브라운 앤 브라운(BRO) 2026년 3분기 실적 발표 콘퍼런스 콜: 액세션 시너지 목표 상향

핵심 요약

• 브라운 앤 브라운의 2026년 3분기 매출은 17억 달러로, 전년 동기 대비 7.4% 증가했다. 자체 매출 성장률은 1.2%였으며, 자체 약정 수수료 포함 시 1.5%를 기록했다.
• 조정 EBITDAC은 1.7% 증가했으나, 조정 EBITDAC 마진은 200bp 하락한 34.6%를 기록했다. 마진 하락폭의 절반 이상은 약 2,900만 달러의 이자 수익 감소를 반영한 것이다.
• 조정 희석 EPS는 1.9% 증가한 1.07달러를 기록했다. 2026년 첫 9개월간 영업활동 현금흐름은 13% 증가한 11억 달러를 기록했다.
• 리테일 부문의 자체 매출 성장률은 2.6%로 개선되었으나, 전문 유통 부문의 자체 매출은 0.8% 감소했다. 이는 대형 재해 재산보험 가격 하락, E&S 시장에서 인가 시장으로의 이동, 타이밍 관련 매출 지연에 기인한다.
• 브라운 앤 브라운은 2026년 예상 어세션 EBITDAC 시너지를 약 5,000만 달러로 상향 조정했으며, 2028년 말 기준 런레이트 순시너지 목표를 1억 7,500만 달러로 기존 1억 5,000만 달러에서 상향했다.
• 경영진은 약정 수수료를 제외한 4분기 자체 매출 성장률에 대해 리테일 부문은 2%~3% 증가, 전문 유통 부문은 2%~4% 감소할 것으로 예상하고 있다. 2027년 예비 전망치는 두 부문 모두에서의 개선 가능성을 나타낸다.

주요 재무 데이터

이사회는 배당금 또한 9% 인상하며 브라운 앤 브라운(Brown & Brown)의 33년 연속 연간 배당 인상을 기록했다.

사업 및 영업 실적

리테일 부문

리테일 부문 매출은 10.8% 증가했으며, 이는 인수합병과 자체 성장에 힘입은 결과다. 자체 매출은 2.6% 상승했고, 자체 조건부 수수료 포함 시 2.5%를 기록했다. 경영진은 순신규 사업 강화, 복리후생, 채권 사업 및 팀 간 협업 증대를 주요 요인으로 꼽았다.

해당 부문의 조정 EBITDAC 마진은 10베이시스포인트(bp) 확대되었으며, 이는 비용 규율 준수, 어세션 매출 인식 시점 및 시너지 효과가 반영된 결과다.

신생 중개업체로 이직한 인력과 관련된 당기 자체 매출 조정액은 1,600만 달러였으며, 경영진은 2026년 전체에 미칠 영향 추정치를 기존 5,000만 달러~6,000만 달러 수준으로 유지했다.

스페셜티 유통 부문

스페셜티 유통 부문 매출은 8.5% 증가했으며, 이는 주로 어세션의 영향이다. 자체 매출은 0.8% 감소했으나, 자체 조건부 수수료 포함 시 0.3% 증가했다. 조정 EBITDAC 마진은 60베이시스포인트 하락한 43.3%였다.

경영진은 자체 실적 부진의 원인으로 다음과 같은 요인들을 꼽았다:

• 캘리포니아와 텍사스를 포함해 기존에 E&S(초과 및 잉여) 시장에 인수되던 계약을 인가 보험사(Admitted carriers)가 더 많이 인수했다.
• E&S 재산보험 요율이 하락했다15%~35%.
• 상업용 지진 보험 요율과 조건은 가용 담보 여력 증가로 인해 추가적인 하락 압력에 직면했습니다.
• 이전 분기에서 이월된 1,000만 달러 규모의 대출자 지정(lender-placed) 매출 항목은 또 다른 포트폴리오의 온보딩 지연으로 상쇄되었습니다. 회사는 해당 대출 건들이 2027년 중 온보딩될 것으로 예상하고 있습니다.
• 폭풍 발생이 적은 계절적 요인으로 홍수 손해사정 청구 처리 매출이 감소했습니다.
• 유럽 도매(wholesale) 역량 강화를 위한 투자 비용이 마진에 부담을 주었습니다.

배상책임 중개, 전문인 배상책임 및 공공기관 프로그램 분야의 성장은 플러스 상태를 유지했습니다. 또한 요율 하락에 따른 매출 압박에도 불구하고 일부 대형 재해 위험 노출 사업 부문의 증권 수(가입 건수)는 증가했습니다.

액세션(Accession) 통합

액세션은 약 17억 달러의 매출을 브라운 앤 브라운(Brown & Brown) 체제에서의 첫해 동안 기록했습니다. 경영진은 마진 및 희석주당순이익(EPS) 기여도가 대체로 예상치에 부합했다고 밝혔습니다.

2026년 예상 EBITDAC 시너지 수치는 약 5,000만 달러로 증가해 기존 전망치인 3,000만~4,000만 달러를 상회했습니다. 브라운 앤 브라운은 현재 2028년 말까지 연간 환산 기준 1억 7,500만 달러의 순 EBITDAC 시너지를 달성하는 것을 목표로 하고 있으며, 이는 기존 1억 5,000만 달러에서 상향 조정된 수치입니다.

예상 통합 비용은 2억 5,000만~3억 달러로 기존 2억~2억 5,000만 달러에서 상향되었습니다. 이와 별도로 약 9,000만 달러의 사전 자금 조달 부채성 항목이 GAAP에 따라 해당 범위 밖에서 비용으로 처리될 예정입니다.

보험 요율 및 AI

경영진은 원수 배상책임(primary casualty) 요율이 일반적으로 2%~5% 인상된 반면, 비재해 재산보험 가격은 보합에서 최대 5% 하락했다고 밝혔습니다. 직원 의료보험 요율은 9%~11% 인상되었으며, 이는 고액 청구자와 의료비 지출 증가에 기인한 것입니다.

