Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the Registrant’s common stock, $0.10 par value, outstanding as of ~~October 25, 2021~~May 6, 2022 was ~~282,426,839~~282,272,959.

Brown & Brown, Inc., together with its subsidiaries (collectively, “we,” “Brown & Brown” or the “Company”), makes “forward-looking statements” within the “safe harbor” provision of the Private Securities Litigation Reform Act of 1995, as amended, throughout this report and in the documents we incorporate by reference into this report, including those relating to the potential effects of the COVID-19 pandemic (“COVID-19”) on the Company’s business, operations, financial performance and prospects. You can identify these statements by forward-looking words such as “may,” “will,” “should,” “expect,” “anticipate,” “believe,” “intend,” “estimate,” “plan” and “continue” or similar words. We have based these statements on our current expectations about potential future events. Although we believe the expectations expressed in the forward-looking statements included in this Quarterly Report on Form 10-Q and the reports, statements, information and announcements incorporated by reference into this report are based upon reasonable assumptions within the bounds of our knowledge of our business, a number of factors could cause actual results to differ materially from those expressed in any forward-looking statements, whether oral or written, made by us or on our behalf. ~~Further,~~Many of these factors have previously been identified in filings or statements ~~about the effects of COVID-19~~made by us or on our ~~business, operations, financial performance and prospects may constitute forward-looking statements and are subject~~behalf. Important factors which could cause our actual results to ~~the risk that the actual impacts may~~ differ, possibly materially from ~~what is reflected in those~~the forward-looking statements ~~due~~in this report include but are not limited to ~~factors~~the following items, in addition to those matters described in Part I, Item 2 “Management’s Discussion and ~~future developments that are uncertain, unpredictable~~Analysis of Financial Condition and ~~in many cases beyond our control, including~~Results of Operations”:

•

COVID-19 and the ~~scope~~resulting governmental and societal responses, the severity and duration of COVID-19 (including through any new variant strains of the underlying virus), the effectiveness of and accessibility to vaccines, the pace and rate at which vaccines are administered, actions taken by governmental authorities in response to COVID-19 and the direct and indirect impact of COVID-19 on our customers, insurance carriers, third parties and us. Many of these factors have previously been identified in filings or statements made by us or on our behalf. Important factors which could cause our actual results to differ materially from the forward-looking statements in this report include but are not limited to the following items, in addition to those matters described in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”:

•

COVID-19 and the resulting governmental and societal responses, the severity and duration of COVID-19 (including through any new variant strains of the underlying virus), the effectiveness of and accessibility to vaccines, the pace and rate at which vaccines are administered, and the resulting impact on the U.S. economy, the global economy and the Company’s business, liquidity, customers, insurance carriers and third parties;

•

The effects of inflation;

•

The inability to retain or hire qualified employees, as well as the loss of any of our executive officers or other key employees;

•

Acquisition-related risks that could negatively affect the success of our growth strategy, including the possibility that we may not be able to successfully identify suitable acquisition candidates, complete acquisitions, integrate acquired businesses into our operations, and expand into new markets;

•

A cybersecurity attack or any other interruption in information technology and/or data security and/or outsourcing relationships;

•

The requirement for additional resources and time to adequately respond to dynamics resulting from rapid technological change;

•

The loss of or significant change to any of our insurance company relationships, which could result in additional expense, loss of market share or material decrease in our profit-sharing contingent commissions, guaranteed supplemental commissions or incentive commissions;

•

Adverse economic conditions, natural disasters, or regulatory changes in states where we have a concentration of our business;

•

The inability to maintain our culture or a change in management, management philosophy or our business strategy;

•

Risks facing us in our Services ~~Segment,~~segment, including our third-party claims administration operations, that are distinct from those we face in our insurance intermediary operations;

•

The limitations of our system of disclosure and internal controls and procedures in preventing errors or fraud, or in informing management of all material information in a timely manner;

•

The significant control certain existing shareholders have over the Company;

•

Risks related to our international operations, which ~~may~~result in additional risks and require more management time and expense than our domestic operations to achieve or maintain profitability;

•

Changes in data privacy and protection laws and regulations or any failure to comply with such laws and regulations;

•

Improper disclosure of confidential information;

•

The potential adverse effect of certain actual or potential claims, regulatory actions or proceedings on our businesses, results of operations, financial condition or liquidity;

•

Uncertainty in our business practices and compensation arrangements due to potential changes in regulations;

•

Regulatory changes that could reduce our profitability or growth by increasing compliance costs, technology compliance, restricting the products or services we may sell, the markets we may enter, the methods by which we may sell our products and services, or the prices we may charge for our services and the form of compensation we may accept from our customers, carriers and third-parties;

•

A decrease in demand for liability insurance as a result of tort reform ~~litigation;~~legislation;

•

Our failure to comply with any covenants contained in our debt agreements;

•

The possibility that covenants in our debt agreements could prevent us from engaging in certain potentially beneficial activities;

•

Changes in the U.S.-based credit markets that might adversely affect our business, results of operations and financial condition;

•

Risks associated with the current interest rate environment, and to the extent we use debt to finance our investments, changes in interest rates will affect our cost of capital and net investment income;

•

Disintermediation within the insurance industry, including increased competition from insurance companies, technology companies and the financial services industry, as well as the shift away from traditional insurance markets;

•

Changes in current U.S. or global economic conditions;

•

Effects related to pandemics, epidemics or outbreaks of infectious diseases;

•

Conditions that result in reduced insurer capacity;

•

Quarterly and annual variations in our commissions that result from the timing of policy renewals and the net effect of new and lost business production;

•

Intangible asset risk, including the possibility that our goodwill may become impaired in the future;

•

The effects of acquisitions on our business relationships, operating results and business generally;

•

Other risks and uncertainties as may be detailed from time to time in our public announcements and Securities and Exchange Commission (“SEC”) ~~filings.~~filings; and

•

Other factors that the Company may not have currently identified or quantified.

Assumptions as to any of the foregoing, and all statements, are not based upon historical fact, but rather reflect our current expectations concerning future results and events. Forward-looking statements that we make or that are made by others on our behalf are based upon a knowledge of our business and the environment in which we operate, but because of the factors listed above, among others, actual results may differ from those in the forward-looking statements. Consequently, these cautionary statements qualify all of the forward-looking statements we make herein. We cannot assure you that the results or developments anticipated by us will be realized or, even if substantially realized, that those results or developments will result in the expected consequences for us or affect us, our business or our operations in the way we expect. We caution readers not to place undue reliance on these forward-looking statements. All forward-looking statements ~~which speak~~made herein are made only as of ~~their dates. We assume no~~the date of this filing, the Company does not undertake any obligation to publicly update or correct any forward-looking statements to reflect events or circumstances that subsequently occur or of which the ~~forward-looking statements.~~Company hereafter becomes aware.

PART I — FINANCIAL INFORMATION

ITEM 1 — Financial Statements (Unaudited)

BROWN & BROWN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)


	Three months ended September 30,						Nine months ended September 30,						Three months ended March 31,
(in thousands, except per share data)	2021			2020			2021			2020
(in millions, except per share data)													2022			2021
REVENUES
Commissions and fees	$	769,654		$	671,396		$	2,309,610		$	1,966,056		$	904.3		$	814.0
Investment income		430			349			909			1,844			0.2			0.3
Other income, net		221			2,217			2,414			3,364			0.2			1.0
Total revenues		770,305			673,962			2,312,933			1,971,264			904.7			815.3
EXPENSES
Employee compensation and benefits		394,997			362,767			1,220,107			1,058,907			459.0			429.5
Other operating expenses		101,071			91,403			291,690			274,103			126.8			94.4
(Gain)/loss on disposal		(288	)		(994	)		(4,332	)		(1,285	)		(0.2	)		(0.2	)
Amortization		29,523			27,059			88,562			80,190			31.1			29.5
Depreciation		9,200			6,647			25,457			18,836			8.1			7.5
Interest		16,175			13,234			48,802			42,334			18.3			16.3
Change in estimated acquisition earn-out payables		23,138			15,318			20,643			4,996			(3.4	)		(0.9	)
Total expenses		573,816			515,434			1,690,929			1,478,081			639.7			576.1
Income before income taxes		196,489			158,528			622,004			493,183			265.0			239.2
Income taxes		50,135			24,549			136,617			110,020			44.7			39.5
Net income	$	146,354		$	133,979		$	485,387		$	383,163		$	220.3		$	199.7
Net income per share:
Basic	$	0.52		$	0.47		$	1.72		$	1.35		$	0.78		$	0.71
Diluted	$	0.52		$	0.47		$	1.71		$	1.35		$	0.77		$	0.70
Dividends declared per share	$	0.093		$	0.085		$	0.278		$	0.255		$	0.103		$	0.093

See accompanying Notes to Condensed Consolidated Financial Statements.

BROWN & BROWN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)


	Three months ended September 30,					Nine months ended September 30,					Three months ended March 31,
(in thousands)	2021			2020		2021			2020
(in millions)											2022			2021
Net income	$	146,354		$	133,979	$	485,387		$	383,163	$	220.3		$	199.7
Foreign currency translation		(2,918	)		—		(6,700	)		—		(2.1	)		(5.3	)
Unrealized (loss) gain on available-for-sale debt securities, net of tax		(83	)		—		150			—		(0.9	)		0.3
Comprehensive income	$	143,353		$	133,979	$	478,837		$	383,163	$	217.3		$	194.7

See accompanying Notes to Condensed Consolidated Financial Statements.

BROWN & BROWN, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


(in thousands, except per share data)	September 30, 2021			December 31, 2020
(in millions, except per share data)							March 31, 2022			December 31, 2021
ASSETS
Current Assets:
Cash and cash equivalents	$	943,969		$	817,398		$	1,694.5		$	693.2
Restricted cash		481,922			454,517
Fiduciary cash								731.6			777.0
Short-term investments		14,428			18,332			17.6			12.9
Premiums, commissions and fees receivable		1,205,655			1,099,248
Commission, fees and other receivables								613.5			522.6
Fiduciary receivables								706.1			693.7
Reinsurance recoverable		220,430			43,469			38.4			63.1
Prepaid reinsurance premiums		411,252			377,615			362.4			392.2
Other current assets		120,621			147,670			144.8			175.6
Total current assets		3,398,277			2,958,249			4,308.9			3,330.3
Fixed assets, net		208,343			201,115			214.5			212.0
Operating lease assets		187,828			186,998			204.2			197.0
Goodwill		4,565,156			4,395,918			5,140.9			4,736.8
Amortizable intangible assets, net		1,045,280			1,049,660			1,171.0			1,081.5
Investments		31,349			24,971			25.0			31.0
Other assets		192,933			149,581			208.4			206.8
Total assets	$	9,629,166		$	8,966,492		$	11,272.9		$	9,795.4
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Premiums payable to insurance companies	$	1,214,835		$	1,198,529
Fiduciary liabilities							$	1,437.7		$	1,470.7
Losses and loss adjustment reserve		220,430			43,469			38.4			63.1
Unearned premiums		411,252			377,615			362.5			392.2
Premium deposits and credits due customers		140,109			102,505
Accounts payable		226,143			190,497			230.8			242.7
Accrued expenses and other liabilities		386,372			371,737			327.0			456.2
Current portion of long-term debt		290,000			70,000			42.5			42.5
Total current liabilities		2,889,141			2,354,352			2,438.9			2,667.4
Long-term debt less unamortized discount and debt issuance costs		1,755,487			2,025,906			3,497.1			1,980.4
Operating lease liabilities		171,571			172,935			185.7			180.0
Deferred income taxes, net		374,595			344,222			432.0			386.8
Other liabilities		330,753			314,854			383.8			383.9
Shareholders’ Equity:
Common stock, par value $0.10 per share; authorized 560,000 shares; issued 300,929 shares and outstanding 282,432 shares at 2021, issued 299,689 shares and outstanding 283,004 shares at 2020		30,093			29,969
Common stock, par value $0.10 per share; authorized 560.0 shares; issued 302.0 shares and outstanding 283.1 shares at 2022, issued 301.0 shares and outstanding 282.5 shares at 2021								30.2			30.1
Additional paid-in capital		830,066			794,909			823.5			849.4
Treasury stock, at cost at 18,497 shares at 2021, 16,685 shares at 2020, respectively		(673,902	)		(591,338	)
Treasury stock, at cost at 18.9 shares at 2022, 18.5 shares at 2021, respectively								(698.0	)		(673.9	)
Accumulated other comprehensive loss		(6,550	)		—			(12.4	)		(9.4	)
Retained earnings		3,927,912			3,520,683			4,192.1			4,000.7
Total shareholders’ equity		4,107,619			3,754,223			4,335.4			4,196.9
Total liabilities and shareholders’ equity	$	9,629,166		$	8,966,492		$	11,272.9		$	9,795.4

See accompanying Notes to Condensed Consolidated Financial Statements.

BROWN & BROWN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)

Common Stock

(in thousands, except per share data)

Shares Outstanding

Par Value

Additional
Paid-In
Capital

Treasury
Stock

Accumulated Other Comprehensive Loss

Retained
Earnings

Total

Balance at December 31, 2020

283,004

$
29,969

$
794,909

$
(591,338
)

$
—

$
3,520,683

$
3,754,223

Net income

199,744

199,744

Net unrealized holding (loss) gain on available-for-
   sale securities

(508
)

263

(245
)
Foreign currency translation

(5,253
)

122

(5,131
)
Shares issued - employee stock compensation plans

Employee stock purchase plan

3,032

3,032

Stock incentive plans

1,400

140

15,506

15,646

Agency acquisition

107

11

4,881

4,892

Repurchase shares to fund tax withholdings for non-cash stock-based compensation

(973
)

(98
)

(44,954
)

(45,052
)
Purchase of treasury stock

(1,558
)

(70,020
)

(70,020
)
Cash dividends paid ($0.0925 per share)

(26,092
)

(26,092
)
Balance at March 31, 2021

281,980

$
30,022

$
772,866

$
(661,358
)

$
(4,990
)

$
3,694,457

$
3,830,997

Net income

139,290

139,290

Net unrealized holding (loss) gain on available-for-
   sale securities

(30
)

(30
)
Foreign currency translation

1,471

1,471

Shares issued - employee stock compensation plans

Employee stock purchase plan

1,988

1,988

Stock incentive plans

(83
)

(8
)

12,067

12,059

Directors

17

2

897

899

Repurchase shares to fund tax withholdings for non-cash stock-based compensation

(61
)

(6
)

(3,198
)

(3,204
)
Purchase of treasury stock

(232
)

(11,405
)

(11,405
)
Cash dividends paid ($0.0925 per share)

(26,063
)

(26,063
)
Balance at June 30, 2021

281,621

$
30,010

$
784,620

$
(672,763
)

$
(3,549
)

$
3,807,684

$
3,946,002

Net income

146,354

146,354

Net unrealized holding (loss) gain on available-for-
   sale securities

(83
)

(83
)
Foreign currency translation

(2,918
)

(2,918
)
Shares issued - employee stock compensation plans

Employee stock purchase plan

851

85

35,215

35,300

Stock incentive plans

7

—

11,567

11,567

Repurchase shares to fund tax withholdings for non-cash stock-based compensation

(25
)

(2
)

(1,336
)

(1,338
)
Purchase of treasury stock

(22
)

(1,139
)

(1,139
)
Cash dividends paid ($0.0925 per share)

(26,126
)

(26,126
)
Balance at September 30, 2021

282,432

$
30,093

$
830,066

$
(673,902
)

$
(6,550
)

$
3,927,912

$
4,107,619

Balance at December 31, 2019

281,655

$
29,711

$
716,049

$
(536,243
)

$
—

$
3,140,762

$
3,350,279

Net income

152,400

152,400

Net unrealized holding (loss) gain on available-for-
   sale securities

194

99

293

Shares issued - employee stock compensation plans

Employee stock purchase plan

2,191

2,191

Stock incentive plans

1,828

182

(173
)

9

Purchase of treasury stock

(42
)

(1,429
)

(1,429
)
Cash dividends paid ($0.085 per share)

(23,902
)

(23,902
)
Balance at March 31, 2020

283,441

$
29,893

$
718,261

$
(537,672
)

$
—

$
3,269,359

$
3,479,841

Net income

96,784

96,784

Net unrealized holding (loss) gain on available-for-
   sale securities

384

(69
)

315

Shares issued - employee stock compensation plans

Employee stock purchase plan

1,349

1,349

Stock incentive plans

(73
)

(7
)

18,733

18,726

Agency acquisition

274

27

9,973

10,000

Directors

16

2

585

587

Cash dividends paid ($0.085 per share)

(24,084
)

(24,084
)
Balance at June 30, 2020

283,658

$
29,915

$
749,285

$
(537,672
)

