Good morning and welcome to the Brown & Brown Inc. First Quarter Earnings Call. Today’s call is being recorded. Please note that certain information discussed during today's call, including information contained in the slide presentation posted in connection with this call and including answers given in response to your questions, may relate to future results and events or otherwise be forward-looking in nature. Such statements reflect our current views with respect to future events, including those relating to the company’s anticipated financial results for the first quarter and are intended to fall within the Safe Harbor provisions of the securities laws. Actual results or events in the future are subject to a number of risks and uncertainties and may differ materially from those currently anticipated or desired or referenced in any forward-looking statements made as a result of a number of factors. Such factors include the company’s determination as it finalizes its financial results for the first quarter, thus its financial results differ from the current preliminary unaudited numbers set forth in the press release issued yesterday. Other factors that the company may not have currently identified or quantified and those risks and uncertainties identified from time to time in the company’s reports filed with the Securities and Exchange Commission. Additional discussion of these and other factors affecting the company’s business and prospects, as well as additional information regarding forward-looking statements is contained in the slide presentation posted in connection with this call and in the company’s filings with the Securities and Exchange Commission. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, further events or otherwise. In addition, these are certain non-GAAP financial measures used in this conference call. A reconciliation of any non-GAAP financial measures to the most comparable GAAP financial measures can be found in the company’s earnings press release or in the investor presentation for this call on the company’s website at www.bbinsurance.com, by clicking on Investor Relations and then Calendar of Events. With that said, I will now turn the call over to Powell Brown, President and Chief Executive Officer. You may begin.

Thank you, Lisa. Good morning, everyone. And thank you for joining us for our first quarter 2020 earnings call. Before we talk about our first quarter results, we at Brown & Brown would like to say our thoughts and prayers are with all of those people directly or indirectly affected by COVID-19. We also want to thank all of those people on the front lines for everything they're doing during these challenging times and finally I'd like to thank all of our 10,000 plus teammates for everything they're doing for our customers and for successfully transitioning to a work-from-home environment. Today we'll discuss our Q1 results and give you our thoughts in the next few quarters. Here are a couple of key points for you to keep in mind. First, we had a very good quarter. In addition, we have a strong balance sheet, the highest cash conversion among our publicly traded peers, and have access to approximately a billion dollars of liquidity. Our conservative operating philosophy has and will continue to be indicative of how we run our business. We're focused on the long term and are a capital-light business that's dedicated to providing unique solutions to our customers every day. The first quarter was A Tale of Two Cities. January and February were growing nicely, and then we hit early March. We started seeing the impact of COVID-19 on our customers in the Pacific Northwest. As we've said before, we believe we are a proxy for the economy, with an emphasis on the middle and upper-middle market. We began seeing the impact on our customers around the country in mid-March. One of the many difficult things to assess today is what will the mitigation efforts from the U.S. Government mean for our customers through government support systems. During these very unusual times, we're focused on the safety and security of our teammates and their families. Many of our previous investments in technology have helped us transition 10,000 plus teammates to a work-from-home environment in a very short period of time. Our customers have been and continue to search for solutions on everything from the CARES Act, SBA loans, insights on furloughs and layoffs, to how you can use your personal vehicle to deliver meals from a restaurant or how to get certain supplies. We opened our B&B Relief Center to customers and others alike to take advantage of discounts on certain supplies. These actions combined with the weekly updates for customers and prospects have been well received by our intended audience. In addition, I'm humbled by the determination, dedication, and commitment of our teammates and what they have for our customers. Now let's transition to the results for the quarter. I'm on Slide 4. For the first quarter, we delivered $698.5 million of revenue, growing 12.8% in total and 5.6% organically. We're very pleased with this strong organic revenue growth, and I'll get into more detail in a few minutes about the performance at each of our segments. Our EBITDA margin was $34.6, which is up 280 basis points versus the first quarter of '19. Our net income per share for the first quarter is $0.54, increasing 35% as compared to the same period in the prior year. On an adjusted basis, excluding the change in acquisition amount payables, we delivered $0.51 of net income per share, growing 24.4% over the adjusted net income per share for 2019 Q1. During the quarter, we acquired another five businesses with annual revenues of approximately $39 million. In summary, we're very pleased with how we grew the top line and bottom line this quarter. It was a great quarter after delivering a really strong 2019. Later in the presentation Andy will discuss our financial results in more detail. Now, on Slide 5. The first quarter was an interesting one. Until early March we saw the U.S. economy continue to grow and most companies continued to hire employees and invest in their businesses, ultimately driving expansion of exposure units. Then in the middle of March, everything changed due to many stay-at-home or shelter-in-place mandates, and we're now seeing companies either terminating employees or putting them on furlough and driving GDP lower for the first quarter and beyond. We've said in the past that one of the primary drivers of our organic growth is exposure units. So we do expect an impact over the coming quarters. More on that later when we get to the outlook. From a rate perspective, we continue to see modest rate increases on most lines of coverage as carriers continue to tighten underwriting standards. The increases were substantially in line with what we had expected for the first quarter and were similar to the last few quarters. Ultimately, the amount of rate increase was primarily driven by the loss experience for a given account. Premium rates for low-loss accounts in the admitted market generally increased 1% to 5%, excluding auto, which is up 5% to 10%. From an ENS perspective, coastal property rates increased 5% to 15% versus the prior year. General property rates were 5% to 10%. Professional liability increased 5% to 10% and cyber was up about 10% to 15%. The impact of the pandemic on the rate now and in the future is unknown. Regarding the M&A landscape, it remained very competitive. During the first quarter, we closed another five transactions with an estimated annual revenue of $39 million. We continue to talk with lots of companies but expect a slowdown as sellers are trying to get a handle on how the pandemic will affect their businesses and therefore impact evaluations they receive. I'm on Slide 6. Now, let's talk about the performance of our four segments. Our Retail segment delivered another strong quarter with organic revenue growing 5.7% in Q1. Our organic revenue growth for Retail would have been approximately 300 basis points higher if not for a $10.5 million change in estimate related to future revenues resulting from the economic disruption associated with COVID-19. Andy will describe this in more detail later. Our growth for the first quarter was driven by improved retention, exposure unit expansion for existing customers, new business, and rate improvement. We would like to congratulate all of our teammates in the Retail segment for delivering another great quarter. National Programs grew 11.8% organically, delivering another great quarter. The organic revenue growth this quarter was one of the highest we've ever delivered when you exclude the impact of flood claims. Our growth was driven by continuing strong performance from a number of our programs, including our lender place, our earthquake, our personal and commercial property, as well as many of our other programs. In early January, we completed our first acquisition in Canada, Special Risk Insurance Managers. We're really pleased with this acquisition and the opportunities we believe will present to us over the coming quarters and years. Overall, it's a great quarter for national programs, and I wanted to say thank you to all of our teammates in that division. Our Wholesale Brokerage segment delivered another solid quarter with organic revenue growing 8.2%, driven by strong performance from both our Brokerage and Binding Authority businesses. This is even while we experienced some pullback from carriers writing California personal lines due to losses from wildfires last year. Thank you to all of our team for delivering another good quarter. The organic revenue for our Services segment decreased 13.1% for the quarter. We originally expected organic revenue to decline by 5% for the Services segment in the first half of the year, driven by our Social Security Advocacy business and terminated customer contract in one of our claims processing businesses. During the quarter, our organic revenue growth of the Services segment was further impacted due to lower weather-related and social security advocacy claims. As we've seen in the past, our Services segment can have more volatility in its revenues based on the volume and timing of claims activity. Now let me turn it over to Andy to discuss our financial performance in more detail.

