Business Combinations

9 Months Ended

Sep. 30, 2025

Business Combinations [Abstract]

Business Combinations

NOTE 5 Business Combinations

During the nine months ended September 30, 2025, Brown & Brown acquired all of the stock of 13 insurance intermediaries, purchased assets and assumed certain liabilities of 16 insurance intermediaries, and purchased eight books of business (customer accounts) for a total of 37 acquisitions. Additionally, adjustments were recorded to the purchase price allocation of certain prior acquisitions completed within the last twelve months as permitted by Accounting Standards Codification (“ASC”) Topic 805 — Business Combinations (“ASC 805”).

The recorded purchase price for all acquisitions includes an estimation of the fair value of liabilities associated with any potential earn-out provisions. Subsequent changes in the fair value of earn-out obligations are recorded in the Condensed Consolidated Statements of Income when incurred. The fair value of earn-out obligations is based on the present value of the expected future payments to be made to the sellers of the acquired businesses in accordance with the provisions outlined in the respective purchase agreements.

Based on the acquisition date and the complexity of the underlying valuation work, certain amounts included in the Company’s Condensed Consolidated Financial Statements may be provisional and thus subject to further adjustments within the permitted measurement period, as defined in ASC 805. Management often uses independent third-party valuation specialists to assist in finalizing the fair value of assets acquired and liabilities assumed. Fair value adjustments, if any, are most common to the values established for amortizable intangible assets and earnout liabilities, with the offset to goodwill, net of any income tax effect. Provisional estimates were used to initially record the acquisitions of NBS Insurance Agency, Tim Parkman, Inc. and Accession, including for intangible assets, goodwill, customer contract related balances, tax related balances and other asset and liability accounts.

On August 1, 2025, the Company completed the acquisition of RSC, the holding company for Accession Risk Management Group, Inc., a North American insurance distribution platform is composed of specialty insurance and risk management companies, including Risk Strategies, a retail brokerage firm, and One80 Intermediaries, an insurance wholesaler and program manager. The acquisition was completed pursuant to an Agreement and Plan of Merger (the “Merger Agreement”), by and among RSC, the Company, Encore Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”) and Kelso RSC (Investor), L.P., a Delaware limited partnership, solely in its capacity as the equityholder representative. The aggregate purchase price totaled $9,598 million and included consideration paid at closing of $8,293 million in cash and $612 million in shares of the Company’s common stock, par value $0.10 per share. The acquisition was funded using cash raised from our June 2025 follow-on common stock offering and senior notes issuance.

The Merger Agreement provided for escrowed consideration of $750 million in the form of $250 million of cash and $500 million in shares of the Company’s common stock. Both the cash and shares are held in an escrow account. Escrowed shares, which were issued at closing of the acquisition, totaled approximately 4.5 million shares. The number of shares was determined using an agreed upon share price of $110.57 and $500 million of consideration, as detailed in the Merger Agreement. The total number of shares will not increase in the future.

Once all claims related to certain indemnification matters described in the Merger Agreement are resolved, the remaining amount in the escrow account will be released to the equityholders. The amount of the cash balance will change over time based on payment of any indemnification obligations of the equityholders associated with the discontinued businesses, as well as dividends paid on the shares and interest income earned on the cash. The Company believes this escrow, plus other available funds, is sufficient to cover any potential costs associated with those specified matters subject to indemnification under the Merger Agreement.

The value of the shares and cash in the escrow account are presented within long-term liabilities (other liabilities), and the restricted cash is presented within other assets in the Company's Condensed Consolidated Balance Sheets. The value of the shares placed in escrow change as the share price of the Company increases or decreases as compared to the value at the start of the applicable reporting period. On August 1, 2025, the closing date of the Accession acquisition, each share was valued at $92.00 using our opening share price, for a total amount of $406 million. In accordance with ASC Topic 480 — Distinguishing Liabilities from Equity and ASC Topic 815 — Derivatives and Hedging, periodic share value changes will be recorded as a mark-to-market of the escrow liability in the Company's Condensed Consolidated Statements of Income. This mark-to-market adjustment is non-cash.

As of September 30, 2025, the total balance of the escrow liability was $676 million, with $414 million in escrowed shares and $263 million in cash. The fair value of the shares held in escrow were re-evaluated and measured at fair value on a recurring basis using unobservable inputs (Level 3) as defined in ASC 820 - Fair Value Measurement. The change in fair value of the shares during the three months ended September 30, 2025, was $8 million.

The following table summarizes the estimated fair values of the aggregate assets and liabilities acquired through the nine months ended September 30, 2025 as of the date of each acquisition and adjustments made during the measurement period of the prior year acquisitions.