$
—

$
3,341,990

$
3,583,518

Net income

133,979

133,979


																				Common Stock
(in millions, except per share data)																				Shares Outstanding			Par Value			Additional Paid-In Capital			Treasury Stock			Accumulated Other Comprehensive Loss			Retained Earnings			Total
Balance at December 31, 2021																					282.5		$	30.1		$	849.4		$	(673.9	)	$	(9.4	)	$	4,000.7		$	4,196.9
Net income																																				220.3			220.3
Net unrealized holding (loss) gain on available-for- sale securities							(51	)										(51	)														(0.9	)					(0.9	)
Shares issued - employee stock compensation plans
Foreign currency translation																																	(2.1	)					(2.1	)
Shares issued - employee stock compensation plans:
Employee stock purchase plan	962			96			31,518											31,614									2.7												2.7
Stock incentive plans	(856	)		(86	)		(22,111	)										(22,197	)		1.7			0.2			17.3												17.5
Agency acquisition	114			12			5,108											5,120																					—
Repurchase shares to fund tax withholdings for non-cash stock-based compensation																					(0.7	)		(0.1	)		(45.9	)											(46.0	)
Purchase of treasury stock	(133	)								(5,884	)							(5,884	)		(0.4	)								(24.1	)								(24.1	)
Cash dividends paid ($0.085 per share)															(24,089	)		(24,089	)
Balance at September 30, 2020	283,745		$	29,937		$	763,749		$	(543,556	)	$	—	$	3,451,880		$	3,702,010
Cash dividends paid ($0.1025 per share)																																				(28.9	)		(28.9	)
Balance at March 31, 2022																					283.1		$	30.2		$	823.5		$	(698.0	)	$	(12.4	)	$	4,192.1		$	4,335.4

Balance at December 31, 2020																					283.0		$	30.0		$	794.9		$	(591.4	)	$	—		$	3,520.7		$	3,754.2
Net income																																				199.7			199.7
Net unrealized holding (loss) gain on available-for- sale securities																											(0.5	)					0.3						(0.2	)
Foreign currency translation																																	(5.3	)		0.2			(5.1	)
Shares issued - employee stock compensation plans:
Employee stock purchase plan																											3.0												3.0
Stock incentive plans																					1.4			0.1			15.5												15.6
Agency acquisition																					0.1			—			4.9												4.9
Repurchase shares to fund tax withholdings for non-cash stock-based compensation																					(1.0	)		(0.1	)		(44.9	)											(45.0	)
Purchase of treasury stock																					(1.5	)								(70.0	)								(70.0	)
Cash dividends paid ($0.0925 per share)																																				(26.1	)		(26.1	)
Balance at March 31, 2021																					282.0		$	30.0		$	772.9		$	(661.4	)	$	(5.0	)	$	3,694.5		$	3,831.0

See accompanying Notes to Condensed Consolidated Financial Statements.

BROWN & BROWN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Nine months ended September 30,						Three months ended March 31,
(in thousands)	2021			2020
(in millions)							2022			2021
Cash flows from operating activities:
Net income	$	485,387		$	383,163		$	220.3		$	199.7
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization		88,562			80,190			31.1			29.5
Depreciation		25,457			18,836			8.1			7.5
Non-cash stock-based compensation		46,659			43,465			20.1			18.7
Change in estimated acquisition earn-out payables		20,643			4,996			(3.4	)		(0.9	)
Deferred income taxes		25,417			4,598			15.2			10.6
Amortization of debt discount and disposal of deferred financing costs		2,081			1,619			0.7			0.7
Amortization (accretion) of discounts and premiums, investment		119			26
Net (gain)/loss on sales of investments, fixed assets and customer accounts		(2,019	)		(720	)
Net (gain)/loss on sales/disposals of investments, fixed assets and customer accounts								(0.1	)		(0.4	)
Payments on acquisition earn-outs in excess of original estimated payables		(5,747	)		(1,199	)		(13.5	)		(0.4	)
Effect of changes in foreign exchange rate changes		475			—			(0.1	)		0.2
Changes in operating assets and liabilities, net of effect from acquisitions and divestitures:
Premiums, commissions and fees receivable (increase) decrease		(66,431	)		(63,124	)
Commissions, fees and other receivables (increase) decrease								(87.8	)		(88.6	)
Reinsurance recoverables (increase) decrease		(176,961	)		(48,959	)		24.8			17.2
Prepaid reinsurance premiums (increase) decrease		(33,637	)		(31,594	)		29.8			32.6
Other assets (increase) decrease		(6,536	)		4,071			31.0			25.3
Premiums payable to insurance companies increase (decrease)		(37,999	)		58,986
Premium deposits and credits due customers increase (decrease)		37,486			1,823
Losses and loss adjustment reserve increase (decrease)		176,961			48,959			(24.8	)		(17.2	)
Unearned premiums increase (decrease)		33,637			31,594			(29.7	)		(32.6	)
Accounts payable increase (decrease)		45,847			53,041			22.2			70.4
Accrued expenses and other liabilities increase (decrease)		(796	)		(22,458	)		(143.1	)		(107.0	)
Other liabilities increase (decrease)		(30,762	)		(27,725	)		2.8			(27.3	)
Net cash provided by operating activities		627,843			539,588			103.6			138.0
Cash flows from investing activities:
Additions to fixed assets		(34,617	)		(55,820	)		(10.0	)		(11.4	)
Payments for businesses acquired, net of cash acquired		(178,007	)		(402,358	)		(436.0	)		(70.4	)
Proceeds from sales of fixed assets and customer accounts		9,327			8,622			0.2			0.2
Purchases of investments		(12,363	)		(10,129	)		—			(5.1	)
Proceeds from sales of investments		9,280			7,434			—			4.3
Net cash used in investing activities		(206,380	)		(452,251	)		(445.8	)		(82.4	)
Cash flows from financing activities:
Fiduciary receivables and liabilities, net								(85.2	)		(12.9	)
Payments on acquisition earn-outs		(36,115	)		(9,859	)		(33.4	)		(15.1	)
Proceeds from long-term debt		—			700,000			1,200.0			—
Payments on long-term debt		(52,500	)		(41,250	)		(10.6	)		(17.5	)
Deferred debt issuance costs		—			(6,788	)		(23.4	)		—
Borrowings on revolving credit facility		—			250,000			350.0			—
Payments on revolving credit facilities		—			(350,000	)
Issuances of common stock for employee stock benefit plans		33,834			29,940
Repurchase shares to fund tax withholdings for non-cash stock-based compensation		(49,594	)		(41,126	)		(46.0	)		(45.1	)
Purchase of treasury stock		(82,564	)		(7,313	)		(24.1	)		(70.0	)
Cash dividends paid		(78,281	)		(72,075	)		(28.9	)		(26.1	)
Net cash (used in) provided by financing activities		(265,220	)		451,529			1,298.4			(186.7	)
Effect of foreign exchange rate cash changes		(2,267	)		—
Net increase in cash and cash equivalents inclusive of restricted cash		153,976			538,866
Cash and cash equivalents inclusive of restricted cash at beginning of period		1,271,915			962,975
Cash and cash equivalents inclusive of restricted cash at end of period	$	1,425,891		$	1,501,841
Effect of foreign exchange rate cash changes in cash and cash equivalents inclusive of fiduciary								(0.3	)		(0.1	)
Net increase in cash and cash equivalents inclusive of fiduciary cash								955.9			(131.2	)
Cash and cash equivalents inclusive of fiduciary cash at beginning of period								1,470.2			1,271.9
Cash and cash equivalents inclusive of fiduciary cash at end of period							$	2,426.1		$	1,140.7

See accompanying Notes to Condensed Consolidated Financial Statements. Refer to Note 10 for the reconciliations of cash and cash equivalents inclusive of ~~restricted cash and investments.~~fiduciary cash.

109

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 Nature of Operations

Brown & Brown, Inc., a Florida corporation, and its subsidiaries (collectively, “Brown & Brown” or the “Company”) is a diversified insurance agency, wholesale brokerage, insurance programs and service organization that markets and sells insurance products and services, primarily in the property, casualty and employee benefits areas. Brown & Brown’s business is divided into 4 reportable segments. The Retail Segment provides a broad range of insurance products and services to commercial, public and quasi-public entities, professional and individual insured customers, and non-insurance risk-mitigating products through our automobile dealer services (“F&I”) businesses. The National Programs Segment, which acts as a managing general agent (“MGA”), provides professional liability and related package products for certain professionals, a range of insurance products for individuals, flood coverage, and targeted products and services designated for specific industries, trade groups, governmental entities and market niches, all of which are delivered through a nationwide network of independent agents, including Brown & Brown retail agents. The Wholesale Brokerage Segment markets and sells excess and surplus commercial and personal lines insurance, primarily through independent agents and brokers, as well as Brown & Brown retail agents. The Services Segment provides insurance-related services, including third-party claims administration and comprehensive medical utilization management services in both the workers’ compensation and all-lines liability arenas, as well as Medicare Set-aside services, Social Security disability and Medicare benefits advocacy services and claims adjusting services.

The Company primarily operates as an agent or broker not assuming underwriting risks. However, we operate a write-your-own flood insurance carrier, Wright National Flood Insurance Company (“WNFIC”). WNFIC’s underwriting business consists of policies written pursuant to the National Flood Insurance Program (“NFIP”), the program administered by the Federal Emergency Management Agency (“FEMA”), excess flood and private flood policies which are fully reinsured, thereby substantially eliminating WNFIC’s exposure to underwriting risk, as these policies are backed by either FEMA or a reinsurance carrier with an AM Best Company rating of “A” or better. The Company also operates a capitalized captive insurance facility (the "Captive") for the purpose of having additional capacity on a quota sharing basis, currently focused on property insurance for earthquake and wind exposed properties underwritten by certain managing general agents. The Captive buys reinsurance, limiting, but not eliminating the Company's exposure to underwriting losses.

NOTE 2 Basis of Financial Reporting

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of recurring accruals) necessary for a fair presentation have been included. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the Notes thereto set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

The preparation of these financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as disclosures of contingent assets and liabilities, at the date of the Condensed Consolidated Financial Statements, and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.

Beginning January 1, 2022 the Company is presenting certain assets and liabilities that arise from activities in which the Company engages as an intermediary, where we collect premiums from insureds to remit to insurance companies, hold funds from insurance companies to distribute to insureds for claims on covered losses and hold refunds due to customers as fiduciary assets and fiduciary liabilities. Uncollected premiums are no longer presented in the same caption with commissions, fees and other receivables, but rather represented in a separate caption as fiduciary receivables. Likewise, payables to insurance companies and premium deposits due customers are now combined into a new caption as fiduciary liabilities. The caption “restricted cash” is now reflected as “fiduciary cash” along with non-restricted fiduciary cash balances previously reported within “cash and cash equivalents.” 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. Previously the net change in cash balances held to remit to insurance carriers or to return to customers was presented as cash flows from operating activity. All prior periods included in these financial statements have been recast to conform to this basis of presentation. The relevant balance sheet captions and how the December 31, 2021 balances as presented under the prior method relate to the current presentation are reflected in the tables below. Certain liabilities reported as premiums payable to insurance companies or within premiums deposits and credits due customers were deemed not to be fiduciary in nature and have been included within accounts payable in the presentation. Likewise, a small component of accounts payable was deemed to be fiduciary in nature and is now included within fiduciary liabilities.


December 31, 2021
(in millions)	As reported		Change in presentation			As revised
Cash and cash equivalents	$	887.0	$	(193.8	)	$	693.2
Restricted cash and investments		583.2		(583.2	)		—
Fiduciary cash		—		777.0			777.0
Total		1,470.2		—			1,470.2

Premiums, commissions and fees receivables		1,216.3		(1,216.3	)		—
Commissions, fees and other receivables		—		522.6			522.6
Fiduciary cash		—		693.7			693.7
Total		1,216.3		—			1,216.3

Premium payable to insurance companies		1,384.6		(1,384.6	)		—
Premium deposits and credits due customers		122.4		(122.4	)		—
Accounts payable		206.4		36.3			242.7
Fiduciary liabilities		—		1,470.7			1,470.7
Total	$	1,713.4	$	—		$	1,713.4


Three months ended March 31, 2021
(in millions)	As reported			Change in presentation			As revised
Cash flows from operating activities:
Premiums, commissions and fees receivable	$	(22.0	)	$	(66.6	)	$	(88.6	)
Premiums payable to insurance companies		(103.9	)		103.9			—
Premium deposits and credits due customers		25.9			(25.9	)		—
Accounts payable		68.9			1.5			70.4

Cash flows from financing activities:
Fiduciary receivables and liabilities, net		—			(12.9	)		(12.9	)
Total restated changes in cash flows	$	(31.1	)	$	—		$	(31.1	)

Recently Issued Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued ~~ASU~~Accounting Standard Update 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." The amendments provide optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference ~~LIBOR~~London Inter-bank Offered Rate ("LIBOR") or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. We have evaluated our contracts and the available expedients provided by the new standard and can assert there is no impact to any carrying value of assets or liabilities as our floating-rate debt instruments that are indexed to LIBOR are carried at amortized cost.

Recently Adopted Accounting Standards

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”. The standard removes specific exceptions in the current rules and eliminates the need for an organization to analyze whether the following apply in a given period: (a) exception to the incremental approach for intra-period tax allocation; (b) exceptions to accounting for basis differences when there are ownership changes in foreign investments and (c) exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses. The standard also is designed to improve financial statement preparers’ application of income tax-related guidance and simplify GAAP for (a) franchise taxes that are partially based on income; (b) transactions with a government that result in a step-up in the tax basis of goodwill; (c) separate financial statements of legal entities that are not subject to tax and (d) enacted changes in tax laws in interim periods. The Company ~~adopted~~ ~~ASU 2019-12 effective~~ ~~January 1, 2021. The impact of adopting this standard was~~ no~~t material to the presentation of the Condensed Consolidated Financial Statements.~~None.

NOTE 3 Revenues

The following tables present the revenues disaggregated by revenue source:


	Three months ended September 30, 2021													Three months ended March 31, 2022
(in thousands)	Retail		National Programs		Wholesale Brokerage		Services		Other (8)			Total
(in millions)														Retail		National Programs		Wholesale Brokerage		Services		Other (8)			Total
Base commissions (1)	$	284,536	$	133,649	$	90,862	$	—	$	25		$	509,072	$	393.5	$	117.3	$	78.3	$	0	$	0		$	589.1
Fees (2)		109,915		49,779		17,938		43,732		(428	)		220,936		112.7		34.6		16.1		43.6		(0.4	)		206.6
Incentive commissions (3)		15,460		444		720		—		—			16,624
Other supplemental commissions (3)															72.2		1.1		5.6		0		0			78.9
Profit-sharing contingent commissions (4)		8,705		6,499		2,414		—		—			17,618		17.9		8.0		2.7		0		0			28.6
Guaranteed supplemental commissions (5)		4,454		549		401		—		—			5,404
Earned premium (5)															0		1.1		0		0		0			1.1
Investment income (6)		236		136		35		—		23			430		0		0.1		0.1		0		0			0.2
Other income, net (7)		115		9		98		—		(1	)		221		0.1		0		0.1		0		0			0.2
Total Revenues	$	423,421	$	191,065	$	112,468	$	43,732	$	(381	)	$	770,305	$	596.4	$	162.2	$	102.9	$	43.6	$	(0.4	)	$	904.7


	Nine months ended September 30, 2021													Three months ended March 31, 2021
(in thousands)	Retail		National Programs		Wholesale Brokerage		Services		Other (8)			Total
(in millions)														Retail		National Programs		Wholesale Brokerage		Services		Other (8)			Total
Base commissions (1)	$	905,470	$	369,703	$	246,233	$	—	$	32		$	1,521,438	$	357.5	$	110.7	$	71.3	$	0	$	0		$	539.5
Fees (2)		307,314		125,329		51,574		135,590		(1,352	)		618,455		87.1		34.4		16.1		47.0		(0.5	)		184.1
Incentive commissions (3)		88,219		1,443		2,321		—		—			91,983
Other supplemental commissions (3)															61.9		1.2		1.4		0		0			64.5
Profit-sharing contingent commissions (4)		32,848		23,833		6,482		—		—			63,163		15.7		8.3		1.9		0		0			25.9
Guaranteed supplemental commissions (5)		12,383		1,316		872		—		—			14,571
Earned premium (5)															0		0		0		0		0			0
Investment income (6)		271		423		120		3		92			909		0		0.2		0.1		0		0			0.3
Other income, net (7)		930		185		332		—		967			2,414		0.7		0.1		0.1		0		0.1			1.0
Total Revenues	$	1,347,435	$	522,232	$	307,934	$	135,593	$	(261	)	$	2,312,933	$	522.9	$	154.9	$	90.9	$	47.0	$	(0.4	)	$	815.3

1.(1)

Base commissions 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, or sales and 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.

2.(2)

Fee revenues relate to fees for services other than securing coverage for our customers, fees negotiated in lieu of commissions, and F&I products and services.

3.(3)

~~Incentive~~Other supplemental commissions include additional commissions over base commissions received from insurance carriers based on predetermined growth or production ~~levels mutually agreed upon by both parties.~~measures. This includes incentive commissions and guaranteed supplemental commissions.