브라운 앤 브라운은 앤스로픽(Anthropic)의 클로드(Claude)를 6,000명 이상의 임직원에게 도입했으며, 90% 이상이 해당 플랫폼을 활발히 사용하고 있습니다. 브라운 앤 브라운의 콤파스(Compass) 생태계는 AI 기능, 자체 데이터, 리테일 부문의 전문 지식을 결합하고 있습니다. 경영진은 콤파스 기반 도구가 연말까지 수천 명의 직원에게 보급될 것으로 예상하며, 2027년에는 추가적인 고객 솔루션이 계획되어 있습니다.

경영진 가이던스

전문 유통 부문 조건부 수수료는 감소할 것으로 예상된다 4분기에 전년 동기 대비 1,400만 달러에서 1,600만 달러, 이는 전년도의 긍정적인 발생액 조정과 올해 예상되는 하향 조정을 반영한 결과다.

경영진은 또한 부문별 성장 가이던스와 조건부 수수료 압박을 고려할 때, 4분기 연결 조정 EBITDAC 마진이 전년 대비 하락할 것으로 예상하고 있다. 실적발표회 중 2027년 마진 가이던스는 제공되지 않았다.

리스크 및 관전 포인트

• 대형 재해 재산보험 가격 책정은 지속적으로 압박을 받고 있다. 경영진은 2027년 대형 재해 재산보험 요율이 10%~20%, 상단에 가까울 가능성이 있다고 보았으나, 브라운 앤 브라운(Brown & Brown)은 예산안에서 이 가정을 최종 확정하지는 않았다.
• 초과 및 잉여 보험(E&S)에서 인가 보험사로 고객 계정이 지속적으로 이동함에 따라 도매 및 위임 인수 매출에 부담을 줄 수 있다.
• 채권자 임의가입(Lender-placed) 포트폴리오 편입은 시기와 물량 변동의 영향을 받는다.
• 일부 프로그램의 수익성이 하락함에 따라 2027년 전문 유통 부문 조건부 수수료는 하향 압력에 직면할 수 있다.
• 상당한 가격 변동 속에서 소매 고객 이탈이 소폭 증가했으나, 경영진은 고객 유지율이 정상 범위 내에 머물렀다고 밝혔다.
• 스타트업 브로커 분쟁 관련 일부 매출 영향이 2027년까지 이어질 수 있으며, 소송 진행 시기는 여전히 불확실하다.
• 남은 악세시온(Accession) 통합 작업에는 소매 시스템, 사무실 통합 및 추가 전문 유통 결합이 포함된다.

애널리스트 Q&A 주요 내용

경영진은 2027년 전문 유통 부문의 회복 기대가 재보험, MGU(전무 인수기관), 어피니티(affinity) 및 캡티브 관리 사업과 지연된 채권자 임의가입 매출에 의해 뒷받침될 것이라고 밝혔다. 이러한 요인들은 대형 재해 프로그램 및 도매 시장의 지속적인 압박을 상쇄할 것으로 전망된다.

자체 성장에 대해 경영진은 가격 하락이 본질적인 영업 활동을 가릴 수 있다고 강조했다. 브라운 앤 브라운은 여러 프로그램에서 증권 수 증가와 지속적인 신규 계약 창출을 확인하고 있으나, 매출은 요율, 피보험 노출액, 보장 한도 및 공제금(deductibles)의 영향도 받는다.

경영진은 악세시온 영업인력의 유지율이 브라운 앤 브라운의 전체 조직 수준을 유지하고 있다고 전했다. 경영진은 대규모 통합이 일시적으로 팀의 집중력을 떨어뜨릴 수 있음을 인정하면서도, 가장 어려운 작업은 이제 대부분 완료되었다고 말했다.

자본 배분과 관련해 브라운 앤 브라운은 자체 투자, 자사주 매입, 부채 감축, 선별적 M&A라는 우선순위를 재확인했다. 경영진은 회사가 지난 1년간 8억 5,000만 달러 규모의 자사주를 매입한 동시에 다가오는 부채 상환 의무도 고려하고 있다고 덧붙였다.

실적발표회 전사록 전문

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전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

Operator

Good morning, and welcome to the Brown & Brown, Inc. third quarter earnings call. Today's call is being recorded. Please note that certain information discussed during this call, including information contained in the slide presentation posted in connection with this call and including answers given in response to your questions, may relate to future results and events or otherwise be forward-looking in nature.

Such statements reflect our current views with respect to future events, including those relating to the company's anticipated financial results for the third quarter. and are intended to fall within the safe harbor provisions of the securities laws. Actual results or events in the future are subject to a number of risks and uncertainties and may differ materially from those currently anticipated or desired or referenced in any forward-looking statements made as a result of a number of factors.

Such factors include the company's determination as it finalizes its financial results for the third quarter that its financial results differ from the current preliminary unaudited numbers set forth in the press release issued yesterday. Other factors that the company may not have currently identified or quantified and those risks and uncertainties identified from time to time in the company's reports filed with the Securities and Exchange Commission.

Additional discussion of these and other factors affecting the company's business and prospects as well as additional information regarding forward-looking statements is contained in the slide presentation posted in connection with this call and in the company's filings with the Securities and Exchange Commission. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

In addition, there are certain non-GAAP financial measures used in this conference call. A reconciliation of any non-GAAP financial measures to the most comparable GAAP financial measure can be found in the company's earnings press release. or in the investor presentation for this call on the company's website at bbrown.com by clicking on Investor Relations and then Calendar of Events.

With that said, I will now turn the call over to Powell Brown, President and Chief Executive Officer. You may begin.

J. Powell Brown

Good morning, everyone, and welcome to our third quarter earnings call. Before we get into our performance for the quarter, we wanted to recognize the 5,000-plus teammates from our Accession acquisition that marked their 1-year anniversary on August 1. It's amazing what we've accomplished over a relatively short period of time, and we look forward to everything we'll accomplish together in the future. A bit later, we'll provide additional color on our accomplishments in the first year of performance. Additionally, we'd like to highlight that last week, our Board of Directors raised our dividend by 9%, which represents an increase for the 33rd year in a row.