(in millions)	NBS Insurance Agency			Tim Parkman, Inc.		Accession Risk Management Group			Other (1)			Total
Business Segment	Specialty Distribution			Specialty Distribution		Retail & Specialty Distribution			Retail & Specialty Distribution
Effective date of acquisition	March 1, 2025			May 1, 2025		August 1, 2025			Various
Cash paid	$	54		$	69	$	8,293		$	98		$	8,514
Common stock issued		—			—		612			—			612
Other payable		—			6		693			—			699
Recorded earn-out payable		—			4		—			20			24
Total consideration		54			79		9,598			118			9,849
Maximum potential earn-out payable		—			23		—			25			48
Allocation of purchase price:
Cash and equivalents		(3	)		—		316			6			319
Fiduciary cash		14			—		516			6			536
Fiduciary receivables		(1	)		—		437			24			460
Other current assets		4			—		1,129			2			1,135
Goodwill		34			60		6,538			71			6,703
Purchased customer accounts and other intangibles (2)		16			19		3,236			36			3,307
Other assets		—			—		112			5			117
Total assets acquired		64			79		12,284			150			12,577
Fiduciary liabilities		(10	)		—		(957	)		(26	)		(993	)
Other current liabilities		—			—		(559	)		(5	)		(564	)
Deferred income tax, net		—			—		(114	)		1			(113	)
Other long-term liabilities		—			—		(1,056	)		(2	)		(1,058	)
Total liabilities assumed		(10	)		—		(2,686	)		(32	)		(2,728	)
Net assets acquired	$	54		$	79	$	9,598		$	118		$	9,849

(1)The other column represents a summarization of current year acquisitions with total consideration of less than $50 million per acquisition and adjustments from prior year acquisitions that were made within the permitted measurement period.

(2)The weighted average useful life of purchased customer accounts is 14 years.

For the nine months ended September 30, 2025, adjustments were made within the permitted measurement period, which increased total net assets acquired by $5 million and decreased goodwill by $4 million. These measurement-period adjustments have been reflected as current-period adjustments in the nine months ended September 30, 2025 in accordance with the guidance in ASC 805. The measurement-period adjustments had no effect on earnings or cash in the current period.

For the acquisitions completed during 2025, the results of operations since the acquisition dates have been combined with those of the

Company. The total revenues and income before income taxes from acquisitions completed through September 30, 2025, included in the Condensed Consolidated Statement of Income for the nine months ended September 30, 2025 were $318 million and $34 million, respectively.

If the Company's 2025 acquisitions had occurred as of the beginning of 2024, the estimated results of operations would be as shown in the following table. These unaudited pro forma results are not necessarily indicative of the actual results of operations that would have occurred had the acquisitions actually been made at the beginning of the respective periods.

(UNAUDITED)	For the three months ended September 30,				For the nine months ended September 30,
(in millions, except per share data)	2025		2024		2025		2024
Total revenues	$	1,750	$	1,636	$	5,316	$	4,972
Net income	$	246	$	253	$	859	$	841
Net income per share:
Basic	$	0.74	$	0.76	$	2.58	$	2.54
Diluted	$	0.73	$	0.76	$	2.57	$	2.52

Acquisition Earn-Out Payables

As of September 30, 2025 and 2024, the fair values of the estimated acquisition earn-out payables were re-evaluated and measured at fair value on a recurring basis using unobservable inputs (Level 3) as defined in ASC 820 - Fair Value Measurement. The resulting additions, payments, and net changes, as well as the interest expense accretion on the estimated acquisition earn-out payables were as follows:

	Three months ended September 30,						Nine months ended September 30,
(in millions)	2025			2024			2025			2024
Balance as of the beginning of the period	$	151		$	169		$	167		$	249
Additions to estimated acquisition earn-out payables		8			8			24			28
Assumed acquisition earn-out payables		439			—			439			—
Payments for estimated acquisition earn-out payables		(32	)		(38	)		(78	)		(135	)
Subtotal		566			139			552			142
Net change in earnings from estimated acquisition earn-out payables:
Change in fair value on estimated acquisition earn-out payables		10			(9	)		14			(15	)
Interest expense accretion		1			1			4			6
Net change in earnings from estimated acquisition earn-out payables		11			(8	)		18			(9	)
Foreign currency translation adjustments during the year		(2	)		6			5			4
Balance as of September 30,	$	575		$	137		$	575		$	137

Of the $575 million of estimated acquisition earn-out payables as of September 30, 2025, $262 million was recorded as accounts payable and $313 million was recorded as other non-current liabilities. Included within the additions to estimated acquisition earn-out payables are any adjustments to opening balance sheet items within the allowable measurement period, which may therefore differ from previously reported amounts. Certain acquisition agreements include provisions with no maximum potential earn-out amount. The amount recorded for these acquisitions as of September 30, 2025 was $431 million. The maximum future acquisition contingency payments totaled $353 million, excluding the uncapped earn-out payables, as of September 30, 2025.