Good morning, and welcome to the Brown & Brown Inc. Third Quarter Earnings Call. Today's call is being recorded. Please note that certain 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 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, 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 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 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, future events, or otherwise. In addition, there are certain non-GAAP financial measures used in this conference call. A reconciliation of non-GAAP financial measures to the most comparable GAAP financial measure can be found in the company's earnings press release or in the investor presentation for this call on the company's website by clicking on the Investor Relations and then Calendar of Events. With that said, I’ll now turn the call over to Powell Brown, President and Chief Executive Officer. You may begin.

Thanks, Kevin. Good morning, everybody, and welcome to our Q3 earnings call. First, we'd like to state that our hearts go out to all those impacted by Hurricanes Helene and Milton. These back-to-back storms were unprecedented in many ways and resulted in significant death and destruction throughout the Southeastern United States. We're committed to helping communities impacted by these events recover and return to normalcy over the coming weeks, months, and years. With that, let’s transition to our performance for the quarter. We had outstanding top and bottom-line results. Our team continues to deliver for our customers, resulting in strong net new business, organic growth, and margin expansion. I'll provide some high-level comments regarding our performance, along with updates on the insurance market and the M&A landscape. Andy will then discuss our financial performance in more detail. And lastly, I'll wrap up with some closing thoughts before we go to Q&A. Now, let's discuss our results. I'm on Slide 4. We delivered nearly $1.2 billion of revenue, growing 11% in total and 9.5% organically over the third quarter of 2023. Our EBITDAC margin improved by 30 basis points to $34.9 million, and our adjusted earnings per share grew 12.3% to $0.91. On the M&A front, we completed four acquisitions with estimated annual revenues of $8 million. Overall, it was another great quarter, as our team is focused on delivering the best solutions for our customers and strong results. I'm on Slide number 5. In the countries where we primarily operate, there were no major changes in the economic conditions versus the first half of this year. Consumers are still spending and driving demand. As a result, businesses are continuing to hire and invest albeit at a more moderate pace as compared to the last few years. Here in the US, we are seeing a bit more caution due to the uncertainty around the Presidential Election. From an insurance pricing standpoint, rates for many lines continue to increase, but at a slightly slower pace than what we experienced in the first half of this year and the third quarter of last year. The line that had the largest change for the quarter was E&A property, which we'll talk about in more detail in just a moment. Pricing for employee benefits was similar to prior quarters with Medical and primary cost trends up 7% and 9% for commission-based accounts. The continual upward rate pressure and the complexity of healthcare are driving strong demand for our employee benefits consulting businesses. Based on historical and ongoing investments to expand our capabilities, we are well-positioned to help companies of any size navigate this challenging market. Rates in the admitted P&C markets were up 2% to 7% for most lines. The downward trend for workers' compensation remained, but there was moderation as we realize decreases of down 1% to 5% in most states. With the high level of employment, we expect this range to continue over the coming quarters. For the third quarter, rate increases for non-CAT property moderated and were in the range of flat to up 5%. For properties in convective storm zones, we did not see the same rate increases that we experienced in the first half of the year. For Casualty, we continue to see rate increases for primary layers due to ongoing size of legal judgments in the US and to a lesser extent, higher levels of inflation. Consistent with the last few quarters, rates for excess casualty continue to increase between 1% and 10% or even more in some instances, while for professional liability, we saw rates flat to up 5%. Shifting to the E&S markets, as you know, this year some carriers and facilities have been willing to put up incremental limits on existing insureds and new business. While CAT property rates continue to increase slightly in the first quarter of this year, we started to see decreases later in the second quarter and into the third quarter. On average, rates decreased between 10% and 20% as compared to the third quarter of last year. As a result, some customers increased their limits or modified adjustables, and some just captured the savings. As we mentioned before, moderate rate increases or decreases for one line of business will generally not have a material impact on the results of our company in total. In order to deliver consistently strong and industry-leading financial performance, we focus on diversification across lines of coverage, geography, industry, and customer segments. On the M&A front, competition for high-quality businesses remained consistent with the first half of the year. While the number of acquisitions by private equity backers decreased as interest rates rose, we are now starting to see higher levels of activity, as interest rates are beginning to decrease. For the quarter, we continue to build relationships with many companies and remain focused on our disciplined M&A approach to identify great organizations which align culturally and make sense financially. I am on Slide. Let’s transition to the performance of our three segments. Retail delivered 3.9% organic growth for the quarter with most lines of business performing well. We had another strong quarter for net new business but realized the impact of moderating rates for most lines, as well as slightly lower growth in exposure units. In addition, our organic growth was negatively impacted by over 100 BPS, resulting from the year-to-date true-up of certain incentive commissions as well as quarterly volatility in bond or non-recurring revenue. Our team is performing really well and has good momentum going into Q4. Programs delivered outstanding results with organic growth of 22.8%. This growth was driven by a number of programs resulting from new business and expansion of existing customers. Our lender-placed business and captives performed very well, and our CAT programs continue to grow. It was another great quarter due to the diversity of our programs; also brokerage delivered another good quarter with organic revenue growth of 8.4%. This performance was driven by a combination of net new business and rate increases. Our Open Brokerage business continues to grow nicely but at a slower pace due to the decline in CAT property rates. Our Delegated Authority business performed well again this quarter. Personal lines grew nicely, driven by California and Texas. We're very pleased that our balanced mix between brokerage and Delegated Authority continues to drive strong and stable performance. Now, I will turn it over to Andy to get into more results – our financial results.

