BROWN & BROWN, INC. (BRO)

LIQUIDITY AND CAPITAL RESOURCES

The Company seeks to maintain a conservative balance sheet and strong liquidity profile. Our capital requirements to operate as an insurance intermediary are low, and we have been able to grow and invest in our business through a combination of cash that has been generated from operations, the disciplined use of debt and the issuance of equity as part of the purchase price consideration to acquire certain businesses. We have the ability to utilize our Revolving Credit Facility under the Third Amended and Restated Credit Agreement (the “Third Amended and Restated Credit Agreement”), which as of June 30, 2026 provided additional capacity for up to $975 million in available cash. We believe that we have access to additional funds, if needed, through the capital markets or private placements to obtain further debt financing under the current market conditions. The Company believes that its existing cash, cash equivalents, short-term investment portfolio and funds generated from operations, together with the funds available under the Revolving Credit Facility will be sufficient to satisfy its normal liquidity needs, including principal payments on our long-term debt, for the next twelve months and in the long term.

The Revolving Credit Facility contains an expansion option for up to an additional $1,000 million of borrowing capacity, subject to the approval of participating lenders. Including the expansion options under all existing credit agreements, the Company has access to up to $1,975 million of incremental borrowing capacity as of June 30, 2026.

Cash and cash equivalents totaled $918 million at June 30, 2026 reflecting a decrease of $161 million from the $1,079 million balance at December 31, 2025. This decrease was primarily driven by share repurchases and deferred contingent consideration payments, partially offset by cash generated from operations.

Operating Cash Flows

Our operating cash flows are primarily derived from the net income generated during the period adjusted for non-cash expenses, which include depreciation, amortization, changes in estimated earnout payables, mark-to-market escrow liability, non-cash stock-based compensation and deferred income taxes while excluding gains and losses on sales/disposals of investments, businesses, fixed assets and customer accounts, payments on acquisition earn-outs in excess of original estimated payables and changes in working capital which relate primarily to the timing of payments of accrued liabilities and receipts of receivables from commissions and fees related to our revenues. Our ratio of current assets to current liabilities was 1.13 and 1.04 for June 30, 2026 and December 31, 2025, respectively.

Cash flows generated from operating activities totaled $608 million and $538 million for the six months ended June 30, 2026 and 2025, respectively, representing an increase of $70 million. Operating cash flows generated in 2026 included $716 million from net income before non-controlling interests with $303 million of non-cash adjustments, offset by $411 million from changes in working capital. The growth in cash from operations is primarily due to recent acquisitions.

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Investing Cash Flows

Cash flows used for investing activities were $71 million and $187 million for the six months ended June 30, 2026 and 2025, respectively, a decrease of $116 million.

Acquisitions

During the six months ended June 30, 2026, the Company completed 14 acquisitions (including book purchases) and paid $30 million net of cash acquired, and including cash and cash equivalents held in a fiduciary capacity. Net cash paid for acquisitions decreased $131 million in the six months ended June 30, 2026, from $161 million during the same period in 2025.

Dispositions

The Company received $3 million from the sale of businesses, fixed assets and customer accounts during the six months ended June 30, 2026, compared to $10 million proceeds received in the same period in 2025. The decrease is attributed to smaller sales of businesses in the current period.

Capital Expenditures

Capital expenditures amounted to $38 million and $32 million in the six months ended June 30, 2026 and 2025, respectively, and included purchases of furniture and fixtures, leasehold improvements related to office moves and hardware and software purchases related to information technology investments.

Financing Cash Flows

Net cash flows used by financing activities totaled $526 million and net cash flows sourced totaled $7,981 million in the six months ended June 30, 2026 and 2025, respectively. The decrease of $8,507 million in sourced financing activities was primarily driven by the proceeds of the Company's follow-on common stock offering and senior notes issuance in June 2025, held in preparation for the closing of the Company's acquisition of Accession, offset by share repurchases and deferred contingent consideration payments in 2026.

Fiduciary Receivables and Liabilities

Fiduciary cash represents funds in the Company's possession collected from customers to be remitted to insurance companies and funds from insurance companies to be distributed to insureds for the settlement of claims or refunds. The net change in fiduciary cash is represented by the net change in fiduciary liabilities and fiduciary receivables and is presented as cash flows from financing activities in the statement of cash flows. Financing cash flows reflect an increase of $157 million and $119 million in the six months ended June 30, 2026 and 2025, respectively, related to fiduciary receivables and liabilities.

