Good morning, and welcome to the Brown & Brown, Inc. Third Quarter Earnings Call. Today's call is being recorded. Please note that personal information discussed during this 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 third quarter and are intended to fall within the Safe Harbor provisions of 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 third quarter and that 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 discussions 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, there 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 the Investor Relations and then Calendar of Events. With that said, I would now like to turn the call over to Powell Brown, President and Chief Executive Officer. You may begin.

Thank you, Cecilia. Good morning, everyone, and thank you for joining us for our third quarter 2021 earnings call. Q3 was another very good quarter for Brown & Brown. This was a result of our nearly 12,000 teammates delivering creative risk management solutions for our customers. We delivered strong top line growth driven by a combination of robust new business, good retention, rate increases, and some expansion of exposure units. At the same time, our team continued to drive profitable growth, resulting in impressive margin improvement and adjusted earnings per share expansion. We're also very proud that last week, our Board of Directors authorized an increase of 10.8% in our quarterly dividend. Of note, we've now increased our dividend for the 28th year in a row. Now let's transition to the results for the quarter, I'm on Slide 3. We delivered $770 million of revenue, growing 14.3% in total and 8.5% organically. I'll get into more detail in a few minutes about the performance of our segments. Our EBITDAC margin grew by 280 basis points to 35.6% versus the third quarter of 2020. Our net income per share for the third quarter was $0.52 on an as-reported basis and $0.58, excluding the change in estimated acquisition earn-out payables. During the quarter, we completed another seven acquisitions and would like to extend a warm welcome to all of our new teammates that joined during the quarter. In summary, we're really pleased with our strong performance for the third quarter and the first nine months as the year-to-date results are the best in our history, 10.8% internal growth year-to-date. Later in the presentation, Andy will discuss our financial results in more detail. I'm now on Slide 4. We have customers that have done well throughout the pandemic and others that are struggling to fully reopen, mainly due to the inability to hire employees. We are seeing this challenge in a number of industries and geographies. And as a consequence, this is restricting how fast companies can become fully operational. In addition to shortages of workers, supply chain issues and inflation are putting pressure on costs. From a placement standpoint, the themes are pretty consistent. Customers with good loss experience are getting the best rates and coverage while those with tough loss experience are seeing material rate increases or reductions in available limits or both. As a result, customers continue to consider program modifications to manage their premium increases. Rate increases remain relatively consistent with prior quarters. Admitted market rates continue to be up 3% to 8% across most lines. The outliers are workers' compensation rates, which are down 1% to 3%, and commercial auto rates, which are up 5% to 10%. From an E&S perspective, most rates were up 10% to 20% with some outliers. Coastal property, both wind and quake, are up 10% to 30%, with this being a slightly broader range than we saw in the previous quarter. Professional liability for most accounts remains very challenging with rates up 10- to 15-plus percent. Cyber rates, in some instances, could increase dramatically depending on the security in place with the customer. Security protocols that were viewed as nice to have in the past are now viewed as minimum expectations to obtain coverage. Also, excess umbrella coverage remains very difficult to place. For professional liability, cyber, and umbrella, we're seeing carriers reduce limits while seeking significant rate increases. Florida and California placements in E&S for personal lines remain the most challenging due to losses or aggregate concentrations. We expect the appetite for personal lines and catastrophe areas to continue to be constrained in 2022, which will likely put pressure on state-sponsored programs and the cost of insurance for the consumer. From an M&A perspective, we were successful in closing seven transactions during the quarter with annual revenues of approximately $21 million. We've closed a total of 11 deals year-to-date with annual revenues of $65 million, and I've already announced a couple of additional acquisitions in October. Our pipeline remains full, and we feel good about our level of activity and engagement with prospective sellers on Slide number 5. Let's discuss the performance of our four segments. Retail delivered great results with organic revenue growth of 8.3% for the third quarter. The performance was driven by growth from all lines of business through a combination of strong new business, good retention, rate increases, and exposure unit expansion. We're leveraging our broad capabilities to benefit our customers and prospects. National Programs delivered another outstanding quarter, growing 13.2% organically. Our growth was driven by the strong performance from most programs due to new business, good retention, and rate increases. The Wholesale Brokerage segment delivered a 5.1% organic growth with commercial brokerage and binding performing well, driven by new business and continued rate increases for most lines of coverage. Personal Lines and coastal states continue to be a headwind, as I mentioned earlier. The Services segment delivered organic revenue growth of 0.5%. The performance for the quarter was driven by claims processing revenue associated with recent weather events, which was substantially offset by external factors continuing to impact our advocacy businesses. Overall, it was a great quarter across the board. Now, let me turn it over to Andy to discuss our financial performance in more detail.