Thank you, Powell. Good morning, everyone. I'm going to review our financial results and some additional detail. When we refer to EBITDAC, EBITDAC margin, income before income taxes, or diluted net income per share, we are referring to those measures on an adjusted basis. The reconciliation of our GAAP to non-GAAP financial measures can be found either in the appendix of this presentation or in the press release we issued yesterday. We're over on Slide number 7. We delivered total revenues of $1,186 million growing 11% as compared to the third quarter of 2023. Income before income taxes increased by 13.1%, and EBITDAC grew by 11.9%. Our EBITDAC margin was 34.9%, expanding by 30 basis points over the third quarter of the prior year. The effective tax rate for the quarter decreased to 24.6% versus the third quarter of the prior year, which was 25.6%. The decrease was driven primarily by certain one-time items in the prior year and the impact of changes in the market value of our company-owned life insurance. Diluted net income per share increased to $0.91 or 12.3%. Our weighted average shares outstanding increased slightly, as compared to last year as we continued to prioritize paying down our floating-rate debt. Our dividends paid per share increased by 13%, as compared to the third quarter of 2023. Last week, our Board of Directors approved a 15% increase to our projected dividend payment for the fourth quarter of 2024. This represents our 31st consecutive annual increase. Overall, we are very pleased with our performance for the quarter and the strong results our team delivered. We are over on Slide number 8. The Retail segment grew total revenues by 6.5% with organic growth at 3.9%. The difference between total revenues and organic revenue was driven substantially by acquisition activity over the past year. EBITDAC decreased due to lower contingent and incentive commissions, higher non-cash stock-based compensation, as well as investments in teammates to drive and support our current and future growth. We are on Slide number 9. Programs had another excellent quarter with total revenues increasing 15.7% and organic growth of 22.8%. Our organic growth was benefited by approximately $15 million associated with onboarding of new customers within our lender-placed business. This revenue will be recognized more evenly throughout 2025. Growth in total revenues was lower than organic due to net acquisition and disposition activity, as well as lower contingent commissions. Our EBITDAC margin expanded by 360 basis points to 48.2%, driven by leveraging our expense base and the sale of certain claims administration and adjusting services businesses in the fourth quarter of 2023. While accounting for the impact of the hurricanes, there are still a lot of unknowns, primarily associated with Hurricane Milton. Our best estimate is that we anticipate recording flood claims processing revenue associated with the recent hurricanes of approximately $12 million to $15 million in the fourth quarter and $18 million to $22 million in the first half of 2025, with the majority of that revenue being recorded in the first quarter. As of now, we're anticipating claims costs of $5 million to $10 million within our captives associated with Hurricane Milton. We're over on Slide number 10. Our Wholesale Brokerage segment delivered another great quarter with total revenues increasing 14% and organic growth of 8.4%. The incremental expansion in total revenues relative to organic was driven by acquisitions completed over the last 12 months and higher contingent commissions associated with finalizing the estimates recorded in the prior year. Our EBITDAC margin increased by 130 basis points to 38.6%, primarily due to higher contingent commissions and leveraging our expense base. We have a few comments regarding our capital structure, cash generation, and outlook. In the third quarter, we paid off $500 million of our inaugural 10-year bonds with the proceeds from our issuance completed in the second quarter of this year. With our continued deleveraging, our balance sheet is in a great position as our gross debt-to-EBITDA ratio on a trailing 12-month basis is in line with our 10-year average. For the first nine months of this year, we had strong cash generation of over $810 million, increasing our ratio of cash flow from operations as a percentage of revenue to 22.4%. As it pertains to full-year cash generation, we feel really good. We want to highlight that there is US Federal Tax relief associated with the recent hurricanes. As a result, payments for the third and fourth quarters of this year are permissible to be deferred into the second quarter of next year. Therefore, our full-year ratio of cash flow from operations as a percentage of total revenue for 2024 should be in the range of 24% to 26%. Based on our strong year-to-date performance and taking into consideration the potential impacts from Hurricanes Helene and Milton, we anticipate our full-year EBITDAC margin will be up at least 100 basis points for 2024 as compared to 2023. With that, let me turn it back over to Powell for closing comments.