Thank you, Powell. Good morning, everyone. Consistent with previous quarters, we’re going to discuss our GAAP results, certain non-GAAP financial highlights, and then our adjusted results excluding the impact of the change in acquisition earn-outs. I'm over on Slide 7. For the first quarter, we delivered total revenue growth of $79.2 million or 12.8% and organic revenue growth of 5.6%. Our EBITDAC increased by 22.8%, growing faster than revenues due to leveraging our expense base with higher organic revenue growth, higher contingent commissions, and the results from one of our acquisitions in the past year that recognizes substantially all its revenue in the first quarter of each year. Our income before income tax increased by 38.2%, going faster than EBITDAC due to the change in acquisition earn-out payables, which decreased by $12.2 million year-over-year based on our most recent projections. Our net income increased by $38.5 million or 33.8% and our diluted net income per share increased by $0.14 or 35% to $0.54. Our effective tax rate for the first quarter was 25.7% compared to 23.3% in the first quarter of 2019. The higher effective tax rate was driven by lower state tax rates and adjustments in the prior year, as well as the change in the market valuation of our company-owned life insurance related to our deferred compensation plan. Our weighted average number of shares were substantially flat compared to the prior year, and our dividends per share increased to $0.085 cents or 6.3% compared to the first quarter of 2019. Moving over to slide 8. This slide presents our results after removing the change in estimated acquisition earn-outs payables for both years. We believe this presentation provides a more comparable year-on-year basis. During the first quarter, we revised our estimated future financial performance and the corresponding estimated earn-out payables by $11 million for certain acquisitions we completed in the last three years, with $6 million of this adjustment related to the potential impact from COVID-19. Isolating the change in acquisition earn-outs in both years, our income before income taxes grew $44.6 million or 29.8%, net income on an adjusted basis increased by $29.5 million or 25.7%, and our adjusted diluted net income per share was $0.51 increasing $0.10 or 24.4%. Overall, it was a really good quarter. Over to Slide 9. This slide presents the key components of our revenue performance. For the quarter, our total commissions and fees increased 12.8%. Our contingent commission and guaranteed supplemental commissions or GSCs increased by $8.9 million as compared to the first quarter of 2019, as the cash received during the first quarter of 2020 were contingents accrued as of December 31, 2019, which was higher than anticipated as we qualified for certain contingencies that we did not qualify for in the past. Our organic revenues, which isolate the net impact of M&A activity, increased by 5.6% for the quarter. Over to Slide 10. Our retail segment delivered total revenue growth of 15%, driven by acquisition activity over the past 12 months, and organic revenue growth of 5.7%, driven by growth across all lines of business. In accordance with ASC 606, we lowered our estimates for the revenues we expect to earn from existing employee benefits and workers' compensation policies, resulting in a reduction to revenue of $10.5 million. These estimates were revised after assessing the projected impact of COVID-19 on future levels of employment and payrolls of our customers during the remainder of their current policy periods. The adjustment lowered organic growth for retail for the quarter by almost 300 basis points. Our EBITDAC margin for the quarter increased by 220 basis points, and EBITDAC grew 22.3% due to the phasing of profit from an acquisition we completed in the third quarter of last year, higher contingent commissions, and leveraging our expense base with higher organic growth. The margin expansion was partially offset by higher non-cash stock-based compensation costs, intercompany IT costs, and the margin flow through on the $10.5 million revenue adjustment we mentioned earlier. We grew our EBITDAC faster than total revenues, even when excluding the impact of the acquisition that records substantially all of its revenue in the first quarter of the year. Our income before income tax margin increased 470 basis points primarily due to higher EBITDAC margin, adjustments to our earn-out liabilities of $7.1 million year-over-year, and the lower percentage growth of intercompany interest charges. The adjustments to earn-out liabilities were primarily driven by the potential impact of COVID-19 upon the future performance of acquisitions we completed in the last three years. Moving over to Slide 11, our National Program segment increased total revenues by $18.8 million or 17.2%, and organic revenue by 11.8% due to strong performance from a number of our programs. EBITDAC increased 25.2% and our margin increased by 210 basis points due to higher revenues, increased contingent commissions, and continuing to leverage our expense base. The margin expansion was partially offset by higher intercompany IT charges. It was another really good quarter for our National Program segment, growing EBITDAC substantially faster than total revenues. Income before income taxes increased by $10.3 million or 53.4%, expanding 550 basis points due to EBITDAC margin expansion, lower intercompany interest expenses, and decreased estimated earn-out payables that were impacted by the potential for lower future performance associated with COVID-19. Over to Slide 12. Our Wholesale Brokerage segment delivered total revenue growth of 10.2% and organic growth of 8.2%. Total revenues grew faster than organic due to acquisitions we completed in the past 12 months, which was partially offset by lower contingent commissions. EBITDAC grew 8.5%, and the margin decreased by 40 basis points due to higher intercompany IT charges and lower contingent commissions that offset underlying margin expansion. Our income before income taxes grew 13.5%, and the margin increased by 70 basis points due to lower amortization and a change in acquisition earn-out payables. Over to Slide 13. Total revenues for our Services segment declined 10.1% and organic revenue decreased by 13.1% with total revenues benefiting from a previous acquisition. Since organic revenue declined more than anticipated in the first quarter, we anticipate our organic growth for the first half of the year could be closer to a negative 10%, excluding any potential impact of COVID-19. For the quarter, EBITDAC declined by 16.9%, and the margin declined by 180 basis points, driven by lower organic revenues and higher intercompany IT charges. Income before income taxes increased 9.8%, and our income before income taxes margin increased by 410 basis points. This increase was driven by lowering our estimated acquisition earn-out payables. Over to Slide 14. We want to make some comments regarding capital and liquidity. Our goal has been and will continue to be disciplined in our approach to allocating our capital, with the goal of optimizing returns for our shareholders and maintaining a conservative leverage position. We've mentioned in the past the importance of having low leverage and a balanced debt maturity ladder in order to provide strength during times of economic uncertainty. We believe having the lowest leverage of the major public or private equity-backed insurance brokers provides us with strong financial security and flexibility. Having a very strong balance sheet and liquidity position will allow us to manage through the uncertainties of this pandemic, but also allows us to continue to invest. At the end of March, we had over $385 million of cash and cash equivalents and $700 million of available capacity on our revolver. We anticipate borrowing approximately $250 million under a revolving line of credit before May 1. A portion of these proceeds are expected to be used in connection with the payment for our previously announced acquisition of loan protector insurance services that we anticipate will close in early May. The remainder of this borrowing will be used to further strengthen our financial position in order to mitigate the potential effects of the COVID-19 pandemic that may result from delays in payments from customers or carriers. Moving over to Slide 15. One of the metrics we are proud of is our ability to convert revenues into free cash flow. We consistently convert 22% to 26% of our revenues into available capital due to our strong margins and rigorous management of working capital. Our industry-leading free cash flow conversion ratio is about 100% higher than the average of the other public brokers. That means we generate about the same amount of cash as compared to a company twice our size. That means we have a lot of capital to invest in our business. Depending upon the level of M&A activity, we generate significant capital in excess of our committed expenditures that include dividends, CapEx, and debt service. We believe we're in a really strong position right now. As a reminder, Q1 normally has a lower free cash flow conversion ratio due to ASC 606 as we accrue revenue primarily related to employee benefits policies with associated cash collected throughout the year. We also pay the majority of our annual performance bonuses earned in the prior year in the first quarter. Our free cash flow conversion ratio was about 2.5% for the first quarter of 2020 compared with a negative 2.9% for the first quarter of 2019. One thing that may affect free cash flow conversion would be customers delaying payments either offered by carriers or mandated by states. We believe this scenario would delay our cash receipts and this is why we anticipate drawing additional capital on our revolver later this month. With that, let me turn it back over to Powell for closing comments.

