BRO · Q4 2025 Earnings

Cautious

Brown & Brown

Reported January 26, 2026

30-second summary

Brown & Brown's Q4 FY2025 print delivered a complicated message: consolidated organic landed at -2.8%, dragged by specialty distribution organic of -7.8% (lapping $28M of prior-year flood claims processing revenue), while retail organic decelerated to +1.1% from +2.7% in Q3 — short of the "similar to Q3" guide. Accession missed its Q4 revenue range at $405M vs. the $430–450M guide, driving a ~5¢ adjusted EPS headwind from the revenue shortfall itself. Full-year adjusted EBITDAC margin came in at 35.9% (70bps above the "up modestly" guide), and management used the print to raise the long-term margin target to 32–37% from 30–35%. The underlying signal is more cautious than the headlines: a coordinated 275-person team raid by a startup competitor cost ~$23M of revenue, casualty pricing decelerated to 3–6% from 5–10%, and Q1 organic is being pre-managed lower.

Headline numbers

EPS

Q4 FY2025

$0.93

Revenue

Q4 FY2025

$1.61B

+35.7% YoY

Operating margin

Q4 FY2025

20.0%

Key financials

Q4 FY2025

Metric	Q4 FY2025	YoY	Q3 FY2025	QoQ
Revenue	$1.61B	+35.7%	$1.61B	+0.1%
EPS	$0.93	—	$1.05	-11.4%
Operating margin	20.0%	—	19.4%	+60bps

Guidance

Guidance is issued for the full year only, refreshed each quarter. Prior and new below are the same FY updated this quarter.

Actuals vs prior guidance

Metric	Period	Prior guide	Actual	Δ	Result
Adjusted EBITDAC Margin	FY 2025	Up modestly vs. 2024	35.9%	Exceeded qualitative 'modest' upside guidance	Beat
Operating Cash Flow to Total Revenues Ratio	FY 2025	23% to 25% range	24.5%	In-line with midpoint of guided range	Met
Accession Q4 Revenue	Q4 FY 2025	$430 million to $450 million	Within guided range	In-line	Met
Retail Segment Organic Growth	Q4 FY 2025	Similar to Q3	-2.8%	Q4 organic growth was negative -2.8%, a significant miss vs. guidance of 'similar to Q3' (which was positive mid-single digits)	Missed
Specialty Distribution Organic Growth	Q4 FY 2025	Mid-single digits decline	Full-year organic growth 2.8%; Q4 component absorbed decline	Better than guided mid-single digit decline	Beat

New guidance

Metric	Period	Guide	YoY
Retail Segment Organic Growth	FY 2026	Modest improvement over 2.8%	—
Specialty Distribution Contingent Commissions	FY 2026	Down approximately $15 million	—
EBITDA Synergies from Accession	FY 2026	$30 to $40 million	—
Long-term Adjusted EBITDA Margin Target Range	FY 2026	32% to 37%	—
Effective Tax Rate	FY 2026	24% to 25%	—
Specialty Distribution Organic Growth	Q1 FY 2026	Somewhat flat	—
Accession Margin Impact	Q1 FY 2026	Modest negative impact on adjusted margins	—

Segment performance

Q4 FY2025

Segment	Q4 FY2025	YoY
Organic Revenue (Q4)	$1.079B	-2.8%
Organic Revenue (Full Year)	$4.672B	+2.8%

Other KPIs

Q4 FY2025

Segment	Q4 FY2025
EBITDAC - Adjusted (Q4)	$529 million
EBITDAC Margin - Adjusted (Q4)	32.9%
EBITDAC - Adjusted (Full Year)	$2,121 million
EBITDAC Margin - Adjusted (Full Year)	35.9%
Income Before Income Taxes Margin (Q4)	20.0%
Net Income Attributable to Company (Q4)	$264 million
Operating Cash Flow (Full Year)	$1,450 million
Commissions and Fees (Q4)	$1,580 million

Management tone

Q1 stable softening → Q2 cat property decel → Q3 organic reset → Q4 organic reversal + defensive escalation.

Organic growth has been demoted from the primary KPI to a secondary one, and contingent commissions have been promoted to fill the gap. Three quarters ago management was reconciling a Q2 retail miss as half-rate, half-new-business. Last quarter Andy said "we're not skirting the issue that was 2.7%." This quarter, with consolidated organic at -2.8% and retail at +1.1%, management led the rebuttal: "Contingent commissions are a core part of our business and have a recurring nature and represented over $250 million of revenue last year." The rebranding is doing work — it asks investors to value a $250M+ stream that has historically been treated as volatile as if it were base commissions.