Thanks, Andy, and a great report. From an economic standpoint, we do not anticipate material changes from what we experienced in the first nine months of this year. The biggest questions that seemed to be on the minds of business leaders here in the States may impact their level of investment or the outcome of the US Presidential Election, geopolitical matters, and the timing and magnitude of future interest rate reductions and inflation. From an admitted lines rate perspective, we anticipate rates in the fourth quarter and early 2025 to be relatively similar or moderate downward slightly versus the third quarter of this year. For the E&S market, Casualty and Professional Liability should be similar to what we experienced during the third quarter of 2024. For CAT property, it will come down to ultimate paid losses associated with Helene and Milton. We anticipate rate decreases from flat to down 10% going into the fourth quarter. On the M&A front, we continue to feel good about our pipeline both domestically and internationally. We're always building relationships with a lot of companies and we have a strong capital position. We will continue our disciplined approach as it has worked very well to help us acquire great companies and enhance our capabilities and drive profitable growth. Lastly, we're excited to have the Qantas team join Brown & Brown and anticipate a closing in the fourth quarter. As we head into the fourth quarter, our team continues to be well-positioned and is leveraging our capabilities to win more net new business. We have great momentum across the company and feel good about our prospects for the fourth quarter and finishing the year strong. With that, we'll turn it back over to Kevin and open it up for Q&A.

Our first question comes from Gregory Peters with Raymond James. Your line is open.

Well, good morning, everyone. I guess the instructions said I should strongly ask one question. So, I guess I'm going to focus my only question on the Retail segment. Powell and Andy ran through some variables that affected the organic in the third quarter. I'm wondering if you could provide some more detail on that. And if there's any read-through we should be thinking about as we look forward?

Greg, good morning, and we appreciate your one question. Actually, we're not going to break it down into specific details. But what I would say is, as we said in the organic growth, there are really incentives, the incentive commissions that are down, and we talked a little bit about non-recurring one-time revenue that didn’t occur like bonds and other related matters. So, from a standpoint of – we feel good about our Retail business. I think that's the important thing. I do not believe that one quarter creates a trend. And so, I think you should take from that what you want. But we feel really good about our Retail business.

And then, Greg, the other thing just, I guess for everybody else, keep in mind, remember we've said in the past that normally our business will grow faster – the Retail business will grow faster in the first half of the year than in the second half of the year. Last year it was a little bit different just because of timing of some bonds and some surety work inside – if you look kind of back historically, it normally grows faster in the first half than second primarily due to the amount of Employment Benefits business that is recorded in the first quarter.