Thanks, Andy. Great report. Let's talk about how we're thinking about the outlook for the coming quarters. We expect the economy and employment are going to decline for at least the next two quarters and then potentially increase slightly into the fourth quarter. This assumption is based on reports from many economists within our banking partners that are projecting a 15% to 20% unemployment rate in the second quarter. Keep in mind that per the CARES Act, self-employed and gig workers are now eligible to file for unemployment. These individuals are generally not covered by sponsored plans. They will be more than likely not impacting our employee benefits or workers compensation lines of business. Also keep in mind there are many employees being furloughed that are filing for unemployment but are still benefit eligible. These are good examples of the complexities when comparing current unemployment figures to prior years and in estimating the potential impact on our business. These same economists are projecting GDP to decline 20% to 30% in the second quarter, with growth starting to rebound in the third quarter, but they're not expecting a recovery until mid to late 2021. Based on these assumptions, we believe the biggest impact on our financial performance will be in the third quarter but anticipate our organic growth could be negative in the second quarter. This is due to the fact that higher unemployment will take about 60 days before we see its impact on our numbers. We believe the largest impact will be to our employee benefits and workers compensation lines of coverage as they are primarily driven by employment and payrolls. In addition, we expect our overall PMC business to be impacted when companies reduce their exposure units. Another dynamic of the work-from-home mandate is that we're expecting our new business to slow, but retention to increase. We do not know if these will offset each other. The unknown right now is how deep and for how long the impact of COVID-19 will last. We hope that the CARES Act and the action by the Fed will start to take effect in the coming months for Q2. Regarding rates, we think most rates will increase slightly in the second quarter but it's unknown what will happen to rates in the second half of the year until more is known about the impact of COVID-19. Taking all these factors into consideration, our best estimate is that the full-year organic growth could be slightly positive or down low to mid-single digits. This range is really unknown as we've made assumptions based on limited actual data. We will have a better view over the coming quarter as to the depth and duration. Here's what we do know. We're a solutions provider. Therefore, we'll continue to stay focused on providing risk management solutions for our customers and prospects, and developing new and creative ways of generating new business remotely. We continue to talk with acquisition candidates and may close a few deals in the second quarter. For the next few months, at least, we expect there will be a slowdown in M&A activity due to the uncertainty around the future performance of businesses and what this might mean for sellers' valuations. I mentioned earlier that we are continuing to innovate and serve our customers during these uncertain times. Out of necessity comes great creativity. We always try at Brown & Brown to deliver as many new solutions as possible for the benefits of our customers, our teammates, our carrier partners, and our shareholders. Lastly, as I started with comments about our teammates and their families, I want to close with the same focus. We are a company of dedicated and hardworking teammates focused on serving our customers. Therefore, it’s our goal to always ensure they are safe and healthy. When we do this, it helps them to be great spouses, parents, and teammates that focus on delivering innovative risk management solutions. With that, let me turn it back over to Lisa for the Q&A.

