Andrew Watts: Thank you. I appreciate it.
Powell Brown: Thank you.
Operator: Please standby for the next question. The next question comes from Gregory Peters with Raymond James. Your line is open.
Gregory Peters: Good morning, everyone. Hey, just circling back on your last answer and what you said in your opening up comments about contingent commissions being flat to down for next year. If we look at the segment results, profit sharing contingent commissions, you had a great year in ’23 in National Programs, $65 million versus $27.6 million in ’22. And you said you factor in at least one storm. What does that mean to contingent commissions if there’s one storm, not only inside National Programs but for the full year for the — on a consolidated basis?
Powell Brown: So I know this — you’re not going to — good morning, Greg. You’re not going to like this answer exactly, but it obviously depends on the magnitude of the storm and how that impacts admitted markets versus non — the non-admitted markets is different. But admitted markets, the Program business versus Wholesale business versus Retail business. And the answer is, it’s very hard to estimate. So we can’t run a model or we don’t run, I shouldn’t say that, we don’t run a model where you put a big storm into Florida or into Texas or Louisiana and then it spits out the other side. The answer is we did have a great year in terms of profit sharing this last year. But as Andy said, we understand that it may have been an — I’m not going to say an over-performance, but a very high performance.
Andrew Watts: Yeah. And Greg, keep in mind that in 2022, remember, we backed out $15 million in contingents in the third quarter and then — which — some of those with lost development not as significant as what was originally anticipated. Some of that got adjusted in the fourth quarter and then we also had adjustments in ’23. So it really — it’s difficult on these to determine where it’s going to be, the magnitude and everything else. So we would anticipate probably some sort of impact. The question is, don’t know exactly what that would look like.
Gregory Peters: Okay, that makes sense, I guess. I want to go back to bigger question on organic. And I know, Powell, part of your answer is going to be that you don’t tell us or forecast out what organic is going to be for ’24. But inside organic, the organic result for your company for ’23, there’s clearly been a benefit from the rate increase — rate increases that have happened in the market. You called that out in your comments. The Wholesale market, I think in your commentary and the slide deck, you called out cap pricing, and it seems like that might moderate. So if I add up all the different variables, if rate increases are going to be moderating in ’24 versus ’23, wouldn’t that naturally bleed over to a lower growth rate for organic across your footprint? Any comments on that would be helpful.
Powell Brown: Sure. So remember, Greg, if you go back over an extended period of time, we’ve always said two-thirds of our growth is exposure units and one-third would be rate. That’s how we’ve always described it since I’ve been in this position. So that’s number one. Number two, the impact of rate is going to be different on different segments and locations in the business. If you’re in a coastal community in Florida, the impact of property rate could be substantial in some of your growth. And that said, they could still be writing a ton of new business on top of that. Conversely, if you’re in Denver, Colorado or Nashville, Tennessee, you may not have that big of an impact on rate. So you’re already — you already kind of called it.
We don’t give organic growth guidance. That’s basically the answer. We have said historically that this is a low to mid-single-digit organic growth business in a steady-state economy. We have over-performed in organic growth the last couple of years and we’re really proud of it. And I know each of you are trying to anticipate what all that means. And basically, the way we look at it is we have to first deliver for our customers. So we want to keep the business that we’ve got and based upon the capabilities and the good job that we do for existing customer base, we go out and we write a lot of new business. And so I think it’s important to differentiate. I wouldn’t want you to get so focused just on rate. I think it’s more important that it is the activity which we do, i.e. the new business culture at Brown & Brown, whereby we are out always talking to prospects and to our existing customers.
So we think that the organic growth profile for 2024 is good. We don’t know what it’s going to be and you don’t know what it’s going to be. And I know that’s hard for you to model, but the answer is, remember, we’ve been doing this for 85 years and we have a pretty good understanding about how our business operates and the segments in the market that we serve and the capabilities that we have and that that we’re building. So I would tell you that we couldn’t be more happy with the performance last year. If you notice our performance against our publicly traded peers in that particular environment, we are at or near the top of that list while we’ve been leading margins and cash flow for many years. And so we’re just kind of generally pumped on where the business is.