Now let's move on to our results for the quarter. In total, our financial -- overall financial performance represented a continuation of the improvement we delivered last quarter. Retail had a good quarter and performed above the top end of our expectations. Specialty distribution had some incremental headwinds and came in below our expectations, which we'll talk about in a few minutes. Our overall improvement was the result of utilizing our robust specializations to win more new business.

I'll provide some comments regarding our performance in the insurance markets and our customers. Then Andy will discuss our financial performance in more detail, including a first year recap of Accession. Lastly, I'll wrap up with some thoughts on our AI journey and closing comments regarding outlook. Then we'll open the call up to Q&A.

I'm on Slide 5. For the third quarter, we delivered revenues of $1.7 billion, growing 7.4% in total. Organic revenue increased 1.2% from the prior year and 1.5% when including organic contingents. Our adjusted EBITDAC margin decreased 200 basis points to 34.6% and our adjusted earnings per share grew nearly 2% to $1.07. Through the first 9 months of 2026, we generated strong cash flow from operations and repurchased $750 million of our shares. That includes $250 million in Q3.

On Slide #6. From an economic and customer investment standpoint, conditions in the third quarter were consistent with the first half of the year. Sentiment remained relatively stable, but varied based on industry and customer size. Some customers were more bullish than others regarding their level of hiring or investments, and we were generally influenced by exposure to inflation and interest rates.

Rate changes this quarter were fairly consistent with the first half of '26. Rates in the mid-market moderated downwards slightly compared with the first half of this year. Casualty and auto rates continue to increase with primary casualty generally up 2% to 5%.

Although the pace of increases for auto moderated slightly in some regions, excess and umbrella layers continue to see the largest increases and capacity continues to tighten for certain classes non-CAT property moderated downward and was generally flat to down 5%. Workers' compensation rates continue to decrease at rates similar to the first half of 2026. Outside the U.S., commercial rates in the U.K., Ireland and the Netherlands remain modestly negative with larger accounts seeing greater decreases than smaller accounts.

Shifting to the E&S market, property rates decreased 15% to 35%, and casualty rates continue to increase a pace similar to the first half with transportation and excess casualty remaining quite difficult to place. For employee benefits, medical rates increased 9% to 11% given -- driven by high-cost claimants and surge in health care costs. Materially higher in medical and pharmacy costs are more pronounced for smaller, fully insured groups. These cost pressures continue to create demand for our advisory and consulting capabilities as customers need to evaluate plan designs, employee contributions and alternative funding arrangements, including self-funded and captive solutions.

Overall, when we step back and look at both the economy and the insurance market, customers are operating with discipline, while overall growth and investment levels remain steady. The insurance market continues to be competitive for many lines, while casualty pressures persist. In these market conditions, we believe our capabilities position us well to win more new business and help our customers navigate this complex landscape.

I'm on Slide #5 (sic) [ Slide #7 ] . Let's transition to the performance of our 2 segments for the third quarter. Retail delivered organic growth of 2.6% and 2.5% when including organic contingents. These growth rates reflect continued incremental improvement in our net new business and good performance within our employee benefits and bond practices. In addition, the growth was driven by the alignment of our teams to enhance collaboration, identify incremental opportunities and generate new business wins that leverage our capabilities.

Turning to Specialty Distribution. Organic revenue growth for the quarter was down 80 basis points and increased 30 basis points, including organic conditions. As we discussed last quarter, we anticipated organic growth of plus 2% to plus 4% for the second half of the year. The third quarter performance was below our expectations due to several factors. First, the desire of admitted carriers to write more business and the abundance of capital drove incrementally more downward pressure during the quarter.

For binding and personal lines accounts we realized incremental movement from the E&S market into the admitted market. As an example, we're seeing admitted carriers now wanting to write in California and Texas. In addition, available capacity drove prices and terms downward even further for certain programs, primarily commercial earthquake. As we've mentioned previously, our disciplined approach to underwriting means we'll walk away from business at certain times with the objective to balance organic growth and profitability.

Second is our lender-placed program. While we did realize the $10 million of revenue delayed from last quarter, this same amount was offset by another delay on onboarding a portfolio of loans. When our customers acquire portfolios, they provide an estimate of loans as well as projected onboarding time lines. Due to size and complexity, the volume and timing can change over quarterly periods. We anticipate onboarding these loans during 2027.

And finally, a quiet storm season resulted in lower than anticipated flood claims processing revenue. Areas where we've delivered growth were in brokerage and programs for casualty, professional liability and public entity lines. Our CAT exposed lines of business -- in our CAT exposed lines of business, we saw increased polities in force even though our revenues declined due to significant rate decreases. Despite specialty distribution facing cyclical headwinds as CAT property rates decline and some policies return to the admitted market, we have a great business.

Its differentiated capabilities, a broad global distribution network and world-class carrier partners. This has enabled our team to deliver double-digit organic growth over the past 5 years organic growth above 8% over the past 10 years. We've been through cycles like this and have confidence that our team knows how to navigate the market for the long-term success.

Now I'll turn it over to Andy to discuss our financials in more detail.

R. Watts

Great. Thanks, Powell. Good morning, everybody. I'll dive deeper into our consolidated results and certain non-GAAP financial measures. As a reminder, when we refer to EBITDAC, EBITDAC margin, income before income taxes for diluted net income per share, we're referring those measures on an adjusted basis.

We delivered total revenues of $1.7 billion, growing 7.4% as compared to the third quarter of 2025. We had another good quarter for contingent commissions that grew by over 8% on an organic basis. Income taxes increased by 1.3% and EBITDAC grew by 1.7%. Our EBITDAC margin was 34.6%, a 200 basis point decrease from the third quarter of the prior year. Over half of this decrease was driven by approximately $29 million of lower interest income as compared to the prior year when we were holding cash for the acquisition of Accession.

Our effective tax rate for the quarter was 25.5%, slightly higher as compared to 24.7% in the third quarter as a result of an increase in state taxes. Diluted net income per share increased by 1.9% to $1.07 with growth slower than revenue due primarily to the higher investment income in the prior year. Lastly, our dividends paid per share increased by 10% as compared to the third quarter of 2025.