4.(4)

Profit-sharing contingent commissions are based primarily on underwriting results, but may also reflect considerations for volume, growth and/or retention.

5.(5)

~~Guaranteed supplemental commissions represent guaranteed fixed-base agreements~~Earned premium relates to the premiums earned in ~~lieu of profit-sharing contingent commissions.~~the Captive.

6.(6)

Investment income consists primarily of interest on cash and investments.

7.(7)

Other income consists primarily of legal settlements and other miscellaneous income.

8.(8)

Fees within other reflects the elimination of intercompany revenues.

Contract Assets and Liabilities

The balances of contract assets and contract liabilities arising from contracts with customers as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 were as follows:


(in thousands)	September 30, 2021		December 31, 2020
(in millions)					March 31, 2022		December 31, 2021
Contract assets	$	375,277	$	308,755	$	460.0	$	361.8
Contract liabilities	$	84,566	$	80,997	$	89.7	$	97.9

Unbilled receivables (contract assets) arise when the Company recognizes revenue for amounts which have not yet been billed in the Company's systems and are reflected in ~~premiums,~~ commissions, fees and ~~fee~~other receivables in the Company's Condensed Consolidated Balance Sheet. The increase in contract assets over the balance as of December 31, ~~2020~~2021 is due to normal seasonality, growth in our business, and from businesses acquired in the current year.

Deferred revenue (contract liabilities) relates to payments received in advance of performance under the contract before the transfer of a good or service to the customer. Deferred revenue is reflected within accrued expenses and other liabilities for those to be recognized in less than 12 months and in other liabilities for those to be recognized more than 12 months from the date presented in the Company's Condensed Consolidated Balance Sheet.

As of ~~September 30, 2021,~~March 31, 2022, deferred revenue consisted of $~~54.5~~57.6 million as current portion to be recognized within one year and $~~30.1~~32.1 million in long term to be recognized beyond one year. As of December 31, ~~2020,~~2021, deferred revenue consisted of $~~54.0~~67.4 million as current portion to be recognized within one year and $~~27.0~~30.5 million in long-term deferred revenue to be recognized beyond one year.

During the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, the net amount of revenue recognized related to performance obligations satisfied in a previous period was $~~22.0~~16.9 million and $13.9 million, consisting of additional variable consideration received on our incentive and profit-sharing contingent commissions. During the nine months ended September 30, 2020, the net amount of revenue recognized related to performance obligations satisfied in a previous period was $~~7.5~~ ~~million, consisting of $16.7~~ ~~million of additional variable consideration received on our incentive~~other supplemental commissions and profit-sharing contingent commissions, ~~offset by $7.1~~ ~~million of revised estimates related to variable consideration on policies where the exposure units are expected to be impacted by the COVID-19 pandemic (“COVID-19”) and $2.1~~ ~~million of other adjustments.~~respectively.

Other Assets and Deferred Cost

Incremental cost to obtain - The Company defers certain costs to obtain customer contracts primarily as they relate to commission-based compensation plans in the Retail Segment, in which the Company pays an incremental amount of compensation on new business. These incremental costs are deferred and amortized over a 15-year period. The cost to obtain balance within the other assets caption in the Company's Condensed Consolidated Balance Sheet was $~~54.1~~62.7 million and $~~42.2~~58.2 million as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. For the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, the Company deferred $~~14.6~~5.7 million of incremental cost to obtain customer contracts. The Company recorded an expense of $~~2.7~~1.2 million associated with the incremental cost to obtain customer contracts for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022.

Cost to fulfill - The Company defers certain costs to fulfill contracts and recognizes these costs as the associated performance obligations are fulfilled. The cost to fulfill balance within the other current assets caption in the Company's Condensed Consolidated Balance Sheet as of ~~September 30, 2021~~March 31, 2022 was $~~73.8~~67.5 ~~million, which is inclusive of deferrals from businesses acquired in the current year.~~million. The cost to fulfill balance as of December 31, ~~2020~~2021 was $~~77.8~~89.3 million. For the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, the Company had net expense of $~~7.5~~21.8 million related to the release of previously deferred contract fulfillment costs associated with performance obligations that were satisfied in the period, net of current year deferrals for costs incurred that related to performance obligations yet to be fulfilled.

NOTE 4 Net Income Per Share

Basic net income per share is computed based on the weighted average number of common shares (including participating securities) issued and outstanding during the period. Diluted net income per share is computed based on the weighted average number of common shares issued and outstanding plus equivalent shares, assuming the issuance of all potentially issuable common shares. The dilutive effect of potentially issuable common shares is computed by application of the treasury-stock method.The following is a reconciliation between basic and diluted weighted average shares outstanding:


	Three months ended September 30,						Nine months ended September 30,						Three months ended March 31,
(in thousands, except per share data)	2021			2020			2021			2020
(in millions, except per share data)													2022			2021
Net income	$	146,354		$	133,979		$	485,387		$	383,163		$	220.3		$	199.7
Net income attributable to unvested awarded performance stock		(3,069	)		(3,740	)		(10,901	)		(12,634	)		(4.4	)		(5.0	)
Net income attributable to common shares	$	143,285		$	130,239		$	474,486		$	370,529		$	215.9		$	194.7
Weighted average number of common shares outstanding – basic		282,132			283,426			282,177			283,139			282.8			282.6
Less unvested awarded performance stock included in weighted average number of common shares outstanding – basic		(5,917	)		(7,911	)		(6,337	)		(9,336	)		(5.7	)		(7.0	)
Weighted average number of common shares outstanding for basic net income per common share		276,215			275,515			275,840			273,803			277.1			275.6
Dilutive effect of potentially issuable common shares		1,338			1,418			1,306			1,535			1.5			1.4
Weighted average number of shares outstanding – diluted		277,553			276,933			277,146			275,338			278.6			277.0
Net income per share:
Basic	$	0.52		$	0.47		$	1.72		$	1.35		$	0.78		$	0.71
Diluted	$	0.52		$	0.47		$	1.71		$	1.35		$	0.77		$	0.70

NOTE 5 Business Combinations

During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, Brown & Brown acquired all of the ~~share capital~~stock of 1 insurance intermediary, ~~assets~~ and ~~assumed certain liabilities of~~acquired 81 ~~insurance intermediaries, and~~ 2 ~~books~~book of business (customer accounts) for a total of 112 ~~acquisitions.~~acquisitions as well as entered into a definitive agreement, pending regulatory approval, to acquire GRP (Jersey) Holdco Limited and its businesses ("GRP"). Additionally, adjustments were recorded to the purchase price allocation of certain prior acquisitions completed within the last 12 months as permitted by Accounting Standards Codification Topic 805 — Business Combinations (“ASC 805”). Such adjustments are presented in the “Other” category within the following two tables. The recorded purchase price for all acquisitions includes an estimation of the fair value of liabilities associated with any potential earn-out provisions. Subsequent changes in the fair value of earn-out obligations will be recorded in the Condensed Consolidated Statements of Income when incurred.

The fair value of earn-out obligations is based on the present value of the expected future payments to be made to the sellers of the acquired businesses in accordance with the provisions outlined in the respective purchase agreements. In determining fair value, the acquired business’s future performance is estimated using financial projections developed by management for the acquired business and reflects market participant assumptions regarding revenue growth and/or profitability. The expected future payments are estimated on the basis of the earn-out formula and performance targets specified in each purchase agreement compared to the associated financial projections. These payments are then discounted to present value using a risk-adjusted rate that takes into consideration the likelihood that the forecasted earn-out payments will be made.

Based on the acquisition date and the complexity of the underlying valuation work, certain amounts included in the Company’s Condensed Consolidated Financial Statements may be provisional and thus subject to further adjustments within the permitted measurement period, as defined in ASC 805. For the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, adjustments were made within the permitted measurement period that resulted in a decrease in the aggregate purchase price of the affected acquisitions of $~~1.5~~3.0 million. These measurement period adjustments have been reflected as current period adjustments in the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 in accordance with the guidance in ASU 2015-16 “Business Combinations.” The measurement period adjustments primarily impacted goodwill, with no effect on earnings or cash in the current period.

The following table summarizes the purchase price allocations made as of the date of each acquisition for current year acquisitions and adjustments made during the measurement period for prior year acquisitions. Cash paid for 112 acquisitions was $~~224.1~~479.7 million during the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. During the measurement periods, the Company will adjust assets or liabilities if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of those assets and liabilities as of that date. These adjustments are made in the period in which the amounts are determined, and the current period income effect of such adjustments will be calculated as if the adjustments had been completed as of the acquisition date.

(in thousands)

Name

Business
segment

Effective
date of
acquisition

Cash
paid

Common stock issued

Other
payable

Recorded
earn-out
payable

Net assets
acquired

Maximum
potential
earn-out payable

O'Leary Insurances (O'Leary)

Retail

January 1, 2021

$
117,408

$
4,892

$
—

$
15,348

$
137,648

$
30,575

Piper Jordan LLC (Piper)

Retail

May 1, 2021

43,428

—

1,397

9,854

54,679

15,000

Berkshire Insurance Group, Inc. (Berkshire)

Retail

September 1, 2021

41,500

—

—

—

41,500

—

AGIS Network Inc. (AGIS) (1)

Retail

September 1, 2021

11,203

—

24,114

739

36,056

12,289

Other

Various

Various

10,602

—

2,098

(778
)

11,922

3,388

Total

$
224,141

$
4,892

$
27,609

$
25,163

$
281,805

$
61,252


(in millions)
Name	Business segment	Effective date of acquisition	Cash paid		Common stock issued		Other payable		Recorded earn-out payable		Net assets acquired		Maximum potential earn-out payable
Orchid Intermediate Holdings, L.P.	National Programs	March 31, 2022	$	476.2	$	0	$	0	$	10.8	$	487.0	$	20.0
Other	Various	Various		3.5		0		0		0		3.5		0
Total			$	479.7	$	0	$	0	$	10.8	$	490.5	$	20.0

~~(1) Amount in the "other payable" column relates to additional contingent consideration expected to be paid within 12 months.~~

The following table summarizes the estimated fair values of the aggregate assets and liabilities acquired as of the date of each acquisition and adjustments made during the measurement period of the prior year acquisitions.

(in thousands)

O'Leary

Piper

Berkshire

AGIS

Other

Total

Cash

$
45,441

$
—

$
—

$
—

$
693

$
46,134

Other current assets

43,354

2,397

1,621

520

5,060

52,952

Fixed assets

544

9

9

20

4

586

Goodwill

84,649

40,019

27,563

21,888

2,539

176,658

Purchased customer accounts

40,459

12,233

12,313

13,577

7,271

85,853

Non-compete agreements

819

21

11

51

109

1,011

Other assets

135

—

—

—

259

394

Total assets acquired

215,401

54,679

41,517

36,056

15,935

363,588

Other current liabilities

(72,683
)

—

(17
)

—

(4,013
)

(76,713
)
Deferred income tax, net

(5,057
)

—

—

—

—

(5,057
)
Other liabilities

(13
)

—

—

—

—

(13
)
Total liabilities assumed

(77,753
)

—

(17
)

—

(4,013
)

(81,783
)
Net assets acquired

$
137,648

$
54,679

$
41,500

$
36,056

$
11,922

$
281,805


(in millions)	Orchid			Other (1)			Total
Cash and equivalents	$	3.2		$	—		$	3.2
Fiduciary cash		40.5			—			40.5
Fiduciary receivables		12.5			—			12.5
Other current assets		3.4			0.5			3.9
Fixed assets		0.6			—			0.6
Goodwill		400.6			4.0			404.6
Purchased customer accounts		119.2			1.7			120.9
Non-compete agreements		—			0.3			0.3
Other assets		1.8			—			1.8
Total assets acquired		581.8			6.5			588.3
Fiduciary liabilities		(53.0	)		—			(53.0	)
Other current liabilities		(11.6	)		(3.0	)		(14.6	)
Deferred income tax, net		(30.2	)		—			(30.2	)
Other liabilities		—			—			—
Total liabilities assumed		(94.8	)		(3.0	)		(97.8	)
Net assets acquired	$	487.0		$	3.5		$	490.5

14(1)

The other column represents current year acquisitions with total net assets acquired of less than $20.0 million and adjustments from prior year acquisitions that were made within the permitted measurement period.

The weighted average useful lives for the acquired amortizable intangible assets are as follows: purchased customer accounts, 15 years; and non-compete agreements, 5 years.

Goodwill of $~~176.7~~404.6 million, which is net of any opening balance sheet adjustments within the allowable measurement period, was allocated to the Retail and National Programs ~~and Wholesale Brokerage Segments~~ in the amounts of $~~174.5~~2.5 ~~million, ($1.3~~) million and $~~3.5~~402.1 million, respectively. Of the total goodwill of $~~176.7~~404.6 million, the amount currently deductible for income tax purposes is $~~151.5~~4.0 million and the remaining $~~25.2~~400.6 million ~~relates to the recorded earn-out payables and will~~is not be deductible ~~until it is earned and paid.~~for income tax purposes.

For the acquisitions completed during ~~2021,~~2022, the results of operations since the acquisition dates have been combined with those of the Company. ~~The~~Due to the combination of the size of the transactions and when in the period they closed, the total ~~revenues from the acquisitions completed through September 30, 2021,~~revenue and income before income taxes included in the Condensed Consolidated Statement of Income ~~for the nine months ended September 30, 2021, was $28.9~~ ~~million. The income before income taxes, including the intercompany cost of capital charge,~~ from ~~the~~ acquisitions completed ~~through September 30, 2021, included in~~during the ~~Condensed Consolidated Statement of Income for the nine months ended September 30, 2021,~~period was $~~0.5~~insignificant. ~~million.~~ If the acquisitions had occurred as of the beginning of the respective periods, the Company’s estimated results of operations would be as shown in the following table. These unaudited pro forma results are not necessarily indicative of the actual results of operations that would have occurred had the acquisitions actually been made at the beginning of the respective periods.


(UNAUDITED)	Three months ended September 30,				Nine months ended September 30,				Three months ended March 31,
(in thousands, except per share data)	2021		2020		2021		2020
(in millions, except per share data)									2022		2021
Total revenues	$	773,593	$	690,002	$	2,329,567	$	2,019,218	$	920.8	$	826.1
Income before income taxes	$	197,444	$	162,392	$	627,088	$	504,731	$	268.7	$	241.7
Net income	$	147,065	$	137,245	$	489,355	$	392,135	$	223.3	$	201.8
Net income per share:
Basic	$	0.52	$	0.48	$	1.73	$	1.38	$	0.79	$	0.71
Diluted	$	0.52	$	0.48	$	1.73	$	1.38	$	0.79	$	0.71
Weighted average number of shares outstanding:
Basic		276,215		275,515		275,840		273,803		277.1		275.6
Diluted		277,553		276,933		277,146		275,338		278.6		277.0

As of ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ the fair values of the estimated acquisition earn-out payables were re-evaluated and measured at fair value on a recurring basis using unobservable inputs (Level 3) as defined in ASC ~~820-~~820 - Fair Value Measurement. The resulting additions, payments, and net changes, as well as the interest expense accretion on the estimated acquisition earn-out payables, for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ were as follows:


	Three months ended September 30,						Nine months ended September 30,						Three months ended March 31,
(in thousands)	2021			2020			2021			2020
(in millions)													2022			2021
Balance as of the beginning of the period	$	242,016		$	218,467		$	258,943		$	161,513		$	291.0		$	258.9
Additions to estimated acquisition earn-out payables		79			22,091			25,163			96,845			10.8			15.0
Payments for estimated acquisition earn-out payables		(1,913	)		(3,580	)		(41,862	)		(11,058	)		(46.9	)		(15.5	)
Subtotal		240,182			236,978			242,244			247,300			254.9			258.4
Net change in earnings from estimated acquisition earn-out payables:
Change in fair value on estimated acquisition earn-out payables		21,855			13,433			15,814			(516	)		(4.8	)		(2.7	)
Interest expense accretion		1,283			1,885			4,829			5,512			1.4			1.8
Net change in earnings from estimated acquisition earn-out payables		23,138			15,318			20,643			4,996			(3.4	)		(0.9	)
Foreign currency translation adjustments during the year		(406	)		—			27			—			(0.6	)		—
Balance as of September 30,	$	262,914		$	252,296		$	262,914		$	252,296
Balance as of March 31,													$	250.9		$	257.5

Of the $~~262.9~~250.9 million estimated acquisition earn-out payables as of ~~September 30, 2021,~~March 31, 2022, $~~94.2~~49.3 million was recorded as accounts payable and $~~168.7~~201.6 million was recorded as other non-current liabilities. As of ~~September 30, 2021,~~March 31, 2022, the maximum future acquisition contingency payments related to all acquisitions was $~~512.9~~452.3 million, inclusive of the $~~262.9~~250.9 million estimated acquisition earn-out payables as of ~~September 30, 2021.~~March 31, 2022. Included within the additions to estimated acquisition earn-out payables are any adjustments to opening balance sheet items within the allowable measurement period, which may therefore differ from previously reported amounts.