Thank you. We will now take the first question. Please go ahead. It's from Greg Peters from Raymond James. Your line is open.

Good morning. So thank you for the guidance regarding the outlook for the year. We appreciate that and I was wondering if you could build upon that by commenting on your exposures to industries like the restaurant industry, the energy industry, etc. And then secondly, I know some of your peers have made comments about no layoff pledges, and I'm just curious if you anticipate the possibility of negative organic revenue growth; how you intend to manage the expense base during this crisis?

Good morning, Greg. As you know, we have a diverse range of business operations, which means we do have some exposures, but they span a wide variety across the United States. Some industries are being significantly impacted, such as gaming, hospitality, restaurants, movie theaters, sporting events, oil and gas, theme parks, gyms, certain construction sectors, and transportation. It's currently challenging to gauge the specific effects on each of these industries. We can make some assumptions that represent our best estimates for now. For instance, in the automobile sector, which includes both new and used dealerships as well as RVs, we manage a variety of business lines. The impact of these changes varies greatly by region; for example, the Northeast has been hit much harder than the mountain states. At this point, it's a bit premature to draw definitive conclusions, but there isn't one specific industry where we face such significant exposure that it warrants special mention. I mentioned the auto industry largely because it's well-known, but we also engage with many government entities, nonprofits, and various construction operations. Regarding the critical question everyone is discussing, I want to emphasize that at Brown & Brown, we refer to our team members as teammates rather than employees, and we operate as one high-performing team. Each local group is led by a leadership team that makes decisions on investments in the business on a daily, monthly, quarterly, and yearly basis. Our organization is shaped by our customers, capabilities, and carrier relationships at the local level. When I say we don't intend to have teammates leave the team during this time, that truly reflects our philosophy. If any assessments regarding staffing were to be made, those would occur locally and not from a central or broad directive. Decisions will be focused on how best to serve our customers. We are particularly mindful of this topic right now because we value our talented teammates, and we believe that as circumstances evolve—whatever that may entail—we will emerge as a stronger organization.

Thank you for that long answer. Appreciate it. Yes, in the comments you spoke about, I mean in the press release about the risk that cash receipts from customers might be delayed and can you speak to, if you've seen any evidence of that today and then perhaps use that and build upon comments around the acquisition and how you are investing in a business at this point going forward?

Okay. First, it's important to note that it's definitely happening because certain states are requiring it. There are states mandating a 60-day premium holiday or something similar. Second, we have some customers, mainly smaller ones, who are asking for rate relief due to a decrease in exposure units. In some cases, carriers are permitting us to reduce exposure units midterm in anticipation of their overall business impact. Regarding acquisitions and our business strategy, we recently announced a loan protector which we believe is a strong addition, and we are awaiting DOJ approval, expecting it to close sometime in the second quarter. Additionally, we completed several other transactions in the first quarter. We constantly engage with various companies. Ultimately, businesses are run by skilled individuals, and even with a solid revenue or earnings potential, if the cultural fit isn't right, the partnership won't succeed, and we want to avoid that. I find it quite challenging to finalize a deal through a video call without ever meeting the team. Nevertheless, we've been reaching out to many prospects over long periods. The reason for emphasizing our liquidity, as Andy mentioned, is crucial. For those familiar with the calls from a decade ago, there was some criticism of being conservative, but we navigated through that tough period and have maintained a conservative approach. This positions us well to invest in our business at our discretion. However, this doesn’t imply that we plan to acquire multiple businesses during the downturn, but rather that we have the flexibility to invest whenever we choose.

Okay. And the final question would be in the previous quarters, you and Andy have been willing to provide some perspective on what would happen to profit sharing and guaranteed supplemental commissions over the course of the year, and I'm wondering if you could use this opportunity based on a really uncertain outlook for the balance of the year, how you think that might ripple through and affect those two lines within their revenue?

Okay. Again, Greg, this is purely a guess and so I'm going to take two whacks at that one. Number one, if you look at it you could say, huh, you may have fewer losses because of automobiles and things like that; not on the road for a period of time. So you could say maybe it goes up slightly, but in some of these, as there are growth components to them. So you have to have growth in the business and have a certain performance. That's number one. Number two, I think many of our large carrier partners, and all other carriers are looking at ways to help their distribution partners. What I mean by that is, again, how we run our business and how a smaller independent agency runs their business might be slightly different from a cash flow standpoint. Some of that other stuff. I do believe that the carriers will be looking closely at how they can mitigate the potential negative side of that, meaning that if there's a growth component, do they decide to waive that for the year? I don’t know. I haven't heard of anybody doing that yet. I'm just speculating. So it's very hard to tell, Greg, but if you press me, I would basically say I think it would be down slightly.