Acquisition Earn-outs

Deferred contingent consideration payments totaled $224 million and $46 million during the six months ended June 30, 2026 and 2025, respectively, including $184 million and $45 million, respectively, classified as financing activities related to acquisition earn-outs associated with original acquisition-date estimates.

Dividends

During the six months ended June 30, 2026 and 2025, the Company paid cash dividends of $112 million and $86 million, respectively, an increase of $26 million, or 30.2%. On July 22, 2026, the Board of Directors approved a quarterly cash dividend of $0.165 per share to be paid on August 19, 2026.

Debt

Net cash proceeds from long term debt totaled $141 million in the six months ended June 30, 2026, compared to net cash proceeds of $3,718 million in the same period of 2025.

Total debt at June 30, 2026 was $7,759 million net of unamortized discount and debt issuance costs, which was an increase of $146 million compared to December 31, 2025. The increase includes the drawdown of $225 million on the Revolving Credit Facility and the amortization of discounted debt related to our various unsecured senior notes and debt issuance cost amortization of $5 million, offset by $81 million of payments on outstanding term loan and Revolving Credit Facility balances and an additional $3 million of deferred financing costs associated with the Third Amended and Restated Credit Agreement.

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On June 5, 2026, the Company entered into the Third Amended and Restated Credit Agreement with the lenders named therein, JPMorgan Chase Bank, N.A. as administrative agent, Bank of America, N.A., Truist Bank and BMO Bank N.A. as co-syndication agents, and U.S. Bank National Association, Fifth Third Bank, National Association, Wells Fargo Bank, National Association, PNC Bank, National Association, HSBC Bank USA, National Association, Citizens Bank, N.A., The Huntington National Bank, and Barclays Bank PLC as co-documentation agents. The Third Amended and Restated Credit Agreement amended and restated the credit agreement dated October 27, 2021, which amended and restated the prior credit agreement, terminated the Company's existing term loan facility, and refinanced the outstanding borrowings thereunder into new term loan facilities. The agreement increased revolving credit commitments from $800 million to $1.25 billion and extended the maturity date to June 5, 2031. The agreement also provides for a $250 million term loan due June 5, 2029 and a $250 million term loan due June 5, 2031. Total borrowings outstanding under the facilities were approximately $775 million as of June 30, 2026.

During the six months ended June 30, 2026, the Company made $6 million of scheduled principal payments on its Second Amended and Restated Credit Agreement term loan. On June 5, 2026, the remaining $163 million outstanding under the term loan was refinanced and consolidated into the Third Amended and Restated Credit Agreement.

During the six months ended June 30, 2026, the Company repaid $25 million of principal related to the Term Loans issued under the Term A-2 Loan Commitment (“Term A-2 Loans”). Upon execution of the Third Amended and Restated Credit Agreement on June 5, 2026, the remaining $338 million outstanding was refinanced and consolidated into the new credit facility.

During the first quarter, the Company drew $225 million on the Revolving Credit Facility in connection with a share repurchase program. The Company has repaid $50 million of the balance as of June 30, 2026. There is an outstanding balance of $275 million on the Revolving Credit Facility as of June 30, 2026.

Common Stock

On February 12, 2026, the Company entered into accelerated share repurchase agreement ("ASR") with an investment bank to purchase an aggregate $250 million of the Company's common stock. The program ended on March 9, 2026 and during the period, the Company received a total of 3,574,890 shares of the Company's common stock.

During the three months ended June 30, 2026, the Company repurchased an additional 4,279,712 shares for $250 million.

At June 30, 2026, the remaining amount authorized by our board of directors for share repurchases was approximately $900 million.

Contractual Cash Obligations

As of June 30, 2026, our contractual cash obligations were as follows:

(1)
Includes the escrow liability which is included within “Other Long-Term Liabilities” issued in connection with the Transaction. The liability reflects the fair value of shares and cash held in escrow to secure certain indemnification obligations of the Accession equityholders related to businesses that are in run-off or discontinued. Once all claims related to certain indemnification matters described in the Merger Agreement are resolved, the remaining amount in the escrow account will be released to the equityholders. The Company believes this escrow, plus other available funds, is sufficient to cover any potential costs associated with those specified matters subject to indemnification under the Merger Agreement. The fair value of the escrow liability is remeasured at each reporting date, with changes recognized in earnings. The timing and amount of any future settlement remains subject to the achievement of contractual milestones and may vary from the amounts disclosed. The value as of June 30, 2026, was $552 million.