Over on Slide #9. Retail segment grew total revenue by 10.8%. This expansion was driven by the combination of acquisition activity during the past year in organic growth. Regarding the litigation impact associated with individuals who left to join th startup broker, current period adjustment to organic revenue was $16 million. Based on currently available information, we are not changing our previously dedicated expected full year impact for 2026 of $50 million to $60 million. Our EBITDAC margin expanded 10 basis points from the third quarter of last year. The increase was driven by disciplined expense management, revenue phasing from Accession and the impact of synergies.

Over on Slide #10. Specialty Distribution grew total revenues by 8.5% driven by the acquisition of Accession. Our EBITDAC margin decreased by 60 basis points to 43.3% due to lower organic growth and investments in our European wholesale capabilities. Moving over on Slide #11. Turning to Accession. The third quarter marked the first anniversary of the acquisition. During the past year, over 5,000 new teammates have become part of the Brown & Brown team. We're pleased with the cultural alignment, financial performance of the business and the progress of our integration efforts.

During the first year, Accession generated approximately $1.7 billion of revenue as well as EBITDAC margins and accretive diluted earnings per share that was substantially in line with our expectations. Regarding our EBITDAC synergies we previously communicated, our full year estimate for 2026 would be in the range of $30 million to $40 million. Based on the efforts of our teammates, we're increasing our full year 2026 expected benefit to approximately $50 million. The incremental synergies reflect strong execution across the organization and include operating efficiencies, enhanced carrier engagement and continued alignment of our go-to-market capabilities. We are now targeting run rate net EBITDAC synergies of $175 million by the end of 2028, up from the $150 million previously anticipated.

Regarding integration costs, when we announced the acquisition, we estimated incurring $200 million to $250 million over the first 3 years. With the higher expected synergies, we are increasing our range to $250 million to $300 million. In addition, GAAP requires that we expense certain prefunded debt-like items that approximate $90 million. As such, they will be recorded incrementally to the $250 million to $300 million.

From an integration standpoint, we have made incredible progress. Key milestones include aligned leadership structures, operating models and brands. We also harmonized teammates benefits and producer compensation. integrated financial and HR systems as well as controls, consolidated offices and selected businesses and refine our carrier engagement strategies. We want to thank all of our teammates for their incredible efforts to achieve these major milestones in the first year.

While substantial work has been completed, and there's still more to do, we believe the hardest part is behind us. We see meaningful opportunities on the horizon as our teams collaborate more closely. We leverage broader capabilities and create new opportunities to serve customers and carrier partners. Pleased with the performance of the session business and teammates for the first year. We also remain confident in our ability to deliver incremental organic growth margin expansion and long-term share value on a company-wide basis.

We've got a few other comments. Transitioning cash flow and the balance sheet. We generated $1.1 billion of cash flow from operations, increasing approximately $135 million or 13% as compared to the first 9 months of 2025. Our ratio of cash flow from operations to total revenues was 22% for the first 9 months and was substantially in line with the prior year. We anticipate continued strong cash generation in the fourth quarter and will balance our deployment of capital between hiring people to help us grow organically, share repurchases, deleveraging and M&A.

Regarding outlook and taking into consideration the improvement we've delivered over the past couple of quarters, we are now anticipating retail's organic growth, excluding contingents to be in the range of 2% to 3% for the fourth quarter. for specialty distribution, based on our earlier comments regarding market headwinds as well as the incremental negative impact of certain nonrecurring and time-and-related items of $8 million to $12 million we're anticipating organic growth excluding contingents to decline 2% to 4% in the fourth quarter.

As it relates to 2027, currently in the process of finalizing our budgets. And based on what we see today, we are expecting improving organic growth, excluding contingents for both divisions. For the retail segment, we're projecting organic growth in the range of 2% to 4% and 1% to 3% for Specialty Distribution segment. Once we finalize the year-end results, we'll clarify or adjust the ranges based on incremental information.

Few other comments regarding contingent commissions within specialty distribution. Taking into consideration accrual adjustments in the fourth quarter of last year and the anticipated adjustments in the fourth quarter of this year we're anticipating our year-over-year contingent commissions for specialty distribution to decrease $14 million to $16 million in the fourth quarter as compared to the fourth quarter of 2025.

With that, let me turn it back over to Powell for an update on our AI initiatives and closing comments.

J. Powell Brown

Thanks, Andy. Good report. We want to update you on the progress of our AI initiatives. 90 days ago, we announced partnership with McKinsey, Accenture and Anthropic to further strengthen our business with an AI-first mindset. This phase has 4 priorities: enhance our technology foundations, further equip our teammates with new skills and tools to evolve how we operate and most importantly, deliver better outcomes and experiences for our customers. Our efforts are surrounded by a responsible framework anchored in strong cybersecurity and governance that was designed to accelerate our years of investment in data, analytics and technology.

Our latest accomplishments include completing a comprehensive assessment of our technology environment, building and governance and cybersecurity structures to the AI use cases and agents operate within clear protocols, clear controls and establish a value management office to measure investments and returns by initiatives. We've also moved quickly to deploy incremental AI capabilities in addition to all teammates having access to copilot over the past year. Just 45 days, we deployed Claude over 6,000 teammates with more than 90% actively using the platform. We're also in the process of rolling out Claude to the next group of teammates.

From an implementation standpoint, we're using AI throughout the insurance placement process across most of the company, including prospecting submissions, claims analysis, analytics and data extraction, just to name a few functions. Our continued experiences and results reinforce our view, AI is not a disruptor to our model, but rather as an accelerator. Everything we've built and will build is to help our teammates serve customers better. This is the idea behind Compass, which we announced in our press release last week.

Compass is a connected intelligent ecosystem that integrates AI-powered capabilities with our proprietary data analytics and specialized knowledge within our retail segment to support important risk management decisions and recommendations. By the end of this year, we expect Compass powered assistance and business intelligence solutions to reach thousands of teammates with an expanded suite of customer solutions planned throughout 2027.

