Brown & Brown, Inc. (NYSE:BRO) Q1 2024 Earnings Call Transcript

Brown & Brown, Inc. (NYSE:BRO) Q1 2024 Earnings Call Transcript April 23, 2024

Brown & Brown, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning, and welcome to Brown & Brown Inc.’s First Quarter Earnings Conference 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 in response to your questions, may relate to future results and events or otherwise be forward-looking in nature. Such statements reflect their current views and with respect to future events, including those relating to the Company’s anticipated financial results for the first quarter and are intended to fall within the safe harbor provisions of the securities laws. Actual results or events in the future are subject to a number of risks and uncertainties and may differ materially from those currently anticipated or desired or referenced in any forward-looking statements made as a result of a number of factors.

Such factors include the Company’s determination as it finalizes its financial results for the first quarter and 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 in 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 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 results or otherwise. In addition, these certain non-GAAP financial measures used in this conference call, a reconciliation of non-GAAP financial measures to the most comparable GAAP financial measures can be found in the Company’s earnings press release or in the investor presentation for this call on the Company’s website at www.bbinsurance.com by clicking on Investor Relations and then Calendar of Events. With that said, I would now like to turn the call over to Powell Brown, President and Chief Executive Officer. You may begin, sir.

Powell Brown: Thanks, Norma. Good morning, everyone, and welcome to our earnings call. Q1 proved to be another strong quarter where we delivered excellent top- and bottom-line growth. Our team did an outstanding job of winning more net new business again this quarter. I’ll provide some high-level comments on our performance along with updates on the insurance market and the M&A landscape. Then Andy will discuss our financials in more detail. Lastly, I’ll wrap up with some comments, some closing thoughts and comments before we open it up to Q&A. Now let’s get into our results for the quarter. I’m on Slide 4. We delivered over $1.25 billion of revenue, growing 12.7% in total and 8.6% organically over the first quarter of 2023.

Our adjusted EBITDAC margin improved by 130 basis points to 37% and our adjusted earnings per share grew 18.8% to $1.14. On the M&A front, we completed six acquisitions with estimated annual revenue of $16 million. I’m on Slide 5. Growth in markets we operate in has not materially changed compared to the fourth quarter of last year as consumer spending remained resilient. Levels of hiring and investment were similar to what we experienced in the second half of ’23. However, there continues to be a shortage of workers for many industries, which has also driven elevated levels of inflation. From an insurance pricing standpoint, the overall changes in rates for most lines were relatively consistent with the fourth quarter of last year. Pricing for employee benefits was similar to prior quarters with medical and pharmacy costs up 7% to 9%.

These pressures are driving strong demand for our EV consulting businesses. Rates in the admitted P&C markets were up 5% to 10% for most lines, while we continue to see decreases of 5% to 10% for workers’ compensation in most states. However, we’re starting to see some changes in rates for casualty, professional lines and CAT property as compared to prior quarters. Due to ongoing levels of inflation and the size of legal judgments, pricing for excess casualty lines continues to increase, and we’re seeing upward pressure for primary limits. Over the majority of my career, primary liability rates seem to have been under downward pressure. As you’ve seen, the excess market has been up substantially in the past few years. And with the continued deterioration in the general liability market, the primary rate seems to be moving up in certain lines of business.

Now, it seems there’s an upward pressure on both primary and excess rates. For professional liability, we saw a slight improvement in pricing as compared to last quarter, but rates are still flat to down 10%. CAT property rates moderated during the quarter as compared to 2023. We saw many accounts that had low or no losses with rates down 10% or more. And accounts with losses or poor construction or a combination of both increased slightly to up 15%. This was driven by some carriers or facilities willing to put up additional limits combined with some new capital entering the marketplace. As we’ve seen some downward rate pressure on certain properties, this may have a slight impact on those offices in CAT areas. However, their new business activity remains strong, and they’re performing well.

As we’ve always said, our organic growth in a steady state economy is generally driven two-thirds by exposure units and one-third by rate. In CAT prone areas, the rate impact might be slightly higher. Keep in mind, we’ve built a highly diversified company in geography, lines of coverage and customer size as these enable our consistently strong financial performance. Lastly, in the M&A marketplace, it continued to be competitive for high-quality businesses. The quarter, we remained active building relationships with lending companies and acquiring another six. I’m on Slide 6. Let’s transition to the performance of our three segments. Retail delivered another great quarter with organic growth of 7.2%, winning a lot of new customers along with good retention.