(2)
Includes $310 million of current and non-current estimated acquisition earn-out payables. Earn-out payables for acquisitions not deno

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ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

General

Company Overview

The following discussion should be read in conjunction with our Consolidated Financial Statements and the related Notes to those Financial Statements included elsewhere in this Annual Report on Form 10-K, which are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). In addition, see “Information Regarding Non-GAAP Financial Measures” below regarding important information on non-GAAP financial measures contained in our discussion and analysis.

We are a diversified insurance agency, wholesale brokerage, insurance programs, specialty insurance business and service organization headquartered in Daytona Beach, Florida. As an insurance intermediary, our principal sources of revenue are commissions paid by insurance companies and, to a lesser extent, fees paid directly by customers. Commission revenues generally represent a percentage of the premium paid by an insured and are affected by fluctuations in both premium rate levels charged by insurance companies and the insureds’ underlying “insurable exposure units,” which are units that insurance companies use to measure or express insurance exposed to risk (such as property values, sales or payroll levels) to determine what premium to charge the insured. Insurance companies establish these premium rates based upon many factors, including loss experience, risk profile and reinsurance rates paid by such insurance companies, none of which we control. We also participate in captive insurance facilities for the purpose of having additional capacity to place coverage, driving additional revenues and to participate in underwriting results. We limit the Company's exposure to claims expenses through reinsurance or by only participating in certain tranches of the underwriting. We also operate registered insurance companies to support our national flood insurance program and to support our cross-collateralized segregated captive cell businesses. We do not participate in earnings of the collateralized segregated captive cells.

We have increased revenues every year from 1993 to 2025, with the exception of 2009, when our revenues declined 1.0%. Our revenues grew from $95.6 million in 1993 to $5.9 billion in 2025, reflecting a compound annual growth rate of 14.2%. In the same 32-year period, we increased net income from $8.1 million to over $1.0 billion in 2025, a 16.9% compound annual growth rate.

The volume of business from new and existing customers, fluctuations in insurable exposure units, changes in premium rate levels, changes in general economic and competitive conditions, a reduction of purchased limits, or the occurrence of catastrophic weather events all affect our revenues. For example, higher levels of inflation, an increase in the value of insurable exposure units or a general decline in economic activity, could increase or decrease the value of insurable exposure units. Conversely, increasing costs of litigation settlements and awards could cause some customers to seek higher levels of insurance coverage. Historically, we have grown our revenues as a result of our focus on new business, customer retention and acquisitions. We foster a strong, decentralized sales and service culture, which enables responsiveness to changing business conditions and drives accountability for results.

The term “core commissions and fees” excludes profit-sharing contingent commissions, and therefore, it represents the revenues earned directly from specific insurance policies sold, and specific fee-based services rendered. The net change in core commissions and fees reflects the aggregate changes attributable to: (i) net new and lost accounts; (ii) net changes in our customers’ exposure units, deductibles or insured limits; (iii) net changes in insurance premium rates or the commission rate paid to us by our carrier partners; (iv) the net change in fees paid to us by our customers and (v) any businesses acquired or disposed of.

We also earn profit-sharing contingent commissions, which are commissions based primarily on underwriting results, but in select situations may reflect additional considerations for volume, growth and/or retention. These commissions, which are included in our commissions and fees in the Consolidated Statements of Income, are estimated and accrued throughout the year based on actual premiums written and knowledge, to the extent it is available, of losses incurred. Payments are primarily received in the first and second quarters of each subsequent year, based upon the aforementioned considerations for the prior year(s), but may differ from the amount estimated and accrued due to the lack of complete visibility regarding loss information until they are received. Over the last three years, profit-sharing contingent commissions have averaged approximately 4.4% of commissions and fees.

Fee revenues primarily relate to services other than securing coverage for our customers, and for fees negotiated in lieu of commissions. Fee revenues are generated by: (i) our Specialty Distribution segment, which earns fees primarily for the issuance of insurance policies on behalf of insurance carriers and (ii) our Retail segment in our large-account customer base, where we primarily earn fees for securing insurance for our customers, in our F&I businesses where we earn fees for assisting our customers with creating and selling warranty and service risk management programs, and fees for Medicare Set-aside services, Social Security disability services and Medicare benefits advocacy services. Fee revenues as a percentage of our total commissions and fees, represented 22.2% in 2025 and 21.1% in 2024.

For the year ended December 31, 2025, our commissions and fees growth rate was 22.5% and our consolidated Organic Revenue growth rate was 2.8%.