NOTE 12 Segment Information

Brown & Brown’s business is divided into 4 reportable segments: (1) the Retail Segment, which provides a broad range of insurance products and services to commercial, public and quasi-public entities, and to professional and individual customers, and non-insurance risk-mitigating products through our F&I businesses, (2) the National Programs Segment, which acts as an MGA, provides professional liability and related package products for certain professionals, a range of insurance products for individuals, flood coverage, and targeted products and services designated for specific industries, trade groups, governmental entities and market niches, all of which are delivered through nationwide networks of independent agents, and Brown & Brown retail agents, (3) the Wholesale Brokerage Segment, which markets and sells excess and surplus commercial and personal lines insurance, primarily through independent agents and brokers, as well as Brown & Brown retail agents, and (4) the Services Segment, which provides insurance-related services, including third-party claims administration and comprehensive

medical utilization management services in both the workers’ compensation and all-lines liability arenas, as well as Medicare Set-aside services, Social Security disability and Medicare benefits advocacy services and claims adjusting services.

Brown & Brown conducts most of its operations within the United States of America. International operations include, Retail operations in Bermuda, the Cayman Islands and Ireland, a National Programs operation in Canada, and a Wholesale Brokerage operation based in England. These operations earned $~~17.4~~20.4 million and $~~9.1~~17.5 million of total revenues for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020, respectively. These operations earned $54.0~~ ~~million and $25.4~~ ~~million of total revenues for the nine months ended September 30, 2021 and 2020,~~ respectively. Tangible long-lived assets held outside of the United States as of ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were not material.

The accounting policies of the reportable segments are the same as those described in Note 1 of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. Intersegment revenues are eliminated.

Summarized financial information concerning the Company’s reportable segments is shown in the following tables. The “Other” column includes any income and expenses not allocated to reportable segments, corporate-related items, including the intercompany interest expense charge to the reporting segment.


	Three months ended September 30, 2021													Three months ended March 31, 2022
(in thousands)	Retail		National Programs		Wholesale Brokerage		Services		Other			Total
(in millions)														Retail		National Programs		Wholesale Brokerage		Services		Other			Total
Total revenues	$	423,421	$	191,065	$	112,468	$	43,732	$	(381	)	$	770,305	$	596.4	$	162.2	$	102.9	$	43.6	$	(0.4	)	$	904.7
Investment income	$	236	$	136	$	35	$	0	$	23		$	430	$	—	$	0.1	$	0.1	$	—	$	—		$	0.2
Amortization	$	19,057	$	6,821	$	2,360	$	1,285	$	0		$	29,523	$	21.1	$	6.7	$	2.0	$	1.3	$	0		$	31.1
Depreciation	$	2,775	$	2,987	$	649	$	374	$	2,415		$	9,200	$	2.5	$	2.8	$	0.7	$	0.4	$	1.7		$	8.1
Interest expense	$	22,417	$	2,190	$	3,916	$	680	$	(13,028	)	$	16,175	$	23.6	$	2.2	$	3.5	$	0.6	$	(11.6	)	$	18.3
Income before income taxes	$	71,639	$	72,358	$	29,365	$	7,080	$	16,047		$	196,489	$	184.1	$	41.7	$	25.6	$	6.6	$	7.0		$	265.0
Total assets	$	7,385,770	$	3,789,376	$	1,918,263	$	449,494	$	(3,913,737	)	$	9,629,166	$	4,903.9	$	3,338.8	$	1,124.8	$	290.5	$	1,614.9		$	11,272.9
Capital expenditures	$	2,092	$	4,660	$	210	$	887	$	1,626		$	9,475	$	1.6	$	5.6	$	0.4	$	0.2	$	2.2		$	10.0

Three months ended September 30, 2020

(in thousands)

Retail

National
Programs

Wholesale
Brokerage

Services

Other

Total

Total revenues

$
359,473

$
168,018

$
101,239

$
43,497

$
1,735

$
673,962

Investment income

$
19

$
205

$
45

$
0

$
80

$
349

Amortization

$
16,624

$
7,100

$
1,945

$
1,390

$
0

$
27,059

Depreciation

$
2,347

$
2,300

$
548

$
355

$
1,097

$
6,647

Interest expense

$
20,519

$
5,335

$
2,488

$
1,004

$
(16,112
)

$
13,234

Income before income taxes

$
56,057

$
47,171

$
35,038

$
6,041

$
14,221

$
158,528

Total assets

$
6,583,606

$
3,530,345

$
1,646,287

$
467,889

$
(3,432,748
)

$
8,795,379

Capital expenditures

$
5,232

$
2,203

$
1,170

$
584

$
10,693

$
19,882

Nine months ended September 30, 2021

(in thousands)

Retail

National
Programs

Wholesale
Brokerage

Services

Other

Total

Total revenues

$
1,347,435

$
522,232

$
307,934

$
135,593

$
(261
)

$
2,312,933

Investment income

$
271

$
423

$
120

$
3

$
92

$
909

Amortization

$
56,892

$
20,558

$
7,121

$
3,991

$
0

$
88,562

Depreciation

$
8,337

$
7,498

$
1,973

$
1,120

$
6,529

$
25,457

Interest expense

$
67,641

$
9,188

$
12,220

$
2,219

$
(42,466
)

$
48,802

Income before income taxes

$
293,342

$
180,222

$
74,539

$
24,002

$
49,899

$
622,004

Total assets

$
7,385,770

$
3,789,376

$
1,918,263

$
449,494

$
(3,913,737
)

$
9,629,166

Capital expenditures

$
5,779

$
11,313

$
1,311

$
1,396

$
14,818

$
34,617


	Nine months ended September 30, 2020													Three months ended March 31, 2021
(in thousands)	Retail		National Programs		Wholesale Brokerage		Services		Other			Total
(in millions)														Retail		National Programs		Wholesale Brokerage		Services		Other			Total
Total revenues	$	1,119,524	$	451,098	$	267,790	$	130,879	$	1,973		$	1,971,264	$	522.9	$	154.9	$	90.9	$	47.0	$	(0.4	)	$	815.3
Investment income	$	143	$	597	$	141	$	0	$	963		$	1,844	$	—	$	0.2	$	0.1	$	0	$	—		$	0.3
Amortization	$	49,363	$	20,331	$	6,326	$	4,170	$	0		$	80,190	$	18.8	$	6.9	$	2.4	$	1.4	$	—		$	29.5
Depreciation	$	6,530	$	6,298	$	1,446	$	1,059	$	3,503		$	18,836	$	2.8	$	2.1	$	0.6	$	0.4	$	1.6		$	7.5
Interest expense	$	63,620	$	15,212	$	6,793	$	3,137	$	(46,428	)	$	42,334	$	22.6	$	4.1	$	4.3	$	0.8	$	(15.5	)	$	16.3
Income before income taxes	$	221,549	$	125,160	$	77,432	$	22,557	$	46,485		$	493,183	$	151.2	$	41.1	$	18.8	$	9.3	$	18.8		$	239.2
Total assets	$	6,583,606	$	3,530,345	$	1,646,287	$	467,889	$	(3,432,748	)	$	8,795,379	$	7,210.5	$	3,398.7	$	1,787.0	$	483.9	$	(3,969.3	)	$	8,910.8
Capital expenditures	$	10,959	$	5,248	$	2,952	$	1,057	$	35,604		$	55,820	$	2.3	$	3.0	$	0.5	$	0.1	$	5.5		$	11.4

ITEM 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion updates the Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020,~~2021, and the two discussions should be read together.

The coronavirus pandemic (“COVID-19”) remains dynamic with uncertainty around its duration and broader impact. We continue to monitor and assess the situation and will further adapt our business practices over the coming quarters to best serve our customers and protect our employees. While there is optimism resulting from the further reopening of the economy and the availability of vaccines, we continue to assess the situation given the risks associated with variant strains of COVID-19.

The following discussion should be read in conjunction with our Condensed Consolidated Financial Statements and the related Notes to those Financial Statements included elsewhere in this Quarterly Report on Form 10-Q. In addition, please 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 and services 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, or sales ~~and~~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 operate a capitalized captive insurance facility (the "Captive") for the purpose of having additional capacity to sell property insurance for earthquake and wind exposed properties. The Captive buys reinsurance, limiting, but not eliminating, the Company's exposure to underwriting losses, and revenues are recognized as net retained earned premiums over the associated policy periods.

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 health pandemic, and the occurrence of catastrophic weather events all affect our revenues. For example, ~~level rates~~higher levels of inflation, which would increase the value of insurable exposure units, or a general decline in economic activity, which could ~~limit increases in~~decrease the ~~values~~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 ~~have typically grown~~ as a result of our focus on net new business ~~growth~~ and acquisitions. We foster a strong, decentralized sales and service culture, ~~with the goal of consistent~~which enables responsiveness to changing business conditions and ~~sustained growth over the long-term.~~drives accountability for results.

The term “Organic Revenue,” a non-GAAP measure, is our core commissions and fees less: (i) the core commissions and fees earned for the first 12 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) the period-over-period impact of foreign currency translation, which is calculated by applying current-year foreign exchange rates to the same period in the prior year. The term “core commissions and fees” excludes profit-sharing contingent ~~commissions and guaranteed supplemental~~ commissions, and therefore represents the revenues earned directly from specific insurance policies sold, and specific fee-based services rendered. ~~“Organic Revenue” is reported~~The net change in ~~this manner in order to express the current year’s~~ core commissions and fees ~~on a comparable basis with the prior year’s core commissions and fees. The resulting net change~~ reflects the aggregate changes attributable to: (i) net new and lost accounts; (ii) net changes in our customers’ exposure units; (iii) net changes in insurance premium rates or the commission rate paid to us by our carrier partners; ~~and~~ (iv) the net change in fees paid to us by our ~~customers. Organic Revenue is reported in “Results of Operations”~~customers; and ~~in “Results of Operations - Segment Information” of this Quarterly Report on Form 10-Q.~~(v) any businesses acquired or disposed of.

We also earn ~~profit-sharing~~“profit-sharing contingent commissions,” which are commissions based primarily on underwriting results, but ~~which~~in select situations may ~~also~~ reflect additional considerations for volume, growth and/or retention. These commissions, which are included in our commissions and fees in the Condensed Consolidated Statements of Income, are accrued throughout the year based on actual premiums written and are primarily received in the first and second quarters of each subsequent year, based upon the aforementioned considerations for the prior year(s). Over the last three years, profit-sharing contingent commissions have averaged approximately 3.0% of commissions and fees revenue.

Certain insurance companies offer guaranteed fixed-base agreements, referred to as “Guaranteed Supplemental Commissions” (“GSCs”) in lieu of profit-sharing contingent commissions. GSCs are accrued throughout the year based on actual premiums written. Over the last three years, GSCs have averaged less than 1.0% of commissions and fees revenue.

Combined, our profit-sharing contingent commissions and GSCs for the three months ended September 30, 2021 increased by $4.9 million from the third quarter of 2020. This increase was the result of recent acquisitions and qualifying for certain profit-sharing contingent commissions and GSCs in 2021 that we did not qualify for in the prior year.

Fee revenues primarily relate to services other than securing coverage for our customers, ~~as well~~and to a lesser extent as fees negotiated in lieu of ~~commissions, and are recognized as performance obligations are satisfied.~~commissions. Fee revenues ~~have historically been~~are generated ~~primarily~~ by: ~~(1)~~(i) our Services ~~Segment,~~segment, which is primarily a fee-based business that provides insurance-related services, including third-party claims administration and comprehensive medical

utilization management services in both the workers’ compensation and all-lines liability arenas, as well as Medicare Set-aside services, Social Security disability and Medicare benefits advocacy services, and claims adjusting services; ~~(2)~~(ii) our National Programs and Wholesale Brokerage ~~Segments,~~segments, which earn fees primarily for the issuance of insurance policies on behalf of insurance companies; and ~~(3)~~(iii) our Retail ~~Segment~~segment in our large-account customer base, where we primarily earn fees for securing insurance for our customers, and in our automobile dealer services (“F&I”) businesses where we ~~primarily~~ earn fees for assisting our customers with creating and selling warranty and service risk management programs. Fee revenues as a percentage of our total commissions and fees, represented 27.4% in 2021 and 26.1% in ~~2020 and 27.1% in 2019.~~2020.

For the three months ended ~~September 30, 2021,~~March 31, 2022, our total commissions and fees growth rate was ~~14.6%~~11.1%, and our consolidated Organic Revenue growth rate was ~~8.5%~~7.8%.

Historically, investment income has consisted primarily of interest earnings on operating cash and where permitted, on premiums and advance 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 fixed income investment securities. Investment income also includes gains and losses realized from the sale of investments. Other income primarily reflects legal settlements and other revenues.

Income before income taxes for the three months ended ~~September 30, 2021~~March 31, 2022 increased from the ~~third~~first quarter of ~~2020~~2021 by ~~$38.0~~$25.8 million, primarily as a result of net new business, acquisitions completed in the past 12 months, and consistent leveraging and management of our expense base.

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 SEC rules: Total Revenues - Adjusted, 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 and because we believe it provides 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 and that we believe are not indicative of ongoing performance. 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 Quarterly Report on Form 10-Q under “Results of Operations - Segment Information.”

We view Organic Revenue and Organic Revenue growth EBITDAC and EBITDAC Margin. EBITDAC is defined as income before interest, income taxes, depreciation, amortization, and the change in estimated acquisition earn-out payables. EBITDAC Margin is defined as EBITDAC divided by total revenues. We view these non-GAAP financial measures as important indicators when assessing and evaluating our performance on a consolidated basis and for each of our four segments, because ~~they allow~~it allows us to determine a ~~more~~ comparable, but non-GAAP, measurement of revenue growth ~~and operating performance~~ that is associated with the revenue sources that were a part of our business in both the current and prior ~~year.~~year and that are expected to continue in the future. We ~~believe that Organic Revenue provides a meaningful representation of our operating performance~~also view EBITDAC and ~~view Organic Revenue growth~~EBITDAC Margin as an important ~~indicator~~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 and EBITDAC Margin as key performance metrics for our short-term and long-term incentive compensation plans for executive officers and other key employees.

Beginning January 1, 2022, we no longer exclude guaranteed supplemental commissions ("GSCs") from core commissions and fees and, therefore, GSCs are a component of Organic Revenue. All current and prior periods contained within this Quarterly Report on Form 10-Q have been adjusted for this treatment. GSCs are a stable source of revenue that are highly correlated to core commissions, so isolating them separately provides no meaningful incremental value in evaluating our revenue.

Beginning January 1, 2022, the following, in addition to the change in estimated acquisition earn-out payables, are excluded from certain non-GAAP measures, as we believe these amounts are not indicative of the ongoing operating performance of the business and are not easily comparable from period-to-period:

We are presenting EBITDAC - Adjusted and EBITDAC Margin - Adjusted for the current and prior year periods contained within this Quarterly Report on Form 10-Q so these non-GAAP financial measures compare both periods on the same basis.

Our industry peers may provide similar supplemental non-GAAP information with respect to one or more of these measures, although they may not use the same or comparable terminology and may not make identical ~~adjustments.~~adjustments and, therefore, comparability may be limited. This supplemental non-GAAP financial information should be considered in addition to, and not in lieu of, ~~our Condensed Consolidated Financial Statements.~~

~~Tabular reconciliations of this supplemental non-GAAP~~the Company's condensed consolidated financial ~~information to our most comparable GAAP information are contained in this Quarterly Report on Form 10-Q under “Results of Operations - Segment Information.”~~statements.

Part of our continuing business strategy is to attract high-quality insurance intermediaries to join our operations. From 1993 through the ~~third~~first quarter of ~~2021,~~2022, we acquired ~~572~~582 insurance intermediary operations.

We have had no changes to our Critical Accounting Policies as described in our most recent Form 10-K for the year ended December 31, ~~2020.~~2021. We believe that of our significant accounting and reporting policies, the more critical policies include our accounting for revenue recognition, business combinations and purchase price allocations including potential earn-out obligations, intangible asset impairments, non-cash stock-based compensation and reserves for litigation. In particular, the accounting for these areas requires significant use of judgment to be made by management. Different assumptions in the application of these policies could result in material changes in our consolidated financial position or consolidated results of operations. Refer to Note 1 in the “Notes to Consolidated Financial Statements” in our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 for details regarding our critical and significant accounting policies.

26While we did not have any changes to our Critical Accounting Policies we have implemented a revised basis of presentation to segregate fiduciary assets and liabilities from the operating assets and liabilities of the Company. The associated fiduciary cash flow is reflected within the financing activity section of the Statement of Cash Flows. All prior periods included in these financial statements have been updated to this basis of presentation.