We're bringing out our 2027 plan and will outline it, including investment and related benefits when we release our year-end earnings. To give a preview, we will not announce a multiyear, multi-hundred million dollar program. This landscape is evolving quickly, and we believe the prudent approach is a 1-year measurable tranches that tie the dollars we invest more closely to the returns that we expect.

Now a few final comments. From an economic perspective, we expect conditions in the markets in which we operate remain stable and relatively consistent with what we've seen through the first 9 months of the year. As a result, we expect investment in hiring to continued levels similar to the last few quarters with some companies deferring larger capital investments. As our customers have done in the past, they will navigate current challenges and capture opportunities to deliver growth. From a pricing standpoint, we expect rate changes for most admitted lines for the fourth quarter remain consistent with the third quarter with the potential for some continued slight moderation.

In the E&S market, we're looking at it from 3 perspectives. First, we expect casualty rates to continue increasing. Second, we expect CAT property rates will remain down in the fourth quarter. And please remember, in years with low or no CAT property losses, property markets can do and have done some very unusual pricing at year-end. Third, we expect the admitted market will remain competitive on certain accounts that are currently written in the E&S space.

Our balance sheet and cash flow remains strong, and our capital allocation philosophy is unchanged. We're focused on hiring teammates to help us grow organically, share repurchases, debt reductions and selective M&A with the goal of deploying capital we generate annually to drive long-term shareholder value.

In closing, we're pleased with our progress and accomplishments this quarter. Our focus remains on the customer and disciplined execution. There will be continued headwinds within our wholesale business and CAT property programs. but we believe the diversity of our businesses and our talent leaders will help deliver improving organic growth in 2027. As we continue our AI journey, we will enhance the effectiveness and productivity of our teammates to help deliver better customer outcomes, resulting in incremental organic growth and margin improvement.

Now let me turn it back over to Crystal to open the line for Q&A.

Operator

[Operator Instructions] And our first question will come from Michael Phillips from Oppenheimer.

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Michael Phillips

I wanted to start with specialty, I guess. You're expecting a rebound next year. I think you said 1% to 3%, Andy said. It sounds like -- I'm not sure I understood your opening comments on that, the headwinds that you listed, those sounded to me, at least most of the mix up for the one on the lender-placed program sounded like they may be here to stay for a while. So can you go through whether you agree with that or not? And how you expect the specialty to rebound given those opening comments?

R. Watts

Mike, Andy here. I think when we look out to -- kind of taking into consideration will be some headwinds heading into 2027, we also know that we've got some growth in some businesses for next year. That would include a number of our specialty businesses that came over through the acquisition of Accession. So that includes our reinsurance, MGU, our affinity programs, our captive management programs. They've got good projections next year and that helped drive some growth in the back end of the year, but that's building going into next year.

We've also got some of the timing that we talked about in our lender-placed program, and that business is expected to come on next year. I don't know exactly of the date because some things are moving around there. but that will also help us in moving forward in that business. And we feel comfortable with that growth from those businesses that will help offset the headwinds on the CAT programs as well as wholesale and get us into that low single digits for organic growth.

Michael Phillips

Okay, Andy. Maybe just a little more general question. When you -- in your experience with larger acquisitions, do you ever see maybe a slowdown -- a temporary slowdown in the acquired business organic growth just from maybe broker distraction as they deal with the integration in general? And then have you seen any of that recently with your Accession acquisition at all.

J. Powell Brown

So the short answer -- this is Powell, Mike. The answer at a conceptual level is yes. And as we've said, the performance of the acquired business is in line with the overall business. And now we're one business, so we don't break it out anymore. But the answer is when you're bringing 2 groups together, particularly large organizations, there is a lot going on. So yes, to your first question, the second part is performed some better, similar, some below. It's just like anything else. There's lots of different -- and Andy alluded to several of the businesses that he alluded to in the SD area. Some of those have seasonal growth patterns, and those were not reflected in 2026 because that occurred prior to August of the year. So that's also next year. Thanks, Mike.

R. Watts

Mike, that was why when we listed out the accomplishments that we've done in the last year, that's some serious heavy lifting that we just pulled off in the last 12 months. And so, yes, it did cause some disruption? Yes, probably somewhere inside it when you're moving parts around. But our comment was we think we've got the hardest part behind us. And our view when we go through these acquisitions is try to get it done as quickly as thoughtfully as possible. We still got some more to go, but we'd rather just get it behind us and move forward. And we feel like one united team now, which is really good.

Operator

Our next question will come from Andrew Kligerman from TD Cowen.

Andrew Kligerman

Paul, you talked a little bit about hiring. Could you give us a little color on net hiring and maybe the change in your producer count this year and where you see that going next year?

J. Powell Brown

Yes. So Andrew, a couple of things. One, I want to clarify that we're always looking to hire talented people across the system. You asked specifically about producers, and I'll address that, but we are always looking to hire talented people. And so as you know, we have a stated goal to get to $8 billion of revenue as our next intermediate step. And in order to get there, we're going to either have to hire or acquire a number of very talented people. That's the first thing.

As it relates to numbers specifically, we don't discuss the specifics in terms of numbers, but I would tell you that we are hiring more producers today but that's not new. I'm saying, we are reinforcing and some people have, I think, misinterpreted some of our comments or seemingly and the information was put out that there's some correlation between our statements on talent and retention or something to that effect. Our producer retention inside of our organization -- and remember, we don't talk about Accession anymore post 81, but the retention of our producers in that business prior to the 1-year anniversary and Brown & Brown were very similar. So we're very pleased with a larger acquisition, the retention of those people, that's -- those producers. That's number one.

Number two, Again, there's lots of changes out there, as you know, in the insurance space, which can create opportunities for certain people who may not be happy in other places to come to Brown & Brown. And so we're always talking to people about that. And we've hired a number this quarter, and we'll continue to hire people in the coming quarters. The interesting thing about that, the flip side is that people realize that we have good people, too. So they want to try to hire our people. So we're doing the very best to create a platform for our producers to be the most successful and arm them with the most capabilities to be successful, which in turn enable them to grow personally, financially and otherwise, and help us grow the business.

