UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-13619

BROWN & BROWN, INC.

(Exact name of Registrant as specified in its charter)

Florida		59-0864469
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
300 North Beach Street, Daytona Beach, FL		32114
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (386) 252-9601

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.10 Par Value	BRO	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the Registrant’s common stock, $0.10 par value, outstanding as of October 25, 2021 was 282,426,839.

BROWN & BROWN, INC.

INDEX

		PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited):
	Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2021 and 2020	5
	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2021 and 2020	6
	Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020	7
	Condensed Consolidated Statements of Equity for the three and nine months ended September 30, 2021 and 2020	8
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020	10
	Notes to Condensed Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42
Item 4.	Controls and Procedures	42
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	44
Item 1A.	Risk Factors	44
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 6.	Exhibits	45
SIGNATURE		46

2

Disclosure Regarding Forward-Looking Statements

Brown & Brown, Inc., together with its subsidiaries (collectively, “we,” “Brown & Brown” or the “Company”), makes “forward-looking statements” within the “safe harbor” provision of the Private Securities Litigation Reform Act of 1995, as amended, throughout this report and in the documents we incorporate by reference into this report, including those relating to the potential effects of the COVID-19 pandemic (“COVID-19”) on the Company’s business, operations, financial performance and prospects. You can identify these statements by forward-looking words such as “may,” “will,” “should,” “expect,” “anticipate,” “believe,” “intend,” “estimate,” “plan” and “continue” or similar words. We have based these statements on our current expectations about potential future events. Although we believe the expectations expressed in the forward-looking statements included in this Quarterly Report on Form 10-Q and the reports, statements, information and announcements incorporated by reference into this report are based upon reasonable assumptions within the bounds of our knowledge of our business, a number of factors could cause actual results to differ materially from those expressed in any forward-looking statements, whether oral or written, made by us or on our behalf. Further, statements about the effects of COVID-19 on our business, operations, financial performance and prospects may constitute forward-looking statements and are subject to the risk that the actual impacts may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond our control, including the scope and duration of COVID-19 (including through any new variant strains of the underlying virus), the effectiveness of and accessibility to vaccines, the pace and rate at which vaccines are administered, actions taken by governmental authorities in response to COVID-19, and the direct and indirect impact of COVID-19 on our customers, insurance carriers, third parties and us. Many of these factors have previously been identified in filings or statements made by us or on our behalf. Important factors which could cause our actual results to differ materially from the forward-looking statements in this report include but are not limited to the following items, in addition to those matters described in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”:

• COVID-19 and the resulting governmental and societal responses, the severity and duration of COVID-19 (including through any new variant strains of the underlying virus), the effectiveness of and accessibility to vaccines, the pace and rate at which vaccines are administered, and the resulting impact on the U.S. economy, the global economy, and the Company’s business, liquidity, customers, insurance carriers and third parties;

• The inability to retain or hire qualified employees, as well as the loss of any of our executive officers or other key employees;

• Acquisition-related risks that could negatively affect the success of our growth strategy, including the possibility that we may not be able to successfully identify suitable acquisition candidates, complete acquisitions, integrate acquired businesses into our operations, and expand into new markets;

• A cybersecurity attack or any other interruption in information technology and/or data security and/or outsourcing relationships;

• The requirement for additional resources and time to adequately respond to dynamics resulting from rapid technological change;

• The loss of or significant change to any of our insurance company relationships, which could result in additional expense, loss of market share or material decrease in our profit-sharing contingent commissions, guaranteed supplemental commissions or incentive commissions;

• Adverse economic conditions, natural disasters, or regulatory changes in states where we have a concentration of our business;

• The inability to maintain our culture or a change in management, management philosophy or our business strategy;

• Risks facing us in our Services Segment, including our third-party claims administration operations, that are distinct from those we face in our insurance intermediary operations;

• The limitations of our system of disclosure and internal controls and procedures in preventing errors or fraud, or in informing management of all material information in a timely manner;

• The significant control certain existing shareholders have over the Company;

• Risks related to our international operations, which may require more time and expense than our domestic operations to achieve or maintain profitability;

• Changes in data privacy and protection laws and regulations or any failure to comply with such laws and regulations;

• Improper disclosure of confidential information;

• The potential adverse effect of certain actual or potential claims, regulatory actions or proceedings on our businesses, results of operations, financial condition or liquidity;

• Uncertainty in our business practices and compensation arrangements due to potential changes in regulations;