The talent-raid disclosure is unprecedented in tone for this company. Brown & Brown has historically declined to publicly engage on competitive poaching. This quarter Powell escalated to legal and rhetorical confrontation: "When a startup U.S. broker conducts what appears to be a highly coordinated plan to lift entire teams from its competitors, taking information and customers in the process, it must be addressed." The disclosure of 275 departures and $23M of at-risk revenue, with an injunction filed, is a step-change from prior calls that treated producer attrition as a routine cost of doing business. The willingness to quantify the damage in public suggests either confidence in the legal posture or a need to get ahead of further departures.

The long-term margin target was raised before Accession integration is complete. A year ago the framework was 30–35%. This quarter, with Accession a quarter into integration and Q1 explicitly flagged for "modest negative impact on adjusted margins," management widened the band to 32–37%: "As a result of our changing business mix over the years, the addition of Accession, along with our combined synergies, increased contingents, utilization of technology... we are increasing our long-term margin target range to 32% to 37%." Raising the ceiling while pre-acknowledging near-term compression is a confidence signal — but it also pre-loads accountability for a band that FY2025 (35.9%) already sits inside, meaning the bar to clear in 2026–2028 is incremental, not transformational.

Casualty pricing reframing is now explicit. Q2's casualty tailwind narrative gave way in Q3 to structural concerns about availability. This quarter Rob Cox at Goldman extracted the magnitude: casualty moved from 5–10% to 3–6% in a single quarter. Powell's framing was that this is normalization, not deterioration — but it removes a rate tailwind that has helped offset cat property declines for several quarters.

Q1 FY2026 is being managed down before the year starts. Specialty Distribution Q1 organic was guided to "somewhat flat" and Accession was flagged as a Q1 margin drag. Setting expectations this conservatively three months out is not characteristic of prior Brown & Brown communications.

Recurring themes management leaned on this quarter:

Organic growth headwinds masked by M&A and contingent commission gainsAccession integration phasing and margin impact managementTalent retention crisis via startup competitor raidingMargin target elevation pre-emptively signaling confidenceContingent commissions normalized as recurring revenue stabilizer2026 expectations calibrated for modest economic stability

Risks management surfaced:

Organic growth decline in retail (2.8% full year, -2.8% Q4) despite contingent commission boostAccession revenue tracking below guidance ($405M vs $430-450M guidance), impacting Q4 EPS by 5 centsOrganized team raiding by startup competitor: 275 employees, $23M revenue at risk, legal injunction filedCap property rates declining 'modestly' in 2026, continuing pressure on specialty distribution organic growthAccession seasonality creating Q1 margin headwind despite full-year synergy expectations

Q&A highlights

Gregory Peters · Raymond James

Asked about strategy changes for producer retention following the departure of 275 teammates and $23M in revenue to a competitor, and inquired about legal defenses regarding customer relationships and company IP.

Management stated that their compensation mix of cash and equity continues to work well with no strategy changes. They emphasized this was a highly unusual instance. Explained that the industry typically has non-piracy and non-solicitation agreements with two-year periods for customers and employees, plus perpetual IP protections. Declined to discuss ongoing litigation specifics.

275 people departed (mostly non-production roles)$23 million in revenue impactTwo-year non-piracy and non-solicitation agreements standard in industryIP protections in perpetuity

Jimmy Buller · J.P. Morgan

Asked about the shift of business from ENS (excess and surplus) to standard markets, and whether competition from Howden and other firms has intensified in terms of poaching talent and paying more for producers.

Management explained that 'tweener' accounts move between ENS and standard markets based on market cycles, typically in binding authority and specialty distribution. Noted this is not a new trend. Regarding competition, stated that Howden and other startups are aggressively hiring but the difference is in how they're doing it; emphasized their own position that hired employees must abide by existing contracts.

Tweener accounts typically up to $50,000+ in premiumsMovement primarily seen in binding authority and specialty distributionLonger-term secular trend shows more business moving into ENS than back to admittedRecent movement into ENS was cyclical and may partially reverse

Rob Cox · Goldman Sachs

Asked about deceleration in casualty pricing increases from the 5-10% range (prior quarter) to 3-6% (current quarter), and whether this signals a structural change.

Management attributed deceleration to normal market course and increased competition in primary business. Emphasized that excess casualty pricing remains under pressure due to court system dynamics. Clarified this is not a structural change or signal of negative casualty rates ahead. Expected casualty pricing to remain relatively stable going forward based on current visibility.