In addition, all lines performed — business performed well. We’re very pleased how the team is leveraging our collective capabilities in order to create unique solutions for our customers. Our goal has always been to have the tools and capabilities to serve our customers as they grow and become more complex. We have strategically built our employee benefits and property and casualty businesses to serve customers of all sizes, those with less than 50 to over 50,000 lives as well as start-ups to multibillion-dollar revenue company. The program segment had an outstanding quarter, delivering organic growth of 11.8%. This is even with the headwinds of $8 million of flood claims processing revenue we recognized in the first quarter of last year.

Our highly diversified global portfolio of over 60 programs performed very well for the quarter as we continue to provide market differentiated solutions that enable us to bind more accounts. Wholesale Brokerage delivered another strong quarter with organic revenue growth of 10.8%. This growth was primarily driven by binding more net new business and rate increases. Our highly diversified lines of business, including open brokerage, delegated authority and personal lines grew very well during the quarter. Now, I’ll turn it over to Andy to get into more details regarding our financial results.

Andy Watts: Great. Thank you, Powell. Good morning, everybody. We’re over on Slide number 7. I’ll review our financial results in 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, which now reflect the previously announced exclusion of intangible asset amortization. The reconciliations 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 delivered total revenues of $1,258 million, growing 12.7% as compared to the first quarter in the prior year. Income before income taxes increased by 19.4% and EBITDAC grew by 17.1%.

Our EBITDAC margin was 37%, expanding by an impressive 130 basis points over the first quarter of 2023. The effective tax rate for the quarter was down slightly from the prior year, with diluted net income per share increasing 18.8% from last year to $1.14. Our weighted average shares outstanding increased a little over 1% as we continue to prioritize paying down debt on a full year basis as this has a higher contribution to earnings per share, cash flow and shareholder value. Lastly, our dividends per share paid increased by 13% as compared to the first quarter of last year. Overall, it was a very strong quarter. We’re on Slide number 8. The Retail segment grew total revenues by 10% with organic growth of 7.2%. The difference between total revenues and organic revenue was driven by acquisition activity over the past year.

EBITDAC grew slightly slower than total revenues due primarily to higher non-cash stock-based compensation costs as well as lower contingent commissions. We’re on Slide number 9. Programs had another strong quarter with total revenues growing 16.9% and organic growth of 11.8%. The incremental growth in total revenues in excess of organic was driven primarily by increased contingent commissions due to our strong underwriting performance and a quiet hurricane season in 2023. The growth in contingent commissions included approximately $7 million related to finalizing prior year estimates that we do not expect to recur in the first quarter of next year. Our EBITDAC margin expanded by 580 basis points to 42.3%, driven by the leveraging of our expense base, higher contingents and the sale of certain claims processing businesses in the fourth quarter of 2023.

We’re over on Slide number 10. Our Wholesale Brokerage segment delivered another great quarter with total revenue growth of 15.4% and organic growth of 10.8%. The incremental growth in total revenues in excess of organic was driven by higher contingent commissions and acquisitions completed over the last 12 months. Our EBITDAC margin increased by 150 basis points to 32.4% due to leveraging our expense base and higher contingent commissions. A few comments regarding cash generation and capital allocation. From a cash flow perspective, our first quarter is normally the lowest of the year. In addition, for this year, our cash flow from operations was impacted by paying two-quarters of federal income taxes for 2023 that were permitted to be deferred as part of Hurricane Idalia tax relief and the payment of income taxes associated with — on the sale of certain businesses in the fourth quarter of last year.

We’re continuing to expect another strong year of cash generation and a conversion ratio of cash flow from operations to revenues in the range of 22% to 24%. Lastly, we ended the quarter with approximately $580 million of operating cash and are in a strong capital position. With that, let me turn it back over to Powell for closing comments.

Powell Brown: Thanks, Andy. Great report. From an economic standpoint, we expect growth to continue this year. As we’ve mentioned before, we do think this expansion will moderate towards more normal levels over the coming quarters. With persistent inflation and a tight labor market, we believe there’s a good backdrop that will drive growth, hiring and investment for many businesses. Regarding the admitted markets, we believe overall rate changes will remain relatively similar to what we experienced in the first quarter. For the E&S markets, rate decreases for professional lines should continue to moderate as we expect casualty both primary in access to further increase. Based on what we see today, we believe there will be continued rate pressure for CAT property.

