Brown & Brown, Inc. (BRO) Q4 2025 Earnings Call Transcript
Revenue for Q4 $1.6 billion, growing 35.7% year-over-year. Organic revenue decreased 2.8%, primarily due to flood claims processing revenue recognized in the fourth quarter of last year.
Adjusted EBITDAC Margin for Q4 32.9%, remained flat year-over-year. This was a strong result considering the negative 200 basis point impact of Accession and prior year flood claim processing revenue.
Adjusted Earnings Per Share for Q4 $0.93, grew over 8% year-over-year. Growth was strong despite the impact of last year's flood claims processing revenue.
Revenue for Full Year 2025 $5.9 billion, growing 23% year-over-year. Organic growth was 2.8%, driven by M&A and contingent commissions.
Adjusted EBITDAC Margin for Full Year 2025 36%, increased by 70 basis points year-over-year. Growth was driven by higher contingent commissions, lower claims, and disciplined expense management.
Diluted Net Income Per Share for Full Year 2025 $4.26, grew over 10% year-over-year. Growth was supported by strong top-line performance and disciplined management.
Cash Flow from Operations for Full Year 2025 Nearly $1.5 billion, grew 24% year-over-year. Growth was attributed to strong revenue growth and disciplined working capital management.
Retail Segment Organic Growth for Q4 1.1%, negatively impacted by multiyear policies written in Q4 2024, onetime adjustments to incentive commissions, and delayed project work.
Specialty Distribution Organic Growth for Q4 Decreased by 7.8%, primarily due to $28 million of flood claims processing revenue recognized in Q4 2024 and a decrease in CAT property rates.
Accession Revenue for Q4 Approximately $405 million, below the guidance of $430 million to $450 million. Revenue recognition estimates impacted quarterly results but not annual expectations.
Contingent Commissions for Q4 Grew by $37 million, with $21 million coming from Accession. Growth was driven by minimal storm claim activity and higher underwriting profitability.
Effective Tax Rate for Q4 21%, decreased from 24.9% in the prior year. The decrease was driven by benefits from international operations and end-of-year adjustments.
Dividends Paid Per Share for Q4 Increased by 10% year-over-year.
Cash Flow from Operations Ratio for Full Year 2025 24.6% of total revenues, reflecting strong margins and disciplined working capital management.
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The Battle Between Insurance Agents and AI Superagents
Insurance Brokerage Stocks Decline: Insurance brokerage stocks experienced a decline on Thursday, reflecting a broader trend in the stock market.
Impact of AI on the Sector: The drop in stock prices is attributed to investors' concerns about potential disruptions caused by emerging AI applications, referred to as superagents.
Brown & Brown Launches $250M Accelerated Share Repurchase Program
- Share Repurchase Program: Brown & Brown has entered into an accelerated share repurchase agreement with Bank of America for $250 million, which is part of the company's $1.5 billion share repurchase authorization aimed at enhancing shareholder value and boosting market confidence.
- Authorization Background: This repurchase initiative is based on the board's approval of a $1.5 billion share repurchase authorization announced on October 22, 2025, reflecting the company's confidence in future growth and commitment to shareholder returns.
- Financial Target Increase: Brown & Brown aims to raise its margin target to 32%-37% in 2026, with projected synergies of $30 million to $40 million through Accession integration, further strengthening the company's profitability.
- Market Reaction: Despite facing a downgrade to Neutral from Citi, Brown & Brown demonstrates a proactive response to market challenges through its repurchase program and margin enhancement strategy, aiming to restore investor confidence and drive stock price appreciation.
Brown & Brown Releases 2026 Market Trends Report Highlighting Buyer Advantages
- Market Dynamics Analysis: The 2026 Market Trends report from Brown & Brown reveals that insurance market conditions are shifting in favor of buyers who are well-prepared and have a positive claims history, emphasizing the importance of thorough preparation in the renewal process.
- Increased Competition in Commercial Insurance: The report highlights that heightened competition among insurers creates new opportunities for companies with strong risk management practices, although large loss events such as wildfires and cyber incidents remain persistent challenges.
- Digital Transformation in Employee Benefits: Companies are increasingly focusing on deploying digital health tools to control costs while ensuring the quality and relevance of benefits, making it essential to attract and retain talented individuals in a competitive labor market.
- Pressure in Personal Insurance Market: Climate volatility and regulatory changes necessitate stronger preparation and clearer documentation, and while capacity is expanding in some areas, regions exposed to natural disasters continue to face tighter requirements and sustained pricing pressure.
Recent Decline in AI Stocks: Insurance Brokers
Insurance Broker Shares Decline: Shares of major insurance brokers fell this week following the announcement of a new ChatGPT-based app designed to assist homeowners in selecting and purchasing insurance.
Introduction of ChatGPT App: The app aims to streamline the insurance buying process for homeowners, potentially disrupting traditional insurance brokerage practices.
Brown & Brown Under Investigation, Stock Plummets
- Financial Performance Decline: Brown & Brown reported a 2.8% decrease in organic revenue for Q4 2025, primarily due to a drop in flood claims processing revenue, which directly impacts the company's financial health and investor confidence.
- Employee Attrition Impact: Company leadership disclosed that 275 former employees joined a competitor, taking with them customers representing $23 million in annual revenue, posing a significant threat to the company's market share and revenue stability.
- Stock Price Reaction: On January 27, 2026, Brown & Brown's stock price fell by $5.50, or 6.91%, closing at $74.12 per share, reflecting market concerns regarding the company's future outlook and operational challenges.
