number 6. Our Retail segment delivered impressive organic growth of 8.8%. The growth across all lines of business were driven by strong new business, good retention and continued rate increases. In addition, our employee benefits businesses performed really well in Q1. Our Program Segment delivered another outstanding quarter of double-digit organic growth of nearly 34% fueled by new business, rate increases, good retention and claims processing revenue from Hurricane Ian. This growth was driven primarily by strong performance from our lender-placed business, our diverse group of wind and quake programs and our captives. Wholesale Brokerage delivered another solid quarter with organic growth of 7% driven by good new business and retention along with continued rate increases. The rate of growth for open brokerage slowed somewhat while the growth of our delegated authority business improved. Organic growth for the Services segment was 1.6% for the quarter, driven by claims processing revenue primarily related to the winter storms. I'd like to thank our 15,000-plus teammates throughout the world for delivering these strong results. Now I'd like to turn it over to Andy to discuss our financial results in more detail.

Thank you, Powell, and good morning everyone. Since Powell covered our GAAP results earlier, I will now review our consolidated financial results on an adjusted basis. We are currently on slide number 7. As a reminder, our adjusted measures exclude the change in estimated earn-out payables, one-time acquisition costs related to our acquisitions of GRP, Orchid, and BdB last year, as well as gains or losses from business divestitures. This quarter, it also excludes $11 million linked to resolving a business matter that is considered one-time in nature, relating to a pre-acquisition event from a business we acquired over 10 years ago. We believe that isolating these items offers a clearer view of our business performance and enhances comparability. The reconciliation of these adjusted amounts to the most comparable GAAP amounts can be found in the appendix of this presentation. Total revenues reached $1.1 billion in the first quarter, establishing a new record for us with a growth of 23.5% compared to the previous year. Income before taxes rose by 13.2%, and EBITDAC increased by 23.2%. We achieved good leverage across the business, despite some additional one-time costs this quarter that offset the benefits of incremental investment income. Additionally, the margins for GRP are more balanced throughout the year compared to our higher margins in the first quarter, which negatively impacted the first quarter margin by about 40 basis points. Consequently, GRP is expected to enhance our margins in subsequent quarters. Income before taxes grew at a slower pace than total revenues due to additional interest and amortization expenses tied to acquisitions we made last year. The effective tax rate stood at 20%, aligning with our expectations, compared to 16.8% in the first quarter of last year. The increase in the tax rate stems from a reduced benefit from the vesting of incentive stock shares that typically occurs in the first quarter. Our diluted net income per share rose by 7.7% from last year to $0.84. Changes in the liabilities and assets related to our deferred compensation plan negatively affected salaries and related expenses as a percentage of revenue year-over-year by 150 basis points, although there was an offsetting benefit in other operating expenses. Finally, our weighted average share count slightly increased, and dividends paid rose about 12% compared to the first quarter of last year. Moving to slide number 8, the Retail segment had an impressive quarter, delivering organic growth of 8.8%. The adjusted EBITDAC margin slipped slightly to 37% for the quarter. While the margin remained robust, it was impacted by approximately 100 basis points due to the phasing of revenue and profit from GRP compared to our higher Q1 margin in the United States, which is driven by our employee benefits business. We expect this trend to reverse and positively influence our margins in future quarters. We also faced some year-over-year challenges linked to higher travel and related expenses, but we anticipate these will decrease as the year progresses.

