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, 2022

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 November 1, 2022 was 283,222,367.

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, 2022 and 2021	5
	Condensed Consolidated Statements of Comprehensive (Loss) Income for the three and nine months ended September 30, 2022 and 2021	6
	Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021	7
	Condensed Consolidated Statements of Equity for the three and nine months ended September 30, 2022 and 2021	8
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021	10
	Notes to Condensed Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	50
Item 4.	Controls and Procedures	50
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	52
Item 1A.	Risk Factors	52
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52
Item 6.	Exhibits	53
SIGNATURE		54

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. 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. 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, possibly 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”:

•The future impacts of the COVID-19 pandemic ("COVID-19") and the resulting governmental and societal responses, including the direct and indirect impact of COVID-19 on the U.S. economy, the global economy and the Company’s business, liquidity, customers, insurance carriers and third parties;

•An extended slowdown in the markets in which we operate;

•The effects of inflation;

•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 result in additional risks and require more management 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;

•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 legislation;

3

•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;

•The effects of acquisitions on our business relationships, operating results and business generally;

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

•Other factors that the Company may not have currently identified or quantified.

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. All forward-looking statements made herein are made only as of the date of this filing, the Company does not undertake any obligation to publicly update or correct any forward-looking statements to reflect events or circumstances that subsequently occur or of which the Company hereafter becomes aware.

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 millions, except per share data)	2022			2021			2022			2021
REVENUES
Commissions and fees	$	925.2		$	769.7		$	2,668.2		$	2,309.6
Investment income		1.2			0.4			1.8			0.9
Other income, net		1.2			0.2			2.0			2.4
Total revenues		927.6			770.3			2,672.0			2,312.9
EXPENSES
Employee compensation and benefits		470.3			395.0			1,341.3			1,220.1
Other operating expenses		169.6			101.1			450.6			291.7
(Gain)/loss on disposal		—			(0.3	)		(0.9	)		(4.3	)
Amortization		43.5			29.5			108.2			88.6
Depreciation		11.3			9.2			28.3			25.4
Interest		41.5			16.2			95.8			48.8
Change in estimated acquisition earn-out payables		(26.6	)		23.1			(33.1	)		20.6
Total expenses		709.6			573.8			1,990.2			1,690.9
Income before income taxes		218.0			196.5			681.8			622.0
Income taxes		56.9			50.1			155.2			136.6
Net income	$	161.1		$	146.4		$	526.6		$	485.4
Net income per share:
Basic	$	0.57		$	0.52		$	1.86		$	1.72
Diluted	$	0.57		$	0.52		$	1.85		$	1.71
Dividends declared per share	$	0.103		$	0.093		$	0.309		$	0.278

See accompanying Notes to Condensed Consolidated Financial Statements.

5

BROWN & BROWN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(UNAUDITED)

	Three months ended September 30,						Nine months ended September 30,
(in millions)	2022			2021			2022			2021
Net income	$	161.1		$	146.4		$	526.6		$	485.4
Foreign currency translation		(172.3	)		(2.9	)		(304.5	)		(6.7	)
Unrealized (loss) gain on available-for-sale debt securities, net of tax		(0.4	)		(0.1	)		(1.6	)		0.2
Comprehensive (loss) income	$	(11.6	)	$	143.4		$	220.5		$	478.9

See accompanying Notes to Condensed Consolidated Financial Statements.

6

BROWN & BROWN, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in millions, except per share data)	September 30, 2022			December 31, 2021
ASSETS
Current Assets:
Cash and cash equivalents	$	579.5		$	693.2
Fiduciary cash		1,271.3			777.0
Short-term investments		11.2			12.9
Commission, fees and other receivables		625.3			522.6
Fiduciary receivables		723.4			693.7
Reinsurance recoverable		1,021.6			63.1
Prepaid reinsurance premiums		409.9			392.2
Other current assets		208.6			175.6
Total current assets		4,850.8			3,330.3
Fixed assets, net		239.2			212.0
Operating lease assets		214.5			197.0
Goodwill		6,522.3			4,736.8
Amortizable intangible assets, net		1,588.0			1,081.5
Investments		24.0			31.0
Other assets		219.5			206.8
Total assets	$	13,658.3		$	9,795.4
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Fiduciary liabilities	$	1,994.7		$	1,470.7
Losses and loss adjustment reserve		1,033.5			63.1
Unearned premiums		430.7			392.2
Accounts payable		276.3			242.7
Accrued expenses and other liabilities		435.9			456.2
Current portion of long-term debt		67.5			42.5
Total current liabilities		4,238.6			2,667.4
Long-term debt less unamortized discount and debt issuance costs		4,040.4			1,980.4
Operating lease liabilities		191.4			180.0
Deferred income taxes, net		572.3			386.8
Other liabilities		305.0			383.9
Shareholders’ Equity:
Common stock, par value $0.10 per share; authorized 560.0 shares; issued 302.9 shares and outstanding 283.3 shares at 2022, issued 301.0 shares and outstanding 282.5 shares at 2021, respectively		30.3			30.1
Additional paid-in capital		903.4			849.4
Treasury stock, at cost at 19.6 shares at 2022, 18.5 shares at 2021, respectively		(748.0	)		(673.9	)
Accumulated other comprehensive loss		(315.5	)		(9.4	)
Retained earnings		4,440.4			4,000.7
Total shareholders’ equity		4,310.6			4,196.9
Total liabilities and shareholders’ equity	$	13,658.3		$	9,795.4

See accompanying Notes to Condensed Consolidated Financial Statements.

7

BROWN & BROWN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)

	Common Stock
(in millions, 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, 2021		282.5		$	30.1		$	849.4		$	(673.9	)	$	(9.4	)	$	4,000.7		$	4,196.9
Net income																	220.3			220.3
Net unrealized holding (loss) gain on available-for-sale securities														(0.9	)					(0.9	)
Foreign currency translation														(2.1	)					(2.1	)
Shares issued - employee stock compensation plans:
Employee stock purchase plan								2.7												2.7
Stock incentive plans		1.7			0.2			17.3												17.5
Repurchase shares to fund tax withholdings for non-cash stock-based compensation		(0.7	)		(0.1	)		(45.9	)											(46.0	)
Purchase of treasury stock		(0.4	)								(24.1	)								(24.1	)
Cash dividends paid ($0.1025 per share)																	(28.9	)		(28.9	)
Balance at March 31, 2022		283.1		$	30.2		$	823.5		$	(698.0	)	$	(12.4	)	$	4,192.1		$	4,335.4
Net income																	145.2			145.2
Net unrealized holding (loss) gain on available-for-    sale securities														(0.3	)					(0.3	)
Foreign currency translation								(0.1	)					(130.1	)					(130.2	)
Shares issued - employee stock compensation plans:
Employee stock purchase plan								1.7												1.7
Stock incentive plans		(0.1	)		—			12.1												12.1
Directors		—			—			0.9												0.9
Repurchase shares to fund tax withholdings for non-cash stock-based compensation		—			—			(2.4	)