Brown & Brown Inc (BRO) — Q4 2024 Earnings Call Transcript

Thank you, Michelle. Good morning, everyone, and welcome to our fourth quarter earnings call. First, we'd like to express our deepest condolences to the many individuals affected by the California wildfires. The magnitude of the devastation caused by these events is horrific. We're committed to assisting those impacted by these terrible fires. Now transitioning to our results. Our fourth quarter performance was just outstanding, capping off another incredible year, where our team delivered nearly $5 billion in revenue, which included double-digit organic growth and strong earnings per share growth, as well as strong margin expansion. These results are only possible through the dedication of our more than 17,000 teammates delivering for our customers every day. Over the years, we've worked diligently to build a highly diversified business that consistently generates best-in-class financial results. The reason we can deliver these results is due to our unique operating culture. Now let's get into the results for the fourth quarter. I'm on Slide number 4. For the fourth quarter, we delivered revenues of $1.4 billion, growing 15% in total and 14% organically over Q4 of 2023. Our adjusted EBITDAC margin improved by almost 200 basis points to 33%, and our adjusted earnings per share grew 24.5% to $0.86. On the M&A front, we completed 10 acquisitions with estimated annual revenues of $137 million. Across the board, it was a very strong quarter. I'm on Slide 5. For the full year of 2024, we delivered revenues of $4.8 billion, growing 13% in total and over 10% organically. Our adjusted EBITDAC margin was over 35%, increasing more than 100 basis points. On an adjusted basis, our diluted net income per share grew over 18% to $3.84, and we generated nearly $1.2 billion of cash from operations. We had another good year of M&A, completing acquisitions with approximately $174 million of annual revenue, with the largest being Quintes in the Netherlands. We'd like to extend a warm welcome to all the new teammates that joined us during 2024, and we're pleased with the quality of the organization and our new capabilities. I'm on Slide 6. From an economic standpoint, there were no major changes for the markets in which we operate compared to the last few quarters. Many business leaders have shifted from being cautious to cautiously optimistic. In addition, we did not see companies materially change their levels of investment, as they're still hiring and growing their revenues generally at levels similar to the second and third quarters of 2024. Overall, the economies in which we operate are relatively stable, which we view as a good backdrop for our growth opportunities in 2025 and beyond. From an insurance pricing standpoint, rate increases for most lines continued; however, they're moderating downward compared to last quarter and last year, except for ongoing upward pressure on auto and casualty. The line that had the largest change for the quarter compared to last year was CAT property, which we'll discuss in more detail. Pricing for employee benefits was similar to prior quarters as medical and pharmacy costs continue to be up 7% to 9%. This ongoing upward pressure and the complexity of healthcare are driving strong demand for our employee benefits consulting businesses. With the investments we've made and continue to make, we are well positioned to help companies of any size navigate these market challenges. Rates in the admitted P&C market moderated slightly compared to last quarter and were up 2% to 7% for most lines versus the prior year. The downward trend for workers' compensation rates remained, and they were flat to down 5% in most states. For the fourth quarter, rate increases for non-CAT property were still in the range of flat to up 5%. For casualty, we continue to see rate increases for primary layers, mainly due to the ongoing size of legal judgments in the U.S. Consistent with the last few quarters, rates for excess casualty increased in the range of 1% to 10%. For professional liability, we saw rates flat to up 5% compared to last year. Now shifting to the E&S markets. First, in reference to CAT property, at the beginning of the fourth quarter, there was speculation that the impact of Hurricane Helene and Milton would slow the recent declines of CAT property rates or even reverse the trend entirely. Based on insured losses and the fact that both storms were heavy flooding events versus wind, CAT property rates continued to decrease throughout the fourth quarter. On average, rates were down 10% to 20%, similar to the end of the third quarter, with more customers seeing decreases closer to or in excess of 20%. From a buyer's perspective, some leveraged the lower rates to increase their limits or modify deductibles, while others realized the savings. As a result of our broad diversification, rate changes for individual lines of business generally will not materially impact the total results for our company. The major drivers of our organic growth are the economy and our ability to win net new business. This quarter was another good example. We had some lines that were up and some lines that were down, while still delivering strong results. On the M&A front, we had a good quarter. We acquired 10 great companies contributing $137 million of annual revenue, and our largest acquisition was Quintes. We're very excited about our Dutch market position and our ability to grow over the coming years. From an overall market perspective, competition remains fierce for high-quality businesses, and we're starting to see more activity from financial sponsors for smaller and mid-sized deals as interest rates are beginning to decrease. I'm now on Slide 7. Let's transition to the performance of our three segments for the fourth quarter. Retail delivered 4.4% organic growth driven by good performance in most lines of business. We're pleased with the level of net new business as it was consistent with our strong performance over the last few quarters. Organic growth was partially impacted by the timing of our new business and certain non-recurring revenue. For the full year, we delivered strong organic growth of 5.8% as our team is performing well and we feel good about our prospects for 2025. Programs delivered another outstanding quarter with organic growth of 38.6%. This performance was driven by a number of our programs with strong new business and exposure unit expansion as well as claims revenue associated with the Q3 and Q4 hurricanes. Our lender-placed business and captives performed very well, and our CAT property business continued to grow even with CAT property rates decreasing. For the full year, we grew 22.4% organically, an amazing result. As one of the largest, if not the largest global operator of MGAs and MGUs, we've made thoughtful and strategic investments creating meaningful differentiation and resiliency in the marketplace. Wholesale Brokerage delivered another good quarter with organic revenue growth of 7.1%. This performance was driven by growth across all lines through a combination of net new business and exposure unit increases, though that was somewhat muted by the downward pressure of CAT property. For the full year, wholesale delivered strong organic growth of 9.1%, and we have good momentum heading into 2025. Now I'll turn it over to Andy to get into more details regarding our financial results.

