Brown & Brown Earnings Call: Growth Strong, Margins Tested

Brown & Brown ((BRO)) has held its Q4 earnings call. Read on for the main highlights of the call.

Brown & Brown Delivers Strong 2025 Results but Flags Near-Term Margin Pressures

Brown & Brown’s latest earnings call mixed confidence with caution: management highlighted robust 23% full-year revenue growth, stronger margins, powerful cash generation and record M&A activity, while candidly acknowledging near-term headwinds from a large acquisition, softer organic growth in the fourth quarter, moderation in catastrophe (CAT) and excess & surplus (E&S) pricing, and a notable talent and client loss episode. The tone was broadly positive and long-term focused, with the company raising its margin target range and underscoring integration synergies, even as it guided investors to expect some pressure on 2026 margins and short-term variability in key earnings levers.

Top-Line Growth Accelerates on Strong Full-Year and Q4 Results

Brown & Brown reported a powerful top-line performance for FY2025, with total revenues reaching $5.9 billion, up 23% year-over-year. The momentum was even more pronounced in the fourth quarter, where revenues jumped 35.7% to $1.607 billion, driven largely by acquired growth and contributions from the Accession deal. While organic growth softened late in the year, the overall revenue trajectory underscored the scale the company has built through both organic initiatives and an aggressive acquisition strategy.

Margins and EPS Trend Higher Despite Q4 Noise

Profitability improved meaningfully in 2025. Adjusted EBITDAC margin expanded by roughly 70 basis points to about 36% for the year, reflecting operating leverage and favorable mix, including higher contingent commissions. Adjusted diluted EPS for the full year rose more than 10% to $4.26, while fourth-quarter adjusted EPS increased 8.1% to $0.93. Management acknowledged that the Q4 figure was dampened by Accession underperforming guidance, but the broader message was that the earnings power of the platform continues to grow.

Cash Generation Remains a Critical Strength

Cash flow from operations was a standout, reaching $1.450 billion in FY2025, up 23.5% year-over-year. The cash-flow-to-revenue ratio improved to 24.6%, underscoring the company’s ability to convert earnings into cash even amid heavy integration and deal activity. This strong cash generation supports flexibility in capital deployment—funding acquisitions, servicing debt, returning capital to shareholders and providing a buffer against cyclical pressures in pricing or investment income.

Record M&A and Accession Transform the Business

M&A was front and center, with 43 acquisitions completed in 2025 adding roughly $1.8 billion of annual revenue, including the transformational Accession transaction. Accession alone contributed about $405 million of revenue in Q4, and Brown & Brown added more than 6,000 teammates during the year, over 5,000 of whom came from Accession. Management framed 2025 as a record year for inorganic expansion, positioning the company with a larger specialty platform and broader capabilities, albeit with the added complexity and near-term earnings drag of integration.

Contingent Commissions Provide a Tailwind—For Now

Contingent commissions were a key earnings tailwind in 2025, contributing more than $250 million of revenue for the year. In the fourth quarter alone, contingent revenue grew by $37 million, with $21 million of that coming from Accession, providing a meaningful boost to margins and cash flow. Management, however, emphasized that these payments are inherently volatile and tied to carrier profitability and storm activity, signaling that investors should not extrapolate 2025’s strength in contingents in a straight line.

Capital Allocation: Debt Reduction, Buybacks and Dividends

Brown & Brown continued to balance growth investments with shareholder returns. In the fourth quarter, the company paid down $100 million on its revolving credit facility and repurchased $100 million of common stock, while also lifting dividends per share by 10% versus Q4 2024. The earnings call highlighted a disciplined capital allocation framework—leveraging strong cash flows to manage leverage, support ongoing M&A, and return capital through buybacks and growing dividends.

Long-Term Margin Target Raised on Synergies and Mix

Reflecting confidence in its evolving business model, Brown & Brown raised its long-term adjusted EBITDAC margin target range from 30%–35% to 32%–37%. Management cited expected integration synergies from Accession, the contribution of higher-margin contingents, and shifts in business mix as key drivers. While acknowledging nearer-term pressures from lower investment income and integration costs, the company framed the higher margin range as a signal of where it believes steady-state profitability can land once current integration efforts mature.

Accession Integration Progress and Synergies

Management described early integration efforts around Accession as progressing positively and reiterated expected EBITDA synergies of approximately $30–40 million in 2026. The integration is a multi-year undertaking, with completion targeted by the end of 2028. The company is working to standardize systems, processes and culture across the combined business, aiming to unlock cost efficiencies and revenue synergies that should support margins and growth over time.

Organic Revenue Softness in Q4 Highlights Volatility

The company’s Q4 2025 organic revenue performance was a weak spot, with consolidated organic revenue down 2.8%. Specialty Distribution was hit hardest, posting a 7.8% organic revenue decline. Management explained that this was largely due to a tough comparison to Q4 2024, when $28 million of flood claims processing revenue was recognized, as well as softer CAT property pricing. The message to investors: the underlying franchise remains healthy, but quarterly results can be choppy, especially in segments exposed to CAT-related business and one-time project flows.