This is highly dependent on early storm activity this year. Regarding M&A, we’re in a great position with a strong balance sheet and access to capital. We continue to talk to a lot of companies and build relationships. Our disciplined approach has proven to be very successful as we’re focused on acquiring high-quality organizations that fit culturally. We have great momentum coming out of the first quarter, there’s good economic outlook and our team continues to win more net new business by leveraging our collective capabilities. This positions us to deliver another year of industry-leading financial results. With that, we’ll turn it back over to Norma to open the lines for Q&A.

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Q&A Session

Operator: [Operator Instructions] Our first question comes from the line of Robert Cox with Goldman Sachs. Your line is now open.

Robert Cox: Maybe just firstly on the margins. I was curious if the margin breakdown this quarter was kind of how you envision this year playing out with National Programs leading the way? And is it right to think that divesting the claims processing business in the fourth quarter created sustainable margin improvement in National Programs that should flow through to coming quarters?

Andy Watts: Rob, it’s Andy here. I think as we’ve talked about in the past, margins can move around in the segments by individual quarters. I think, overall, we’re extremely pleased with the performance for the first quarter. There will probably be ups and downs of orders. And as an example, I know we’ve talked about in the past third quarter, we normally will budget for storms and a half. You never know how exactly that’s going to turn out. So that kind of moves things back around. And then at least for this year, on the sale of some of those services businesses is, yes, year-over-year, we’ll see an increase in the margin from that disposal.

Robert Cox: Okay. Great. And then just in regard to the pricing moderation in property CAT, I’m just trying to wrap our heads around if increased demand for coverage could offset some of the pricing declines and kind of the magnitude of each of those factors, and how that could play out for Brown & Brown organic growth in 2Q and beyond?

Powell Brown: So, Rob, what I would say is this, we — I actually thought that we would be at this place a little sooner in the cycle than today. So, I thought we might have been here a year ago or somewhere between a year ago and today. So, what are you seeing, and let me describe that and then I’ll answer your question, number one, remember, most buyers of insurance have what I call pricing fatigue? So, if you have gotten a price increase on your condo or your properties or whatever for the past four or five years, you’re just over it. That’s the first thing. The second thing is sometimes even though you do the very best you can as the broker, sometimes the client shoots the messenger because they’re just so frustrated with the marketplace.

Having said that, what you’re finding today is people that wrote a $10 million primary are giving you $20 million or $25 million now, and that’s bumping out several of those buffer layers. So, you’re going to have downward pressure on the overall program. So, you have several scenarios that could occur. One, yes, you could buy more limits although my instinct would be because of the pricing fatigue, they would probably not buy more limits right now. Number two, they might be able to get slightly better terms and conditions, which would be good. And three, in the event that we don’t have another storm this year sometime, that pricing pressure, downward, will continue. That said, and we’ve always said in E&S, in our wholesale business and in our Retail business, we actually write a lot of business when the market is going up and when the market is going down.

Usually, you don’t see as much in that market, the E&S market when the rates are flat, which they’re relatively never flat. That’s the answer, excuse me.

Operator: [Operator Instructions] Our next question comes from the line of Gregory Peters with Raymond James. Your line is now open.

Gregory Peters: So, I would like to — Powell, in your comments, you talked about different rate movements and then you mentioned this two-thirds to one-third ratio. I guess I’m trying to reconcile the downward pressure moderating upward pressure in some of the lines of business. Can you give us a perspective on like how much of your total business is excess and surplus lines? How much is property? How much is excess casualty, just so we can sort of gauge moving pieces?

Powell Brown: Well, Greg, it’s nice to talk to you this morning and thank you for the question. I know you know the answer to this, but we don’t give that level of detail out. However, what I would say is this, we write lots of CAT property in all CAT prone states, but we don’t write it all exclusively from the CAT prone states. So, you could have an office that is in Chicago or Minneapolis or Milwaukee that writes business in these areas as well. That’s number one. Number two, from a casualty standpoint, think about we write an enormous amount in our Retail business of package business. And in that package business, property many times is not the biggest part of the account. The largest account many times is workers’ compensation followed by either auto or general liability.

So, I know I didn’t answer your question, but I’m just trying to give you a little color on our book in small, medium, upper middle market and even large accounts. And so, you’re going to have a certain segment in the large accounts that are going to not be as affected up or down because if they’re on fees. But what I would say is, we are very focused on delivering very, very competitive programs for our customers. And that is, in many instances, going to have downward pressure on our property book. There is some offset. I’m not going to say it’s one for one, but there is some offset with this pressure in the casualty areas and the moderation in professional liability rates going down.