Yes. Hey, good morning, Greg. Andy here. Because we accrue for these on a go-forward basis now with ASC 606, it puts another level of complexity in. You saw that our first quarter we picked up additional contingents based on those we didn't qualify for the last year. At least we would not anticipate as of right now that going forward hopefully that will occur but that would probably not be our expectation at this stage. We're going to need to really watch this closely over the next quarter or two and just see what trends look like, feedback we're getting from carriers. Again, the loss comment is spot on the other side of it, but its premium is down, form and it impacts their profitability which impacts the contingents. So there's a lot of factors we're going to need to kind of monitor on the way through.

Got it. In your ASC 606 adjustments that you referenced up front, none of that related to the profit sharing and guaranteed supplemental commission component of your revenue or did some of that go through there?

No, it was very small. There was no basis.

Thank you.

Thank you. We will now take the next question from Mike Zaremski from Credit Suisse. Please go ahead.

Good morning, gentlemen. My first question is regarding revenue recognition. I would like to know if this quarter's changes had a significant impact on margins.

Well, I don't know I would say, materially on it, Mike is what we disclosed as we made the $10.5 million revenue adjustment and it had a profit impact of about $5.8 million, and as you've seen in the past, normally the adjustments that we make around ASC 606 usually move with higher margins than the overall business. So that's pretty consistent and how it works.

Thanks. Andy, to clarify that, did it improve the margin by approximately $5 million to $6 million?

No, it negatively impacted the margin. Basically, what it did is it slowed out about a 58% margin. We don't have a 58% EBITDAC margin.

Okay. Got it. And should we expect that to persist potentially through 2Q and 3Q, given your commentary?

No. Let's see if we can do an example here to try to explain how this worked because what we had to do is, we had to look at all current policies that are in effect through or enforced through March 31 and do a look back on all of those and of the adjustment of $10.5 million about 7.5 million or so relates to policies that we bound in the first quarter, and then the residual relates to policies that we bound back in 2019. Here's how you want to think about what let's use worker compensation. So if we were to bind a policy and the estimated payrolls for that policy said that we were going to earn a $100 over the next 12 months, what would happen is now at this stage if we think that the payrolls are going to decrease and we're now going to earn $80, what we need to do is reverse the $20 that we’ve recognized when we bound that policy. So in this example, we did that in January. We then turned around and backed up to $20 in March. So that should represent all outstanding policies. What it doesn't account for Mike, and the piece that we don't know and then the commentary we had is what exactly happens on renewal business over the coming quarters and the impact to the organic of that piece we just don't know right now.

Understood and helpful. My last question is regarding potential business interruption claims. A lot of chatter out there, not speaking to the regulatory front, I think that's something that unless you have an opinion on that, I'd love to hear it, but maybe this is out of our control; curious kind of what your clients, you are seeing from your clients and from the carriers in terms of the ability or there to be, do you think there will be some business interruption claims paid out for your clients or most of them excluded?

Okay. Mark, it's Powell. A couple of things, I'd like to first say that as you know business interruption is typically excluded or generally excluded due to pandemic and then on top of that there is a provision for a physical damage loss. So you got to keep that in the back your mind. So I would tell you that in a very small number of policies out there, there are some sublimits, but I mean very small as a percentage, less than 1% if I had to guess. But having said that again you would have to look at every single policy for every single customer, but if you’re talking about generally speaking in the industry of which our customers represent a good wide range of what’s written in the industry, as I said generally speaking, business interruption has a pandemic exclusion and it also necessitates physical damage loss. That's number one.

Thank you very much.

Hey, Mike, I want to just come back and clarify one thing on your question, just to make sure that we've covered it with everybody because you asked about would it be a go-forward impact. The adjustment that we made on the 10.5, again that's our best estimate based upon what we think may happen with unemployment and payroll for those outstanding policies. If for some reason that turns out to be different than what we anticipate, could we have another adjustment in the second or third quarter incremental? Yes, we could. We don't know right now. Again, we made our best estimate at this stage.

Understood. Thank you.

Thank you. We will now take the next question from Elyse Greenspan from Wells Fargo. Please go ahead.

Hi, thanks. Good morning. My first question, just a couple of quick things on the quarter and then I have a bigger picture question. Is there about $6.4 million of EBITDAC that didn't go through the segment that might have gone through a corporate? And if there was, what was the corporate benefit coming from in the quarter?

Hi, good morning Elyse. The other couple of things, we mentioned this during our commentary on the incremental, the higher IT cost down on the divisions that was really just a shift from corporate down to the divisions versus how we reported it last year, so that was a portion of it. And then also during the first quarter we did make some adjustments to our SIP based upon estimated payout for those, the three grants that are outstanding. So those were the primary drivers in corporate that made up the $6 million. As it relates to SIP, again we monitor that on a regular basis, as you know, and we will make adjustments up and down over the coming quarters based upon what we think the payouts will be both on organic and the earnings per share.

Okay, that's helpful, and then in your prepared remarks you guys had called out some good growth in lender place business. Does that growth on client sticking to recessionary pressures from COVID-19 or is it growth that you would have seen regardless of what happened with COVID-19?

Yes. Elyse, that was a few different dynamics going on there. That was almost primarily all driven by new business and we saw that they had a great 2018, they had a good '19. We lost a couple customers last year through M&A, but we had picked them up covered most of that through new business. They’re continuing that same trend. The dynamic right now in that space, and you see a number of mandates regarding the inability to foreclose on properties. So we're not seeing a lot of incremental placements right now, but the thing that we like about that space is that it gives us a nice buoy around the organic growth because if the economy does go down, those businesses take off, which is really good.