Thanks, Andy for a great report. We continue to watch the impact of inflation and increases in interest rates on the economies in which we operate. As a result, we expect business leaders will continue to be cautious regarding the pace of their hiring and investing over the coming quarters. With that said, most of our customers are prospering. In the marketplace, buyers have pricing fatigue due to increases delivered over the last several years. We anticipate similar rate increases in coastal property in the near to intermediate term. As a result, we're seeing buyers either decrease limits, increase deductibles or possibly opt for loss limits. In some instances, we're seeing personal lines customers paying off their mortgage and going without wind coverage in their personal policies. We continue to talk with our carrier partners about capacity, flight equality, and diversification. Our MGAs and MGUs have delivered good underwriting results over many years due to our disciplined approach. As a result, this positions us well to retain and/or increase our capacity that will help deliver incremental organic growth from our programs. We are pleased with the performance of our recent international acquisitions of GRP and BdB. They're growing nicely, winning new business and retaining customers. In the case of GRP, they're also completing high-quality acquisitions and adding to our capabilities and geographic footprint. Many of you have seen that we completed our first Canadian retail acquisition of Highcourt Breckles on April 1. They're located in Toronto with approximately 110 teammates and will add to our capabilities in the Canadian marketplace. We'd like to welcome all teammates that have joined us over the past few months. And lastly, we're in a strong position with a good M&A pipeline. Overall, we feel really positive about our business and how our team is executing. We're winning more new business and doing a good job of retaining our customers. Our focus is on leveraging the total capabilities of Brown & Brown for the benefit of our customers both domestically and internationally. We're looking forward to having a good 2023, and have a lot of momentum coming out of the first quarter. With that, we'll turn it back over to Mikee and open the lines for Q&A.

Hi. Good morning. My first question is on the outlook for margin expansion for the full year. I was hoping you could break out maybe by segment where you're expecting to see margin expansion. I'm more focused on Retail there where in the 1Q the margin was still down ex-GRP. So if you could maybe break out the pluses and minuses there that'd be great.

Yes. Good morning, Wes, Andy here. So we don't provide that level of granularity on outlook by the segments and everything, but just a couple of things maybe to take into consideration. Our comments earlier is we had about 100 basis points of headwinds for GRP in Retail for the quarter. That will reverse itself over the coming quarters and will be a benefit. And as we mentioned the cost around travel and entertainment some of the inflation side of it that will continue to lessen as the year comes along and we're on a more comparative basis. So hopefully that kind of gives you an idea of what it should look like.

Got it. And was there any impact in Retail from wage inflation and hiring as well? I know you called that out in a couple of other segments.

Yes, we experienced some of that. While we didn't specifically highlight it, it's present in several of our segments since we are consistently investing in the business. This can lead to fluctuations from quarter to quarter due to hiring and growth activities.

And last one I know you haven't guided to FX in the past, but is there an FX headwind that's kind of built into that margin guide as well for maybe the second quarter?

No, sir.

Great. Thanks for taking the questions.

Thank you.

Hi. Thanks. Good morning. My first question was also on the margin side. So, first of all, I just want to understand, I guess, the only thing you're calling out, I guess, from having a significant impact on margins in the quarter is that 40 basis points all from GRP. And then as we think about that reversing over the course of the year, does that get better in all other quarters? I just want to think about the seasonality of that. And then also would you expect in that updated guidance that your margins will expand in the other three quarters of the year?

Let's see if we can take a few of those pieces there. Let's see so on the first one on the GRP and the 40 basis points is yes, that will reverse in the back end of the year and it's relatively evenly spread not perfect. So it's not 25% each quarter, but pretty even through the year consistent with what we've communicated in the past in there. Other thing to keep in mind and we had mentioned it is, we did have some one-time items in the quarter that are in our numbers that offset the benefit from our investment income. So, again, we'd not envision that those would recur in future quarters that are out there.

And then is the Q1 investment income, right, I think it's trending better than what you guys had provided last quarter. I think you had said $14 million to $17 million for the full year. Is the Q1 a good run rate level for investment income?

Yeah, probably somewhere in that range all depends upon what the balances are on cash, which can move up and down but that's probably a reasonable number. When you think about it from an absolute, what you wouldn't want to do is put that on incremental year-over-year remember because rates were going up last year as the year was coming along. So think about it on a run rate basis when you model it, okay?

Yeah, it’s great. And then last one, retail. You guys both highlighted it seems like a good environment there both on the core brokerage and the benefits business. I guess, good growth in both in the Q1. Anything one-off or anything you guys want to highlight as we think about just the go-forward organic growth of that segment?