Great. Thank you, Powell. Good morning, everyone. I'll review our financial results in additional detail. When we refer to EBITDAC, EBITDAC margin, income before income taxes or diluted net income per share, we're referring to those measures on an adjusted basis. The reconciliations of our GAAP to non-GAAP financial measures can be found either in the appendix of this presentation or in the press release we issued yesterday. We're over on Slide number 8. We delivered total revenues of $1.184 billion, growing 15.4% compared to the fourth quarter of 2023. Income before income taxes increased by 27.2%, and EBITDAC grew by 22.6%. Our EBITDAC margin was 32.9%, expanding by 190 basis points over the fourth quarter of the prior year. Our effective tax rate for the quarter increased slightly to 24.7% versus 24.1% in the fourth quarter of the prior year. Diluted net income per share increased 24.6% to $0.86. Our weighted average shares outstanding increased slightly compared to last year as we continue to prioritize paying down our floating rate debt. Lastly, our dividends paid per share increased by 15.4% compared to the fourth quarter of 2023. Overall, it was a very strong quarter. We’re on Slide number 9. The Retail segment grew total revenues by 9.5%, with organic growth of 4.4%. The difference between total revenues and organic revenue was driven substantially by acquisition activity over the past year and higher contingent commissions. EBITDAC margin expanded by 100 basis points to 27.8%, driven by higher contingent commissions, finalization of full year performance incentives, and leveraging of our expense base. This growth was partially offset by higher non-cash stock-based compensation. We're over on Slide number 10. Programs had an excellent quarter with total revenues increasing 28.7% and organic growth of 38.6%. Keep in mind that a portion of this growth was associated with the $19 million charge recorded in 2023 for the change in reinsurance related to one of our captives. Growth in total revenues benefited from higher contingent commissions, but was lower than organic due to net disposition activity in the prior year. Our EBITDAC margin expanded by 660 basis points to 47.9%, primarily driven by leveraging our expense base and to a lesser extent, the sale of certain businesses in the fourth quarter of 2023. As we discussed in our third quarter earnings call, we anticipated recording $12 million to $15 million of flood claims processing revenue in the fourth quarter associated with Hurricanes Helene and Milton. As a result of faster-than-anticipated adjudication and increased average severity, we recorded approximately $28 million. With increased visibility into the timing of adjudicating claims and severity, we now anticipate recognizing revenues of approximately $14 million to $18 million in the first half of 2025, with the majority being recorded in the first quarter of this year. We’re on Slide number 11. Our Wholesale Brokerage segment had another good quarter with total revenues increasing 11.6% and organic growth of 7.1%. The incremental expansion in total revenues in excess of organic was driven substantially by higher contingent commissions. Our EBITDAC margin decreased by 140 basis points to 25.7% due to the finalization of full year performance incentives along with certain one-time costs. We're over on Slide number 12. This slide presents our results for both years. Our EBITDAC grew by 17%, with the margin increasing 130 basis points to 35.2%, with net income before income taxes growing 19.6% and net income per share was $3.84 growing by 18.2%. These compare to total revenue growth of 12.9%. Overall, we are extremely pleased with the results for 2024. From a cash perspective, we generated $1.174 billion of cash flow from operations, growing 16.2% over the prior year. Our full year ratio of cash flow from operations as a percentage of total revenues remained strong at 24.4%. As a reminder, we have also deferred the payment of approximately $90 million of federal income taxes for the third and fourth quarters of 2024 related to the IRS tax relief associated with the 2024 hurricanes. These taxes are due to be paid in the second quarter of 2025. During the quarter, we also drew down $250 million on our revolving credit facility in connection with the closing of the Quintes acquisition. For the full year, we continue to delever and finish 2024 in a conservative position as our gross debt to EBITDA ratio is in line with our 10-year average. We have a few comments regarding our outlook for 2025. As it relates to contingent commissions, based on what we know now, we anticipate contingents for the full year of 2025 will be down slightly compared to 2024. The unknown variables are the potential impact of the California wildfires and the outcome of the 2025 Atlantic hurricane season. For the Retail division, we have two items. The first relates to the phasing of revenues between quarters. Based on the forecasted timing of net new business, organic revenue growth for the first quarter is anticipated to be approximately 100 basis points lower than the organic growth for the other three quarters. The second item relates to our recent acquisition of Quintes and the phasing of its revenues and profit. In the Netherlands, a substantial number of policies are placed in the first quarter of the year. As a result, we will record approximately 60% of Quintes’ annual revenues in the first quarter, with the remaining revenues recognized fairly evenly over the following three quarters. From a margin perspective, this will improve Q1 margins and will unfavorably impact the margins in the other quarters. From a full year perspective, we anticipate revenue and EBITDAC to be within the ranges outlined during our August 2024 call. As it pertains to taxes, we expect our effective tax rate to be relatively consistent with 2024 and should be in the range of 24% to 25%. Based on the current outlook regarding interest rate cuts in 2025, we anticipate interest expense to be in the range of $170 million to $180 million for the full year. In regard to interest income, we anticipate this to be in the range of $65 million to $70 million, given recent reductions in the benchmark rate in certain territories. Finally, taking into consideration that net income and contingents will most likely be down in 2025, we're expecting our adjusted EBITDAC margins for 2025 to be relatively flat.