Andy Watts: Greg, just on this, I mean, I know we’ve talked about it, we started last year going through a few different times. And then, we’ve been over on other calls. I think the reason why we mentioned a lot about diversification in the business is while we do write a lot of CAT property, we write a lot of non-CAT property. We write a lot of other lines. We’re across multiple industries, geographies. So, we don’t have this major concentration in any area, which we think is a really good thing for our business because if one thing could be up, something else could be down. It puts a nice balance across the organization.

Gregory Peters: Right. Makes sense. I guess as a follow-up, Andy, I think in your prepared comments, you called out a one-time benefit in the program side. Can you quantify that again? You were going through this quickly so I didn’t catch all the detail.

Andy Watts: Sure. Yes, no problem. What we had called out as you said about $7 million of the contingent commissions that we recorded in the first quarter were related to finalizing the estimates that we recorded last year. So, we would not expect to see that in Q1 of next year. So just keep that in mind for modeling purposes next year.

Operator: [Operator Instructions] Our next question comes from the line of Michael Zaremski with BMO Capital Markets. Your line is now open.

Michael Zaremski: Back to the contingents, and we could take this offline, if you think it’s warranted. But if we take out the $7 million, contingents were still much better than I feel like you’ve kind of directionally guided to, although the guide, I believe is for a full year. So, I’m just trying to get at is there — was there — is there a seasonality or a pull forward on your — in 1Q that we should be cognizant of when we think about the next three quarters of the year? Or is there kind of a change in your view now, ex the $7 million of your view on contingents for the year?

Powell Brown: No, I wouldn’t say that there was any pull forward in any nature, so no timing or anything in nature. When we record the contingent commissions based upon the policies that we place with the written premium that’s out there. And we estimate those to the best knowledge that we have at the time on what we believe the profitability of the book will be. So that’s why there’s always going to be some sort of adjustments up and down to the estimates. I think as we went into the year, we thought that they would probably be flat to up a little bit. There’ll probably be now with the first quarter looks like qualifying potentially for a little bit more than what we had before, which is good for us for the year. And then, there’s always a question of kind of what happens during storm season. That’s always kind of the wildcard that may adjust the calculations.

Michael Zaremski: Okay. That’s helpful. Lastly, switching gears to cash flow as a percentage of revenues, loud and clear about the 22% to 24% guide still near term. I believe in the past — not too distant past, you talked about a higher figure closer to 25% being normal. Can you walk us through quickly what — why lower today and whether they’re — and I guess we can figure out whether it could go back to a higher level over time, depending on the — what’s keeping it down today?

Powell Brown: Yes. So, Mike, so your first question is, and I think what we said in the past is, we think that the business kind of over a medium term — medium to long term has a conversion ratio of cash flow from ops, somewhere around 24% to 26%. We still feel really good with that range for the organization. It’s come down over the last 1.5 years, 2 years, primarily associated with the higher interest expense. But as we’re now kind of making that lap and you can see the impact on cash flow from interest expense for the quarter, right, it was minimal. The main thing impacting this year was really the incremental taxes that we talked about. So, if you were — if you take those and kind of isolate that in your projections, you’d see we’re actually back pretty close to our normal rate this year.

So, we feel really comfortable upon what happens with interest rates or if we take on any incremental debt for acquisitions or whatever, that there’s a pretty clear path back to that by next year.

Operator: [Operator Instructions] Our next question comes from the line of Mark Hughes with Truist Securities. Your line is now open.

Mark Hughes: You had mentioned the employee benefits, the medical pharmacy up 7% to 9%. Was the organic in benefits comparable to the overall organic number? Or was it a little bit faster in benefits, a little bit slower?

Powell Brown: Once again, we don’t usually break out, as you know, the specifics on P&C and benefits, but I would tell you, we’re very pleased with the way our benefits business is growing organically and the capabilities that we’ve built over the last 10 years there. We’re able, Mark, to compete on basically any size account here domestically. It could have 100,000 lives. It could have 100 lives. And so, we’re very pleased with how that business is performing.

Mark Hughes: And then, the wholesale open brokerage, any observations there about the growth profile in that business kind of this quarter versus last quarter? And are you still seeing the mix shift into excess and surplus? Or has that stabilized? How do you see that?