Got it. Thanks for the answer.

Great. Thanks, Greg.

One moment for our next question. Our next question comes from Rob Cox with Goldman Sachs. Your line is open.

Hey, thanks. Appreciate the flat to down 10 guide for Property CAT rates. I was just curious if the products mix in wholesale is built to sustain nice growth in that type of environment? Or are we going to start seeing that show up a little bit more in the organic?

All right, so, good morning, Rob. Let me make one other clarifying comment on what I said. I believe that there is a great interest by the risk-bearers, particularly domestically to hold rates closer to flat. Having said that, there are new participants. There are other markets, specifically, London, which is very aggressive and that's going to put additional pressure on that. So, having said that, interestingly enough, our Q3 is not an inordinately heavy property quarter. Property is typically in Q1 and Q2 out of hurricane seasons. So, again, it depends on the mix, but we have quite balanced brokerage and binding authority businesses, and what we're talking about is in brokerage, not necessarily in binding. So, what I would say is, anytime you have rate decreases it can, but from a standpoint of we're going to see what kind of discipline the markets will see here in Q4. And what I'm about to say is purely speculative. Remember, prior to the storms, we were seeing down 20% and 30%. And so, we don't anticipate that, but anything is possible. I think it’s a much higher probability is zero to 10.

Thank you.

Thank you. One moment for our next question. Our next question comes from Elyse Greenspan with Wells Fargo. Your line is open.

Hi, thanks. Good morning. My question is going back to the Retail segment. So I guess, that incentive compensation, it sounds like a supplemental commission, which I think you guys started leaving inorganic but like a couple of years ago, so I just want to confirm that. And then given that the one-off with the 100 basis points, I know you guys don't typically like to guide, but how you did say right one quarter doesn't make a trend. Is the right way to think about it that some growth of around 5% is kind of like the baseline for Q4 and beyond?

Andy, do you want to take that?

Yeah. So let me hit the first one because that's pretty easy. Yeah, so, on the so GSCs, so the Guaranteed Supplement Commissions and then incentive commissions are out of organic growth. And as you know, those can move up and down by quarters just like the contingent commissions can adjust themselves inside. As you know, we don't give guidance for organic growth for the business. But I think as we look into at least the fourth quarter, we would at least think that, one, we feel really good about our business and the net performance and how we're bringing in new business. One of us is going to come down to what happens to rates and then exposure units for the economy. So, unless something unusual happens there, we would expect those two would be fairly similar to the third quarter.

Thank you. One moment for our next question. Our next question comes from Yaron Kinar with Jefferies. Your line is open.

Thank you. Good morning, everybody. So, my question is in the Programs business. So I think you sold a portion of the Captives to a third party and that's how coming back into consolidated through a non-controlling interest. Could you maybe walk us through the impacts to the Programs segment itself where that non-controlling interest is in the Programs business, namely what would the adjusted margin be? And what the organic growth be for that segment?

Well, morning Yaron. It has no impact on the organic growth or the margins. Remember, the non-controlling interest is only on a pre-tax basis allocation over. So we record all the growth above and then back up minority interest below.

Right, so my question would be what would the impact to the segment B, had we adjusted that non-controlling interest at the segment level?

I guess, I would say, it’s going to be relevant because the kind of rules don't allow you to do it anyway. We're following what the rules are. You have to bring it in on a gross basis.

Okay. Thank you.

Yeah.

One moment for our next question. Our next question comes from Michael Zaremski with BMO. Your line is open.

Morning. Hey, I guess for my one question. I want to focus on the Program segment, its growth has been exceptional for years now in the segment. And I think you gave some color to that, maybe this quarter’s outsized growth was coming from catastrophe programs. But maybe just curious, is there, when we think of the wholesale marketplace, we think about that marketplace over a long period of time typically growing a bit faster than the standard market due to some underlying kind of secular factors. Just curious in your Programs business, is there anything structural or secular you think this is just – should grow at a multiple of the standard markets over time?