Andrew Kligerman

Got it, Powell. And I'd like to get a sense also as we look at the specialty business -- or actually just before that, how should I get the sense that net hiring will be up without any particular guidance. And then my next question, my follow-up question is just around the different subsegments of specialty. It sounds like Arrowhead Specialty has the most juice in it as you talked about some of the unique programs there, MPU, reinsurance affinity. I think that's allocated all in Arrowhead specialty. But I'd like to get a little more color on what's going on there? And then maybe a little bit on Arrowhead programs and bridge specialty and how they're doing in terms of growth?

J. Powell Brown

Sure. Okay. So the short answer to question one is, yes, that's the desire. As it relates to 2, the answer is yes, a number of those that we pointed to are in the specialty segment. Let's start with just wholesale for just a moment. Remember, our wholesale business, we have lots of binding authority. We have a good bit of property and casualty and professional. But in there in the binding authority and personal lines in our wholesale space, one of their biggest headwinds is the admitted market continued intrusion into that space.

So as you know, there are certain accounts that I call betweeners or in-betweeners or whatever you want to call it, that typically look more like an E&S account, but in a softening rate environment, admitted carriers will come in and write those. And then when the market stabilizes, typically those flow back into the E&S market. That's the first part.

The second part, as you know, is in the last several years, there have been a lot of challenges in personal lines in places like California and Texas and others. But those 2, in particular, and there was a lot of business that rolled into the E&S market in California and some of the admitted carriers have gotten comfortable with rates and terms through the insurance department out there to be able to write some of that business. So what I would say is they're facing normal pressure just like anything else. It's very competitive in the wholesale space. If you talk to anybody private or public, that was what they would say.

Remember, our business may be reflected as the makeup of our wholesale business might be slightly different than theirs. So the results of every wholesaler are highly dependent on the portfolio of businesses that are in there. As it relates to wholesale, I mean, specialty Arrowhead regular or programs. If you think about it, several of the big programs that have been discussed are wind-related businesses, quake related businesses and lender-placed businesses. So quake and wind, although Q3 is not a big property quarter, it is a big quake quarter as quick as every quarter. And so there's a lot of pressure there. That's very positive for our customers, but it's a challenge to grow.

And then lender-placed is not as much premium. It's not subject to such a wild whips and the pricing. But as I alluded to earlier, portfolios, we are given direction on when portfolios we think are coming online and sometimes those don't happen as planned. So we think that's a great business. It's just facing challenging dynamics right now, and they'll work their way through it. So thanks, Andrew.

Operator

Our next question will come from Gregory Peters from Raymond James.

Charles Peters

Thank you for providing the organic guidance, not only for the fourth quarter, but give us an early view on what you think 2027 might look like? And you also highlighted some contingent headwinds in the fourth quarter. Can you give us some ideas of what's going on there? And if this is related to price competition and movements between E&S admitted side of the market, is it possible that when we look and think about contingents for next year that it could be a very tough comp as competition continues to ripple through the marketplace.

R. Watts

Greg, it's Andy here. Let me take that and just add a little bit more color to it. The -- on the contingent front, as you know, we're making accruals throughout the year. and then generally doing adjustments towards the end of the year or early in the year that we start receiving the cash. We did have positive adjustments in the fourth quarter of last year and specialty distribution. As we look through some of the accruals we made this year, we've got some adjustments that we'll need to make downward in the fourth quarter, that's what causes that kind of $14 million to $16 million impact year-over-year in the fourth quarter. But if you look at it on a full year basis for '26, we had a really, really good year for contingent commissions. So we're very pleased with that.

As it relates to 2027, still getting our arms around those as we're working through the projections probably would anticipate some downward pressure in '27 on contingents and specialty distribution. Just again, as overall profitability is shrinking in some of the programs, it will pull some of those down some. We're probably not going to see potentially what might be talked about in the general market because, again, we're calculating these on a program-by-program basis. Our comment is not relevant to retail. Those are pretty consistent over time. So they don't move by a tremendous amount.

Charles Peters

Got it. I guess I'll pivot to the Slide 11, which you talked about the Ascension year-end review and you highlight the projected EBITDAX synergies. And I think you called out an unusual additional expense that's not inside this $250 million to $300 million number that's on the slide deck. But can you just give us -- I thought this is a multiyear basis, you said a multiyear project, you're kind of leading with -- leaving us with the impression that a big chunk of the heavy lifting has been done, but maybe you can give us sort of some more detail on progress update on the integration.

R. Watts

Sure. Let me tackle the first one on it, Greg. So it was part of the acquisition, the legacy Accession had a number of agreements in place on some of their previous acquisitions, and those need to be paid out post our acquisition. So in that case, gap is going to require that we actually expensed those because they're associated with performance in the future. Those were funded by the sellers for [ it ]. So that's why we're calling that out as kind of individual something that occurred pre-acquisition. And that's the $90 million. So you will see that flowing down into the integration cost. We just want to be clear on that front.

As it relates to the overall integration, we still have some systems work still to be done in retail. And we've got -- we've made a lot of progress, but we still have that underway. We still have some offices we still need to consolidate. We say we haven't finalized all that work at this stage. And then we have some additional combinations that still need to occur in specialty distribution.

Operator

Our next question will come from Mark Hughes from Truist.

Mark Hughes

Andy, any early thoughts on margins. Just roughly speaking, as we think about Q4 and 2027 EBITDAC margin?

R. Watts

So we haven't given any guidance yet, Mark, on '27 margins we'll tackle that when we get through year-end results and everything. As it relates to the fourth quarter, if you take into consideration our commentary on revenue guidance as well as contingents, we would expect the margins will be down in the fourth quarter compared to last year.

Mark Hughes

Okay. And then how about the cash flow next year? I think you're up 13% year-to-date with the integration costs, et cetera. How do you think about cash flow trending relative to revenue?