No, I wouldn't say anything that we haven't said Elyse. We're really pleased with how retail is performing. And as I like to say, we continue to hire talented teammates to help us service the market and producing the business that we're bringing on and that those customers that we already have, our existing customer base. So nothing out of the ordinary about growth itself, but I would just tell you we are very pleased with where the retail business is positioned both domestically and with our new acquisitions, not just like last year in GRP but in Ireland and excited about Canada as well.

Thank you.

Thank you.

Good morning Paul and Andy. I guess, I'm going to go back Powell to your comments about the impact of all the challenges in Florida. It's my impression that if there's a migration to Citizens that might be some pressure on commission rates for the company. And so maybe you could spend a minute and just talk to us about the economic conditions in Florida, considering what's going on in the property insurance market. Are you seeing any other pressures economically with any of the business developments et cetera? And then talk about the migration of Citizens and its impact on your business?

Sure. First, I want to emphasize that the impact of Florida today, with over $2 billion in revenue, is very different from what it was 15 years ago. It’s important to start with that context. From an economic perspective, our customer base in Florida appears to be doing fairly well. The construction sector is thriving, and businesses are expanding. However, that doesn't necessarily mean their profit margins are increasing, as various industries are experiencing different inflation rates and cost impacts. But if you go out to dinner, places are busy, indicating the economy in Florida is robust. Regarding Citizens, I want to outline two scenarios since there are both similarities and differences for those familiar with the situation in 2007. To draw a parallel, Citizens is considered the market of last resort now just as it was back then. In 2007, if the market rate for a condominium was $0.85 and Citizens quoted a rate of $1, followed by the Governor providing wind mitigation credits that reduced Citizens’ rate to $0.50, buyers effectively saw their insured values drop from $0.85 to $0.50. This led to negative growth for us back then, especially with a different concentration in Florida. At that time, Citizens would accept any risks. Now, looking at 2023, Citizens has specific underwriting guidelines with no cutting of rates. For the same scenario, if the market is at $0.85 and Citizens at $1 or $1.25, with the broader market at rates like $1.75 or $1.50, Citizens is enforcing underwriting criteria based on factors like roof construction, therefore qualifying specific accounts. This situation is much more complex compared to 2007. Transitioning an account from the E&S market to Citizens would likely see commissions flat or slightly down, reflecting the increased effort needed. In the wholesale segment, there’s potential for an account to shift entirely to Citizens, which could result in the loss of that account for us. Alternatively, Citizens might offer a wind-only quote while we provide an ex-wind quote, which could lead to a significant reduction in premiums, ultimately resulting in reduced commission for us as well. It’s crucial for everyone to recognize the significant differences between now and 2007, as understanding these changes is vital.

Yes. That's great color. Just a point of clarification. Is it fair to sort of I'm guessing right now but is it – when I look at your Florida residential book of property, is it fair to say that Citizens is about 20% of that book, or do you think it is a lower or higher percentage?

I think now I want to make sure that you – when you say residential, are you talking about residential homes, or you talking about condos and apartments as well?

Yes. Residential homes, condos and apartments.

Okay. So the short answer is no, I don't think it's 20% presently. And what you find is there's a lot of activity in the residential, specifically condos and apartments in the first half of the year. So there's a lot of activity right now going on. And as I said, there are properties, not only where you live but up and down the West Coast and the East Coast, that are currently in the E&S market that have been submitted to Citizens but we don't know yet, if they're going to qualify. So how that ultimately plays out this year is yet to be determined.

Yes Greg, regarding the limitation that Powell mentioned on the homeowner side, in Tri-County, I believe the limit is around $999,000. When considering how many homes fall below $900,000 or $999,000 in that area, the number is quite low due to the expensive real estate market. For the rest of the state, the limit is around $700,000. Not everything qualifies for Citizens, and there’s a lot of discussion about this. However, only specific properties meet the criteria. Additionally, there are significant quality limitations for what can be accepted. We wanted to highlight this because the market today is very different from what it was in 2007, and there has been much speculation about how this affects our figures. We have frequently discussed diversifying our organization, emphasizing that we are not solely Florida-based like we were 15 to 20 years ago. Nonetheless, our Florida businesses had a strong performance in the first quarter, and we are pleased with how both Retail and Wholesale and Programs are doing.