All right. So, good morning, Mike. So let's think about that most of our Programs, many, I shouldn't say most are admitted, okay? So, think of that as an extension of the Specialty admitted market as opposed to the traditional wholesale or non-admitted market. I think that's an important distinction upfront. That’s number one. Number two, I believe there will continue to be interest and emphasis on the Programs business going forward, depending on what you read and what you believe the Programs space is somewhere between $85 billion and $100 billion of premium in the United States. And so, we do continue to see that growing nicely into the future. And there are a number of very talented underwriters that want to join us either from a risk-bearer or sometimes from other Programs, because there is a dynamic environment here where we have fostered great relationships with our carrier partners. And remember, we are underwriting on behalf of, we are, as we understand it, the largest delegated underwriting authority entity in the United States. And so, they place - carriers place enormous authority in our hands, of which we take very seriously. So, is the growth going to continue in the 20% range? That's quite high, all right? Let's call it what it is. But what I would say is, we believe that the Program space is a very nice, consistent grower over a long period of time and our results would indicate as such. And it's interesting because, and I know this isn't the case with you Mike, but there are some people out there that really don't, I don't think fully understand or give us credit for the others than retail part of our business, which is 40% of revenue, and as you know, it is performing very nicely. So, if you want to look at it on a slightly different perspective, and I know, you’ve already thought about this. But if you look at the performance of Wholesale and Programs together, that 40% grew at 17.7% in Q3. Pretty impressive.

I mean, I do think people when they look at, Programs and Wholesale if we look at arriving is a comp. But can I – since I fixed my one question, but a follow-up on your answer on the same topic. Would it be a fair assumption to say that underwriters that come to Brown or just a broker-owned Programs business can be compensated more highly than what a carrier can pay given valuation dynamics?

Do you mean through the individual?

Correct, correct.

The compensation. Well, I think the compensation is typically different because it can be cash, base plus a bonus in many instances, plus equity. So, generally it's, I think that as a broad statement you could probably say, yes.

Thank you.

One moment for our next question. Our next question comes from Mark Hughes with Truist Securities. Your line is open.

Yeah, thanks. Good morning.

Morning.

Andy, you had mentioned that you generated $15 million in revenue from onboarding new customers in Programs and that would be spread more evenly throughout 2025. Was any of that $15 million non-recurring and can you give us a sense of when you say, 'spread more evenly', are there any kind of bumps or tough comps as we think about 2025 in that lender-placed business?

Yeah, good morning, Mark. So, how that works is when we pick up a new account or we have a customer that buys a portfolio, normally, there is a lag of anywhere from 90 to 180 days from the previous servicer of actually sending out notifications, and next, so what happens is you generally will get two to three quarters of revenue in the first quarter that we onboard them. Then when it comes around to renewal or the exit date, then that revenue will fall according and that's really what we're saying is next year in the third quarter, we would not anticipate seeing that $15 million. But that will be spread out during ’25, with most of it in the first half of the year. Does that help kind of explain how that works?

It does, yeah. The second half of my one question is, anything on the advocacy business, if you’ve seen the first security administration be a little more active on adjudicating claims?

No, everything is pretty similar to what we’ve been seeing over the last few years. We’ve got good inflow into our business, but only so much comes out of the back of the funnel.

Thank you.

One moment for our next question. Our next question comes from Alex Scott with Barclays. Your line is open.

Hi, I wanted to ask you to provide more color on the M&A pipeline, in particular the comments around interest rates beginning to come down and more interest from private equity players? Could you talk about the potential size of those opportunities and where you're focused on growing inorganically?