Okay, that's helpful. And then I appreciate the outlook and obviously understand that there's a lot of uncertainty in terms of GDP and unemployment projections as well as how long some of these stay-at-home orders are going to last, but those of you guys think about this kind of slightly positive to down organic for this year. How do you see the different segments? And I recognize this is very fluid, but as you run through different scenarios, it seems like programs could still perform pretty well in a downward scenario. Can you kind of high-level walk us through the different segments and what could perform better and what might see more pressures on the economy turning downward?

So Elyse, it's Powell. The answer is, as you know, historically we have not given guidance, and we're not going to give guidance on the divisions this time. We've done our best to give you an overall view based upon our best guess today, and if and when we have better information, we would be able to give you a better answer. But at the present time, we've said what we're going to say on that.

Yes, the only segment that we had additional color on this quarter release was the Services segment just because of what we were seeing on underlying claims activity.

Okay. That's helpful, and then in the past you said two-thirds to three-quarters, right, of organic growth was driven off also exposure units with the remainder being of an office price. Does that kind of ballpark assumptions to apply right now, given some changes that we've seen within your book of business?

I believe that's accurate. It's crucial for everyone on this call to understand that between 2008 and 2011, exposure units decreased alongside rates. Currently, we're facing a different situation where exposure units are still declining, but rates are increasing. There are several factors to consider. One aspect is that when people are financially strained and if there is a mindset focused solely on survival, they may opt to purchase a lower coverage umbrella, reduce their earthquake limits, or choose less wind coverage, all of which may be necessary for them to get through tough times. It's essential not to overlook this, and I am not aware of any way for you or anyone else on this call to predict this behavior because it remains uncertain. We are sharing our insights based on discussions with our customers and our team, as understanding their financial well-being is significant for us, and we want to support them in remaining viable.

Yes Elyse, we talked about this in our last couple of calls that you can't always make a direct correlation to that, as an example, if property rates are up 5%, that as a result organic growth is up 5% because of how companies are thinking about deductibles. Again, 5% might not be the trigger mark but for some reason you lay a 10, 15 or 20 on somebody because of their loss experience, they might change their deductibles, and so those are the dynamics that kind of play into the actual revenues and then the weightings.

Okay. That's very helpful. Thanks for the color.

Thanks Elyse.

Thank you. We will now take the next question from Mark Hughes from SunTrust. Please go ahead.

Yes. Thank you. Good morning. Thanks for all the detail. Andy, if organic is taking the midpoint flat or down just a little bit, what does that do to EBITDAC profitability for the full year?

Hi, morning Mark. I think that's probably still one of the unknowns for us right now. As you've seen in the past, there's not always a direct correlation between our organic growth and our margins. We've had quarters when the two of them moved in tandem and we've had quarters where it moves back and forth. As you know, we try to manage the business and lead the business on a long-term basis, not a quarter-over-quarter. Is there a potential for some interim margin impact potentially because how quickly this came at everybody through all of it but we try to really stay on top of all this every day. It's why we have the margins that we have in our business but it wouldn’t be surprising if there’s some downward pressure on the margins on the full year as it relates to the quarters, but we don't have a good view at this stage, just because we're struggling to get our arms around the revenues in all honesty. There's minimal actual data today for us to base any of our assumptions on, that's what our struggle is.

How about the distinction between smaller accounts versus middle sized or large accounts, how much of a difference are you seeing in their behavior?

Well, Mark, it's Powell. I would tell you that, we write a lot of all of it, and so a lot of our small customers, a number of them don't have the financial resources to weather six weeks working from home or as I say, when I go home and see the ingenuity that has come out and the transition or transformation of, particularly from small businesses to an alternative delivery model of value, whatever it is that there are, whether it's takeout service that our restaurant to something else. I think that there are people that are just getting by, in some instances more so in small businesses or if they have received some sort of financial assistance or its forthcoming, they're just trying to get to where we crank back up again, many of the medium and larger businesses barring those that are highly leveraged, so and there are a lot of those too, but they have typically been better equipped and a common response would be when we went into this into the teeth of it, we can make it for a couple of months but we got to get this thing cranked back up first part of the summer or middle of summer because they had managed their balance sheet and their cash position pretty conservatively. So it's kind of all over the board.

Thank you.

Thank you. We will now take the next question from Yaron Kinar from Goldman Sachs.

Hi good morning everybody. First question, circling back to margins and second in the scenarios where organic growth actually turns negative for the year, and you're not really looking to shrink headcount here. Can you maybe talk about the other measures that you have at your disposal to keep margins relatively stable? And maybe in a broader sense, what portion of your costs are variable?

Good morning, Yaron. As you know, we've got a fair amount of levers inside the organization on variable cost and those are just going to float up and down accordingly from anything that we pay on the commissions front. Anything we can look at, at the right time on compensation we will do, but again, we'll figure out how to step through that at the right time. As we said in our commentary, that's going to really come down to the leaders and those individual businesses because how each of our businesses navigate through this uncertainty is going to be different, and we're going to really rely upon our leaders locally to make the right calls inside of there. They do an excellent job of leading their businesses today; they have in the past. We've got all the confidence that they will continue to do that in the future in order to balance off the needs with our customers, carrier partners, and all of our teammates.

Okay. And then if I look back at the global financial crisis, I think the company’s organic growth is under pressure for exactly long period of time in the recovery period. I think a lot of that had to do with just a greater orientation relating to smaller businesses. Can you maybe talk about that has changed since 2009 to 2012? Maybe you can get a sense of what the average account sizes or average commissions or anything that you could share with us in terms of how you think about the impacted on both the crisis now and the recovery?