Great. Thank you, Powell. Good morning, everybody. We're over on Slide number 6. Like previous quarters, we'll discuss our GAAP results and certain non-GAAP financial highlights. For the third quarter, we delivered total revenue growth of $96.3 million or 14.3% and organic revenue growth of 8.5%. Income before income taxes and EBITDAC both increased by approximately 24%. EBITDAC margins expanded 280 basis points driven by strong organic revenue growth and managing our expenses. Net income increased by $12.4 million or 9.3%, and our diluted net income per share increased by 10.6% to $0.52. The effective tax rate increased to 25.5% for the third quarter of this year as compared to 15.5% in the third quarter of last year. The tax rate for the current quarter is in line with previous guidance while the prior year was driven by the tax benefit associated with the vesting of restricted stock awards. We continue to anticipate our full year effective tax rate for 2021 will be in the 23% to 24% range. Our weighted average number of shares increased slightly compared to the prior year, and our dividends per share increased to $0.093, or 9.4% compared to the third quarter 2020. We're over on Slide number 7. This slide presents our results after removing the change in estimated acquisition earn-out payables for both years, which we believe presents a more meaningful year-over-year comparison. The change in estimated acquisition earn-out payables was a charge of $23.1 million in the third quarter of this year compared to $15.3 million for the same period last year. Excluding these non-cash items, income before income taxes on an adjusted basis increased by 26.4%. Our net income on an adjusted basis increased by $16.7 million or 11.4%, and our adjusted diluted net income per share was $0.58, increasing 11.5%. The lower growth of earnings per share and net income for the quarter as compared to the growth of income before income taxes was driven by the change in the effective tax rate. Overall, it was a very strong quarter on the top and bottom line. I'm going to move over to Slide number 8. This slide presents the key components of our revenue performance. For the quarter, our total commissions and fees increased by 14.6%, and our contingent commissions and GSCs increased by 27.1% as we qualify for certain additional contingents and GSCs this year. Organic revenue, which excludes the net impact of M&A activity and changes in foreign exchange rates, increased by 8.5%. Forward to Slide number 9. The Retail segment delivered total revenue growth of 17.8%, driven by acquisition activity over the past 12 months and organic revenue growth of 8.3% with solid growth across all lines of business. EBITDAC margin for the quarter increased by 180 basis points and EBITDAC grew 24.6% due to higher organic revenue growth, increased contingent commissions and GSCs, and managing our expenses even with slightly higher variable costs. The growth in income before income tax as compared to EBITDAC for all segments is impacted by changes in intercompany interest, amortization, depreciation, and estimated acquisition earn-out payables. Over to Slide number 10. Our National Programs segment increased total revenue by 13.7% and organic revenue by 13.2%. In conjunction with the onboarding of a new customer, we recognized approximately $5 million of incremental revenue this quarter that represents timing. We expect the incremental revenue from this customer to more than likely be recognized within the first half of 2022. EBITDAC increased by $18.7 million or 28.5% with the margin improving 510 basis points as a result of strong organic revenue growth, managing our expenses and the positive impact of the non-recurring write-off of certain receivables that occurred in the third quarter of last year. Over to Slide number 11. The Wholesale Brokerage segment delivered total revenue growth of 11.2% driven by acquisitions in the past 12 months and organic revenue growth of 5.1%. EBITDAC grew 4.7%, but the growth was impacted by incremental broker compensation driven by higher levels of performance, slightly higher variable costs, and certain non-recurring intercompany IT charges. On Slide 12. Our Services segment increased total revenue and organic revenue by 0.5% with EBITDAC growing 6.8%, driven by continued management of our expenses. Few comments regarding cash conversion and liquidity. We experienced another strong quarter of cash flow generation and have delivered $628 million of cash flow from operations through the first nine months of this year, growing $88 million or 16% as compared to the first nine months of last year. Our ratio of cash flow from operations as a percentage of total revenue remained strong at 27% for the first nine months of this year. With the combination of our cash generation and capital availability, we are well positioned to fund continued investments in our business. With that, let me turn it back over to Powell for closing comments.