Sure. So, as it relates to the first part of the comment, as interest rates - prior to interest rates going up, there were typically lots of private equity firms that expressed interest. And obviously, they think of it in a little different manner in terms of the way they account for it and look at those investments. Then, that – and so there might have been ten firms that were involved initially just as an example. And then, as the interest rates ticked up, that number being involved might have slowed to three firms. These are very hypothetical situations. And then, today there might be six or seven firms. So, what I'm trying to give you is that, as interest rates go down, there are more interested parties that are short-term in nature in terms of the way they view it, i.e., private equity. As it relates to us, we continue to look both here domestically, which we think there are some very good opportunities for us here in the future, and in the international market that we currently operate in and as evidenced by the fact that we anticipate closing Qantas in The Netherlands this quarter, that’s another market that we are excited about participating in on a go-forward basis. So there is not one over another. We stress the importance of cultural fit. We think about capabilities, we think about either enhancing existing capabilities, adding new capabilities, or maybe new geography as long as it's consistent with the core, which is one, we want it to fit culturally and make sense financially. And two, we like to operate in countries that we understand their governments. There is typically a rule of law. There is generally a stable economy and we are very pleased with the environments that we are currently operating in.

Got it. Thanks for the clarification on the private equity piece.

Sure. Thank you.

One moment for our next question. Our next question comes from Meyer Shields with KBW. Your line is open.

Great. Thanks so much. I just want to go back to the lender-placed insurance in Programs. Should we think that $15 million I think you said that there was a 90 to 120 day lag. So is the $15 million the equivalent of like three quarters of revenue or is that a full year? And did that impact margins in the segment?

So let's see. The - it represents over about six months of revenue or just a little bit more on that Meyer. Again, primarily in the first half of 2025. Some of it will reach into the fourth quarter as it kind of comes around just normal lag in processing and over from the previous processor. And then, from a full year margin no, it doesn't impact full year margins. It's just between the quarters.

Okay, perfect. Thank you so much.

Yeah, no. Thanks.

One moment for our next question. The next question comes from Grace Carter with Bank of America. Your line is open.

Hi, everyone. Good morning. You mentioned some pressure on contingents in the Retail from higher loss ratios to carrier partners. I think that this is the second quarter in a row that we've seen that. Could you elaborate on which lines caused the pressure in 3Q? And how those compare to 2Q? And just kind of any thoughts on whether you think that this will be an issue that recurs moving forward for the next few quarters?

Good morning, Grace. Yeah, we've been talking about this over, probably the last few quarters, at least. We saw this starting back in ’23. It's primarily on the auto side, both on personal, as well as on commercial. I think as you know well, carriers have been pushing for rate in that space, just because of frequency and severity of the claims that are out there, which is putting pressure on overall profitability. And that’s so that's the main driver. I guess, we would say right now, we don't see anything in the marketplace yet that is changing that trend at this stage. So, we would continue to expect some pressure on those.

Thank you.

Thank you.

One moment for our next question. Our next question comes from Scott Heleniak with RBC Capital Markets. Your line is open.

Yeah. Thanks. Good morning. Just wondering if you could expand on the Employee Benefits business. I know you gave some commentary on that. It sounds like you're seeing some positive trends on healthcare. So just wondering if you can talk about the trends in Q3 versus the first half and just the opportunity for 2025 just organically and through M&A, and what you're seeing in that business?

So Scott, what I would say is, remember, in the last - I'm taking you back a little while, but in the last 10 years, we have consciously invested in additional capabilities, which has enabled us as an organization to basically handle any size customer in employee benefits. And so, what that means is, we can write a startup and if they grow one day to a 100,000 employees, we can actually handle them at 100,000 employees. And so, remember, our core business is middle market and upper middle market, and the capabilities that we bring to the table we see a lot of opportunities today and in the future and are very excited about the growth opportunities for us. And so, it's something that healthcare every CFO wants to talk about their cost of healthcare. And there are lots of things that we are able to bring to our customers and prospects that will enable them to think differently and potentially realize different and in some instances outsized positive performance versus what they have been experiencing. So, we are actively looking for additional firms to join the team. But even in light of if we did not do an acquisition with employee benefits capabilities in them in the next 12 months, I don’t think that in any way shape or form changes our opinion on existing business and employee benefits. Andy and I and the entire operating team are very, very pleased and quite honestly, very excited about our ability to write and service customers of all sizes.

Great. Appreciate the detail.

Yep.