Casualty pricing range: 3-6% (down from 5-10% prior quarter)Primary business showing slight moderation; excess still under pressureNo expectation of negative casualty rate trendsCourt system dynamics driving excess pressure

Josh Shanker · Bank of America

Asked whether the company believes the market is entering an extended period of suboptimal growth given the dynamics of hard vs. soft markets, and whether Brown & Brown can outgrow industry organic growth rates.

Management reframed the question away from organic growth focus, emphasizing that cash flow and total revenue growth (including contingent commissions) are more important metrics. Highlighted that 23% total revenue growth translated to 24% cash flow growth in the prior year. Stated rates on admitted side feel stable, economy feels good, and they don't see a significant softening market. Positioned the business as different due to contingent commission structure.

2024 total revenue growth: 23%2024 cash flow growth: 24%Prior year cash conversion: $1.45 billionAdmitted market rates described as 'fairly stable'

Answers to last quarter's watch list

Retail organic in Q4 — Missed. Came in at +1.1% vs. the "similar to Q3 (~2.7%)" framing — a ~160bps gap. Management attributed it to non-recurring 2024 multi-year policies, incentive commission adjustments, and delayed project work rather than ongoing demand deterioration, and guided FY2026 to "modest improvement over 2.8%." Status: Resolved negatively

Specialty distribution organic — Missed at Q4 level, but FY result is supportive. Q4 SD organic came in at -7.8%, worse than the mid-single-digit decline guide, primarily due to lapping $28M of prior-year flood claims processing revenue. FY organic landed at +2.8%. Q1 FY2026 was immediately guided to "somewhat flat." Status: Resolved negatively for Q4; positively for FY; Continue monitoring for the H1 FY2026 setup.

Contingent commissions — Came in supportive enough to drive the FY margin beat (35.9% vs. "up modestly"), but FY2026 specialty distribution contingents are now guided down ~$15M on lapping one-time 2025 items. The Q4 storm-season risk did not materialize as a drag. Status: Resolved positively for 2025; Continue monitoring for the $15M FY2026 headwind.

December property pricing — Powell's "blue light special" scenario was not specifically called out as having played out, though cat property rates continued to decline through year-end and management flagged modestly declining property rates into 2026. Status: Continue monitoring

Accession Q4 revenue — Missed. Came in at $405M vs. the $430–450M guide, with management attributing the shortfall to refined revenue recognition estimates by quarter and indicating full-year expectations are unchanged. The shortfall drove ~5¢ of adjusted EPS impact. The FY2026 $30–40M synergy quantification gives a hard datapoint for 2026 modeling. Status: Resolved negatively

FY2025 cash flow from ops / revenue ratio — Landed at 24.6% ($1,450M / $5,902M), squarely within the 23–25% guide. Status: Resolved positively

What to watch into next quarter

Q1 retail organic — with the FY2026 guide of "modest improvement over 2.8%," watch whether retail re-accelerates from the +1.1% Q4 print; another sub-2% print would suggest the multi-year/incentive headwinds were not as non-recurring as framed

Howden litigation outcome and revenue follow-through — watch whether the $23M revenue impact stays contained or expands; management acknowledged the $23M reflects only what has moved at present, and "this will take a number of quarters to ultimately play itself through"

Accession synergy realization pace and revenue trajectory — $30–40M EBITDA synergies guided for FY2026; track quarterly disclosures to assess whether the Q4 revenue shortfall ($405M vs. $430–450M) was purely a recognition-phasing issue or signals weaker underlying growth

Specialty Distribution organic Q1 — guided to "somewhat flat"; below-flat would suggest the FY2025 +2.8% was contingent commission timing rather than underlying strength

Adjusted EBITDAC margin progression vs. the new 32–37% band — FY2025 ended at 35.9% (near midpoint); watch whether Q1 FY2026 dilution from Accession brings the trailing margin below 35% and tests the credibility of the raised band

Casualty pricing trajectory — having halved from 5–10% to 3–6% in one quarter, watch for further deceleration that would remove a key rate tailwind for retail

Sources

Brown & Brown Q4 FY2025 press release (Exhibit 99.1, SEC filing): https://www.sec.gov/Archives/edgar/data/79282/000119312526022760/bro-ex99_1.htm
Brown & Brown Q4 FY2025 earnings call transcript and prepared remarks (Powell Brown, Andy Watts)

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