Got it. That's great detail. I believe we could likely discuss this topic for an entire hour. However, I will shift gears and focus my final question on your comments regarding GRP. You mentioned their acquisitions, but I haven't seen any press releases from Brown. How is this reflected in the reported numbers, and where can we see the acquisition activity within GRP as reported in Brown & Brown's consolidated statements?

Yes Greg, you should see those on our IR website. We tag them inside there. They come out underneath of a GRP press release that's got Brown & Brown in the footer, but we pull all those over into our normal IR website. So they should all be there.

Got it. Regarding your approach to organic growth, you've established a standard by excluding acquisitions from this measurement. I assume you are applying the same conservative method when calculating organic growth in GRP. Is that correct?

Correct.

Yes.

Got it. Thanks for your answers.

Yes.

Thank you.

Hey. Thanks for taking my question. So broadly across the business and maybe specifically to employee benefits, I was curious on your expectations for exposure growth for the duration of the year just considering your outlook for the economy to continue to moderate.

Yes. So I think the way we look at it is we still have a positive outlook on exposure growth, not so much inside of existing clients but the growth in number of clients. So we do believe that our customer base on a net basis will actually expand in terms of adding new people to their plans but the biggest part of the growth will be new benefits plans where we're helping people manage their costs and the delivery of what they want to their employee base.

Great. Thank you. And just as a follow-up the pressure in professional lines, did the D&O pressure, which I think is most acute in the E&S market accelerate this quarter? And do you see any signs of stabilization in D&O rates?

Yes. The short answer is that we did notice a slight acceleration in the decline. That's correct. It's important to remember that directors and officers (D&O) rates were increasing more rapidly and earlier than the trends we see in property. They had reached a level that the market considered appropriate or high, leading to more participants re-entering. One could argue, though I’m not suggesting this myself, that if someone on the risk-bearing side is managing earnings volatility by closely analyzing their catastrophe (CAT) property portfolio, they would need to reinvest those assets, potentially into areas like professional liability. This could explain the continued price decreases we're observing in professional liability. Some people are adopting this viewpoint, and I just wanted to share this perspective for your consideration.

Got it. Thank you. That’s helpful.

Thank you. Good morning. My first question goes to the Retail segment and employee benefits. I think the last couple of quarters you'd called out the potential for some pressure on growth from employee benefits and yet, I think, numbers actually came in quite strong. Can you maybe talk about what changed or what actually happened this quarter relative to your expectations there? And would that then create a headwind for 1Q 2024?

So, do we believe there will be a headwind for the first quarter of 2024? Not really, as we assess the situation today. That's the first part. However, you are correct to ask. If we look back at our previous comments, there was one specific business that had an adverse effect in the fourth quarter. That particular business has continued to present challenges in the first quarter. Nonetheless, the other businesses have performed exceptionally well. As Andy has mentioned previously, we have a front-end loaded revenue recognition due to employee benefits in the first quarter, which is tied to our growth in new employee benefits business. This growth, along with the strong performance of our other businesses, effectively offsets the minor headwind from that one business. Overall, we feel optimistic. I don’t want to convey the impression that our confidence is limited to just employee benefits. We also feel very positive about our property and casualty and personal lines businesses in Retail. I bring this up because there were participants on the call in the fourth quarter who perceived the organic growth as a declining trend, which is not the case, as we previously stated. We just wanted to clarify that.

Yaron, we noted in the fourth quarter that one of our specialty aligned businesses faced challenges, which we expected to continue into the first quarter. Those challenges did materialize, but as we indicated during the earnings call, we anticipated they would be modest in the first quarter, and that is indeed what we experienced. Therefore, we were very pleased with the 8.8% organic growth despite these modest challenges. Looking ahead, we do not see these challenges as a significant concern for those businesses in the upcoming quarters.

Got it. Thanks. And then, my second question is with regards to the captive revenues. Is it fair to think of them as, kind of, full margin revenues, at least in kind of the first half of the year until we hit storm season barring an earthquake?