With that, let me turn it back over to Powell for closing comments. Thanks, Andy. Great report. From an economic standpoint, we expect the economies in which we operate to continue to be stable and grow at levels similar to the second half of ‘24. We believe this is a good backdrop for companies to grow and invest at moderate levels. From a U.S. perspective, the main topics that most business leaders are watching include policy changes from the new presidential administration, the outcomes of potential tariffs, the timing and trajectory of interest rates, inflation and finally, geopolitical matters. Depending on the outcome of each, it will influence the pace and intensity of investments in business growth. For insurance pricing, we'll provide our thoughts on rates for the first half of 2025, as too many things can change during the year. Specifically, the timely extinguishment of the California wildfires will be critical, and we're hopeful there will not be other large wildfires, as the estimated losses are significant. Then, depending on the magnitude of insured losses, there could be impacts on California pricing for both admitted and non-admitted property. Subject to this outcome, we anticipate rates for admitted lines to be relatively similar or maybe moderate downward slightly versus their pricing in the second half of 2024 across the country. There will be similar outliers that we talked about earlier. For the E&S markets, the discussion will really be split between CAT property and all other lines. We expect rates for casualty and professional liability to be similar to what they were in the second half of '24. For CAT property, we expect there will be additional downward pressure in rates compared to pricing in the fourth quarter. Based on what we're seeing, early indications in Q1 would lead us to believe that property rates could be down more than 20% based on construction quality and loss experience. On the M&A front, we feel good as we have a robust pipeline both domestically and internationally and are building relationships with lots of good companies. As a result of some of the larger transactions last year, we're starting to see a moderation in multiples in the larger PE backed businesses. From our perspective, we finished the year in a strong cash and balance sheet position and have access to capital to deploy for companies that fit culturally and make sense financially. We're looking forward to another successful year in 2025. Our businesses are performing well as we're leveraging our collective capabilities to win more new business and help our existing customers achieve better results. Our market position is great, as we will continue to leverage our solution selling model to win and retain more customers across our three segments. With that, I'll turn it back over to Michelle to open for Q&A.