3

• Regulatory changes that could reduce our profitability or growth by increasing compliance costs, technology compliance, restricting the products or services we may sell, the markets we may enter, the methods by which we may sell our products and services, or the prices we may charge for our services and the form of compensation we may accept from our customers, carriers and third-parties;

• A decrease in demand for liability insurance as a result of tort reform litigation;

• Our failure to comply with any covenants contained in our debt agreements;

• The possibility that covenants in our debt agreements could prevent us from engaging in certain potentially beneficial activities;

• Changes in the U.S.-based credit markets that might adversely affect our business, results of operations and financial condition;

• Risks associated with the current interest rate environment, and to the extent we use debt to finance our investments, changes in interest rates will affect our cost of capital and net investment income;

• Disintermediation within the insurance industry, including increased competition from insurance companies, technology companies and the financial services industry, as well as the shift away from traditional insurance markets;

• Changes in current U.S. or global economic conditions;

• Effects related to pandemics, epidemics, or outbreaks of infectious diseases;

• Conditions that result in reduced insurer capacity;

• Quarterly and annual variations in our commissions that result from the timing of policy renewals and the net effect of new and lost business production;

• Intangible asset risk, including the possibility that our goodwill may become impaired in the future; and

• Other risks and uncertainties as may be detailed from time to time in our public announcements and Securities and Exchange Commission (“SEC”) filings.

Assumptions as to any of the foregoing, and all statements, are not based upon historical fact, but rather reflect our current expectations concerning future results and events. Forward-looking statements that we make or that are made by others on our behalf are based upon a knowledge of our business and the environment in which we operate, but because of the factors listed above, among others, actual results may differ from those in the forward-looking statements. Consequently, these cautionary statements qualify all of the forward-looking statements we make herein. We cannot assure you that the results or developments anticipated by us will be realized or, even if substantially realized, that those results or developments will result in the expected consequences for us or affect us, our business or our operations in the way we expect. We caution readers not to place undue reliance on these forward-looking statements, which speak only as of their dates. We assume no obligation to update any of the forward-looking statements.

4

PART I — FINANCIAL INFORMATION

ITEM 1 — Financial Statements (Unaudited)

BROWN & BROWN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

	Three months ended September 30,						Nine months ended September 30,
(in thousands, except per share data)	2021			2020			2021			2020
REVENUES
Commissions and fees	$	769,654		$	671,396		$	2,309,610		$	1,966,056
Investment income		430			349			909			1,844
Other income, net		221			2,217			2,414			3,364
Total revenues		770,305			673,962			2,312,933			1,971,264
EXPENSES
Employee compensation and benefits		394,997			362,767			1,220,107			1,058,907
Other operating expenses		101,071			91,403			291,690			274,103
(Gain)/loss on disposal		(288	)		(994	)		(4,332	)		(1,285	)
Amortization		29,523			27,059			88,562			80,190
Depreciation		9,200			6,647			25,457			18,836
Interest		16,175			13,234			48,802			42,334
Change in estimated acquisition earn-out payables		23,138			15,318			20,643			4,996
Total expenses		573,816			515,434			1,690,929			1,478,081
Income before income taxes		196,489			158,528			622,004			493,183
Income taxes		50,135			24,549			136,617			110,020
Net income	$	146,354		$	133,979		$	485,387		$	383,163
Net income per share:
Basic	$	0.52		$	0.47		$	1.72		$	1.35
Diluted	$	0.52		$	0.47		$	1.71		$	1.35
Dividends declared per share	$	0.093		$	0.085		$	0.278		$	0.255

See accompanying Notes to Condensed Consolidated Financial Statements.

5

BROWN & BROWN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

	Three months ended September 30,					Nine months ended September 30,
(in thousands)	2021			2020		2021			2020
Net income	$	146,354		$	133,979	$	485,387		$	383,163
Foreign currency translation		(2,918	)		—		(6,700	)		—
Unrealized (loss) gain on available-for-sale debt securities, net of tax		(83	)		—		150			—
Comprehensive income	$	143,353		$	133,979	$	478,837		$	383,163

See accompanying Notes to Condensed Consolidated Financial Statements.