Historically, investment and other income has consisted primarily of interest earnings on operating cash and where permitted, on premiums collected and held in a fiduciary capacity before being remitted to insurance companies. Our policy as it relates to the Company’s capital is to invest available funds in high-quality, short-term money-market funds and fixed income investment securities. Investment income also includes gains and losses realized from the sale of investments. Other income primarily reflects other miscellaneous revenues.

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Income before income taxes for the year ended December 31, 2025, increased by $68 million, or 5.2% over 2024, driven by Organic Revenue growth, increased profit-sharing contingent commissions, leveraging our expense base, increased investment income, acquisitions completed in the past twelve months and the change in mark-to-market of escrow liability. This growth was partially offset by Acquisition/Integration Costs and the change in estimated acquisition earn-out payables.

Information Regarding Non-GAAP Financial Measures

In the discussion and analysis of our results of operations, in addition to reporting financial results in accordance with generally accepted accounting principles (“GAAP”), we provide references to the following non-GAAP financial measures as defined in Regulation G of the SEC rules: Organic Revenue, EBITDAC, EBITDAC Margin, EBITDAC - Adjusted and EBITDAC Margin - Adjusted. We present these measures because we believe such information is of interest to the investment community. We believe they provide additional meaningful methods to evaluate the Company’s operating performance from period to period on a basis that may not be otherwise apparent on a GAAP basis due to the impact of certain items that have a high degree of variability, that we believe are not indicative of ongoing performance and that are not easily comparable from period to period. This non-GAAP financial information should be considered in addition to, not in lieu of, the Company’s consolidated income statements and balance sheets as of the relevant date. Consistent with Regulation G, a description of such information is provided below and tabular reconciliations of this supplemental non-GAAP financial information to our most comparable GAAP information are contained in this Annual Report on Form 10-K under “Results of Operations - Segment Information.”

We view Organic Revenue and Organic Revenue growth as important indicators when assessing and evaluating our performance on a consolidated basis and for each of our two segments, because they allow us to determine a comparable, but non-GAAP, measurement of revenue growth that is associated with the revenue sources that were a part of our business in both the current and prior year and that are expected to continue in the future. We also view EBITDAC, EBITDAC - Adjusted, EBITDAC Margin and EBITDAC Margin - Adjusted as important indicators when assessing and evaluating our performance, as they present more comparable measurements of our operating margins in a meaningful and consistent manner. As disclosed in our most recent proxy statement, we use Organic Revenue growth, and EBITDAC Margin - Adjusted as key performance metrics for our short-term and long-term incentive compensation plans for executive officers and other key employees.

Non-GAAP Revenue Measures

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Organic Revenue is our core commissions and fees less: (i) the core commissions and fees earned for the first twelve months by newly acquired operations; (ii) divested business (core commissions and fees generated from offices, books of business or niches sold or terminated during the comparable period) and (iii) Foreign Currency Translation (as defined below). The term “core commissions and fees” excludes profit-sharing contingent commissions; and therefore, represents the revenues earned directly from specific insurance policies sold and specific fee-based services rendered. Organic Revenue can be expressed as a dollar amount or a percentage rate when describing Organic Revenue growth.

Non-GAAP Earnings Measures

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EBITDAC is defined as income before interest, income taxes, depreciation, amortization and the change in estimated acquisition earn-out payables.

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EBITDAC Margin is defined as EBITDAC divided by total revenues.

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EBITDAC - Adjusted is defined as EBITDAC, excluding (i) (gain)/loss on disposal (as defined below), (ii) Acquisition/Integration Costs (as defined below) and (iii) mark-to-market of escrow liability (as defined below).

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EBITDAC Margin - Adjusted is defined as EBITDAC - Adjusted divided by total revenues.

Definitions Related to Certain Components of Non-GAAP Measures

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“Acquisition/Integration Costs” means the acquisition and integration costs (e.g., costs associated with regulatory filings; costs for third-party professional services, including legal, accounting, consulting, financial advisory and due diligence; costs and fees associated with entry into the bridge financing commitment; costs of integrating or streamlining processes and information technology systems, including data migration and system integration; costs associated with optimizing vendor agreements and leased office space, including exit costs related to location combinations; and employment-related costs, including severance payments, costs associated with the transition of certain legacy compensation programs, retention-related compensation expenses, and incentive payments) arising out of our acquisition of Accession and acquisitions previously completed by Accession, which are not considered to be normal, recurring or part of ongoing operations.

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“Foreign Currency Translation” means the period-over-period impact of foreign currency translation, which is calculated by applying current-year foreign exchange rates to the various functional currencies in our business to our reporting currency of U.S. dollars for the same period in the prior year.

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“(Gain)/loss on disposal” is a caption on ou

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