Accession Miss and Margin Drag in Q4

Accession came in below management’s Q4 expectations, generating around $405 million of revenue versus prior guidance of $430–$450 million. This shortfall shaved roughly $0.05 from Q4 adjusted EPS and compressed company margins by about 200 basis points for the quarter, with full-year margins also pressured by about 80 basis points due to Accession’s seasonality. While management remains confident in the strategic logic and long-term value of the deal, they clearly signaled that near-term earnings volatility and margin dilution are part of the integration journey.

Retail Segment Hit by One-Time Factors and Timing

Retail organic growth in Q4 was modest at 1.1%, weighed down by several one-time and timing-related factors. Multiyear policies, larger-than-expected incentive commission adjustments and project delays collectively reduced organic growth by an estimated 100–150 basis points. Management suggested that these items do not indicate structural weakness in the retail franchise but do highlight how timing and contract structures can create short-term noise in reported growth.

Softening CAT and E&S Pricing Creates a Headwind

The call underscored growing pricing pressure in key markets. E&S property rate changes were generally down 15%–30%, while non-CAT property rates were roughly flat overall but varied by individual risk and loss experience. CAT property rates, which had been elevated, are moderating. These shifts are a headwind for segments with greater CAT exposure and help explain some of the softness in Specialty Distribution. Brown & Brown appears to be managing through the cycle but is not immune to the broader market cooling in property, particularly in CAT-prone areas.

Talent Poaching Event Raises Retention and Client Risk

A notable negative surprise was a talent and client loss event: a start-up U.S. broker hired approximately 275 former Brown & Brown teammates and took clients representing about $23 million of known annual revenue. Management indicated the company has secured an injunction and is pursuing legal remedies, yet the episode introduces ongoing retention and client erosion risk around that book of business. The event highlights competitive intensity in the brokerage labor market and the importance of retention strategies during periods of heavy integration and change.

Contingent Commissions: Key but Volatile Earnings Lever

While contingents were a major positive in 2025, management repeatedly stressed their variability. For 2026, Specialty Distribution’s contingent commissions are expected to decline by roughly $15 million due to one-time adjustments, and overall contingent levels remain at the mercy of underwriting results and storm activity. Investors are being encouraged to treat contingents as a volatile but important part of the earnings mix, rather than a stable, predictable driver of growth.

Lower Investment Income Set to Pressure 2026 Margins

Looking ahead, Brown & Brown expects lower investment income in 2026, as cash has been deployed for acquisitions and as interest rate dynamics shift. Management made clear that this will put downward pressure on total margins even if the underlying operating margin of the core business stays relatively flat. In effect, some of the 2025 margin gains from higher investment income will unwind, emphasizing that reported margin performance will reflect both insurance operations and the financial environment.

Acquisition Financing and Share Dilution

The scale of the Accession transaction is also evident in the share count. Weighted average shares outstanding rose by around 55 million to 339 million in Q4, primarily tied to Accession consideration. This increase introduces dilution that partially offsets per-share earnings gains. Management’s capital return actions help mitigate this over time, but in the near term, investors must factor in a larger equity base when assessing EPS growth and valuation.

Integration Timeline and Seasonality Risks Remain

Management reminded investors that Accession integration is still in its early phases and will continue through 2028. They warned that Accession is expected to have a modest negative impact on adjusted margins in the first quarter, and that seasonal revenue patterns—particularly the heavier weighting to the third quarter—could amplify quarterly volatility. The long runway underscores both the potential upside from full integration and the execution risk that remains over the next several years.

Guidance Points to Near-Term Margin Pressure, Longer-Term Upside

Forward-looking guidance focused on Accession’s ramp, margin dynamics and the sustainability of recent performance. Accession’s revenue and profit are now expected to be roughly evenly split between the first and second halves, with a skew toward the third quarter within H2. After the Q4 revenue miss and associated EPS and margin impact, management expects a modest negative effect on adjusted margins from Accession in Q1. For 2026 overall, they anticipate lower investment income will weigh on total margins, though underlying business margins should be relatively stable. Retail organic growth is expected to modestly improve from 2.8% in 2025, while Specialty Distribution may be flat in Q1 with improvement later in the year. Contingent commissions will remain lumpy, with Specialty Distribution contingents specifically guided down by about $15 million. The company continues to target an effective tax rate of roughly 24%–25% and reaffirmed its raised long-term adjusted EBITDAC margin range of 32%–37%, supported by expected $30–40 million of EBITDA synergies in 2026 from Accession and an integration plan extending through 2028, alongside continued activity on the M&A front.

In closing, Brown & Brown’s earnings call painted a picture of a company in strong financial health yet in the midst of a complex transition. Revenue, margins, EPS and cash flow all advanced in 2025, and management signaled confidence by lifting long-term margin targets and doubling down on integration synergies and M&A. At the same time, investors were clearly warned about near-term margin pressure from lower investment income, Accession’s integration and seasonality, contingent volatility, pricing headwinds in CAT and E&S, and talent-related disruptions. For market participants, the story is one of solid current fundamentals and attractive long-term potential, balanced against an earnings profile that may be bumpier over the next several quarters.