Thanks, Andy, for a great report. We've had an outstanding first nine months of the year and believe we are well positioned to continue profitable growth. As we look towards the remainder of the year and into '22, we expect business confidence to improve and exposure units to expand. The main influencers of increased confidence and business expansion will be: one, the availability of employees across all industries; two, the resolution of supply chain constraints; three, inflation. Is it transitory, or is it sustained? And four, the continued management of COVID. How and when these play out over the coming quarters will influence the trajectory of the economy. From an underwriting perspective, we anticipate premium increases will continue to moderate for many lines with the exception of cyber, professional excess, and automobile. The M&A market will continue to be very active and valuations will remain at heightened levels as a result of many buyers with a lot of available capital. We feel that we're well positioned with a good pipeline to attract great companies to join the Brown & Brown team. We will continue with our disciplined approach of focusing on culture and financial alignment as these have been key to our long-term success in delivering shareholder value. From an innovation standpoint, our focus is to constantly and consistently deliver creative solutions for the benefit of our customers, prospects, and teammates. We're making good progress and are continuing to align on common operating platforms for each division, enhancing our customer-facing applications to make it easier to do business with Brown & Brown and leveraging our data to the benefit of our customers. In summary, the results were outstanding for the third quarter and the first nine months of the year, and we are uniquely positioned to succeed in this ever-changing marketplace. With that, let me turn it back over to Cecilia for the Q&A session.

We will now take our first question from Greg Peters from Raymond James. Please go ahead.

Congratulations on your quarter. Powell and Andy, you discussed the outlook for the economy, particularly regarding pricing, which will influence how organic growth develops over the next year or two. One of the main issues we frequently hear about is what we should expect for organic growth next year. I understand you typically do not predict or comment on organic growth. However, considering the supply chain constraints you've mentioned alongside the improved business confidence, it appears they are moving in different directions. Any additional insights you could provide on organic growth as we look ahead to next year would be greatly appreciated.

Thanks, Greg, for your comments. As you know, we don't provide organic guidance. What you're pointing out is accurate; there are some differing opinions and various developments in the economy. For instance, construction is booming in many areas, yet in those same locations, some restaurant businesses are struggling to find enough servers. I apologize that we can't give you a specific answer to your question. However, it's interesting to note that most people we engage with have a generally positive outlook for the future. The challenge they face is that their costs for goods or services are rising, and they are unsure of how much that increase will be. It's possible they could sell more of their product but still see a slight decrease in margins next year.

Right. That, I guess, is effects of inflation. I guess in conjunction with your strong organic revenue results, I guess, one of the other areas, it would be for you, compensation. If you look at the margin improvement, substantial margin improvement and there's a lot to unpack there, whether it's T&E or lower comp. But it seems like you might have some pressure as we look forward just because of the organic revenue results that you're producing and the possibility of higher T&E. So maybe you can cover that as well.

Sure. First, we are in a very competitive talent environment, and this is not a new situation for us. Second, as a pay-for-performance company, we value our great teammates and aim to retain them while also seeking to acquire new talent to support growth opportunities in various business segments. We are continuously assessing how we compensate our teammates and develop long-term alignment with our goals. It's important to note that hiring is not a straightforward process; it's not as simple as replacing one person with another. We prioritize having the best talent on our team, which means we may hire more people in certain areas next year to better serve our customers or generate new business. Our investment in salaries is not merely an increase in costs for current employees; it's also about bringing in new hires who are so talented that we cannot pass up the opportunity to hire them.

Andy here. Hi, Greg. Just a couple of things, I think, on the question about T&E. You're at least thinking about it in the right direction. I think we try to be really consistent on this topic, which is, we don't know exactly where the new levels of spend will end up for T&E. They will realistically go up over time. I don't know if they'll get all the way back to where they were probably pre-COVID potentially, we'll see what that looks like. But as you saw what we did last year and what we've done this year is, we're trying to focus the best we can on how do we deliver profitable growth. That will move up and down over time based upon how our costs move back and forth inside of the organization. But we probably at least manage everybody's expectation. We've had a great 2021 already. The likelihood of that level of further expansion next year could be challenging with some of the items that you mentioned.