Andy Watts: Yes. I think the short answer to that is yes, we continue to still see accounts coming in to the E&S marketplace. That’s number one. Number two, I would say that to my earlier comments, any time the rates are going up or going down, there is opportunity to write a lot of new business. Having said that, there also is sort of a reset in the market. So, I’m going to use my term is sort of — I’m not going to say chaos, but it’s a little bit chaotic in terms of who will do what and how do you get to additional limits or some markets will put out more limits. And so, you’ve had a lot of very strong results in some carriers domestically and overseas. And those carriers or marketplaces will want to play in the CAT property market.

So, I would say that it creates a lot of opportunity for us, but don’t lose sight of the fact that I made the comment when you have five years of increasing rates, sometimes we, as the messenger gets shot in the process. Now that works both ways. We pick up a lot business that way, but we also are subject to lose business that way because the buyer is just tired.

Operator: Our next question comes from the line of Elyse Greenspan with Wells Fargo. Your line is now open.

Elyse Greenspan: My first question, you guys have continued to post pretty strong organic growth within the program segment. I know you guys pointed out, I think — Powell, you that you guys lapped some one-off revenue last Q1. So, can you just dive into a little bit more detail on what’s driving the really strong growth there? And should we expect to persist throughout the rest of the year? And I guess, I’m looking more kind of away just from some of the revenue — from the captive just in the programs, the traditional programs ex the captive business?

Powell Brown: And glad that you recognize that strong performance in programs today. We appreciate that. Number one, remember, inside of programs, we have several programs that have either significant wind exposure, that would be CAT property or earthquake exposure. So that’s not really a CAT event, but it is an area where there is more competition. So, what I would tell you is we do think that there are good growth opportunities us going forward in programs. We — as we said last quarter, we have moderated those slightly just because we are starting to see more entrants, i.e., in the E&S space on wind, so CAT wind, and we’re starting to see some more competitors in quake. That said, we feel really good about the Programs business, as you know.

And we think about it very long term. So, the performance of our underwriting facilities has delivered really good results for our carrier partners. And so, what we find is more and more carrier partners want to come and join our facilities. That doesn’t mean that we can put them all in those facilities, but I’m just saying there continues to be a great deal of interest. And I would remind you and everyone else, only 12 short years ago when we bought Arrowhead, there was a feeling that maybe MGAs were not as good as they are today. So, you all in the investment community sort of said, that might be a mistake or you’re changing the business or the case may be, and we’ve been very fortunate, Arrowhead was a very good acquisition, and we got a lot of very good leaders out of it.

And so, we’re very pleased, but it is interesting how the tide turns. I would also mention one final thing. We have a lender-placed business where we do loan processing and things like that and that business has performed very well in terms of, we’ve written a lot of new business there as well. So, I hope that answers your question, Elyse.

Elyse Greenspan: Yes. And then my second question is on margin. You guys have said your guidance last quarter, Andy, I think, was slightly up for the full year, obviously started off pretty strong. And it sounds like you’re not changing the guidance for contingents, right, because to a prior question, there was no forward. So, does it now feel like margins should come in better than expected for the full year? And how should we think about — I know there are some headwinds from captives in the back half as we think about losses. But is there anything else you could point out if we just think about, I guess, there’s some tailwinds relative to the original margin guide for the full year?

Andy Watts: We still feel really good about the guidance for the full year right now. And I think to your point, the question is, what’s the potential impact, and more than likely in the third quarter, but it could be the fourth quarter of storm claim activity. So, I think would it just be in the first quarter. I was very, very pleased with the first quarter. But I think right now, we’re probably hold with still up slightly, but feel — we feel really good about the year.

Operator: [Operator Instructions] Our next question comes from the line of Jing Li with KBW. Your line is now open.

Jing Li: I just have a question on the program margin. So, I know you mentioned you included the sale of the service segment. Is it possible to see what’s the impact on the margin that can you put a number on? Or…

Andy Watts: Yes. Jing is probably the easiest way to give that if you go back to the 8-K that we put out in early March, you can kind of see the impact of the businesses, and the businesses that we sold rolled into National Programs, that will give you a pretty easy way to calculate that.

Jing Li: Just follow-up on the Retail segment margin. They also contracted a little year-over-year. Can you please add more color on that?