RESULTS OF OPERATIONS FOR THE THREE ~~AND NINE~~ MONTHS ENDED MARCH 31, ~~SEPTEMBER 30,2021~~2022 AND ~~2020~~2021

The following discussion and analysis regarding results of operations and liquidity and capital resources should be considered in conjunction with the accompanying Condensed Consolidated Financial Statements and related Notes.

Financial information relating to our condensed consolidated financial results for the ~~three and~~ ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020~~2021 is as follows:

(1) "Income Before Income Taxes Margin" is defined as income before income taxes divided by total revenues.

Commissions and fees, including profit-sharing contingent commissions, ~~and GSCs,~~ for the three months ended ~~September 30, 2021~~March 31, 2022 increased ~~$98.3~~$90.3 million to ~~$769.7~~$904.3 million, or ~~14.6%~~11.1%, over the same period in ~~2020.~~2021. Core commissions and fees revenue for the ~~third~~first quarter of ~~2021~~2022 increased ~~$93.4~~$87.6 million, composed of (i) approximately ~~$55.6~~$61.4 million of net new and renewal business, which reflects an Organic Revenue growth rate of ~~8.5%~~7.8%; (ii) ~~$38.5~~$29.3 million from acquisitions that had no comparable revenues in the same period of ~~2020;~~2021; (iii) ~~a positive~~an offsetting decrease from the impact ~~from~~of foreign currency translation of ~~$0.3~~$0.7 million; and (iv) an offsetting decrease of ~~$1.0~~$2.4 million related to commissions and fees revenue from business divested in the preceding twelve months. Profit-sharing contingent commissions ~~and GSCs~~ for the ~~third~~first quarter of ~~2021~~2022 increased by ~~$4.9~~$2.7 million, or ~~26.9%~~10.4%, compared to the same period in ~~2020.~~

For the nine months ended September 30, 2021, commissions and fees, including profit-sharing contingent commissions and GSCs, increased $343.6 million to $2,309.6 million, or 17.5%, over the same period in 2020. Core commissions and fees revenue for the nine months

ended September 30, 2021 increased $334.7 million, composed of: (i) approximately $205.6 million of net new and renewal business, which reflects an Organic Revenue growth rate of 10.8%; (ii) $131.2 million from acquisitions that had no comparable revenues in the same period of 2020; (iii) a positive impact from foreign currency translation of $1.0 million; and (iv) an offsetting decrease of $3.1 million related to commissions and fees revenue from businesses divested in the preceding 12 months. Profit-sharing contingent commissions and GSCs for the nine months ended September 30, 2021 increased by $8.8 million, or 12.8%, compared to the same period in 2020.2021.

Investment income for the three months ended ~~September 30, 2021 increased~~March 31, 2022 decreased $0.1 million, or ~~23.2%~~33.3%, from the same period in ~~2020. Investment income for the nine months ended September 30, 2021 decreased $0.9 million, or 28.2%, from the same period in 2020.~~2021. The ~~increase for the quarter was primarily driven by higher average cash balances as compared to the prior year, and the~~ decrease ~~for the nine months ended September 2021~~ was primarily driven by lower interest rates as compared to the prior year.

Other income for the three months ended ~~September 30, 2021~~March 31, 2022 was $0.2 million, compared with ~~$2.2~~$1.0 million in the same period in ~~2020. Other income for the nine months ended September 30, 2021 was $2.4 million, compared with $3.4 million in the same period in 2020.~~2021. Other income consists primarily of legal settlements and other miscellaneous income.

Employee compensation and benefits expense as a percentage of total revenues was ~~51.3%~~50.7% for the three months ended ~~September 30, 2021~~March 31, 2022 as compared to ~~53.8%~~52.7% for the three months ended ~~September 30, 2020,~~March 31, 2021, and increased ~~8.9%~~6.9%, or ~~$32.2~~$29.5 million. This increase included ~~$12.6~~$10.9 million of compensation costs related to stand-alone acquisitions that had no comparable costs in the same period of ~~2020.~~2021. Therefore, employee compensation and benefits expense attributable to those offices that existed in the same time periods of ~~2021~~2022 and ~~2020~~2021 increased by ~~$19.6~~$18.6 million or ~~5.4%~~4.4%. This underlying employee compensation and benefits expense increase was primarily related to: (i) increased claims associated with our self-insured employee health plan; (ii) an increase in staff salaries attributable to salary inflation; ~~(ii)~~(iii) an increase in accrued performance bonuses; ~~and (iii)~~(iv) an increase in producer compensation associated with revenue ~~growth.~~

~~Employee compensation and benefits expense as a percentage~~growth; partially offset by (v) the year-over-year decrease of total revenues was 52.8% for the nine months ended September 30, 2021 as compared to 53.7% for the nine months ended September 30, 2020, and increased 15.2%, or $161.2 million. This increase included $51.2approximately $10.6 million ~~of compensation costs related to stand-alone acquisitions that had no comparable costs~~ in the ~~same period~~value of ~~2020. Therefore, employee~~deferred compensation ~~and benefits expense attributable to those offices that existed~~liabilities driven by changes in the ~~same time periods~~market prices of ~~2021 and 2020 increased~~our employees' investment elections, which was substantially offset by ~~$110.0 million or 10.5%. This underlying employee compensation and benefits expense increase was primarily related to: (i) an increase in staff salaries attributable~~other operating expenses as we hold assets to ~~salary inflation; (ii) an increase in accrued performance bonuses; and (iii) an increase in producer compensation associated with revenue growth.~~fund these liabilities that closely match the investment elections of our employees.

Other operating expenses represented ~~13.1%~~14.0% of total revenues for the ~~third~~first quarter of ~~2021~~2022 as compared to ~~13.6%~~11.6% for the ~~third~~first quarter of ~~2020.~~2021. Other operating expenses for the ~~third~~first quarter of ~~2021~~2022 increased ~~$9.7~~$32.4 million, or ~~10.6%~~34.3%, from the same period of ~~2020.~~2021. The net increase included: (i) ~~$9.7~~$4.2 million of other operating expenses related to stand-alone acquisitions that had no comparable costs in the same period of ~~2020; and~~2021; (ii) increased variable expenses with higher travel and entertainment being the largest ~~driver~~driver; (iii) acquisition and integration costs associated with the purchase of Orchid and our pending acquisitions of GRP and BdB and (iv) the year-over-year increase of approximately $10.6 million in the value of assets held to fund the associated liabilities within our deferred compensation plan, which was substantially offset by ~~non-recurring legal costs and the write-off of certain receivables in one of our programs where it was determined the collectability was in doubt recorded~~increases in the ~~third quarter~~value of ~~2020.~~

~~Other operating expenses represented 12.6% of total revenues for the nine months ended September 30, 2021,~~those liabilities recognized as compared to 13.9% for the nine months ended September 30, 2020. Other operating expenses for the first nine months of 2021 increased $17.6 million, or 6.4%, from the same period of 2020. The net increase included: (i) $31.2 million of other operating expenses related to stand-alone acquisitions that had no comparable costsexpense in ~~the same period of 2020; partially offset by (ii) non-recurring legal costs~~employee compensation and the write-off recorded in the third quarter of 2020 of certain receivables in one of our programs where it was determined the collectability was in doubt and which did not recur in the third quarter of 2021; and (iii) lower variable operating expenses, including travel and entertainment and meeting-related expenses, primarily resulting from responses to COVID-19.benefits.

Gain on disposal for the ~~third~~first quarter of 2022 and the first quarter of 2021 ~~decreased $0.7 million from the third quarter of 2020. Gain on disposal for the nine months ended September 30, 2021 increased $3.0 million from the nine months ended September 30, 2020.~~was $0.2 million. The ~~changes in the (gain)/loss~~gains on disposal were due to activity associated with book of business sales. Although we ~~are~~do not ~~in the business of selling~~routinely sell businesses or customer accounts, we periodically sell an office or a book of business (one or more customer accounts) that we believe does not produce reasonable margins or demonstrate a potential for growth, or because doing so is in the Company’s best interest.

Amortization expense for the ~~third~~first quarter of ~~2021~~2022 increased ~~$2.5~~$1.6 million, or ~~9.1%~~5.4%, compared to the ~~third~~first quarter of ~~2020. Amortization expense for the nine months ended September 30, 2021 increased $8.4 million, or 10.4%, compared to the nine months ended September 30,~~

~~2020. These increases reflect~~2021. This increase reflects the amortization of new intangibles from businesses acquired within the past 12 months, partially offset by certain intangible assets becoming fully amortized.

Depreciation expense for the ~~third~~first quarter of ~~2021~~2022 increased ~~$2.6~~$0.6 million, or ~~38.4%~~8.0%, compared to the ~~third~~first quarter of ~~2020. Depreciation expense for the nine months ended September 30, 2021 increased $6.6 million, or 35.2%, compared to the nine months ended September 30, 2020.~~2021. Changes in depreciation expense reflect the addition of fixed assets resulting from business initiatives, and net additions of fixed assets resulting from businesses acquired in the past 12 months, which were partially offset by fixed assets that became fully depreciated.

Interest expense for the ~~third~~first quarter of ~~2021~~2022 increased ~~$2.9~~$2.0 million, or ~~22.2%, compared to the third quarter of 2020. Interest expense for the nine months ended September 30, 2021 increased $6.5 million, or 15.3%~~12.3%, compared to the first ~~nine months~~quarter of ~~2020. These increases were~~2021. The increase was due to higher average debt balances resulting from ~~increased borrowings associated with~~a recent debt issuance in the ~~issuance~~first quarter of ~~bonds~~2022 in ~~September 2020, partially offset by~~preparation of the ~~decrease~~funding of the Orchid, GRP and BdB acquisitions, as well as increases in ~~interest rates associated with~~the floating rate benchmark used on our floating rate ~~debt balances.~~debt.

Accounting Standards Codification (“ASC”) Topic 805-Business Combinations is the authoritative guidance requiring an acquirer to recognize 100% of the fair value of acquired assets, including goodwill and assumed liabilities (with only limited exceptions) upon initially obtaining control of an acquired entity. Additionally, the fair value of contingent consideration arrangements (such as earn-out purchase price arrangements) at the acquisition date must be included in the purchase price consideration. The recorded purchase price for acquisitions includes an estimation of the fair value of liabilities associated with any potential earn-out provisions. Subsequent changes in these earn-out obligations are required to be recorded in the Condensed Consolidated Statements of Income when incurred or reasonably estimated. Estimations of potential earn-out obligations are typically based upon future earnings of the acquired operations or entities, usually for periods ranging from one to three years.

The net charge or credit to the Condensed Consolidated Statements of Income for the period is the combination of the net change in the estimated acquisition earn-out payables balance, and the interest expense imputed on the outstanding balance of the estimated acquisition earn-out payables.

As of ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ the fair values of the estimated acquisition earn-out payables were re-evaluated based upon projected operating results and measured at fair value on a recurring basis using unobservable inputs (Level 3) as defined in ASC 820-Fair Value Measurement. The resulting net changes, as well as the interest expense accretion on the estimated acquisition earn-out payables, for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were as follows:

For the three months ~~and nine months~~ ended ~~September 30,~~March 31, 2022 and 2021, the fair value of estimated acquisition earn-out payables was re-evaluated and ~~increased~~decreased by ~~$21.9~~$4.8 million and ~~$15.8~~$2.7 million, respectively, which resulted in ~~charges~~credits to the Condensed Consolidated Statements of ~~Income, respectively.~~Income.

As of ~~September 30, 2021,~~March 31, 2022, estimated acquisition earn-out payables totaled ~~$262.9~~$250.9 million, of which ~~$94.2~~$49.3 million was recorded as accounts payable and ~~$168.7~~$201.6 million was recorded as other non-current liabilities.

The effective tax rate on income from operations for the three months ended ~~September 30, 2021~~March 31, 2022 and 2020 was 25.5% and 15.5% respectively. The effective tax rate on income from operations for the nine months ended September 30, 2021 and 2020 was 22.0% and 22.3%, respectively. The increase for the three months ended September 30, 2021 was driven primarily by the tax benefit associated with incremental vesting of restricted stock awards in the third quarter of 2020. In 2016, we began issuing the majority of our restricted stock awards in the first quarter of each year,16.9% and ~~the vesting of such awards is generally tied to the fifth anniversary of the date of grant, subject to certain exceptions.~~16.5% respectively.

As discussed in Note 12 toof this 10-Q on the Condensed Consolidated Financial Statements, we operate four reportable segments: Retail, National Programs, Wholesale Brokerage, and Services. On a segmented basis, changes in amortization, depreciation and interest expenses generally result from activity associated with acquisitions. Likewise, other revenues in each segment reflects net gains primarily from legal settlements and miscellaneous income. As such, in evaluating the operational efficiency of a segment, management focuses on the Organic Revenue growth rate and EBITDAC ~~Margin.~~Margin - Adjusted.

The reconciliation of commissions and fees included in the Condensed Consolidated Statements of Income to Organic Revenue, a non-GAAP financial measure, for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ including by segment, and the growth rates for Organic Revenue for the three months ended ~~September 30, 2021, including by segment,~~March 31, 2022, are as follows:

(1) The Retail Segment includes commissions and fees reported in the “Other” column of the Segment Information in Note 12 of this 10-Q of the Notes to the Condensed Consolidated Financial Statements, which includes corporate and consolidation items.

The reconciliation of commissions and fees included in the Condensed Consolidated Statements of Income to Organic Revenue, a non-GAAP financial measure, for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ including by segment, and the growth rates for Organic Revenue for the three months ended ~~September 30, 2020,~~March 31, 2021, including by segment, are as follows:

The reconciliation of ~~commissions and fees included in the Condensed Consolidated Statements of Income~~Total Revenues to ~~Organic Revenue,~~Total Revenues - Adjusted, a non-GAAP ~~financial~~ measure, for the nine months ended September 30, 2021 and 2020, including by segment, and the growth rates for Organic Revenue for the nine months ended September 30, 2021, including by segment, are as follows:

(1) The Retail Segment includes commissions and fees reported in the “Other” column of the Segment Information in Note 12 of the Notes to the Condensed Consolidated Financial Statements, which includes corporate and consolidation items.

The reconciliation of commissions and fees included in the Condensed Consolidated Statements of Income to Organic Revenue, a non-GAAP financial measure, for the nine months ended September 30, 2020 and 2019, including by segment, and the growth rates for Organic Revenue for the nine months ended September 30, 2020, including by segment, are as follows:

~~The reconciliation of~~ income before incomes taxes, included in the Condensed Consolidated Statement of Income, to EBITDAC - Adjusted, a non-GAAP measure, and Income Before Income Taxes Margin to EBITDAC Margin - Adjusted, a non-GAAP measure, for the three months ended ~~September 30, 2021,~~March 31, 2022, is as follows:

(1) “Income Before Income Taxes Margin” is defined as income before income taxes divided by total revenues.

The reconciliation of Total Revenues to Total Revenues - Adjusted, a non-GAAP measure, income before incomes taxes included in the Condensed Consolidated Statement of Income to EBITDAC - Adjusted, a non-GAAP measure, and Income Before Income Taxes Margin to EBITDAC Margin - Adjusted, a non-GAAP measure, for the three months ended ~~September 30, 2020, is as follows:~~

~~(1) “Income Before Income Taxes Margin” is defined as income before income taxes divided by total revenues.~~

The reconciliation of income before incomes taxes included in the Condensed Consolidated Statement of Income to EBITDAC, a non-GAAP measure, and Income Before Income Taxes Margin to EBITDAC Margin, a non-GAAP measure, for the nine months ended September 30,March 31, 2021, is as follows:

~~(1) “Income Before Income Taxes Margin” is defined as income before income taxes divided by total revenues.~~

(1) “Income Before Income Taxes Margin” is defined as income before income taxes divided by total revenues.

The Retail ~~Segment~~segment provides a broad range of insurance products and services to commercial, public and quasi-public, professional and individual insured customers, and non-insurance risk-mitigating products through our ~~automobile dealer services (“~~F~~&I”)~~&I businesses. Approximately ~~77.3%~~81.3% of the Retail ~~Segment’s~~segment’s commissions and fees revenue is commission based. Because most of our other operating expenses are not correlated to changes in commissions on insurance premiums, a significant portion of any fluctuation in the commissions we receive, net of related producer compensation and cost to fulfill expense deferrals and releases as required by ASC 340, Other Assets and Deferred Costs, will result in a similar fluctuation in our income before income taxes, unless we make incremental investments or modifications to the costs in the organization.

Financial information relating to our Retail Segment for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ is as follows:

(1) "Income Before Income Taxes Margin" is defined as income before income taxes divided by total revenues.