Yes, I wouldn't call it full margin, because we do have some operating expenses in there, but they are much higher margin in non-storm periods when we have claim cost, yes.

And that's about wind and earthquakes, I just wanted to make sure you were aware of it. Thank you very much.

Thank you.

Thanks, guys. Good morning. Maybe just following up on that last one. I think you mentioned you had $10 million of earned premium for the captives in the quarter, but the - I think the guidance was $30 million to $35 million. So I was just wondering what's in that guide for the year, assume some level of losses?

We are currently estimating that there will be some fluctuations. In the third quarter of last year, when we recognized the claim costs for Ian's, we also had some accelerated premiums at that time. Therefore, the figures will vary slightly from quarter to quarter. We took that into account, so you may not see a perfectly aligned distribution across each quarter in terms of earned basis. We expect a slight decrease in the third quarter.

Thank you for that information. Regarding capital deployment, how much debt repayment do you expect to undertake moving forward? Do you have a specific leverage ratio in mind that you aim to achieve?

Why don't we tackle the last one first. So what we have said publicly is on a gross basis 0 to 3. We're very comfortable with that range and 0 to 2.5 on a net basis. Michael, if you look back over time, we traditionally will move on the higher end of that range around acquisitions, and then we trend back down. And we normally kind of operate in kind of that middle part of the range in both net and gross, if you look at it over a longer period of time. And that's probably not unreasonable for our business. That will kind of continue to go down. One is, we repay debt normal maturities that are coming along on a quarterly basis and then as we just continue to grow the organization. If you look back we normally will delever about 0.25 to 0.5 turn per year is a pretty decent amount.

And that's also assuming, if we're going to continue to invest in the business and we have to continue to weigh and measure M&A opportunities as they come along. But yeah.

Thanks, guys.

Thanks, and good morning. One, I guess, small question. When we look at the international acquisitions do they have a different fiduciary investment income profile than the legacy domestic business? Is there more investment income associated with their placements than the direct build test we have in the US?

Hey, good morning, Meyer. No, we don't earn as much on a fiduciary income internationally as what we do in the US. And again keep in mind in the US that, there's still limitations even here where you have trust restricted states that only allow you to earn interest up to your bank fees and then where we have relationships also with our carrier partners. Some of those also will only allow us on banks. So you don't see everything move on a linear basis.

Okay. But it seems like the year-over-year improvement you're referring to is primarily due to interest rates rather than a change in mix.

Correct. Yes, yeah. Don't read that that was all benefit of GRP and/or anything of that nature now.

Okay. I just wanted to confirm something. I believe you mentioned this in your recent comments, but one of the LPI insurers has significant catastrophe losses in the quarter, and you're saying that there were no losses in the captive reinsurance component?

Can you repeat that one more time please?

Yes, repeat the first part of that question. You were breaking up or I didn't hear it exactly.

Okay. I just want to confirm that there were no losses in the layer of reinsurance that you funded for captive. The reason I'm asking is because we did see some significant storm losses that impacted the lender-placed market.

No, there isn't. But keep in mind that the captives we have are not linked with our lender-placed business. They are associated with large condominiums as well as earthquakes, specifically for wind and quake coverage. Additionally, we did not experience any storm-related claim costs in the first quarter.

Okay. Perfect. Thanks so much for the clarification.

Thank you. Good morning, Powell. I wanted to express some optimism regarding our program capacities. Last quarter, you mentioned that you would be monitoring this as it could potentially impact organic growth. Have there been any changes in that regard over the past three months?