One moment for our next question. Our next question comes from Brian Meredith with UBS. Your line is open.

Yeah, thank you. Just a quick one for me. Do you anticipate any impact on contingent commissions from Milton and Helene in the fourth quarter?

Hi, good morning, Brian. I think still kind of to be determined. In our earlier comments, we said there's still a lot of moving parts on Milton. We did have some adjustments in the third quarter for Helene not dissimilar to what we're back in ‘22 with Ian. We take the extent that we can based on what we know at the time. So would we expect some adjustments in the fourth quarter? Yeah, that probably will occur. Now, again, keep in mind that we had - we did have adjustments positively in Q4 of last year because of low claim activity. So and that's primarily in the Program space. So you will see probably some meaningful year-over-year change in there. I don't know the magnitude of it right now, just we need some claims development to occur.

Hey, Brian. I'd like to just point out two things that might not be as immediately comes to mind. Number one, we saw and had continued to see a lot of auto losses in the storms, particularly Helene, but Milton, as well. So you’ve got a car in a garage and flood waters come up and the car dies. Okay, so it doesn't work anymore, and I'm not even talking about electric vehicles, I am just saying that. That’s number one. Number two, depending on where you are, there is a very, very distinct correlation between structures, commercial and residential, that are built after 2005 and the amount of loss. So, there are new codes, as that were put in place quite honestly, if you go back 1992 with Hurricane Andrew, and then every couple of years, it seems that they kind of up them. But if you talk to people in the market about losses on properties, those losses are typically on structures that are – they're in the ‘90s and the ‘80s and the ‘70s and the ‘60s, beginning to older homes, in the ‘30s and the ‘40s, they're not, the ones having losses. They're actually very, solid structures. But it's that kind of middle stuff where the building codes may not have been as stringent. So just a little aside, just to kind of give you a little color around your question. Thank you.

Thank you.

One moment for our next question. Our next question comes from Gregory Peters with Raymond James. Your line is open.

Okay. I get my follow-up question. In your commentary on free cash flow, you talked about some deferred tax payments that will help the free cash flow result for ‘24. Should we anticipate that because you're going to have additional tax payments from ’24 and ’25 on top of just the ’25, the conversion rate on the ’25 free cash flow will be lower?

Yes, Greg. That would be correct. And as of right now, the rules by the IRS is those need to be paid in the second quarter. So, when you're working out your projections, you can get a pretty good idea of our taxes later on somewhere between $90 million and $100 million per quarter in there. So just make sure you put those in the second quarter. So that'll pull down our conversion for ‘25 is why we made the comment that we raised the conversion ratio for ’24 up because of that deferral.

And the conversion rate for ‘24 is raised from to, can you just remind me?

Yeah, we said ‘22 to ‘24, previously. So this will take it up by a percentage point. But when we look at the business and if you recall a while back, when we were talking about conversion ratio and we talked about 2025 is, we said we saw kind of a very clear path back to the ‘24 to ‘26 range. That was prior to this storm coming through. But when we look at the overall business itself, and how we're growing the business, the margins that we generate, and our free cash flow conversion, we feel really, really good about the business and the trajectory it's just you have this timing of items back and forth sometimes between years. But underlying business continues to be very, very strong.

Great. Thanks for answering the question.

Yeah, thanks.

One moment for our next question. Our next question comes from Elyse Greenspan with Wells Fargo. Your line is open.

Hi, thanks. My follow-up is actually on investment income. That went up by a good amount in the quarter. Andy, what drove that? And then, is that level, like as rates move, how should we think about, I guess the level of NII that you're expecting in the Q4 and going forward?

So one thing to keep in mind, remember the $600 million of bonds that we issued back in the second quarter, so, we were holding that money until we had paid off the September bonds. So that drove somewhere an incremental $6 million to $7 million dollars of interest income for the quarter. So, don't use the $31 million or so that we had in the quarter as a run rate. It'll definitely come back down in the second quarter. And then – or excuse me, in the fourth quarter for us.