Great. Just a point of clarification around hiring because I know one of your competitors was out talking and promoting all the new hiring success they've had. Powell, can you talk about your recruiting program and maybe a status update on your retention versus new hires?

One of the things I'm always interested in is that while big announcements can be positive, they can also overshadow other important details. When someone states they've hired a certain number of people, I wonder if they have also considered how many have retired or left the company. Regarding our situation, we are actively recruiting across all areas of our business, and our retention rates are currently at historical highs. This doesn’t mean we aren’t facing challenges with competitors trying to lure our employees away, but our retention remains strong. Additionally, our hiring process is robust. We prefer not to disclose specific numbers like some of our competitors do, but we are confident in our ability to onboard new staff and develop their skills to better serve our customers. We also support individuals in taking on more responsibilities, whether in leadership roles within the same office or elsewhere. It’s a hectic time for talent acquisition across all businesses, including ours, but I am optimistic about our recruiting, development, and retention efforts.

We will now take our next question from Mike Zaremski from Wolfe Research. Please go ahead.

It seems there has been notable margin improvement alongside organic growth. If I understand Andy's comments correctly, it appears that while there may be tougher comparisons ahead, it seems like you might be able to maintain the current margin levels, although you indicated not to expect the same level of improvement next year. I just want to ensure I'm thinking about this correctly and if there are any one-time factors or tougher comparisons we need to consider that could affect the margins in our projections.

Sure. Mike, we do not provide organic growth or margin guidance. We have consistently stated that we view ourselves as a mid- to single-digit organic growth business in a steady-state economy, with a margin profile of 30% to 35%. I want to reiterate what Andy mentioned, which is that we will invest in the business as necessary to grow, serve our current customers, and acquire new business moving forward. It's also important to note that we do not consider a single quarter to be a trend. We had a strong quarter, and we are pleased with our year-to-date organic growth and margin. However, we cannot provide specific numbers for your margin profile next year as we do not know how many people we will hire or the opportunities we will have to enhance or develop our team's capabilities. I understand this might be frustrating, but we remain consistent. While that may seem repetitive, it reflects our commitment to doing what we say and communicating transparently.

Not at all boring. It's good in this business a lot of times. But I guess just as a follow-up to that question, a couple of peers, I guess, as the pandemic has played out, have kind of laid out some specific kind of efficiency measures that they think will persist beyond the pandemic that kind of lead to greater efficiencies. Is Brown undergoing any of those kind of exercises that could be kind of permitting down and helping out the income statement?

Yes, let me clarify that. We are not planning to significantly reduce our real estate footprint by 40% or 30%. It's important to note that we were already operating efficiently. I've mentioned before that we tend to be consistent and a bit unexciting. We will keep evaluating our real estate based on the needs of our specific offices. This may lead to some reductions in certain areas while expanding in others. We believe the return to office dynamics will continue to evolve. This doesn't exclude a work-from-anywhere approach, which we fully embrace. However, I can't predict any permanent changes at this time. The only uncertainty we have pertains to how travel and expenses will respond moving forward.

Yes, Michael, I guess I think if you go back to our comments last year, and there were a lot of questions everybody had of us of why we weren't putting mandates in place in order to drive all the cost out. And we said at that stage because we've got complete confidence in all of our leaders that they will know how to navigate through the process. That's part of the reason why we have industry-leading margins that we've had for decades as an organization. So, we run a very profitable business. We're very proud of that. So, we don't have a lot of just excess costs just sitting around that we just cut out one day just because we think we were constantly looking at where we invest in our business where we need to put our chips, where we need to pull them back, et cetera, in order to make sure that we invest for the long term, but also deliver good shareholder value.

I think it's important to recognize that our industry-leading margins are closely linked to our exceptional cash conversion. This capability allows us to reinvest the profits we earn back into our business, and we take great pride in that.

That's helpful. If I could ask one last quick question, I noticed the press release about unifying the retail segment under the brand name Brown & Brown for all the branches. Is there any significance to that decision or the thought process behind it?

Yes, we have had the chance to acquire several talented business teams and firms over the past 5 to 10 years. Unifying our brand simplifies our market presence, reducing any possible confusion that competitors might create when discussing our capabilities with different account sizes. We are very pleased with this direction, and ultimately, we all represent Brown & Brown. Moving forward, we will refer to everyone in retail as Brown & Brown. So there's no need to read too much into it.

