What Brown & Brown (BRO) Said on Its Q3 Earnings Call

Key Points

• Q3 revenue rose 7.4% to $1.7 billion, while adjusted EPS increased nearly 2% to $1.07. Retail outperformed expectations with 2.6% organic growth, offsetting an 80-basis-point organic decline in specialty distribution.
• Specialty distribution faced pressure from more aggressive admitted carriers, lower E&S pricing and timing-related delays, though management expects the segment to return to 1%–3% growth in 2027.
• Brown & Brown raised its Accession synergy targets to approximately $50 million in 2026 and $175 million in run-rate synergies by 2028, while repurchasing $250 million of stock during the quarter and increasing its dividend 9%.

Brown & Brown NYSE: BRO reported third-quarter revenue of $1.7 billion, up 7.4% from a year earlier, as improvement in its retail business helped offset pressure in specialty distribution operations.

Organic revenue rose 1.2%, or 1.5% including organic contingent commissions. Adjusted EBITDAC margin declined 200 basis points to 34.6%, while adjusted diluted earnings per share increased nearly 2% to $1.07. The company also repurchased $250 million of shares during the quarter, bringing year-to-date repurchases to $750 million through the first nine months of 2026.

Chief Executive Officer Powell Brown said the company’s overall performance continued the improvement seen in the prior quarter. Retail operations exceeded the high end of management’s expectations, while specialty distribution encountered additional market-related headwinds.

Retail Growth Improves, Specialty Distribution Faces Pressure

Brown & Brown’s retail segment posted organic revenue growth of 2.6%, or 2.5% including contingents. Brown attributed the performance to improving net new business, strength in employee benefits and bond practices, and greater collaboration across the company’s teams.

The specialty distribution segment reported an organic revenue decline of 80 basis points, though growth was positive 30 basis points when including organic contingents. Management said the result fell short of expectations because admitted carriers became more aggressive in markets that had shifted to excess and surplus, or E&S, channels.

Brown said admitted carriers were seeking business in markets including California and Texas, contributing to movement of some binding and personal-lines accounts out of E&S markets. Capacity also pushed down pricing and terms for some programs, particularly commercial earthquake business.

“Our disciplined approach to underwriting means we will walk away from business at certain times with the objective to balance organic growth and profitability,” Brown said.

The company also cited timing in its lender-placed insurance program. While it recognized $10 million of revenue delayed from the prior quarter, that benefit was offset by another delay in onboarding a loan portfolio. Brown & Brown expects those loans to be onboarded during 2027. A quiet storm season also reduced anticipated flood claims-processing revenue.

Specialty distribution did generate growth in brokerage and programs involving casualty, professional liability and public entity lines, according to management. Brown said the segment has historically navigated market cycles and has produced double-digit organic growth over the past five years.

Market Conditions Remain Mixed

Management described customer investment and hiring conditions as stable overall, though sentiment varied by industry and customer size. Commercial insurance pricing continued to show diverging trends across lines.

• Primary casualty rates generally rose 2% to 5%, while auto rates continued to increase at a slower pace in some regions.
• Excess and umbrella layers recorded the largest increases, with tighter capacity for certain classes.
• Non-catastrophe property pricing was generally flat to down 5%, while workers’ compensation rates continued declining.
• In E&S markets, property rates declined 15% to 35%, while casualty rates continued rising, particularly in transportation and excess casualty.
• Medical rates in employee benefits rose 9% to 11%, driven by high-cost claims and healthcare expenses.

Brown said higher medical and pharmacy costs were prompting customers to seek more advisory support around plan designs, employee contributions, self-funded arrangements and captive solutions.

Accession Integration Raises Synergy Targets

The quarter marked the first anniversary of Brown & Brown’s acquisition of Accession, which added more than 5,000 teammates. Chief Financial Officer Andy Watts said Accession generated approximately $1.7 billion of revenue in its first year and delivered EBITDAC margins and earnings-per-share accretion substantially in line with expectations.

The company raised its expected 2026 EBITDAC synergy benefit from a prior range of $30 million to $40 million to approximately $50 million. It also lifted its targeted run-rate net EBITDAC synergies by the end of 2028 to $175 million, from $150 million previously.

Watts said the additional synergy expectations reflect operating efficiencies, enhanced carrier engagement and continued alignment of go-to-market efforts. The company increased its estimated three-year integration-cost range to $250 million to $300 million from $200 million to $250 million, citing the higher synergy opportunity. Separately, it expects to record about $90 million of certain pre-funded or debt-like items required to be expensed under GAAP.

Management said major integration milestones have included aligning leadership structures, operating models and brands; harmonizing benefits and producer compensation; integrating financial and human-resources systems; consolidating offices; and refining carrier engagement strategies.

Outlook Calls for Improving Growth in 2027

For the fourth quarter, Brown & Brown expects retail organic growth excluding contingents of 2% to 3%. Specialty distribution organic growth excluding contingents is expected to decline 2% to 4%, reflecting market headwinds and $8 million to $12 million of nonrecurring and timing-related impacts.

For 2027, the company currently expects retail organic growth of 2% to 4% and specialty distribution growth of 1% to 3%, excluding contingents. Watts said the specialty outlook incorporates anticipated growth in businesses acquired through Accession, including reinsurance, managing general underwriter, affinity and captive-management operations, as well as lender-placed business expected to come online.

Brown & Brown also expects specialty distribution contingent commissions to decline by $14 million to $16 million year over year in the fourth quarter, partly due to accrual adjustments. Watts said there could be downward pressure on specialty contingent commissions in 2027 as profitability declines in some programs.

Cash flow from operations totaled $1.1 billion during the first nine months, up approximately 13% from the prior-year period. Management said it plans to balance capital deployment among hiring, share repurchases, debt reduction and selective acquisitions. The company’s board raised its dividend by 9%, marking the 33rd consecutive year of dividend increases.

AI Rollout Expands Across the Company

Brown said the company is pursuing an “AI-first mindset” through partnerships with McKinsey, Accenture and Anthropic. It has completed a technology-environment assessment, established governance and cybersecurity frameworks, and created a value-management office to measure investment returns.

The company deployed Anthropic’s Claude platform to more than 6,000 teammates in 45 days, with more than 90% actively using it, according to Brown. AI tools are being used in prospecting, submissions, claims analysis, analytics and data extraction.

Brown & Brown also introduced COMPASS, an ecosystem combining AI capabilities, proprietary data analytics and specialized knowledge to support risk-management decisions in retail operations. The company expects COMPASS-powered tools to reach thousands of teammates by year-end, with additional customer solutions planned for 2027.

About Brown & Brown (NYSE:BRO)

Brown & Brown, Inc is an insurance brokerage and risk management company headquartered in Daytona Beach, Florida. The company helps businesses, public entities, individuals and other organizations identify, manage and transfer risk by arranging insurance coverage and providing related advisory services.

Its operations include retail insurance brokerage, national programs, wholesale brokerage and services. Brown & Brown offers property and casualty insurance, employee benefits, personal insurance, surety and other specialized coverage.

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