6

BROWN & BROWN, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except per share data)	September 30, 2021			December 31, 2020
ASSETS
Current Assets:
Cash and cash equivalents	$	943,969		$	817,398
Restricted cash		481,922			454,517
Short-term investments		14,428			18,332
Premiums, commissions and fees receivable		1,205,655			1,099,248
Reinsurance recoverable		220,430			43,469
Prepaid reinsurance premiums		411,252			377,615
Other current assets		120,621			147,670
Total current assets		3,398,277			2,958,249
Fixed assets, net		208,343			201,115
Operating lease assets		187,828			186,998
Goodwill		4,565,156			4,395,918
Amortizable intangible assets, net		1,045,280			1,049,660
Investments		31,349			24,971
Other assets		192,933			149,581
Total assets	$	9,629,166		$	8,966,492
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Premiums payable to insurance companies	$	1,214,835		$	1,198,529
Losses and loss adjustment reserve		220,430			43,469
Unearned premiums		411,252			377,615
Premium deposits and credits due customers		140,109			102,505
Accounts payable		226,143			190,497
Accrued expenses and other liabilities		386,372			371,737
Current portion of long-term debt		290,000			70,000
Total current liabilities		2,889,141			2,354,352
Long-term debt less unamortized discount and debt issuance costs		1,755,487			2,025,906
Operating lease liabilities		171,571			172,935
Deferred income taxes, net		374,595			344,222
Other liabilities		330,753			314,854
Shareholders’ Equity:
Common stock, par value $0.10 per share; authorized 560,000 shares; issued 300,929 shares and outstanding 282,432 shares at 2021, issued 299,689    shares and outstanding 283,004 shares at 2020		30,093			29,969
Additional paid-in capital		830,066			794,909
Treasury stock, at cost at 18,497 shares at 2021, 16,685 shares at 2020, respectively		(673,902	)		(591,338	)
Accumulated other comprehensive loss		(6,550	)		—
Retained earnings		3,927,912			3,520,683
Total shareholders’ equity		4,107,619			3,754,223
Total liabilities and shareholders’ equity	$	9,629,166		$	8,966,492

See accompanying Notes to Condensed Consolidated Financial Statements.

7

BROWN & BROWN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)

	Common Stock
(in thousands, except per share data)	Shares Outstanding			Par Value			Additional Paid-In Capital			Treasury Stock			Accumulated Other Comprehensive Loss			Retained Earnings			Total
Balance at December 31, 2020		283,004		$	29,969		$	794,909		$	(591,338	)	$	—		$	3,520,683		$	3,754,223
Net income																	199,744			199,744
Net unrealized holding (loss) gain on available-for-    sale securities								(508	)				263							(245	)
Foreign currency translation														(5,253	)		122			(5,131	)
Shares issued - employee stock compensation plans
Employee stock purchase plan								3,032												3,032
Stock incentive plans		1,400			140			15,506												15,646
Agency acquisition		107			11			4,881												4,892
Repurchase shares to fund tax withholdings for non-cash stock-based compensation		(973	)		(98	)		(44,954	)											(45,052	)
Purchase of treasury stock		(1,558	)								(70,020	)								(70,020	)
Cash dividends paid ($0.0925 per share)																	(26,092	)		(26,092	)
Balance at March 31, 2021		281,980		$	30,022		$	772,866		$	(661,358	)	$	(4,990	)	$	3,694,457		$	3,830,997
Net income																	139,290			139,290
Net unrealized holding (loss) gain on available-for-    sale securities														(30	)					(30	)
Foreign currency translation														1,471						1,471
Shares issued - employee stock compensation plans
Employee stock purchase plan								1,988												1,988
Stock incentive plans		(83	)		(8	)		12,067												12,059
Directors		17			2			897												899
Repurchase shares to fund tax withholdings for non-cash stock-based compensation		(61	)		(6	)		(3,198	)											(3,204	)
Purchase of treasury stock		(232	)								(11,405	)								(11,405	)
Cash dividends paid ($0.0925 per share)																	(26,063	)		(26,063	)
Balance at June 30, 2021		281,621		$	30,010		$	784,620		$	(672,763	)	$	(3,549	)	$	3,807,684		$	3,946,002
Net income																	146,354			146,354
Net unrealized holding (loss) gain on available-for-    sale securities														(83	)					(83	)
Foreign currency translation														(2,918	)					(2,918	)
Shares issued - employee stock compensation plans
Employee stock purchase plan		851			85			35,215												35,300
Stock incentive plans		7			—			11,567												11,567
Repurchase shares to fund tax withholdings for non-cash stock-based compensation		(25	)		(2	)		(1,336	)											(1,338	)
Purchase of treasury stock		(22	)								(1,139	)								(1,139	)
Cash dividends paid ($0.0925 per share)																	(26,126	)		(26,126	)
Balance at September 30, 2021		282,432		$	30,093		$	830,066		$	(673,902	)	$	(6,550	)	$	3,927,912		$	4,107,619
Balance at December 31, 2019		281,655		$	29,711		$	716,049		$	(536,243	)	$