We will now take our next question from Elyse Greenspan from Wells Fargo. Please go ahead.

My first question on Retail. Do you guys have some strong growth throughout this year? Obviously, spot a little bit in the third quarter, but I think a bunch of that was just because the benefits business is very half year on heavy and that performed really well. Can you give us a sense of the components of retail benefits versus your traditional brokerage business? And what you saw in organic growth in the third quarter relative to the first half of the year?

Okay. So let me just unpack that, Elyse. So number one, we were pleased with the 8.3% organic growth in retail, which we call out. We don't give growth by line of business, as you know. And as it relates to benefits, what we have said is our benefits are about 1/3 of our retail business. So I think that answered what you said, but did I hit what you wanted?

I was just curious about how benefits performed and the rest of the business in the third quarter compared to the growth at the start of the year, but it seems you are not going to provide that information.

Elyse, just to go back to our prepared comments, one of the things we said in there is that all lines of business grew during the quarter, and we're pleased with the performance all the way across.

And then in terms of wholesale, you guys saw a slowdown in growth in that business. But you did point to personal lines being a headwind. So is that really what drove the slowdown within wholesale? Can you just give us a sense of without giving us numbers within the businesses, but just the core trends, and what's going on to the wholesale business?

Let me make an important observation. We don’t think one quarter defines a trend. Our business has grown by 8% year-to-date, and we are pleased with the wholesale performance. It's worth noting that our business leans more towards authority than brokerage, unlike some firms which are more brokerage-oriented. Additionally, we have a portion of our binding authority business in personal lines that is significantly affected in California and Florida. In California, there are not just losses but also challenges with people trying to exit policies, and insurance commissions are restricting access in certain areas. In Florida, some individuals are facing non-renewal by standard markets, resulting in them having to turn to Citizens. Thus, we have two significant personal lines markets in a state of flux, creating a headwind for us. That summarizes the situation for you.

That's helpful. And then one last one. Andy, you guys had spoken with the non-cash stock-based comp. I think the expectation was flat for the year. That trended up this quarter, probably reflective of the strong growth that you guys have seen this year. So I'm assuming we'll probably end up seeing that up for the year, just given that there's one quarter left. Any kind of new commentary there about the non-cash stock based comp?

Yes. No, that's correct. We're up about $3 million year-to-date versus the prior year, and that is all based upon incremental performance that we've been seeing both top line as well as on earnings per share. So we'd expect that to probably continue into the back end of the year, Elyse.

We will now take our next question from Mark Hughes from Truist. Please go ahead.

Your comment about margins, I think you said...

Hi, Mark, we can't hear you. Yes, you might be on a speaker phone or something. Can you pick up because you're breaking up.

Okay. How about this?

A better.

Can you hear me now?

Yes, yes.

Okay, very good. Andy, in discussing margins, I want to confirm that you mentioned you do not anticipate the same level of margin improvement next year as we have seen this year. However, this doesn't imply that there won't be any margin improvement or that there isn't potential for margin improvement next year. Is that an accurate interpretation?

Yes, there is, I guess, probably just as much likelihood that we would have some upside we would have some downside next year. In the business just based upon we're investing, we're just trying to manage everybody's expectations.

Yes, exactly. When we consider inflation, could it be viewed as a potential advantage if customers experience higher revenues and asset values? If carriers are dealing with some loss inflation, might that ultimately benefit us, perhaps balanced out by some of our customers facing challenges from inflation? Should we regard it as a net positive?

I believe it varies by industry, and I’m making a bit of an educated guess here because inflation is influenced by two factors. One is the money supply, which is significant with a lot of money in consumers' hands. The second is how quickly that money is spent, and some consumers are spending a lot in certain areas. For many of our customers, while their revenues might increase, their costs for goods or services may rise even faster. This situation could create a short-term positive effect, but there are also businesses that might face negative consequences. Overall, I would say my perspective is fairly neutral. Andy, what are your thoughts on this?

Yes. I think, Mark, in isolation, that is a fair comment. However, a key variable is how the buyer of insurance perceives their total cost. If their costs increase and they are trying to navigate through that, they might reconsider their deductibles and aggregates. There are always multiple factors to consider, and it’s not a straightforward process that affects organic growth.