Thank you, and good morning, everyone. In your comments, you spoke about net new business and the success you had last year. I was wondering if you could give us some perspective on some of the drivers there and how your outlook is for ‘25 on net new business and how it compares with the industry? And maybe inside that, sort of, map out for us what California might do, or how that might affect new business for you next year?

All right. Good morning, Greg. A couple of things that I would just say broadly across the business in ‘24. We wrote more new business than we ever have in all three of our divisions, so we're really pleased with that, number one. Number two, we anticipate our ability to continue to do that because of the capabilities that we have and we've invested in, both built and purchased. And we are working really well together, as you know, as a collaborative company to leverage the capabilities to the benefit of all of our customers. As it relates to California, and I think that's a whole kettle of fish onto itself, I think there's a lot of variables there. And so number one, the impact to the fare plan and in the event, the losses are in excess of all monies accessible both surplus and reinsurance; how do the assessments work? That's a big question. Number two, the number of admitted carriers in the state today doing business and the number of non-admitted carriers will be impacted probably by the actions on a go-forward basis. The Governor and the Insurance Commissioner there are dealing with a difficult scenario where they're trying to provide an acceptable market, so availability of product with competitive pricing of that product. And so, at a very high level, I would tell you that we believe that there is, it would seem to us that it would be a massive expansion in the E&S market in that area. Having said that, many people not in our industry don't fully understand the impact of demand surge and the need for quality contractors to rebuild. And I can't stress the importance of those two things because that drives pricing and the ability to respond; that is independent of any regulatory or permitting actions.

Gregory, are you still there?

Go ahead, Michelle.

Hey, thanks for taking my question. Yeah. Curious just to maybe start off with Retail. Last quarter, I think you all mentioned that the run rate going into the fourth quarter was about 5%. Is that still the run rate as we think about heading into next year or into 1Q '25? And could you sort of size the impact to the retail organic this quarter from the non-recurring item?

Good morning, Rob. It's Andy here. On the comment that we made in our prepared remarks regarding timing, as you know, we've got a number of businesses that we can have comparables by quarters, and timing when kind of things come in. Some of our employee benefits businesses as well as bond businesses, such as those, can move around by quarters, and then there's always just kind of timing of net new business. We think that probably impacted the organic by 40 basis points to 60 basis points in the quarter. We'll see that. That will just come back over the coming quarters. It can move around by quarters, but nothing that gave us any underlying pause in there. But we feel really good about momentum heading into 2025 and just how well the business is collaborating and winning the net new business, as Powell talked about earlier.

Okay. Thank you. And just on my follow-up, for the Program segment, it seems like a lot of moving pieces. I was just hoping you could talk about sort of the sustainability of the underlying organic growth in that segment into 2025. And also, what does a normal run rate year of contingent commissions look like in programs?

Do you want to answer the contingent?

We've had a really good year, including a strong fourth quarter in the Programs businesses, as well as across all of our segments. However, the Retail segment, particularly in personal lines, experienced some downward pressure throughout the year. Looking ahead to 2025, we anticipate that there will be some adjustments related to the finalization of the contingents for 2023, which may lead to downward pressure on contingents in that area. Additionally, the outcomes of losses in California could affect a few of our programs, but it's difficult to predict at this time.