I’d like to clarify something at least I would like to clarify something you asked earlier. And you are correct in saying that we do not give organic growth guidance, as you know. However, what we said was, you would ask about a number in Q4 and what Andy and I were implying or trying to say was, if you look at the performance in Q3, and you note the adjustments that we made, we believe that that is a good starting place for Q4. I wanted to make sure that was clear for you, does that make sense?

Yeah, so the 3.9 plus the 100 basis points, so around 5 is the Q4 starting point for Retail.

I was going to allow you to do the math and we don't give guidance, but I just wanted to clarify.

Okay, got it. Thank you. Powell.

And then, hey Elyse, just kind of rounding out on the net investment income because that is also important to talk about kind of the other side of that. And you can kind of get a feel for in modeling with rates drop by 1% an idea as to what it could mean on the net investment income. Now again, keep in mind that as we continue to grow as an organization, there is more fiduciary cash. So you're not going to see it on an exact ratio if you do that, right if you got to assume that fiduciary assets will continue to grow, but then also keep in mind on the other side of that is our floating rate debt. So as an organization, we build our capital structure to have somewhere around 25% of our debt to be floating rate has been extremely, extremely beneficial for creating shareholder value over many years. And so when we, at the end of 9/30 we had just under $800 million on floating-rate debt. So just make sure you grab down the other side of the equation if you're doing your ups and downs on interest, okay?

Okay, thank you both.

Thank you.

One moment for our next question. Our next question comes from Mark Hughes with Truist Securities. Your line is open.

Yeah, thank you. You mentioned margin impact from the investment in teammates, given that the M&A market has been, at least in Q3, your activity was a little bit lower. Is that a deliberate plan to spend more money on teammates or was that more opportunistic?

I look at it as more opportunistic, Mark. And the reason I say that is, is when we find the right people, we're going to invest in them. And so, that's why I always try to say that one quarter doesn't make a trend. And when we make those investments, we fully anticipate that we will grow into those investments in the coming quarters and years ahead. If it were something very significant in terms of a number, we would call it out and talk to you about it. But from this standpoint, we - this is what I call normal opportunistic investing. Like we're not going to be some drama and say we got some programming. It's not like that. We're always looking for good people. We believe that culturally, we will attract a certain group of people that would like to work for a competitive, collaborative, high-performing sales and service organization. But there's not something, there is not some secret initiative going on that I want to give you that impression.

Yeah, I appreciate that. Thank you.

Thank you.

One moment for our next question. Our last question comes from Michael Zaremski with BMO. Your line is open.

Hey. Great. Just a follow-up on kind of teasing out what you all are seeing or projecting on the Casualty side in terms of pricing power trends? I know that, I think last quarter, you all said maybe many other stuff pricing would move up a bit. Has that changed at all? And I don't know if you want to bifurcate between E&S or admitted versus non-admitted? Thanks.

Sure. All right. So Mike, number one, if you remember, in the past, I have sort of said in my career, which is only back to 1990 in the insurance business. There’s always been an underlying tone that Casualty has been underpriced, but I don’t think that there has been a discipline around pricing it by the carriers. Today, that seems to be different. So there seems to be a discipline around that. And so, I believe it’s both in the primary in the excess, I believe it’s also in admitted and non-admitted. So it’s not something that we are bifurcating that you are seeing more so in one versus the other; that’s not the case. And so, I think that we are going to continue to see rate pressure on Casualty. So, general liability, excess liability, and as Andy said earlier, in automobiles, both commercial and personal auto. For the time being, I don't see that changing, depending on the carrier they are going to tell you different trends they're seeing in their books. But yes, there continues to be pressure on all of those segments.

Helpful. Thank you.

Ladies and gentlemen, this does conclude the Q&A portion of today's call. I’d like to turn the conference back over to Powell for any closing remarks.

Sure, thanks, Kevin. We really appreciate everybody's time today. We are very pleased with the performance in Q3. We are excited about Q4, ending the year strong and going into 2025. You all have a wonderful day. Thank you for your time.

Ladies and gentlemen, this does concludes today’s presentation, you may now disconnect and have a wonderful day.