Okay. And then a final question. Andy, you mentioned National Programs, you got $5 million in incremental revenue from timing. And then I think you had suggested there would be more incremental revenue from that program in the first half. Can you say anything about 4Q? And can you say anything about the magnitude of the incremental revenue in the first half?

So assuming pull that apart a little bit. So in the case of the $5 million, that was a new customer that we onboarded, just we onboarded it quicker than anticipated. We would have thought it would have kind of been over the third and fourth quarter. And what normally happens on some of those accounts is you're going to end up there's kind of a lag when you transition from a previous provider out there. That's what represents the $5 million that will show up over the first half of next year. And then we haven't changed any of our commentary on the fourth quarter versus what we said last quarter. And if you recall, we said there would be potentially $4 million to $6 million of revenue moving from the third quarter to the fourth quarter. We still stand behind that comment.

Our next question comes from Meyer Shields from KBW. Please go ahead.

If I can just tag on to Mark's question. Is that $4 million to $6 million moving to the fourth quarter? Is that also onetime that will correct next year? Or is that now in the fourth quarter, now its new home?

Yes, that will be the new home for it in May. It's similar to the $5 million; as we onboard accounts, we expect to see incremental revenue, and when it comes to renewal cycles, it will align in the right period. Just keep in mind that once you have your estimates for the third and fourth quarters, you probably want to consider the $6 million. You should not take $4 million to $6 million out of the third quarter and move it to the fourth, as that would be incorrect.

Got it. Okay. Can you give us an update in terms of when the advocacy businesses within services should normalize?

We wish we could tell you that, but if you could give us some insight about what's going on in Washington, we could answer that, and I'm not trying to be flipping, Meyer. I'm just saying that the processing of that type of business is greatly impacted, as you know, by the government working at full steam or whatever you want to call that, and that hasn't really been going on for a while. So you have backlog, and we don't have an answer. It's not like we can say, six months from now, we don't know yet. So it's going to kind of plot along.

Yes. I mean, the other thing we know on those, Meyer, is it does work itself out over time. If you just go back historically and look at that business, it goes through these cycles. We just don't know how long this cycle is going to last.

Okay. That's perfectly fair. Final question, if I can. Are you guys seeing any increase in compensation expenses for non-client-facing folks?

We're observing that the environment is consistently competitive. In our business, we consider this as involving all teammates, rather than attributing it to just one group. It's a collective effort from all teammates.

Yes to Powell's comment earlier, because we're in a competitive environment, salaries went up in 2019 versus 2018. They went up in 20%. So, we see that in the marketplace all the time.

Right, I guess the question was more because we hear more rumblings of, I don't want to call it the great resignation or things that seem unusual relative to past years instead of maybe the normal upward drift in compensation?

So let's answer that. That is absolutely happening across lots of businesses. But what I've said is that our retention ratio is in line with what it has been historically. So, I think that the magnitude, of the last 18 months, has created lots of changes in many people's minds. And some people are deciding to leave industries they've been in for long periods of time or make work-life balance changes and things like that. And so having said that, we see that affecting our customers all over the place. So it's real. We're here to tell you it's real.

We will now take our next question from Michael Phillips from Morgan Stanley. Please go ahead.

Paul, in your opening comments, you talked about cost pressures for clients and went through a whole host of reasons why these pressures there, one of which obviously is insurance. I don't know the extent to which clients pay attention to profitability levels of insurance companies or not, I have no idea, but maybe they do. I guess to what extent is that conversation coming into play more than ever before and maybe impacting kind of how much they're willing to accept rate levels from carriers?

Clients generally do not concentrate on the profitability of insurance companies. It's also important to note that depending on the discussion, there are times when conversations arise about increases in loss costs, indicating that losses could rise by 5%, 6%, or 7%. Currently, when listening to the carriers, they're mentioning very large verdicts that seem to be outside the ordinary range. Although I dislike the term, some of these are referred to as nuclear verdicts. You might see situations where the expected settlement is much lower than what it turns out to be, perhaps increasing significantly. To answer your question briefly, customers typically do not focus on how the insurance company is performing. Instead, they prioritize controlling their costs, securing the best possible coverage, and ensuring flexibility and options in their programs. When you compile all these factors, you get a sense of the conversation's direction. In some market segments, options may be limited, leading to greater pricing pressure compared to areas where all insurance companies are eager to participate. This creates a challenge in discussions with customers, but the crucial aspect is to avoid any unexpected surprises. Therefore, we strive to communicate frequently and transparently with our customers about market conditions and to develop strategies for managing their costs and coverage effectively moving forward.