Hey Yaron, it's Powell. Number one, I caution you or anybody else to try to draw parallels between this event and any other subsequent event that has occurred historically because that is purely a guess. I just want to make sure that's up front. Number two, if you think about our business, just at a very high level, just think about this for just a moment. We’ve had Arrowhead, Beecher Carlson, Wright, and all kinds of other really high-quality organizations that span the entire size spectrum, and a lot of that has been upper-middle market and even into some large account businesses. Having said that, I think another important distinction is, if we're just talking about retail for a moment, the reliance upon the state of Florida as a percentage of revenue then as it is today. Overall, the company, it's about 20% of our overall revenue emanates from Florida, but that's misleading because let's say almost 6% of that revenue is in NASH in a program that's outside of Florida for the most part. So all of a sudden, you have a more diversified portfolio of companies. I actually would tell you that we are not economists and by the way, we are optimists by nature. We are simple salespeople who live by the sea and we understand our numbers, and we reinvest it for the long term. So what I would say is this is not a V, but whether it’s a U, or L or whatever that is, we don't know, but what we do know is in light of all of that, I want everybody to understand that we're really pleased with the first quarter and that our three biggest divisions had great quarters and we are writing a lot of new business. And we are going to be there for our customers. So I actually think it, I would be very cautious of trying to draw a parallel between then and now because there are no similarities in my opinion. That was a long downward slide, over let's say 16 to 18 months and a very slow crawl out. This was an elevator drop down which included financial panic for many people. So you had a demand drop for services and consumable goods and you have the financial institutions and much stronger point of view. So I wish we could give you more on that Yaron because it would help us too, but I'm just saying, I think it's different and if 68% of the GDP is the customer then and that's going to impact demand then how does the customer feel if they're unemployed, getting an unemployment check, or they're furloughed or what and we don't know. They don't feel good I know that.

The other thing to keep in mind is the citizens effect we experienced during that time period, particularly in 2007. This had an impact that drove things down. Looking at commercial lines rates from 2006 to 2010, all commercial lines were also down during that time. There were significant effects from construction, which is why we believe this situation feels very different to us. In some ways, it reminds us of the 2008 to 2010 period, condensed into about three or four weeks. At least, that’s how it feels right now, and these are some of the uncertainties we are facing.

Okay. I appreciate that and it's exactly trying to understand a difference. So that is where I was at. So thank you for that. And maybe one final one, pricing can you maybe talk about the momentum you saw in April from a pricing perspective?

It's kind of the same. I mean, like I said, I don't want you to get too caught up in, is it going to go up more so or down. I think the carriers obviously are very sensitive around limits that they put up and certain lines of coverage where they think there might be some potential exposure and I'm not talking about a BI claim, I'm just talking about other lines of coverage that might have an exposure, and how they underwrite that, D&O, professional liabilities, etc.

Okay. Thank you very much.

Thanks.

Thank you. We will now take the next question from Ron Bobman from Capital Returns. Please go ahead.

Hi Andy and Powell. Thanks a lot. We always care about your well-being. So we sure hope that neither of you were on those beach pictures that we saw a couple weeks ago?

We weren't.

Great. I have a question about your wholesale business which obviously had a very strong quarter. I'm curious, I know it's very, very early days, but I'm curious what you're seeing this far as sort of the flow of activity, traditional wholesale business of late carriers quoting activity pushing more business into that channel or not visible as of yet or no change? Thanks.

Well, let's talk about just Q1 again and the answer is I think it's similar to the prior quarters, but I would tell you that there continues to be a lot of activity. So I think the activity is saying let’s say Q4 to Q1, but there's just a lot of activity in wholesale and so remember depending on the agent that we're doing business with, some of those agents have not been able to transition to a work-from-home environment as easily as let's say we did or maybe someone else.

So your point being, despite that, it's still quite active? Is that the emphasis you're placing?

Yes. That's it.

Okay.

That's correct. That's how I want you to think about it.

Okay. All right. Thanks gentlemen. Be well. Thanks a lot. Bye, bye.

Thank you Ron.

Thank you. We will now take the next question from Meyer Shields from KBW. Please go ahead.

Great. Thanks. Good morning all. Andy, I was looking to sort of frame the $10.5 million adjustment in terms of maybe what's the denominator of like annual revenues or what sort of employment or what sort of employment or payroll decreases contemplated in that and then I am out.

Yes. Hi good morning, Meyer. So maybe a couple ways to think about that is again we look at outstanding policies. So again, it doesn't not that it's applying to all policies for an entire year and the reason why it's got more waiting in the first part of the year is any policy that we placed last year would have upwards to 11 months that they've already had the previous exposure uses kind of underpinning in inside of there. What we try to do is in our commentary that we mentioned is, we leveraged a lot of what all the economists are saying, there are our banking partners or other information that we could get and utilize that to potentially at least project what unemployment could look like. Here's the variable is, we don't know what furloughing will do. So that's unknown. The data that is out there is from about three weeks ago and so that that's a piece we don't know exactly what Cobra effect is going to do on the employee benefits business. So that's also kind of a unknown and then this question about how many of those previous individuals that are now able to file for unemployment claims i.e. independent contractors or gig workers. Again, it's going to inflate the number that is reported but we'll have more likely almost no impact on our employee benefits or our work comp businesses. So those are kind of the dynamics that we were juggling around in order to come up with an estimate.

Okay. Understood. That's very helpful. Does ASC 606 mean that if your estimate is correct then the historical impact is pretty modest doesn't show up in the segment?