R. Watts

Should be good, and we would normally anticipate that our conversion ratio on a normal basis is kind of that 24% to 26% of revenues. And that will continue -- we keep heading back towards that range as the interest income comes down, but we would expect that ratio from where we are this year to increase a little bit this year, expecting good cash flow.

Mark Hughes

Yes. I might sneak one in with the quake pressure you're seeing. Is that largely pricing? Or is there mix in so far as maybe bigger carriers are just taking more of the quake along with their underlying property exposure. Is there some competitive dynamic like that.

J. Powell Brown

It's a bit of both, Mark, because what you have is you are seeing admitted carriers providing a sublimit in some instances where they might not have been doing that before or slightly higher supplement. And so it's a combination of -- I think of it more as pricing pressure -- but there is absolutely a component of admitted markets, assuming some of it to, yes.

Operator

Our next question will come from Tracy Benguigui from Wolfe Research.

Tracy Benguigui

You gave helpful color on the reverse flow from nonadmitted to admitted in California, Texas, commercial earthquake. Should we think of it as relatively bespoke to those pockets? Or is it showing up more broadly even on the margin?

J. Powell Brown

So the answer is it could happen anywhere, Tracy. And I think that's a good distinction. I just used that because we were talking about those components. But remember, binding authority business is everywhere, Personal Lines business is everywhere. You have accounts that -- and they don't have to just be property. These can be casualty accounts or professional where somebody in an admitted market will write it for a couple of years even though it looks and acts like a nonadmitted account. So it is everywhere, yes.

Tracy Benguigui

To be sure you're seeing it everywhere, more broadly?

J. Powell Brown

Correct.

Tracy Benguigui

Okay. And this also may be a very basic question. But when you say you're walking away from programs because of your underwriting discipline, given that you're not a balance sheet company, is that primarily a reflection of the fronting carriers pulling back and applying tighter standards? And your discipline basically is a second derivative of that? Or is that driven more by your own focus on shared profitability where you walk away from a program, if it won't clear your hurdle rate?

J. Powell Brown

Okay. So let's -- it's typically not a program. It could be accounts inside of a program. So that's a first clarification. The second thing is we are the largest delegated underwriter. We believe -- we know in the United States, but we believe in the world. And so we have relationships with both insurance companies and reinsurance companies and the way we approach it is similar in either scenario.

So what I would say is typically, carriers are looking to achieve certain metrics on programs. we're giving the authority to underwrite business within certain parameters in the event that there are accounts that actually don't fit those parameters. The carrier could one, accept one on a one-off basis or make a wholesale modification to what they're achieving or looking to achieve. So at the end of the day, we believe that we must deliver probable growth or profitable premium to our carrier partners. And as a result of doing that for decades, we have a lot of support because we -- is truly a partnership.

And so again, there might be an account that is a good account in any -- you could put it in any category, but somebody will do something in a market like this that doesn't make sense, and we have to make -- take the disciplined approach and walk away from it. So in many instances, we may get the opportunity to match or improve in our programs area, not every scenario, but in many instances, to match the terms and conditions. And if they don't fit, we don't do it.

R. Watts

Tracy, just one other thing just to keep in mind, and this is why we provide 2 metrics: the organic and then organic with contingents. And we've talked about this on a few different calls in the past is when we go through cycles like this, right, and these are -- you're never going to have this match, I'm going to talk about on a quarterly basis or sometimes on an annual basis.

But when you've got rates going up where they did a number of years ago, right, that drives up over profitability. So contingents are up in our programs. But then you go down the back end of this thing on rates, right? Our contingents continue to still be very high, but the organic -- those 2 need to be that together, okay? Don't look at them separately like that. You won't end up with the right outcome.

Operator

Our next question comes from Pablo Singzon from JPMorgan.

Pablo Singzon

First question I had, so the upsized '26 EBITDA synergy number, how much of that should have in 3Q '26 vis-a-vis an expected incremental benefit in 4Q.

R. Watts

Well, if you look on Pablo, we said originally we were anticipating $30 million to $40 million this year. We took that range up to approximately $50 million for this year.

Pablo Singzon

Right. But the question was how much of that already showed up in 3Q versus what might show up in 4Q?

R. Watts

We haven't broken out that level of granularity by quarters. But -- so it's building over time. So you'll see some incremental time. You're not going to see an incremental $15 million or $20 million in the fourth quarter. It won't jump by that much.

Pablo Singzon

Got it. And then my second trends a bit broader. So the Brown's margins have always been industry-leading. But the question is, do you have a view on the structural ceiling for your business, if any? And do you think current technology, including AI hubs lift that? And I guess I'll just throw one more in there, right, just on the topic of margins. Is overall margin expansion contingent on growing specialty faster than retail?

J. Powell Brown

So I'd like to comment on that. I'll take the last question first. No, it's not. But historically, it has grown more quickly than retail on an organic basis. Number two, if you think about it, what we're trying to do is deliver the best customer outcomes. And obviously, the investment community wants growth. And we, Andy and I might argue, growth at all costs except if you have a good margin. And so we are fortunate we do have a good margin. So what we want to do is grow the business more organically with good margins.

And so the short answer is our margins go up. If we didn't invest in the business the way we think we need to invest in the business, the answer is yes, but we're not going to do that. And so it's going to be very balanced. And it's very clear to us what is valued, and we understand that. And so we're very focused on growing our business organically and profitably, Pablo.

Operator

Our next question will come from Rob Cox from Goldman Sachs.

Robert Cox

So just first question on the litigation impact. So I saw there was no change in guidance as it relates to the start-up broker. I think there was also a favorable judge ruling for you all this quarter. But just as we think about 2027, would you think that there could be any lingering litigation impacts? Or do you think that will wrap up in 2026.

J. Powell Brown

Well, I don't think -- I think that, that's going to stretch for a while. I wish that the system would move more quickly, but I don't -- we don't have any idea, Rob, on that. [ Just to ] say, you now.

R. Watts

Yes. From a settlement standpoint, Rob, there will probably be some carryover of some revenues into '27, again, probably not a significant amount because not all of the business was a 1/1 or anything. So we'll have some carryover.