- Legal Investigation Initiated: Pomerantz LLP is investigating Brown & Brown and its executives for potential securities fraud or other unlawful business practices, which could further impact the company's reputation and shareholder confidence.
Brown & Brown Stock Rating Downgraded
- Rating Maintenance and Price Target Cut: Michael Zaremski from BMO Capital and Yaron Kinar from Mizuho Securities both maintained a Hold rating on Brown & Brown (NYSE:BRO), lowering their price targets from $88 to $81 and from $90 to $84 respectively, indicating a cautious market outlook.
- Valuation Analysis: Zaremski noted that while P/E ratios are at discounted levels, the enterprise value to EBITDA and free cash flow yield remain expensive compared to the S&P 500, suggesting limited attractiveness for the stock.
- Earnings Forecast Adjustment: BMO Capital reduced its EBITDA estimates for Brown & Brown by approximately 3% and projected a 2.4% organic growth in 2026, reflecting a cautious stance on the company's future growth prospects.
- Lack of Positive Catalysts: Analysts believe there are no positive catalysts to drive the stock price higher in the near term, hence the Hold rating and reduced price target, indicating a pessimistic outlook for the stock's short-term performance.
The Battle Between Insurance Agents and AI Superagents
Insurance Brokerage Stocks Decline: Insurance brokerage stocks experienced a decline on Thursday, reflecting a broader trend in the stock market.
Impact of AI on the Sector: The drop in stock prices is attributed to investors' concerns about potential disruptions caused by emerging AI applications, referred to as superagents.
Brown & Brown Launches $250M Accelerated Share Repurchase Program
- Share Repurchase Program: Brown & Brown has entered into an accelerated share repurchase agreement with Bank of America for $250 million, which is part of the company's $1.5 billion share repurchase authorization aimed at enhancing shareholder value and boosting market confidence.
- Authorization Background: This repurchase initiative is based on the board's approval of a $1.5 billion share repurchase authorization announced on October 22, 2025, reflecting the company's confidence in future growth and commitment to shareholder returns.
- Financial Target Increase: Brown & Brown aims to raise its margin target to 32%-37% in 2026, with projected synergies of $30 million to $40 million through Accession integration, further strengthening the company's profitability.
- Market Reaction: Despite facing a downgrade to Neutral from Citi, Brown & Brown demonstrates a proactive response to market challenges through its repurchase program and margin enhancement strategy, aiming to restore investor confidence and drive stock price appreciation.
Brown & Brown Releases 2026 Market Trends Report Highlighting Buyer Advantages
- Market Dynamics Analysis: The 2026 Market Trends report from Brown & Brown reveals that insurance market conditions are shifting in favor of buyers who are well-prepared and have a positive claims history, emphasizing the importance of thorough preparation in the renewal process.
- Increased Competition in Commercial Insurance: The report highlights that heightened competition among insurers creates new opportunities for companies with strong risk management practices, although large loss events such as wildfires and cyber incidents remain persistent challenges.
- Digital Transformation in Employee Benefits: Companies are increasingly focusing on deploying digital health tools to control costs while ensuring the quality and relevance of benefits, making it essential to attract and retain talented individuals in a competitive labor market.
- Pressure in Personal Insurance Market: Climate volatility and regulatory changes necessitate stronger preparation and clearer documentation, and while capacity is expanding in some areas, regions exposed to natural disasters continue to face tighter requirements and sustained pricing pressure.
Recent Decline in AI Stocks: Insurance Brokers
Insurance Broker Shares Decline: Shares of major insurance brokers fell this week following the announcement of a new ChatGPT-based app designed to assist homeowners in selecting and purchasing insurance.
Introduction of ChatGPT App: The app aims to streamline the insurance buying process for homeowners, potentially disrupting traditional insurance brokerage practices.
Brown & Brown Under Investigation, Stock Plummets
- Financial Performance Decline: Brown & Brown reported a 2.8% decrease in organic revenue for Q4 2025, primarily due to a drop in flood claims processing revenue, which directly impacts the company's financial health and investor confidence.
- Employee Attrition Impact: Company leadership disclosed that 275 former employees joined a competitor, taking with them customers representing $23 million in annual revenue, posing a significant threat to the company's market share and revenue stability.
- Stock Price Reaction: On January 27, 2026, Brown & Brown's stock price fell by $5.50, or 6.91%, closing at $74.12 per share, reflecting market concerns regarding the company's future outlook and operational challenges.
- Legal Investigation Initiated: Pomerantz LLP is investigating Brown & Brown and its executives for potential securities fraud or other unlawful business practices, which could further impact the company's reputation and shareholder confidence.
Brown & Brown Stock Rating Downgraded
- Rating Maintenance and Price Target Cut: Michael Zaremski from BMO Capital and Yaron Kinar from Mizuho Securities both maintained a Hold rating on Brown & Brown (NYSE:BRO), lowering their price targets from $88 to $81 and from $90 to $84 respectively, indicating a cautious market outlook.
- Valuation Analysis: Zaremski noted that while P/E ratios are at discounted levels, the enterprise value to EBITDA and free cash flow yield remain expensive compared to the S&P 500, suggesting limited attractiveness for the stock.
- Earnings Forecast Adjustment: BMO Capital reduced its EBITDA estimates for Brown & Brown by approximately 3% and projected a 2.4% organic growth in 2026, reflecting a cautious stance on the company's future growth prospects.
- Lack of Positive Catalysts: Analysts believe there are no positive catalysts to drive the stock price higher in the near term, hence the Hold rating and reduced price target, indicating a pessimistic outlook for the stock's short-term performance.