No. I don't want to give you the impression that there's some like found new capacity. I wish we could say that. But I think the issue is this every carrier or market participant is evaluating how they want to deploy their capacity. As I said earlier carriers are looking for more protection against earnings volatility nothing new. They're looking for balance of risk to the extent possible where we have a very large group of programs that are not just CAT. So we're able to balance those with people and so that's a very positive and we've had really good results over a long period of time. So we feel like as I've said before that we are effectively an outsourced insurance company. We can do everything other than bear the risk. And as a result of that and the results that we have delivered if in fact someone is considering, expanding or repositioning, which is a better thing. I don't think of it as expanding but repositioning capacity then we typically like to think that we're going to be near the top of that list because they've seen our results and they've seen the growth that we've had in the past. So there's no found bucket of gold under the rainbow. It's not that kind of deal. But I do feel like there's some really good discussions around us being able to keep capacity, which is as equally as important. I view that as a win Mark not just cutting capacity, because a lot of people have had a lot of capacity cuts. And if we can keep our capacity that to wind and then we might get cut a little bit somewhere but we get a little new. And so on a net basis, we're about even or maybe up just slightly.

Thank you for that. And then you mentioned that Florida construction sounds like its good. How about nationally?

What I would say, Mark, is that if you look at various locations, it's impressive. For instance, Nashville, Tennessee, Atlanta, and several areas in the Northeast like Boston, as well as Colorado and Phoenix, all show a lot of activity. However, there's a challenge in our industry, particularly in the specialty lines business related to auto dealers. Our work with auto dealers is facing some downturn as their units are decreasing. Their pricing is reverting to MSRP levels or lower, which is affecting used car values. This is directly tied to the increases in interest rates. Eventually, this trend will likely change. That said, many other sectors are actively seeking employees. The restaurant industry is particularly struggling, especially with businesses that are not classified as sit-down establishments. They find it difficult to attract workers, while fast-food places are facing their own challenges.

Yeah, yeah. And then one final question. Andy I don't know if you gave the revenue impacts from the winter storm claims?

No, we didn't break it out but we did mention it Mark in the commentary on services. And yeah we did pick up some claims from the winter storms, again nothing really, really material in there but a few.

Okay, great. Thank you.

Yeah. And just for clarity those sit in services, okay?

Yeah, understood. All right.

Hello, Elyse.

Hi. Sorry, I was on mute. Thanks for taking me back. I just had a follow-up question. So, just thinking through some of the stuff that came up earlier in the call in terms of just the captive and Ian revenue and the margin. So I know you said the captive isn't 100% margin. So if I assume Ian and the captive right, which I think was $18 million revenue is 75% margin and I adjust the overall margin for that, and I add back the 40 basis point headwind from GRP, I still get that you're about a 35.4% margin for the quarter. So will it still would have been down a little bit year-over-year right? And you did have the NII tailwind. What am I missing, I guess, in thinking about this math and then tying it back to your guide for margin improvement over the balance of the year?

Hi, Elyse. There are a few points to consider that we've mentioned in our comments. We thought it would be easier to provide guidance for the full year because there are always fluctuations and variations in business mix involved. It's not simply a matter of adding a few numbers together. Our goal is to keep things straightforward for everyone and offer a clear perspective on what the full year looks like for the organization.

Okay. And then when thinking from here, I guess, the only, I guess, one-off items embedded within the updated full year guide is just right programs will be some stronger revenue from the captive right until we kind of annualize that later in the year. So that could help margins, I guess, in the second quarter and then also just the higher investment income. Are there any other like headwinds or tailwinds in that updated full year guide for the rest of the three quarters?

In the second quarter, your observation is valid. However, we should remember that revenue from the captives will begin to stabilize. This means we won't experience the same organic growth each quarter going forward as we did in the first quarter. We are essentially writing a specific amount of premium as we committed within the captive, which is inherently limited. This is why we anticipate revenue remaining steady by the end of the year. Additionally, we must consider the one-time bonus programs from the fourth quarter of last year and the $8 million in claims related to Ian. These factors should be accounted for when evaluating organic growth in the latter part of the year and its possible impact on margins.

Okay. And then one last one the $30 million to $35 million of captive revenue this year what was that last year in your full year…?

Yes, we said it was about $25 million last year.

Okay. Thank you.

Yes. Thank you. Appreciate it.

Thank you very much, Mike. We appreciate everybody's time, and we look forward to talking to you next quarter, very pleased with the outcome and look forward to talking to you then. Thank you.