So Robert, regarding your other question about the growth in programs this quarter, we saw an increase in total flood revenue and a $19 million reinsurance component. A significant portion of the growth in our program space over the past few years has come from wind and quake, as well as some of our other larger programs. Currently, we're noticing more rate pressure in these areas. However, this does not imply that we believe we cannot grow. Rather, we are observing a general moderation of growth rates, not just in our programs but across the industry. While we do not provide guidance on organic growth in that area, we feel very positive about our programs business. This optimism is largely due to the positive results we have achieved for our carrier partners, who are willing to adjust prices downward to stay competitive in the market. It's a challenging situation, but we are confident about 2025 and beyond for our programs.

And then Rob, also keep in mind our captive, right? And we write a specific amount of premium inside of there, and we're kind of hitting that, we'll call it, that run rate now. So we won't see that same amount of lift going into ‘25 as we've seen over kind of ‘23 and ‘24. It's performing very well, but we capitate that in order to limit the exposure.

Thanks for all the color.

Yeah. Thanks.

Hi. Thanks. My first question is on Retail. So it sounds like with some of the timing stuff, it gets you right closer to the 5, which was the adjusted Q3 number as well. Andy, I know you pointed out, right, Q1, 1% better than the other three quarters of the year. And I know you guys typically don't want to give forward guidance on that segment. But can you just help us think about triangulating that 5, maybe even just to the Q1 given this 1% headwind, that you're pointing to is the right way to think that it's 5 less 1 just given the noise we saw in the back half of 2024?

I'd like to answer that, Elyse. So I know this frustrates you, but at the end of the day, we've said that our retail business is a low to mid-single digit organic growth business. So we're not going to give you the number. But whatever the number is that you think, as you said, we've articulated that we foresee a 100 basis point headwind in Q1. That does not impact our overall outlook for the year. We just are giving you that guidance relative to Q1.

So Elyse, the easiest way to think that whatever number you have on it, so if it's a 4, 5, 6, whatever your number is, you want to keep your full year number correct or keep it in line with where you are, just adjust down the first quarter and then push up to the second, third and fourth, okay?

And then with the margin guide, right, obviously, programs, right, there's some headwind, right, from, you obviously had greater flood related revenue in ‘24 than you expect in ‘25. So I'm assuming that could be a margin headwind in that segment depending upon organic. Do the other segments, I guess, feel clean from just thinking about organic relative to margin expectations? And then one just random one, the corporate segment had like $11 million of negative EBITDA in the quarter. I just wasn't sure what was flowing through there?

I believe the guidance we provided for the full year pertains to the entire company and we do not provide a breakdown by individual segments. You are correct that we anticipate two primary areas of headwinds, which are investment income and contingents. The impact of storm claim activity this year is still uncertain, although we recorded storm claim revenues in the first quarter, and some into the second quarter from last year. Despite the known headwinds related to contingents and investment income, we expect the rest of the business to perform quite well next year. There are always variables to consider, but this should keep the total company adjusted EBITDAC margins relatively flat.

And then just the corporate in the Q4?

We just had some one-off costs in there in the fourth quarter, nothing real unusual in nature. So those can always kind of move around by quarters and by years, but nothing unusual.

Okay. Thank you.

Yeah. Thank you.

Hi. First one I had for you is just to see if you could expand on some of the commentary provided on the M&A environment. Just looking at what some of your peers have done, it seems like maybe the environment is more ripe for larger scale M&A of some of these private equity-backed companies that have gotten maybe too big for the private markets. Are you seeing more of those types of opportunities? And any way we could think about your appetite in terms of how big it you would go?

Good morning, Alex. As you know, we prioritize cultural fit and then financial sense. What's happening in the market, both last year and this year, aligns with our expectations. Over two years ago, I began discussing the potential for significant consolidation in our industry over the next three to seven years, and we are beginning to see that unfold. The firms acquired last year were all backed by private equity, and there are additional private equity firms looking to acquire large firms as well. Other strategic buyers are also considering potential acquisitions. We assess each opportunity individually based on its own merits. We are proud of our conservative financial approach, having reduced our debt to prepare for any size acquisition we might consider. This doesn't mean we will pursue every large acquisition, but we want to be in a position to do so if the right opportunity arises. We feel confident about our current business and the potential for successful stand-alone acquisitions. If a larger acquisition presents itself that aligns with our culture and financial criteria, we would certainly consider it. Overall, we are optimistic about our business direction, and it’s crucial for us to maintain the flexibility to invest as we see fit.