The Retail Segment’s total revenues for the three months ended ~~September 30, 2021~~March 31, 2022 increased ~~17.8%~~14.1%, or ~~$63.9~~$73.5 million, as compared to the same period in ~~2020,~~2021, to ~~$423.4~~$596.4 million. The ~~$60.5~~ $71.9million increase in core commissions and fees revenue was driven by: (i) approximately ~~$32.7~~$28.3 million related to the core commissions and fees revenue from acquisitions that had no comparable revenues in the same period of ~~2020;~~2021; (ii) an increase of ~~$28.8~~$45.0 million related to net new and renewal business; offset by (iii) a decrease of ~~$1.0~~$0.7 million related to commissions and fees recorded in ~~2020~~2021 from businesses since ~~divested.~~divested and a negative impact from foreign currency translation of $0.7 million. Profit-sharing contingent commissions ~~and GSCs~~ for the ~~third~~first quarter of ~~2021~~2022 increased ~~32.3%~~14.0%, or ~~$3.2~~$2.2 million, as compared to the same period in ~~2020,~~2021, to ~~$13.2~~$17.9 million. This increase was primarily the result of recent acquisitions and qualifying for ~~certain~~incremental profit-sharing contingent commissions ~~and GSCs~~ in ~~2021 that we did not qualify~~2022 beyond what was qualified for in the prior year. The Retail Segment’s total commissions and fees increased by ~~17.7%~~14.2%, and the Organic Revenue growth rate was ~~8.3%~~8.9% for the ~~third~~first quarter of ~~2021.~~2022. The Organic Revenue growth rate was driven by ~~revenue from~~ net new business, which was impacted by modest exposure unit improvement and rate increases in most lines of business

with the most pronounced being the continued increases in commercial ~~property, professional liability,~~ and condo property, and professional liability, partially offset by continued premium rate reductions in workers’ compensation. Organic Revenue growth was realized across all lines of business.

Income before income taxes for the three months ended ~~September 30, 2021~~March 31, 2022 increased ~~27.8%~~21.8%, or ~~$15.6~~$32.9 million, as compared to the same period in ~~2020,~~2021, to ~~$71.6~~$184.1 million. The primary factors affecting this increase ~~were:~~were (i) the ~~profit associated with~~drivers of EBITDAC - Adjusted described below; and (ii) the ~~net increase~~decrease in ~~revenue as described above; (ii) intercompany interest and amortization expenses growing slower than EBITDAC;~~estimated acquisition earn-out payables; partially offset by (iii) ~~an increase to the change in estimated acquisition earn-out payables.~~acquisition/integration costs.

EBITDAC - Adjusted for the three months ended ~~September 30, 2021~~March 31, 2022 increased ~~24.6%~~18.4%, or ~~$26.3~~$35.7 million, as compared to the same period in ~~2020,~~2021, to ~~$133.2~~$229.7 million. EBITDAC Margin - Adjusted for the three months ended ~~September 30, 2021~~March 31, 2022 increased to ~~31.5%~~38.5% from ~~29.7%~~37.2% in the same period in ~~2020.~~2021. The increase in EBITDAC Margin - Adjusted was driven by: (i) the total revenue ~~increase;~~growth; and (ii) ~~higher profit-sharing contingent commissions and GSCs; which were partially offset by slightly higher variable operating expenses.~~

The Retail Segment’s total revenues for the nine months ended September 30, 2021 increased 20.4%, or $227.9 million, as compared to the same period in 2020, to $1,347.4 million. The $223.5 million increase in core commissions and fees revenue was driven by: (i) approximately $102.9 million related to the core commissions and fees revenue from acquisitions that had no comparable revenues in the same period of 2020; (ii) an increase of $123.7 million related to net new and renewal business; and (iii) an offsetting decrease of $3.1 million related to commissions and fees recorded in 2020 from businesses since divested. Profit-sharing contingent commissions and GSCs for the nine months of 2021 increased 10.8%, or $4.4 million, as compared to the same period in 2020, to $45.2 million. The Retail Segment’s total commissions and fees increased by 20.4%, and the Organic Revenue growth rate was 11.5% for the first nine months of 2021. The Organic Revenue growth rate was driven by net new business written during the preceding 12 months and growth on renewals of existing customers. Renewal business was impacted by rate increases in most lines of business with continued increases in commercial P&C, and professional liability, partially offset by continued premium rate reductions in workers’ compensation.

Income before income taxes for the nine months ended September 30, 2021 increased 32.4%, or $71.8 million, as compared to the same period in 2020, to $293.3 million. The primary factors affecting this increase were: (i) the profit associated with the net increase in revenue as described above; and (ii) the drivers of EBITDAC described below; (iii) intercompany interest and amortization growing slower than EBITDAC; which were partially offset by (iv) an increase in the change in estimated acquisition earn-out payables.

EBITDAC for the nine months ended September 30, 2021 increased 29.0%, or $100.6 million, as compared to the same period in 2020, to $447.1 million. EBITDAC Margin for the nine months ended September 30, 2021 increased to 33.2% from 30.9% in the same period in 2020. The increases in EBITDAC and EBITDAC Margin were primarily driven by: (i) the net increase in revenue of $227.9 million; and (ii) cost savings delivered in response to COVID-19; which wereleveraging our expense base; partially offset by (iii) higher ~~non-cash stock-based compensation.~~variable operating expenses that include travel and meeting related costs.

The National Programs Segment manages over 40 programs supported by approximately 100 well-capitalized carrier partners. In most cases, the insurance carriers that support these programs have delegated underwriting and, in many instances, claims-handling authority to our programs operations. These programs are generally distributed through a nationwide network of independent agents and Brown & Brown retail agents, and offer targeted products and services designed for specific industries, trade groups, professions, public entities and market niches. The National Programs Segment operations can be grouped into five broad categories: Professional Programs, Personal Lines Programs, Commercial Programs, Public Entity-Related Programs and Specialty Programs. Approximately 75.2% of the ~~National Flood Program. The~~ National Programs Segment’s commissions and fees revenue is ~~primarily~~ commission based.

Financial information relating to our National Programs Segment for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ is as follows:

(1) "Income Before Income Taxes Margin" is defined as income before income taxes divided by total revenues.

The National Programs Segment’s total revenue for the three months ended ~~September 30, 2021~~March 31, 2022 increased ~~13.7%~~4.7%, or ~~$23.0~~$7.3 million, as compared to the same period in ~~2020,~~2021, to ~~$191.1~~$162.2 million. The ~~$21.8~~$7.8 million increase in core commissions and fees revenue was driven by: (i) ~~approximately $21.5 million related to net new and renewal business; and (ii) a positive impact from foreign currency translation~~an increase of ~~$0.3 million. Profit-sharing contingent commissions and GSCs for the third quarter of 2021 increased approximately $1.4 million compared to the third quarter of 2020.~~

The National Programs Segment’s total commissions and fees increased by 13.8%, and the Organic Revenue growth rate was 13.2% for the three months ended September 30, 2021. The Organic Revenue growth was driven primarily by strong net new business, retention and rate increases for many programs.

Income before income taxes for the three months ended September 30, 2021 increased 53.4%, or $25.2 million, as compared to the same period in 2020, to $72.4 million. Income before income taxes increased due to: (i) the drivers of EBITDAC described below; (ii) decreased estimated acquisition earn-out payables; and (iii) lower intercompany interest expense.

EBITDAC for the three months ended September 30, 2021 increased 28.4%, or $18.7 million, from the same period in 2020, to $84.4 million. EBITDAC Margin for the three months ended September 30, 2021 increased to 44.2% from 39.1% in the same period in 2020. The EBITDAC growth was higher than total revenue growth due to leveraging our expense base and the impact of a non-recurring receivable write-off recorded in the prior year.

The National Programs Segment’s total revenue for the nine months ended September 30, 2021 increased 15.8%, or $71.1 million, as compared to the same period in 2020, to $522.2 million. The $66.0 million increase in core commissions and fees revenue was driven by: (i) $56.8$8.9 million related to net new and renewal business; (ii) approximately ~~$8.2~~$0.1 million related to the core commissions and fees revenue from acquisitions that had no comparable revenues in the same period of ~~2020; and~~2021; offset by (iii) a ~~positive impact~~decrease of $1.2 million related to commissions and fees recorded in 2021 from ~~foreign currency translation of $1.0 million.~~businesses since divested.

The National Programs Segment’s total commissions and fees increased by ~~15.8%~~4.9%, and the Organic Revenue growth rate was ~~13.2%,~~6.1% for the ~~nine~~three months ended ~~September 30, 2021.~~ March 31, 2022. The Organic Revenue growth was driven primarily by ~~net~~good new business, ~~good retention~~exposure unit expansion and rate ~~increases for many programs.~~increases.

Income before income taxes for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 increased ~~44.0%~~1.5%, or ~~$55.1~~$.6 million, ~~from~~as compared to the same period in ~~2020,~~2021, to ~~$180.2~~$41.7 million. Income before income taxes increased due to: (i) the drivers of EBITDAC - Adjusted described below; ~~(ii) decreased estimated acquisition earn-out payables;~~ and ~~(iii)~~(ii) lower intercompany interest expense.

EBITDAC - Adjusted for the ~~nine~~three months ended ~~September 30, 2021 increased 23.2%~~March 31, 2022 decreased 0.4%, or ~~$39.4~~$0.2 million, ~~as compared to~~from the same period in ~~2020,~~2021, to ~~$209.2~~$53.8 million. EBITDAC Margin - Adjusted for the ~~nine~~three months ended ~~September 30, 2021 increased~~March 31, 2022 decreased to ~~40.1%~~33.2% from ~~37.6%~~34.9% in the same period in ~~2020.~~ 2021. The ~~increase in~~ EBITDAC ~~and EBITDAC Margin~~- Adjusted was ~~driven by: (i) total revenue growth; (ii) leveraging our expense base;~~substantially flat year-over-year due to increased variable costs, increased non-cash stock-based compensation and ~~(iii) cost savings delivered in response to COVID-19; (iv) the impact of a non-recurring receivable write-off recorded in the prior year; partially offset by (v)~~ incremental costs associated with ~~the~~ onboarding of new ~~customers and increased non-cash stock-based compensation.~~customers.

The Wholesale Brokerage Segment markets and sells excess and surplus commercial and personal lines insurance, primarily through independent agents and brokers, including Brown & Brown retail agents. ~~Like the Retail and National Programs Segments,~~Approximately 83.3% of the Wholesale Brokerage Segment’s ~~revenues are primarily~~commissions and fees revenue is commission based.

Financial information relating to our Wholesale Brokerage Segment for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ is as follows:

(1) "Income Before Income Taxes Margin" is defined as income before income taxes divided by total revenues.

The Wholesale Brokerage Segment’s total revenues for the three months ended ~~September 30, 2021~~March 31, 2022 increased ~~11.1%~~13.2%, or ~~$11.2~~$12.0 million, as compared to the same period in ~~2020,~~2021, to ~~$112.5~~$102.9 million. The ~~$10.9~~$11.2 million net increase in core commissions and fees revenue was driven primarily by: (i) ~~$5.8~~$10.3 million related to net new and renewal business; and (ii) $0.9 million related to the core commissions and fees revenue from acquisitions that had no comparable revenues in the same period of ~~2020; and (ii) $5.1 million related to net new and renewal business.~~2021. Profit-sharing contingent commissions ~~and GSCs~~ for the ~~third~~first quarter of ~~2021~~2022 increased ~~$0.3~~$0.8 million compared to the ~~third~~first quarter of ~~2020.~~2021. The Wholesale Brokerage Segment’s growth rate for total commissions and fees was ~~11.1%~~13.2%, and the Organic Revenue growth rate was ~~5.1%~~11.6% for the ~~third~~first quarter of ~~2021.~~2022. The Organic Revenue growth rate was driven by new business, good retention as well as rate increases for most lines of ~~coverage as well as new business.~~coverage.

Income before income taxes for the three months ended ~~September 30, 2021 decreased 16.2%~~March 31, 2022 increased 36.2%, or ~~$5.7~~$6.8 million, as compared to the same period in ~~2020,~~2021, to ~~$29.4~~$25.6 million. The ~~decrease~~increase was due ~~to an increase in the change in estimated acquisition earnout payables and intercompany interest expense; which was partially offset by~~to: (i) the drivers of EBITDAC - Adjusted described ~~below.~~below; and (ii) lower intercompany interest and amortization expenses; partially offset by (iii) acquisition/integration costs.

EBITDAC - Adjusted for the three months ended ~~September 30, 2021~~March 31, 2022 increased ~~4.8%~~23.2%, or ~~$1.9~~$6.1 million, as compared to the same period in ~~2020,~~2021, to ~~$42.1~~$32.4 million. EBITDAC Margin - Adjusted for the three months ended ~~September 30, 2021 decreased~~March 31, 2022 increased to ~~37.4%~~31.5% from ~~39.7%~~28.9%, as compared to the same period in ~~2020.~~2021. EBITDAC Margin ~~decreased~~- Adjusted increased due to: (i) ~~higher broker compensation; (ii) slightly higher variable expenses as compared to prior year; and (iii) non recurring intercompany IT charges.~~

~~The Wholesale Brokerage Segment’s~~ total revenues for the nine months ended September 30, 2021 increased 15.0%, or $40.1 million, as compared to the same period in 2020, to $307.9 million. The $40.9 million net increase in core commissions and fees revenue was driven primarily by: (i) $20.2 million related to core commissions and fees revenue from acquisitions that had no comparable revenues in the same period of 2020; and (ii) $20.7 million related to net new and renewal business. Profit-sharing contingent commissions and GSCs for the first nine months of 2021 decreased approximately $0.8 million compared to the same period of 2020. The Wholesale Brokerage Segment’s growth rate for total commissions and fees was 15.0%, and the Organic Revenue growth rate was 8.0% for the first nine months of 2021. The Organic Revenue growth rate was driven by: (i) rate increases for most lines of coverage; and (ii) net new business and exposure unit expansion during the first nine months of 2021.

Income before income taxes for the nine months ended September 30, 2021 decreased 3.7%, or $2.9 million, as compared to the same period in 2020, to $74.5 million. The decrease was due to an increase in the change in estimated acquisition earnout payables and intercompany interest expense; which was partially offset by the drivers of EBITDAC described below.

EBITDAC for the nine months ended September 30, 2021 increased 13.1%, or $12.0 million, as compared to the same period in 2020, to $103.9 million. EBITDAC Margin for the nine months ended September 30, 2021 decreased to 33.7% from 34.3% in the same period in 2020. The increase in EBITDAC was due to: (i) the profit of newly acquired businesses; andgrowth; (ii) leveraging our expense base; and (iii) higher profit-sharing contingent commissions; partially offset by ~~(iii) slightly~~(iv) higher variable operating expenses, ~~as compared to prior year.~~which are primarily travel and meeting related.

The Services Segment provides insurance-related services, including third-party claims administration and comprehensive medical utilization management services in both the workers’ compensation and all-lines liability arenas. The Services Segment also provides Medicare Set-aside account services, Social Security disability and Medicare benefits advocacy services, and claims adjusting services.

Unlike the other segments, nearly all of the Services Segment’s revenue is generated from fees, which are not significantly affected by fluctuations in general insurance premiums.

Financial information relating to our Services Segment for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ is as follows:

(1) "Income Before Income Taxes Margin" is defined as income before income taxes divided by total revenues.

The Services Segment’s total revenues for the three months ended ~~September 30, 2021 increased 0.5%~~March 31, 2022 decreased 7.2%, or ~~$0.2~~$3.4 million, as compared to the same period in ~~2020,~~2021, to ~~$43.7~~$43.6 million. The Services Segment’s total commissions and fees and Organic Revenue ~~growth rate was 0.5%~~declined 6.2% for the ~~third~~first quarter of ~~2021~~2022 driven by: (i) ~~expansion~~lack of ~~existing programs;~~catastrophic weather driven claim activity; (ii) ~~specialized claims handling in our advisory business; and (iii)~~ COVID-19 travel restricted ~~claims; which were partially offset by (iv) lower~~claim activity; and (iii) to a lesser extent continued external delays in processing claims in our advocacy ~~businesses.~~business.

Income before income taxes for the three months ended ~~September 30, 2021 increased 17.2%~~March 31, 2022 decreased 29.0%, or ~~$1.0~~$2.7 million, as compared to the same period in ~~2020,~~2021, to ~~$7.1 million. Income before income taxes increased faster than EBITDAC~~$6.6 million due to the drivers of EBITDAC - Adjusted described below, with a partial offset of lower intercompany interest ~~expense~~ and amortization.

EBITDAC - Adjusted for the three months ended ~~September 30, 2021 increased 7.2%~~March 31, 2022 decreased 25.2%, or ~~$0.6~~$3.0 million, from the same period in ~~2020,~~2021, to ~~$9.4~~$8.9 million. EBITDAC Margin - Adjusted for the three months ended ~~September 30, 2021 increased~~March 31, 2022 decreased to ~~21.5%~~20.4% from ~~20.2%~~25.3% in the same period in ~~2020.~~2021. The ~~increases~~decrease in EBITDAC ~~and EBITDAC Margin were~~- Adjusted was driven primarily by ~~continued expense management.~~lower catastrophic weather claims activity.