Okay. That's helpful, Powell. Totally separate question. Another quarter of pretty severe weather again and again and again, and this time includes lots of flood losses, which are even occurring today. So I guess in your service segment, are you seeing any change in, I guess, the competitive environment there for others that want to kind of do what you do in that space given the kind of onslaught and continuation of frequency of flooding?

The answer to your question is that many people are exploring various options in the flood sector. Generally speaking, I haven't encountered any groundbreaking innovations. However, there is a growing interest in private flood insurance, which is positive. Nonetheless, private insurers are hesitant to cover the most vulnerable flood zones. It’s akin to insuring wind damage on a top-tier construction where the risk of loss is low; while many insurers would prefer that, they often struggle to set appropriate prices. Currently, I’m not aware of any programs that provide reliable flood modeling, which remains a significant obstacle. We are focused on the risk rating 2.0 with the NFIP and are assessing the adequacy of flood maps among other discussions about growth opportunities. Despite the potential, the private flood market isn't capturing a substantial share of the segments served by the NFIP. In summary, while I’m not aware of any major shifts affecting the industry, we continue to strive for creativity and stay informed about developments in Washington that could influence our operations and expand our customer reach.

And Mike, keep in mind in our Services division, we do substantially no adjudication of flood claims. If you recall, we sold that business a number of years ago. We still work with that business that's out there. But if we're going to see claim activity, it's normally going to show up in our National Programs division.

We will now take our next question from Greg Peters from Raymond James. Please go ahead.

Thank you for allowing me to ask a follow-up. In your comments, and I know you've talked about the M&A market. Can you give us an update on the multiples being paid and your appetite for expanding the Brown & Brown footprint beyond North America into Europe and other areas?

Sure. Greg, it's always interesting to discuss multiples since our definition of EBITDA or EBITDAC differs from others. What we see as a recurring expense, others might consider non-recurring. I've altered my perspective on this, stating that valuations remain high, continuing to sit at the upper end of the range, and I don’t foresee this changing in the near to medium term. Additionally, as we've mentioned before, we acquired a business called Special Risk in January 2020, located in Vancouver, British Columbia, and we operate across Canada with a fantastic team. Earlier this year, we also purchased O'Leary Insurances in Cork, Ireland, which we are just as excited about. When you look at those two regions and our operations in London, they represent areas where there is a rule of law and established business opportunities. We are continually seeking partnerships that align culturally and are financially viable. While some investors find international expansion appealing, I view it differently. Traveling to London isn't easy, and the lack of sleep can make meetings challenging. Nevertheless, we aim to collaborate with partners who fit our culture and finances, and we believe opportunities exist, but the key question will be whether we can make them financially viable.

Got it. I would like to hear more about the free cash flow conversion. Andy, you mentioned it in your earlier remarks. It appears that the free cash flow conversion rate is slightly higher than what we've seen over the past five years. Should we expect this rate to decrease, or are we looking at a new normal for what you anticipate this year?

Yes. Thanks for the question, Greg. We have consistently managed our working capital closely for years, which contributes to our high conversion ratio. Additionally, our organization delivers strong margins, and together, these factors have positively influenced our performance. If you examine how our margins have changed over the past few years, you'll see that they support at least a 27% year-to-date range. While this could fluctuate slightly, I don’t expect it to drop into the low 20s. We are highly focused on ensuring that we convert our revenues into cash so we can reinvest that cash back into our business.

Yes, we encourage you to consider this in relation to other companies because if you have an expense that affects cash flow, it’s important. As I often say, when you look at the cash you generate, it's primarily adjusted for non-cash items like changes in acquisition earn-out payables. Comparing this with others you can access may provide valuable insights. We'll take one more question before we conclude at the top of the hour. Do we have any other questions?

There are no further questions over the phone at this time.

Perfect. Cecilia. Thank you very much for your help, and thank you all very much. We appreciate your time. We're very pleased with what's going on with the business. I'll stress again 10.8% organic growth year-to-date. We're at 11.5% in Retail, 13.2% for Programs, 8% in Wholesale, and 3.6% in Services. So we're very pleased with what's going on, and we look forward to talking to you next quarter. Have a great day. Thank you.

Thank you. And that will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.