That's really helpful. Thanks. Next one I had is just on lender-placed. I wanted to get a sense for, does that business operate more in sort of the Southeast Florida or do you have exposure to California? I'm just trying to understand where we are in sort of the cycle of non-renewals and how that may impact lender-placed. I think Florida maybe we're hopefully getting closer to the end of a challenging environment where there were a lot of non-renewals. But in California, it seems like we're probably going into one, right? So I'm just trying to understand tailwinds and tougher cost and that sort of thing.

We'll make it simple, Alex, the entire United States.

That's clear. All right.

I'm not trying to be funny. I'm just telling you we have exposure everywhere.

Yeah. Thank you. Good morning.

Good morning.

Andy, I want to just make sure I'm thinking about the $19 million change to reinsurance items. Are we to think the impact on organic growth is the fact that you didn't have that item this year is a $19 million good guide to organic, and that's the way to calculate it?

I think that would be fine, Mark. Remember, last year in the fourth quarter, we made an adjustment for the change in treatment, which negatively impacted our organic growth in the fourth quarter of last year. Now we're on a comparative basis, so you won't see a difficult comparison next year, as that is already accounted for. We will be comparable between Q4 '24 and Q4 '25.

Understood. Then Powell, you had mentioned, I guess, in Florida, you've got a lot more experience with the need for quality contractors to rebuild. Do you have any observations about the supply of quality contractors in California?

Well, this would be purely speculative, Mark. But the answer is, based on the magnitude of the losses, there cannot humanly possible be enough contractors. I'm not trying to be funny, but I'm just saying the demand will be so massive. And one of the things that I've been told, please don't quote me on this, but is that getting a permit to build a home can take up to 1.5 years. So I believe that the Governor and the rest of the elected officials there will need to do something that will be more thoughtful in terms of expediting the rebuild. So think of something on a much larger scale, which would allow them to expedite construction. So let me lead you down the path of something like the Marshall plan.

Hey, thanks. This is Charlie on for Mike. Maybe just going back to the flattish margin expectations. Can you just provide some color on what the drivers of margin expansion, ex-contingents and ex-flood revenue since that will likely be lower? Is it more operating expense or comp and bend? And is it just operating leverage driving that or is there anything more you can touch on? Thanks.

Yeah. Hey. Good morning, Charlie. It's really around operating leverage. Again, remember, we run hundreds of businesses across the platform. So we're always looking to try to make sure we grow profitably. But also, we invest in our businesses at different times. So it's not like each one of them grows the exact same percentage and delivers the exact same profit. There's a lot of moving parts inside the organization. So we're just trying to kind of make it relatively simple for the outside world as to how we see all the moving parts. And we'll get some benefits of investments we made in previous years, and we'll make some more investments in the current year in different areas.

Got it. Thank you. And then I guess for my follow-up, we've seen some data showing relatively significant deep population out of citizens into the private market in Florida. Do you guys, is that materially expecting or impacting your guidance? Or do you see that having an impact just based on the different commission structures there?

No.

Okay. Thank you.

Hi. I was wondering if the decelerating pricing in property implies less customer shopping or in other words, are you seeing less property accounts migrate for the wholesale markets?

Absolutely not. Let me explain the dynamics using an extreme but real example. If you own cold storage warehouses in Florida with a total insured value of $50 million, having locations in Miami, Naples, Tampa, and Jacksonville, your insurance premium has increased every year for the past five years, sometimes significantly. Consequently, you're likely frustrated with the insurance situation. In this scenario, you want to ensure your broker is acting in your best interests, and typically, the market will exert downward pressure on rates. Owners and managers are eager to save money after five years of rising costs, and I believe this sentiment is understood intellectually, though perhaps not emotionally. Everyone's experience is different, but there's a lot to consider. We generate a significant amount of business under these conditions and face competition regularly, which adds pressure to prove our value and earn customer trust daily. However, Dean, don't think this market is solely competitive; there's a significant emotional element influencing buying decisions that is often overlooked.

