Brown & Brown

Brown & Brown benefits from multiple, mutually reinforcing advantages. Switching costs are meaningful: mid‑market and specialty clients embed the broker into annual renewal, risk engineering, claims advocacy, regulatory navigation, and program design.

Those human and data relationships are not trivial to replicate, particularly in complex commercial lines. Scale and efficient distribution increase access to markets, speed to quote, and negotiating leverage with carriers, while programs (MGU) provide niche underwriting expertise and fee economics less dependent on the market cycle.

Brand and trust matter in insurance placement and claims resolution, where reputational capital and carrier relationships accumulated over decades are hard to copy. There is a mild marketplace effect between clients and carriers but it is not a pure network effect.

Risks to the moat include digital disintermediation in simple personal and very small commercial lines, and carrier consolidation. Brown & Brown’s breadth across retail, wholesale, and programs, global footprint of 700+ locations and 23,000+ teammates, and consistent organic growth indicate a durable, if not impregnable, moat.

Pricing power is indirect because revenue is primarily commissions and fees tied to premium rates and exposures.

Brown & Brown cannot simply “name a price,” yet it captures value through mix shift to specialty lines and programs with higher margins, service fees, and contractual annual escalators. 2024 organic growth was 10.4%, aided by firm to moderately firm pricing in many lines; Q3‑25 organic growth of 3.5% reflects integration and some normalizing rate momentum.

Over long cycles, brokers have demonstrated the ability to hold or expand take‑rates with increasing complexity and service depth. Latent pricing power also exists in the ability to bundle risk services and analytics into programs. Constraints include competitive pressure in standard lines and rate softening in some markets.

The business model is highly recurring with policy renewals creating a steady baseline.

Multi‑cycle performance shows consistent growth in commissions and fees, limited working capital demands, and low capex. 2024 delivered 12.9% total revenue growth and 10.4% organic, with EBITDAC‑adjusted margin expansion, while 2025 YTD maintained positive organic growth despite integration costs for Accession.

The company’s diversified segment mix (Retail, Programs, Wholesale Brokerage, Services) and geographic breadth dampen volatility. Exposure to macro shocks is mitigated by insurance’s non‑discretionary nature for most customers.

Key unpredictability drivers are rate‑cycle turns, weather‑related impacts on contingent commissions, and integration timing on large acquisitions, but these typically affect magnitude rather than direction of growth.

Brown & Brown’s balance sheet shifted in 2025 to fund the Accession acquisition with new senior notes and a follow‑on equity offering. As of Q3‑25, long‑term debt stood near 7.65 billion (plus 75 million current), and interest expense increased accordingly; however, trailing operating cash flow exceeds 1.3 billion and capex needs are minimal.

On our estimates, net debt to TTM FCF is roughly mid‑to‑high 5s, with a clear path to delever through organic cash generation while funding moderate buybacks and dividends. The board also authorized up to 1.5 billion in repurchases, providing flexibility to counter 2025 issuance over time.

Primary risks are a faster‑than‑expected softening of premium rates and slower synergy capture from Accession.

Brown & Brown’s long record of high‑ROIC tuck‑ins continued with a step‑change acquisition in 2025: Accession. Management pre‑funded the deal with debt and equity to minimize closing risk, accepted near‑term integration costs, and outlined synergy levers across retail, wholesale, and programs.

The firm couples reinvestment with a conservative but rising dividend (32 consecutive annual increases) and, as of October 2025, a 1.5 billion repurchase authorization. Historically, capex has been de minimis and internal investments focus on talent, systems, and analytics.

Watchpoints: disciplined pricing for large M&A, integration execution, and avoiding permanent dilution. Early signals, including measured buyback authorization post‑deal and robust cash conversion, are favorable.

Founder‑influenced, owner‑oriented stewardship is a core strength. Chairman J. Hyatt Brown and CEO J. Powell Brown have cultivated a decentralized, performance‑driven culture that has compounded value for decades.

Management’s communication is conservative, with clear disclosures on organic growth, integration costs, and cash conversion, and a track record of integrating numerous acquisitions across cycles. The team has deep industry credibility and recently broadened leadership with seasoned operators in key segments.

Risks include key‑person dependence and the need to maintain culture as scale expands, but the organization’s bench and incentives appear aligned with long‑term compounding.