The Services Segment’s total revenues for the nine months ended September 30, 2021 increased 3.6%, or $4.7 million from the same period in 2020, to $135.6 million. The Services Segment’s total commissions and fees and Organic Revenue growth rate was 3.6% for the first nine months of 2020. The increase in Organic Revenue was caused primarily by: (i) travel restricted claims due to COVID-19; (ii) specialized claims handling in our advocacy business; and (iii) weather related claim activity; which were partially offset by (iv) lower claims in our advocacy businesses.

Income before income taxes for the nine months ended September 30, 2021 increased 6.4%, or $1.4 million, from the same period in 2020, to $24.0 million. The increase was driven by: (i) a lower change in estimated acquisition earn-out payables as compared to the prior year; (ii) lower intercompany interest expense; and (iii) the drivers of EBITDAC described below.

EBITDAC for the nine months ended September 30, 2021 increased 12.6%, or $3.5 million, from the same period in 2020, to $31.3 million. EBITDAC Margin for the nine months ended September 30, 2021 increased to 23.1% from 21.3% in the same period in 2020. The increase in EBITDAC and EBITDAC Margin were driven primarily by leveraging our expense base with higher Organic Revenue growth and lower variable expenses in response to COVID-19.

As discussed in Note 12 of the Notes to Condensed Consolidated Financial Statements, the “Other” column in the Segment Information table includes any revenue and expenses not allocated to reportable segments, and corporate-related items, including the intercompany interest expense charges to reporting segments.

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 principally through cash that has been generated from operations. We have the ability to utilize our Revolving Credit Facility, which as of ~~September 30, 2021~~March 31, 2022 provided up to ~~$800.0~~$450.0 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 our normal liquidity needs, including principal payments on our long-term debt, for at least the next 12 months.

The Revolving Credit Facility contains an expansion option for up to an additional $500.0 million of borrowing capacity, subject to the approval of participating lenders. In addition, under the Term Loan Credit Agreement, the unsecured term loan in the initial amount of $300.0 million may be increased by up to $150.0 million, subject to the approval of participating lenders. On March 31, 2022, the Company entered into a Loan Agreement (the “Loan Agreement") which provided term loan capacity of $800.0 million which was not drawn on at the time of closing. Additionally, the Company may, subject to satisfaction of certain conditions, including receipt of additional term loan commitments by new or existing lenders, increase either Term Loan Commitment under the existing Loan Agreement or the term loans issued thereunder or issue new tranches of term loans in an aggregate additional amount of up to $400.0 million. Including the expansion options under all existing credit agreements, the Company has access to up to ~~$1.5~~$2.3 billion of incremental borrowing capacity as of ~~September 30, 2021.~~March 31, 2022.

Subsequent to March 31, 2022, the Company has exercised all available funding under the Loan Agreement of $800.0 million.

As of ~~September 30, 2021,~~March 31, 2022, our contractual cash obligations were as follows:

Total debt at ~~September 30, 2021~~March 31, 2022 was ~~$2,045.5~~$3,539.6 million net of unamortized discount and debt issuance costs, which was ~~a decrease~~an increase of ~~$50.4~~$1,516.6 million compared to December 31, ~~2020.~~2021. The ~~decrease~~increase includes: (i) the ~~repayment~~issuance of $1,200.0 million in aggregate principal amount of Senior Notes on March 17, 2022, exclusive of debt issuance costs and discounts applied to the principal; (ii) the drawdown of $350.0 million of the ~~principal balance of $52.5 million~~revolving credit facility in conjunction with the acquisition payment for ~~scheduled principal amortization balances related to our various existing floating rate debt term notes; (ii)~~Orchid on March 31, 2022; and (iii) net of the amortization of discounted debt related to our various unsecured Senior Notes, and debt issuance cost amortization of ~~$2.1~~$0.7 million; offset by decreases due to: (i) the scheduled principal amortization balances related to our various existing floating rate debt term notes in total of $10.7 million; and (ii) added discounted debt balances related to the issuance of $600.0 million in aggregate principal amount of the
Company’s 4.200% Senior Notes due 2032 (the “2032 Notes”) and $600.0 million in aggregate principal amount of the Company’s 4.950% Senior Notes due 2052 (the “2052 Notes,” and together with the 2032 Notes, the “Notes”) of $10.4 million; and (iii) debt issuance costs related to the Notes and the Loan Agreement of $13.0 million.

During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, the Company repaid ~~$30.0~~$3.1 million of principal related to the Second Amended and Restated Credit Agreement term loan through the quarterly scheduled amortized principal payments. The Second Amended and Restated Credit Agreement term loan had an outstanding balance of ~~$260.0~~$243.8 million as of ~~September~~March 31, 2022. The Company's next scheduled amortized principal payment is due June 30, ~~2021.~~2022 and is equal to $3.1 million.

The Company is in active dialogue with currently participating banks and potential new banks related to the refinancing of our Amended and Restated Credit Agreement which consists of the Revolving Credit Facility and term loan component. The renewed facilities are expected to consist of an $800.0 million revolving credit facility and $250.0 million term loan and will mature in five years from the time of renewal. Much of the terms and covenants within the agreement are expected to be unchanged when compared to the Amended and Restated Credit Agreement.

During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, the Company repaid ~~$22.5~~$7.5 million of principal related to the Term Loan Credit Agreement through quarterly scheduled amortized principal payments. The Term Loan Credit Agreement had an outstanding balance of ~~$247.5~~$232.5 million as of ~~September 30, 2021.~~March 31, 2022. The Company’s next scheduled amortized principal payment is due ~~December 31, 2021~~June 30, 2022 and is equal to $7.5 million.

On March 17, 2022, the Company completed the issuance of $600.0 million aggregate principal amount of the Company’s 4.200% Senior Notes due 2032 and $600.0 million aggregate principal amount of the Company’s 4.950% Senior Notes due 2052 (and together with the 2032 Notes, the “Notes”). The net proceeds to the Company from the issuance of the Notes, after deducting underwriting discounts and estimated offering expenses, were approximately $1,178.2 million. The Senior Notes were given investment grade ratings of BBB- stable outlook and Baa3 stable outlook. The 2032 Notes bear interest at the rate of 4.200% per year and will mature on March 17, 2032. The 2052 Notes bear interest at the rate of 4.950% per year and will mature on March 17, 2052. Interest on the Notes will be payable semi-annually in arrears. The Notes are senior unsecured obligations of the Company and will rank equal in right of payment to all of the Company’s existing and future senior unsecured indebtedness. The Company may redeem the Notes in whole or in part at any time and from time to time, at the “make whole” redemption prices specified in the Prospectus Supplement for the Notes being redeemed, plus accrued and unpaid interest thereon to but excluding the redemption date. If we do not consummate the acquisition of GRP (the “GRP Acquisition”) on or prior to December 31, 2022 or, if prior to such date, we notify the trustee in writing that the majority share purchase agreement relating to the GRP Acquisition (“GRP Acquisition Agreement”) is terminated, then, in either case, we must redeem all of the 2032 Notes at a redemption price equal to 101% of the principal amount of the notes, plus accrued and unpaid interest to, but not including, the special mandatory redemption date. The 2052 Notes are not subject to the special mandatory redemption provision and will remain outstanding even if the GRP Acquisition is not consummated on or prior to December 31, 2022. The Company intends to use the net proceeds from the offering of the Notes, together with borrowings under its revolving credit facility, cash on hand and other borrowings, to fund the cash consideration and other amounts payable under the GRP Acquisition Agreement and to pay fees and expenses associated with the foregoing. If the GRP Acquisition is not consummated on or prior to December 31, 2022, the Company expects to use the net proceeds from the sale of the 2052 Notes for general corporate purposes. As of March 31, 2022, there was a total outstanding debt balance of $1,200.0 million exclusive of the associated discount balance on both Notes.

On March 31, 2022, the Company entered into the Loan Agreement with the lenders named therein, BMO Harris Bank N.A., as administrative agent, Fifth Third Bank, National Association, PNC Bank, National Association, U.S. Bank National Association and Wells Fargo Bank, National Association, as co-syndication agents and BMO Capital Markets Corp., BofA Securities, Inc., JPMorgan Chase Bank, N.A. and Truist Securities, Inc., as joint bookrunners and joint lead arrangers. The Loan Agreement evidences commitments for (i) unsecured delayed draw term loans in an aggregate amount of up to $300.0 million (the “Term A-1 Loan Commitment”) and (ii) unsecured delayed draw term loans in an amount of up to $500.0 million (the “Term A-2 Commitment” and, together with the Term A-1 Loan Commitments, the “Term Loan Commitments”). The Company may, subject to satisfaction of certain conditions, including receipt of additional term loan commitments by new or existing lenders, increase either Term Loan Commitment or the term loans issued thereunder or issue new tranches of term loans in an aggregate additional amount of up to $400.0 million. The Company may borrow term loans (the “Term Loans”) under either of the Term Loan Commitments during the period from the Effective Date (the "Effective Date") until the date which is the first anniversary thereof. Once borrowed, Term Loans issued under the Term A-1 Loan Commitment (“Term A-1 Loans”) are due and payable on the date that is the third anniversary of the Effective Date unless such maturity date is extended as provided under the Loan Agreement. Once borrowed, Term Loans issued under the Term A-2 Loan Commitment (“Term A-2 Loans”) are repayable in installments until the fifth anniversary the Effective Date with any remaining outstanding amounts due and payable on such fifth anniversary of the Effective Date unless such maturity date is extended as provided under the Loan Agreement. While outstanding, the undrawn Term Loan Commitments accrue a commitment fee of 0.15% beginning on the earlier of the initial funding of Term Loans under the Loan Agreement and the date that is 120 days from the Effective Date. Once drawn, Term A-1 Loans will bear interest at the annual rate of Adjusted Term SOFR plus 1.125% or Base Rate plus 0.125% (subject to a pricing grid for changes in the Company’s credit rating and/or leverage) and Term A-2 Loans will bear interest at the annual rate of Adjusted Term SOFR plus 1.25% or Base Rate plus 0.25% (subject to a pricing grid for changes in the Company’s credit rating and/or leverage). The

~~Neither we nor our subsidiaries have ever incurred off-balance sheet obligations through~~Loan Agreement includes various covenants (including financial covenants), limitations and events of default customary for similar facilities for similarly rated borrowers. As of March 31, 2022, there were no borrowings under the ~~use~~terms of ~~or investment in, off-balance sheet derivative financial instruments or structured finance or special purpose entities organized as corporations, partnerships or limited liability companies or trusts.~~the Loan Agreement.

~~For further discussion~~On March 31, 2022 the Company accessed $350.0 million of available proceeds on the revolving credit facility under the Second Amended and Restated Credit Agreement. The proceeds were used in conjunction with the funding of the Orchid acquisition along with funds from cash on hand.

As of April 28, 2022, the Company has fully drawn all available funds of $800.0 million under the Loan Agreement in connection with the preparation of closing our ~~cash management~~pending acquisitions of GRP and ~~risk management policies, see “Quantitative and Qualitative Disclosures About Market Risk.”~~BdB.

Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates, foreign exchange rates and equity prices. We are exposed to market risk through our investments, revolving credit line, term loan agreements and international operations.

Our invested assets are held primarily as cash and cash equivalents, restricted cash, available-for-sale marketable debt securities, non-marketable debt securities, certificates of deposit, U.S. treasury securities, and professionally managed short term duration fixed income funds. These investments are subject to interest rate risk. The fair ~~values~~value of our invested assets at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021 approximated their respective carrying values due to their short-term duration and therefore, such market risk is not considered to be material.

We do not actively invest or trade in equity securities. In addition, we generally dispose of any significant equity securities received in conjunction with an acquisition shortly after the acquisition date.

As of ~~September 30, 2021,~~March 31, 2022, we had ~~$507.5~~$826.3 million of borrowings outstanding under our various credit agreements, all of which bear interest on a floating basis tied to the Overnight London Interbank Offered Rate (“LIBOR”) and are therefore subject to changes in the associated interest expense. The effect of an immediate hypothetical 10% change in interest rates would not have a material effect on our Consolidated Financial Statements. As of July 2017, the UK Financial Conduct Authority (“FCA”) has urged banks and institutions to discontinue their use of the LIBOR benchmark rate for floating rate debt, and other financial instruments tied to the rate after 2021. However, on November 30, 2020, the ICE Benchmark Administration Limited (“IBA”), announced that it would consult in early December 2020 on its intention to cease the publication of the one-week and two-month U.S. dollar LIBOR settings immediately following the LIBOR publication on December 31, 2021, and the remaining U.S. dollar LIBOR settings (overnight and one, three, six and 12 months) immediately following the LIBOR publication on June 30, 2023. In connection to the released statement from the IBA, on December 4, 2020, the FCA released a similar statement in support of the continuation of the LIBOR rate beyond 2021. The Alternative Reference Rates Committee (“ARRC”) have recommended the Secured Overnight Financing Rate (“SOFR”) as the best alternative rate to LIBOR post discontinuance and has proposed a transition plan and timeline designed to encourage the adoption of SOFR from LIBOR. Post consultation on March 5, 2021, IBA confirmed its proposed dates to stop publishing the London interbank offered rate for Dollars ("USD ~~LIBOR~~LIBOR") on a representative basis.

~~The~~When the Company ~~is currently evaluating~~entered into the Second Amended and Restated Credit on October 27, 2021, it included provisions regarding transition from LIBOR ~~as an~~to SOFR in preparation of the LIBOR cessation. On March 31, 2022, the Company entered into the Loan Agreement which will bear interest ~~rate benchmark to other potential alternative reference rates, including but not limited~~tied to the ~~SOFR interest rate. Management~~annual rate for the adjusted secured overnight financing rate ("Adjusted Term SOFR"). In the coming periods, the Company will ~~continue~~assess any other current agreements with benchmark rates tied to ~~actively assess the related opportunities and risks associated with the transition and monitor related proposals and guidance published by ARRC and other alternative-rate initiatives,~~LIBOR with an expectation that the Company will be prepared for a termination of LIBOR benchmarks ~~after 2021.~~prior to June 30, 2023 when typical rate settings will no longer be available.

We are subject to operational exchange rate risk ~~primarily~~ in ~~our~~the following currencies, Canadian dollar, British Sterling and Euros. Our U.K.-based wholesale brokerage business ~~that~~ has a cost base principally denominated in British pounds and a revenue base in several other currencies, but principally in U.S. ~~dollars, and in our~~dollars. Our Canadian MGA business ~~that~~ has substantially all of its revenues and cost base denominated in Canadian ~~Dollars, and in our Ireland-based~~dollars. Our Irish retail brokerage ~~business which~~operations has substantially all of its revenue and cost base in Euros.

Based upon our foreign currency rate exposure as of ~~September 30, 2021,~~March 31, 2022, an immediate 10% hypothetical change of foreign currency exchange rates would not have a material effect on our Condensed Consolidated Financial Statements.

We carried out an evaluation (the “Evaluation”) required by Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15 and 15d-15 under the Exchange Act (“Disclosure Controls”) as of ~~September 30, 2021.~~March 31, 2022. Based upon the Evaluation, our CEO and CFO concluded that the design and operation of our Disclosure Controls were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) accumulated and communicated to our senior management, including our CEO and CFO, to allow timely decisions regarding required disclosures.effective.

There has not been any change in our internal control over financial reporting identified in connection with the Evaluation that occurred during the quarter ended ~~September 30, 2021,~~March 31, 2022, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Our management, including our CEO and CFO, does not expect that our Disclosure Controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple

error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.

The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, a control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Exhibits 31.1 and 31.2 are the Certifications of the CEO and the CFO, respectively. The Certifications are supplied in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (the “Section 302 Certifications”). This Item 4 of Part I of this Quarterly Report on Form 10-Q contains the information concerning the evaluation referred to in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.

In Item 3 of Part I of the Company’s Annual Report on Form 10-K for its fiscal year ended December 31, ~~2020,~~2021, certain information concerning litigation claims arising in the ordinary course of business was disclosed. Such information was current as of the date of filing. During the Company’s fiscal quarter ended ~~September 30, 2021,~~March 31, 2022, no new legal proceedings, or material developments with respect to existing legal proceedings, occurred which require disclosure in this Quarterly Report on Form 10-Q.