Got it. Yes. That makes sense. Sort of staying on the topic of submissions, but moving to casualty, sort of, given that trajectory of like rate increases there. Can you just talk about the impact that's having on casualty line submission growth into the wholesale line?

It depends on which lines you are referring to. Overall, there is still a net inflow into the E&S market today, meaning more accounts are coming in than before, and we expect this trend to continue in the near to intermediate term. When we talk about casualty, we include automobile, which is an admitted line. We are still seeing regular and recurring rate increases in the automobile sector. I understand you are trying to determine if these trends are directed towards wholesale, retail, or both; the answer is that we are observing more submissions into wholesale than before. There are increasing submissions and growing written business in the non-admitted market, which is further driven by various events, some of which you may have seen in the news and some you may not, that create discomfort for people. This includes issues like convective storms in states such as Oklahoma, Nebraska, and Kansas, where they may have been in the admitted property market for a long time, but now the admitted property market may be requiring high deductibles or pushing them into the E&S market. While I am discussing property, the same idea applies to casualty. However, the wholesale market continues to grow.

And Dean, we talked about this on a couple of calls. The thing to keep in mind, you always have to look about how the buyer thinks about it. While they are focused on rate online, what they're really focused on is their premium. And they're trying to figure out how to balance the premium because ultimately, they've got to cut a check for that amount. And so they're trying to figure out what's the right balance with their retention that they want to keep through deductibles, etc. What limits do they want to buy? They're going to move or other exclusions, etc., they're going to move all of that around in order to figure out the premium. So you're not going to see that if rates go up 5% or down 5%, there's going to be a direct correlation in our commissions or potentially even direct correlation into the premium that the customer pays, okay?

Okay. Thank you.

Okay.

All right. Yeah. Good morning. Just wondering if you could talk about some of the organic hiring you've done in 2024 and the past few years, kind of, how that's stacked up? Anything you can share on that, and has that been a big driver behind the organic growth? Just curious what's going on behind the scenes there in terms of that part outside of M&A?

We have been actively hiring for the last several years, including during COVID, across all positions such as service, marketing, production, and claims adjusting. Our focus is on bringing in the best talent, and we hire individuals from other industries who have successfully transitioned into our field. We also recruit those with insurance backgrounds and benefit from the talented people we gain through our acquisitions. Overall, we are very pleased with the hiring of new team members in addition to the acquisitions from last year.

Okay. That's helpful. Regarding the captive business, I understand you projected claims cost for last quarter to be between $5 million and $10 million. What was the actual figure for the quarter? Did it fall within that range?

Yeah, it was in that range.

Okay. And then, I guess, the only question just on the captives was just to clarify. So you're saying you still see growth for 2025 and cap just not at the same rate as before. Was that the comment that you had made before?

Correct. Yes. Remember, we write a target amount of premium in there. There's more complexity behind it, but we are almost at a run rate there.

Yeah. Okay. Thanks.

Thank you. Just one quick follow-up. I'm curious if you could discuss where the contingents landed for Helene and Milton, particularly if there were any adjustments in the quarter or if you expect any adjustments in the first quarter.

Okay. Hi, Mike. Charlie, that’s right. We got Charlie, you’re stepping in there for Mike. We had some adjustments back in the third quarter for Helene, and then we had some adjustments in the fourth quarter for Milton. Nothing significant that we called out. And ultimately, we've got to see how loss development plays out there and what that might mean for '25. And I think that's why we just have a little bit of cautionary outlook on those as well as what happens in California.

Thanks, guys.

Okay. Thank you.

Thanks, Michelle. I wanted to thank everybody for your time today. We are really pleased with the performance of our business last year and equally excited about 2025. There are a lot of cool things going on at Brown & Brown, as you can tell. And I've said this before, but I am pumped on our performance last year and equally feel the same way about 2025 and beyond. Hope you all have a nice day, and we look forward to talking to you next quarter. Bye.