So let's see here is on, as it relates to work comp and employee benefits is, yes, that would be true in your statement if everything worked out perfectly which by the way is not going to work out perfectly, but yes that would be the case. The item that we don't know about right now is for other policies that we place. If it starts to become evident that there are the likelihood for significant return premiums in out periods, yes we are going to need to take a look at those absolutely but again we have no data at this stage to give us any indication that it's there. So we need to watch that one again, wish we could be more specific, man, there are so many unknowns in this current environment at this stage.

Okay. Understood and definitely appreciate all the help. One last question if I can. You're hearing a lot of rumblings about, particularly in the small enterprise space about insurers that are shocked to hear that their business interruption claims aren't covered. Let me you take through Brown & Brown sort of all these procedures and maybe no cover against claims from people that had that disappointment?

Well, remember as I have said before, generally speaking there is a pandemic exclusion in business interruption and it usually mandates a physical damage loss. And so we are talking to our customers obviously relative to how it is written in their policies and in instances that there needs to be some clarification, we may be obviously talking with our carrier partners on that, and in some instances there have actually been claims filed. So it depends very much so on the customer and the policy.

Okay. Thanks so much.

Thank you. We have two additional follow-up questions in the queue. The first one from Elyse Greenspan from Wells Fargo. Please go ahead.

Hi. Thanks for taking the follow-up. Just had one quick additional question. Have you guys commented on how much transportation and entertainment is as a percent of your expenses, because my assumption is just given travel ban restrictions, there could potentially be a benefit from lower cumulative expenses in the second and potentially in the third quarter?

The answer is you were breaking up Elyse there. So if I don't answer your question exactly you may have to rephrase it, but what I got out of that was the potential positive on reduction T&E expense in the organization, and the answer is yes. We do believe there could be a slight benefit in Q2 and Q3 relative to travel. Obviously, we are encouraging our teammates to talk with our clients. The best would be on video conference just like all the other millions of people out there trying to do that or on the telephone, and then as and when states reopen and we believe that it would be safe for teammates to go out and see our customers, we would, they’ll be traveling there. I do think it'll be a cautious open from our standpoint and what I mean by that is I think it's going to be a lot of driving the cars as opposed to jumping on planes right away. But yes, we do believe there could be a slight positive impact in Q2 and Q3.

Have you said how much T&E is as a percent of your expenses?

No, Elyse, we haven't disclosed that in the past.

Okay. Thank you. Thank you again. That's for taking the follow-up.

Sure. Have a good day.

Thank you. The next call is from Mark Hughes from SunTrust. Please go ahead.

Okay, thank you. Powell, you mentioned we're selling a lot of new business. Can you comment on April new business trends if you think about April compared to what it might have been in January/February based on the run rate?

Yes. So let me, remember this is purely speculative anecdotal statement because we're not giving forward-looking information, and I would tell you that, remember we work 60, 80, 120, 150 days out. So remember we had inventory in the pipe that was April, May, June things that were working on. So I would tell you and I think this is an important distinction, I think that when you start to see the potential impact on new business and the reduction in exposure units for our existing customer base is May. So I want you to think about that statement for just a moment. If somebody has gotten through April and we are working with them and they say we think let’s say their annual revenues are $12 million a year, $1 million a month, and let’s say for three months that their revenues were next to zero or 10% of the regular and they adjust that down then that would flow through in May and June and into July and everything and that's why we believe Q3 will have a potential bigger downdraft because you’ll have three full months of exposure changes versus potentially two months.

One final question.

Hey, Mark. One additional point is that carriers are likely more open to adjusting mid-term exposure units right now compared to what they usually would say, which is that they'll address it during the audit. This is just another factor that will likely be relevant during this period. It varies by carrier and their approach, but we prefer to make adjustments that accurately reflect the current exposure units.

To that point, how reliable do you think your information is and how timely is it? How much delay is there in this process? Many business owners may be engaged in other activities and might not have considered the insurance impacts yet. Do you think there's a natural delay, or how timely is it?

As I have said, it's going to depend on the customer but I want to make sure that pretty much every business owner’s thought about insurance. So that's number one, and number two, they have also thought about cash flow. So I call it the going concern theory, which is if you think about it if the carrier takes the position to just keep paying in the normal payments and we’ll catch you at the audit, I would encourage you to say that’s not that good because the client is thinking, I don’t know if I’m going to be around in some instances when the audit comes around. So I have to manage my cash flow today and next week and next month and next quarter to get there. So I believe there is a slight delay Mark, but not that much. To the extent that our carrier partners will allow us to make those adjustments midterm, we are encouraging that and working with our customers to do that to help them get through this period of time.

Very helpful. Thank you.

Yes.

Hey Lisa, I think we're going to probably go ahead because we're about an hour and 20 minutes. If there's anybody else has other follow-up they can give us a ring. We will go ahead and wrap up the call today. Powell you have got some closing comments?

Thank you, Andy. As we conclude, I just want to remind everybody of a couple of key themes. We had a really good quarter and although some people may put that to the side in light of the recent events, I want to make sure that everybody understands that we don't, and we're really proud of our teammates and how they have delivered for our customers time and time again in what I would call difficult environments. Number one. Number two, and we don't take this lightly, we have a strong balance sheet, and we're proud of it. We deliver the highest cash conversion among our publicly traded peers, and we have access to a billion dollars plus in liquidity. So we think about things long-term and so could it be a little bit bumpy in the next quarter or two and beyond? Yes, sure, but I'll tell you one thing, we got our hands on the wheel and we're navigating through this situation and trying to work to deliver for our customers business solutions so they can live to carry on their businesses again. So with that, I wish each of you the best of health and we look forward to talking to you again in the next quarter. Good day and good luck.

This concludes today's call. Thank you for your participation. You may now disconnect.