There were no material changes in the risk factors previously disclosed in Item 1A, “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

The following table provides information about our repurchase of shares of our common stock during the three months ended ~~September 30, 2021:~~March 31, 2022:

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Florida				59-0864469
(State or other jurisdiction of incorporation or organization)				(I.R.S. Employer Identification Number)
300 North Beach Street, Daytona Beach, FL				32114
(Address of principal executive offices)				(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.10 Par Value	BRO	New York Stock Exchange





		PAGE NO.
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited):
	Condensed Consolidated Statements of Income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~	5
	Condensed Consolidated Statements of Comprehensive Income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~	6
	Condensed Consolidated Balance Sheets as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021	7
	Condensed Consolidated Statements of Equity for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~	8
	Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~	109
	Notes to Condensed Consolidated Financial Statements	1110

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2526
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42
Item 4.	Controls and Procedures	42

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	44
Item 1A.	Risk Factors	44
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 6.	Exhibits	45
SIGNATURE		46


	September 30, 2021									December 31, 2020									March 31, 2022									December 31, 2021
(in thousands)	Gross carrying value		Accumulated amortization			Net carrying value		Weighted average life (years) (1)		Gross carrying value		Accumulated amortization			Net carrying value		Weighted average life (years) (1)
(in millions)																			Gross carrying value		Accumulated amortization			Net carrying value		Weighted average life (years) (1)		Gross carrying value		Accumulated amortization			Net carrying value		Weighted average life (years) (1)
Purchased customer accounts	$	2,249,514	$	(1,207,247	)	$	1,042,267		15.0	$	2,164,968	$	(1,118,316	)	$	1,046,652		15.0	$	2,432.0	$	(1,266.0	)	$	1,166.0		14.7	$	2,311.6	$	(1,235.3	)	$	1,076.3		14.9
Non-compete agreements		36,080		(33,067	)		3,013		4.4		35,093		(32,085	)		3,008		4.6		37.9		(32.9	)		5.0		4.5		37.6		(32.4	)		5.2		4.5
Total	$	2,285,594	$	(1,240,314	)	$	1,045,280			$	2,200,061	$	(1,150,401	)	$	1,049,660			$	2,469.9	$	(1,298.9	)	$	1,171.0			$	2,349.2	$	(1,267.7	)	$	1,081.5


(in thousands)	September 30, 2021			December 31, 2020
(in millions)							March 31, 2022			December 31, 2021
Current portion of long-term debt:
Current portion of 5-year term loan facility expires 2022	$	260,000		$	40,000
Current portion of 5-year term loan facility expires 2026							$	12.5		$	12.5
Current portion of 5-year term loan facility expires 2023		30,000			30,000			30.0			30.0
Total current portion of long-term debt		290,000			70,000			42.5			42.5
Long-term debt:
Note agreements:
4.200% senior notes, semi-annual interest payments, net of the unamortized discount, balloon due 2024	$	499,534		$	499,416		$	499.6		$	499.5
4.500% senior notes, semi-annual interest payments, net of the unamortized discount, balloon due 2029		349,582			349,540			349.6			349.6
2.375% senior notes, semi-annual interest payments, net of the unamortized discount, balloon due 2031		699,306			699,252			699.3			699.3
4.200% senior notes, semi-annual interest payments, net of the unamortized discount, balloon due 2032								597.9			0
4.950% senior notes, semi-annual interest payments, net of the unamortized discount, balloon due 2052								591.8			0
Total notes		1,548,422			1,548,208			2,738.2			1,548.4
Credit agreements:
5-year term-loan facility, periodic interest and principal payments, LIBOR plus up to 1.750%, expires June 28, 2022		0			250,000
5-year revolving-loan facility, periodic interest payments, LIBOR plus up to 1.500%, plus commitment fees up to 0.250%, expires June 28, 2022		—			—
5-year term-loan facility, periodic interest and principal payments, LIBOR plus up to 1.750%, expires October 27, 2026								231.3			234.4
5-year revolving-loan facility, periodic interest payments, LIBOR plus up to 1.525%, plus commitment fees up to 0.225%, expires October 27, 2026								350.0			0
5-year term-loan facility, periodic interest and principal payments, LIBOR plus up to 1.750%, expires December 21, 2023		217,500			240,000			202.5			210.0
Total credit agreements		217,500			490,000			783.8			444.4
Debt issuance costs (contra)		(10,435	)		(12,302	)		(24.9	)		(12.4	)
Total long-term debt less unamortized discount and debt issuance costs		1,755,487			2,025,906			3,497.1			1,980.4
Current portion of long-term debt		290,000			70,000			42.5			42.5
Total debt	$	2,045,487		$	2,095,906		$	3,539.6		$	2,022.9


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐


(in thousands)	O'Leary			Piper		Berkshire			AGIS		Other			Total
Cash	$	45,441		$	—	$	—		$	—	$	693		$	46,134
Other current assets		43,354			2,397		1,621			520		5,060			52,952
Fixed assets		544			9		9			20		4			586
Goodwill		84,649			40,019		27,563			21,888		2,539			176,658
Purchased customer accounts		40,459			12,233		12,313			13,577		7,271			85,853
Non-compete agreements		819			21		11			51		109			1,011
Other assets		135			—		—			—		259			394
Total assets acquired		215,401			54,679		41,517			36,056		15,935			363,588
Other current liabilities		(72,683	)		—		(17	)		—		(4,013	)		(76,713	)
Deferred income tax, net		(5,057	)		—		—			—		—			(5,057	)
Other liabilities		(13	)		—		—			—		—			(13	)
Total liabilities assumed		(77,753	)		—		(17	)		—		(4,013	)		(81,783	)
Net assets acquired	$	137,648		$	54,679	$	41,500		$	36,056	$	11,922		$	281,805


Weighted-average remaining lease term	~~6.27~~6.44
Weighted-average discount rate	~~2.86~~2.62	%


(in thousands)	Operating leases
2021 (Remainder)	$	10,413
2022		49,792
2023		41,772
2024		34,963
2025		28,608
Thereafter		67,616
Total undiscounted lease payments		233,164
Less: Imputed interest		18,496
Present value of lease payments	$	214,668


(in millions)	Operating leases
2022 (Remainder)	$	37.0
2023		47.5
2024		40.6
2025		33.7
2026		24.7
Thereafter		63.1
Total undiscounted lease payments		246.6
Less: Imputed interest		16.5
Present value of lease payments	$	230.1



(in millions)	March 31, 2022		December 31, 2021
Table to reconcile restricted and non-restricted fiduciary cash
Restricted fiduciary cash	$	572.5	$	583.2
Non-restricted fiduciary cash		159.1		193.8
Total restricted and non-restricted fiduciary cash at the end of the period	$	731.6	$	777.0


	Three months ended September 30, 2020
(in thousands)	Retail		National Programs		Wholesale Brokerage		Services		Other			Total
Total revenues	$	359,473	$	168,018	$	101,239	$	43,497	$	1,735		$	673,962
Investment income	$	19	$	205	$	45	$	0	$	80		$	349
Amortization	$	16,624	$	7,100	$	1,945	$	1,390	$	0		$	27,059
Depreciation	$	2,347	$	2,300	$	548	$	355	$	1,097		$	6,647
Interest expense	$	20,519	$	5,335	$	2,488	$	1,004	$	(16,112	)	$	13,234
Income before income taxes	$	56,057	$	47,171	$	35,038	$	6,041	$	14,221		$	158,528
Total assets	$	6,583,606	$	3,530,345	$	1,646,287	$	467,889	$	(3,432,748	)	$	8,795,379
Capital expenditures	$	5,232	$	2,203	$	1,170	$	584	$	10,693		$	19,882


(in thousands)	Cost		Gross unrealized gains		Gross unrealized losses			Fair value
(in millions)										Cost		Gross unrealized gains		Gross unrealized losses			Fair value
U.S. Treasury securities, obligations of U.S. Government agencies and municipalities	$	31,756	$	239	$	(172	)	$	31,823	$	30.2	$	0.1	$	(1.2	)	$	29.1
Corporate debt		8,288		160		(23	)		8,425		8.2		—		(0.2	)		8.0
Total	$	40,044	$	399	$	(195	)	$	40,248	$	38.4	$	0.1	$	(1.4	)	$	37.1


	Less than 12 Months					12 Months or More					Total					Less than 12 Months					12 Months or More					Total
(in thousands)	Fair value		Unrealized losses			Fair value		Unrealized losses			Fair value		Unrealized losses
(in millions)																Fair value		Unrealized losses			Fair value		Unrealized losses			Fair value		Unrealized losses
U.S. Treasury securities, obligations of U.S. Government agencies and municipalities	$	15,987	$	(141	)	$	969	$	(31	)	$	16,956	$	(172	)	$	8.7	$	(0.5	)	$	10.3	$	(0.7	)	$	19.0	$	(1.2	)
Corporate debt		2,929		(23	)		0		0			2,929		(23	)		5.8		(0.2	)		0		0			5.8		(0.2	)
Total	$	18,916	$	(164	)	$	969	$	(31	)	$	19,885	$	(195	)	$	14.5	$	(0.7	)	$	10.3	$	(0.7	)	$	24.8	$	(1.4	)


(in thousands)	Amortized cost		Fair value
(in millions)					Amortized cost		Fair value
Years to maturity:
Due in one year or less	$	8,801	$	8,899	$	12.0	$	12.1
Due after one year through five years		30,243		30,379	$	25.4	$	24.1
Due after five years		1,000		970	$	1.0	$	0.9
Total	$	40,044	$	40,248	$	38.4	$	37.1


	Nine months ended September 30,
(in thousands)	Written			Earned
Direct premiums	$	577,348		$	543,712
Ceded premiums		(577,332	)		(543,696	)
Net premiums	$	16		$	16


2021	Retail (1)						National Programs						Wholesale Brokerage						Services					Total
(in thousands, except percentages)	2021			2020			2021			2020			2021			2020			2021			2020		2021			2020
2022																														Retail (1)						National Programs						Wholesale Brokerage						Services						Total
(in millions, except percentages)																														2022			2021			2022			2021			2022			2021			2022			2021			2022			2021
Commissions and fees	$	422,667		$	359,022		$	190,920		$	167,802		$	112,335		$	101,075		$	43,732		$	43,497	$	769,654		$	671,396		$	595.9		$	521.7		$	162.1		$	154.6		$	102.7		$	90.7		$	43.6		$	47.0		$	904.3		$	814.0
Total change	$	63,645					$	23,118					$	11,260					$	235				$	98,258					$	74.2					$	7.5					$	12.0						(3.4	)				$	90.3
Total growth %		17.7	%					13.8	%					11.1	%					0.5	%				14.6	%					14.2	%					4.9	%					13.2	%					(7.2	)%					11.1	%
Profit-sharing contingent commissions		(8,705	)		(6,359	)		(6,499	)		(5,499	)		(2,414	)		(1,881	)		—			—		(17,618	)		(13,739	)		(17.9	)		(15.7	)		(8.0	)		(8.3	)		(2.7	)		(1.9	)		—			—			(28.6	)		(25.9	)
GSCs		(4,454	)		(3,591	)		(549	)		(182	)		(401	)		(623	)		—			—		(5,404	)		(4,396	)
Core commissions and fees	$	409,508		$	349,072		$	183,872		$	162,121		$	109,520		$	98,571		$	43,732		$	43,497	$	746,632		$	653,261		$	578.0		$	506.0		$	154.1		$	146.3		$	100.0		$	88.8		$	43.6		$	47.0		$	875.7		$	788.1
Acquisitions		(32,662	)		—			—			—			(5,873	)		—			—			—		(38,535	)		—			(28.3	)		—			(0.1	)		—			(0.9	)		—			—			—			(29.3	)		—
Dispositions		—			(1,014	)		—			—			—			—			—			—		—			(1,014	)		—			(0.7	)		—			(1.2	)		—			—			—			(0.5	)		—			(2.4	)
Foreign currency translation		—			—			—			262			—			—			—			—		—			262			—			(0.7	)		—			—			—			—			—			—			—			(0.7	)
Organic Revenue (2)	$	376,846		$	348,058		$	183,872		$	162,383		$	103,647		$	98,571		$	43,732		$	43,497	$	708,097		$	652,509		$	549.7		$	504.6		$	154.0		$	145.1		$	99.1		$	88.8		$	43.6		$	46.5		$	846.4		$	785.0
Organic Revenue growth (2)	$	28,788					$	21,489					$	5,076					$	235				$	55,588					$	45.1					$	8.9					$	10.3					$	(2.9	)				$	61.4
Organic Revenue growth rate (2)		8.3	%					13.2	%					5.1	%					0.5	%				8.5	%					8.9	%					6.1	%					11.6	%					(6.2	)%					7.8	%


	Payments Due by Period										Payments Due by Period
(in thousands)	Total		Less than 1 year		1-3 years		4-5 years		After 5 years
(in millions)											Total		Less than 1 year		1-3 years		4-5 years		After 5 years
Long-term debt	$	2,057,500	$	290,000	$	717,500	$	—	$	1,050,000	$	3,576.3	$	42.5	$	746.3	$	537.5	$	2,250.0
Other liabilities (1)		189,249		43,051		33,321		10,185		102,692		175.9		28.2		20.4		12.0		115.3
Operating leases (2)		245,316		48,375		83,494		55,619		57,828		266.7		50.7		90.2		59.9		65.9
Interest obligations		347,278		60,308		109,381		64,750		112,839		1,474.6		115.9		215.6		180.2		962.9
Unrecognized tax benefits		881		—		881		—		—		1.6		—		1.6		—		—
Maximum future acquisition contingency payments (3)		512,873		131,057		381,816		—		—		452.3		80.0		372.3		—		—
Total contractual cash obligations (4)	$	3,353,097	$	572,791	$	1,326,393	$	130,554	$	1,323,359	$	5,947.4	$	317.3	$	1,446.4	$	789.6	$	3,394.1


	Total number of shares purchased (1)		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs (2)		Maximum value that may yet be purchased under the plans or programs (3)
July 1, 2021 to July 31, 2021		43,543	$	52.60		21,795	$	323,622,993
August 1, 2021 to August 31, 2021		2,223		55.71		—		323,622,993
September 1, 2021 to September 30, 2021		1,074		58.73		—		323,622,993
Total		46,840	$	52.89		21,795	$	323,622,993


1.1		Underwriting Agreement, dated as of March 14, 2022, among Brown & Brown, Inc. and J.P. Morgan Securities LLC, BofA Securities, Inc., BMO Capital Markets Corp. and Truist Securities, Inc., as representatives of the several underwriters named therein (incorporated by reference to Exhibit 1.1 to Form 8-K filed on March 15, 2022).

3.1		Articles of Amendment to the Articles of Incorporation (incorporated by reference to Exhibit 3.1 to Form 8-K filed on March 29, 2018), Articles of Amendment to Articles of Incorporation (adopted April 24, 2003) (incorporated by reference to Exhibit 3a to Form 10-Q for the quarter ended March 31, 2003) and Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3a to Form 10-Q for the quarter ended March 31, 1999).

3.2		By-Laws (incorporated by reference to Exhibit 3.2 to Form 8-K filed on October 12, 2016).

4.1		Fourth Supplemental Indenture, dated as of March 17, 2022, between Brown & Brown, Inc. and U.S. Bank Trust Company, National Association (as successor to U.S. Bank National Association) (incorporated by reference to Exhibit 4.2 to Form 8-K filed on March 17, 2022).

4.2		Form of Brown & Brown, Inc.’s 4.200% Notes due 2032 (incorporated by reference to Exhibit 4.3 to Form 8-K filed on March 17, 2022).

4.3		Form of Brown & Brown, Inc.’s 4.950% Notes due 2052 (incorporated by reference to Exhibit 4.4 to Form 8-K filed on March 17, 2022).

10.1*		Majority Share Purchase Agreement, dated March 7, 2022, between the Company, Brown & Brown UK Holdco Limited, GRP (Jersey) Topco Limited and certain other parties named therein.

10.2*		Loan Agreement, dated March 31, 2022, between the Company and the lenders named therein, BMO Harris Bank N.A., as administrative agent, Fifth Third Bank, National Association, PNC Bank, National Association, U.S. Bank National Association and Wells Fargo Bank, National Association, as co-syndication agents, BMO Capital Markets Corp., BofA Securities, Inc., JPMorgan Chase Bank, N.A. and Truist Securities, Inc., as joint bookrunners and joint lead arrangers.

10.3**		Form of Performance Stock Award Agreement under the 2019 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to Form 8-K filed on February 23, 2022).

10.4**		Form of Restricted Stock Unit Agreement under the 2019 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to Form 8-K filed on February 23, 2022).

31.1		Rule 13a-14(a)/15d-14(a) Certification by the Chief Executive Officer of the Registrant.

31.2		Rule 13a-14(a)/15d-14(a) Certification by the Chief Financial Officer of the Registrant.

32.1		Section 1350 Certification by the Chief Executive Officer of the Registrant.

32.2		Section 1350 Certification by the Chief Financial Officer of the Registrant.

101		The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2021,~~March 31, 2022, formatted in inline XBRL, include: (i) Condensed Consolidated Statements of Income, (ii) Condensed Consolidated Balance Sheets, (iii) Condensed Consolidated Statements of Equity, (iv) Condensed Consolidated Statements of Cash Flows and (v) the Notes to the Condensed Consolidated Financial Statements.

104		Cover Page Interactive Data File (formatted in inline XBRL and included in Exhibit 101).


		BROWN & BROWN, INC.

		/s/ R. Andrew Watts
Date: ~~October 26, 2021~~May 9, 2022		R. Andrew Watts
		Executive ~~Vice President, Chief Financial Officer~~vice president, chief financial officer and ~~Treasurer~~treasurer
		(duly authorized officer, principal financial officer and principal accounting officer)