Powell Brown: Sure. And I would tell you that, as you know, we don’t think one quarter makes a trend. We were very pleased with the organic growth in our Retail business and the amount of new business that we are winning on a net new basis. I’ll also tell you that we write business in Q1 and not all the revenue comes in, in Q1, as you know. So, it comes in over subsequent quarters. So having said that, please don’t think one quarter, whether it’s up slightly, down slightly, create the trend. We’re trying to improve the business over the long term. That’s one year, three years, five years, 10 years. And if you look at the performance of our retail business in the last, let’s say, three years, we’re extremely pleased with not only the organic growth, but the margin profile. So, we’re very bullish on Retail as we have been. And so, thank you for the question, but I would say that we’re very pleased and don’t take a little up or a little down too far out of context.

Operator: [Operator Instructions] Our next question will come from the line of Brian Meredith with UBS.

Brian Meredith: Powell, I’m just curious, there’s some data out this quarter that showed — stamping that showed E&S kind of premium slowing in some of the major states. I’m wondering if that’s what you’re experiencing seeing that maybe the standard markets are getting a little more of a risk appetite here and the E&S kind of growth rates that we’ve been seeing are slowing? Or maybe we’re just misinterpreting that?

Powell Brown: I think, Brian, I would hold judgment on that, and let me tell you why. Let’s just use the state of California for a moment. You read a lot about the state of California and what’s going on. There was a large carrier that’s a direct writer that has a bunch of folks. I think [Caitlin Clark] is a spokesperson for who they just had their carrier in the state downgraded to be, okay? And so, they are talking about non-renewing 30,000 policies in that state. So, the question is, where is it going to go? And the answer is it may go into the fair plan, which is not the desire of the state. And so — but they may — that may flow into this fair plan in the near term. Those ultimately may come out of the fair plan and into the E&S market.

So, there’s an example in the state of California. In the state of Florida, as you probably know, the number of policies in Citizens, the state facility, has technically gone down year-over-year. I think that’s a little misleading because what you had is you had a number of depopulation companies come and they allocated those policies to them. So again, in states like California, Florida, as noted, even Texas and others, Louisiana, the insurance commissioners are trying, first and foremost, to create an environment where there is a competitive environment that actually there is affordability and availability. And so, I would not read too much into those early indications because the next time that report comes out, Brian, it might say up substantially.

I don’t think it would say up substantially, but up. So, I would just hold judgment on that one.

Brian Meredith: Got you. And then specifically on Florida, are you seeing any additional capacity coming at this point because of the legislative changes? I think we’re hearing a little bit about that.

Andy Watts: Yes. So, what I would say is the legislative changes, that’s going to take time for that fully to bake in. So don’t make the assumption that you effectuate a law and then all of a sudden, immediately, they start lining up. It just doesn’t work that way. What I would say though is on the flip side, as I described, carriers that might provide a $10 million primary limit on a property might actually provide a $20 million or a $25 million, and we are seeing that on certain properties in Florida. So technically, I view that as more willingness to write and extend limits, which in turn is downward pressure for the buyer, the client — that’s good for the client. And so, we’re seeing some of that. It is not all downward.

I do not want anybody to come away from this call saying, hey, every piece of property is going down. That is not the case. If you talk to our senior leaders and leaders in Florida and our Retail business, and you said, what’s happening in property? Depending on the line or the type of business, they might say it’s down in condos. It might be up overall slightly with all properties and — but there are just very, very unique distinctions in there. So, think not so much legislative action yet, it’s more market action.

Operator: [Operator Instructions] Our next question comes from the line of Grace Carter with Bank of America.

Grace Carter: Looking at the contingent commissions and national program past couple of quarters, even taking out the non-recurring benefit this quarter, there’s been some pretty significant growth. I was hoping you could help us kind of frame that across underlying growth in the business versus maybe improvements in underwriting performance versus just the contribution from the relatively low storm activity last year, just to kind of help us think about how that might look going forward and what sort of growth rate we should assume?

Andy Watts: I think as we mentioned in our comments or prepared remarks, really driven off of both of those factors that are out there. We think we deliver some of the best underwriting results for our carrier partners in the industry. And so, I think that’s reflective of the contingent commissions that we’re able to participate in. And then with the lower storm claim — or the lower storm activity last year, that is providing for at least incremental also this year again, we’ll kind of see what happens as we get through the storm. And then you’ve got some which is just based upon the growth in the business. The one thing to keep in mind is Programs is very different than if you look at Retail. And the Retail generally kind of trends right along with the growth in commissions and fees.

You can see ups and downs within Programs that you wouldn’t get the same correlation in some of the other divisions just because we may qualify for a program — or qualify for contingent commissions for one program one year and another not inside of there. So, you may see a little bit more volatility over there. Okay.