Robert Cox

Okay. Great. And then I just wanted to, like, hopefully put a finer point on the Accession revenues from July and over the trailing 12 months. acquisition integration period in the acquisition revenues. Just trying to tie out how that might compare to sort of 2024 revenues for a Accession and think about how to disaggregate the drivers between the net new business and pricing, deal breakage or anything else?

R. Watts

Yes. So Rob, when we announced the transaction, we said it was around about $1.7 billion. It still right around that range. So during that time, we did dispose of the whole businesses that just don't fit with us strategically, not that they're bad businesses. They just don't match with the Brown & Brown bottle. We have some businesses in there that performed really well. We have some businesses that are cyclical in nature with it. And then we got part of it grew very similar to Brown & Brown.

So really pleased with the underlying performance on the pieces that we can control, some things we can't control in the marketplace. But when we step back and look at the business, it's performed really, really well for us since acquisition over a year ago.

J. Powell Brown

The other thing, if I can interject, Rob, is the number of talented people are exceeded even our expectations. We knew they had a great group of people on the team. But once we join forces, we really realized that and are pumped about the combined entity and the capabilities that we now have as one organization.

R. Watts

And Rob, your question was around range or something like that, just to give -- come back and put a finer point on this one. If the concern, and we've heard this swimming around out there in the marketplace that we've lost all kinds of producers and everything else, that is absolutely factually incorrect. It is our retention of production on the legacy Accession side has been really good. It's right in line with Brown & Brown. We're very, very pleased with the attention not only producer, but all of our team base.

Operator

And our next question comes from Elyse Greenspan from Wells Fargo.

Elyse Greenspan

My first question is on retail, right? So you guys are updated, give us fourth quarter and guidance for next year. So Q4 2% to 3% next year, you said 2% to 4%. Obviously, part of it depends where you fall on the ranges. But I guess, as you're thinking about '27, what are you seeing is getting slightly more favorable relative to what you're expecting to be the drivers of organic growth in the fourth quarter in retail.

J. Powell Brown

We're just more pleased with the execution of our plan, and we've talked about that in terms of go-to-market strategy placement how we're doing business with certain partners across the platform both in wholesale and from a carrier standpoint. It's a combination of all of those. And remember, Steve Hearn and the team rolled out the plan in Q1. It started to take shape in Q2. You're starting to see some opportunities that have come out of it in Q3. And we think, although it's not linear in nature, it will continue to improve in Q4 and going into next year. That's how I'd answer that, Elyse.

Elyse Greenspan

And then my second question is on programs. I just want to make sure I'm not missing something. So I think you said right there was some negative timing from the lender replaced program that was $10 million in Q3. Q4 guide implies another $8 million to $12 million. And then are you expecting the comp -- all of that around $20 million all to come back in 27 in the 1% to 3% guide? And then also with the program's organic guide, are you expecting accession to be a tailwind relative to what the guide would have been about it?

R. Watts

Yes, Elyse, so on the guidance for Specialty Distribution for '27, yes, that would include the timing from this year being recognized in '27. And we don't know the exact dates on some of that. And then we do have some onetime items in the fourth quarter, some 606 adjustments that we know we need to make so that will impact going into next year on it.

From growth expectations. We touched on this earlier, and especially distribution, yes, we are anticipating that those businesses will contribute to our organic growth. But just for clarity, as we move forward now as a company, we're not breaking out and saying, here's what legacy Accession or legacy Brown & Brown did. We're one company at this stage as we move forward. And specifically in retail. There's a lot of these -- we've been buying offices, et cetera. You actually can't split them apart anymore. And that's a really good thing. That means that we've combined efforts and capabilities in teammates.

Operator

Our next question will come from Andrew Anderson from Jefferies.

Andrew Andersen

You had cited some investment in European wholesale capabilities as a margin headwind. Could you just talk about what you're investing in there? Kind of what growth opportunities you're investing behind and when that could contribute to especially organic growth and margins?

J. Powell Brown

Sure. So we've been making those investments throughout this year, the calendar year of '26, and that would be embellishing North American wholesale capabilities and international wholesale capabilities. So as you know, we have a nice London brokerage business and some program businesses there, but we have some really neat opportunities in the wholesale component.

And so we're pleased with the performance of our London business even than Q3, and we anticipate that to continue to improve into next year. So we've been making the investments this year. We have obviously called it out that will continue to be a slight headwind in Q4. But the answer is we anticipate and we're starting to see some of the benefits already, but into next year and beyond.

R. Watts

Just to help manage expectations for everybody on the phone, we still got a number of people in the queue. We're going to run to about 9:15 and then cut it off to risk. We'll try to be crisp on questions and responses on this and try to get through as many people as possible.

Andrew Andersen

And technology costs had increased this quarter, I think, offsetting some benefit on comp. But as you build that '27 plan, should we expect total tech spend to increase further? And when do you see those benefits beginning to offset that investment.

J. Powell Brown

We're going to get into all of that in the January call. So we'll have a much better idea. We are finalizing all of that right now. But you'll -- we're going to lay out a 1-year spend -- '27 spend and projected benefits in January.

Operator

Our next question will come from Alex Scott from Barclays.

Taylor Scott

Wanted to ask about retention, not producer retention, but more client retention in retail. I mean, I guess we're hearing from some of the private equity backed middle-market brokers that they've seen or at least one of them saw some decline in retention that attracted some interest. So just wondering if that's an industry dynamic and if you're seeing a little more churn in the customer base. And if you're a net winner of that.

J. Powell Brown

So the answer to the question is, any time you have dramatic price changes you will probably see a little uptick in near-term churn or switching to clients. And the reason being is good producers will try to exploit that and go and talk to people sometimes before people have spoken to their client about it, not exclusively. Not all the time, I'm just saying a general rule. So with our retention outside of normal levels, no, not. But if you're going to make the comment, have you seen a little more churn in your retail book, the answer is yes, we have. And that is expected in this type of cycle.

And so one of the things that's interesting, depending on the people, the producers, the organization, whatever the case may be, there are people who are in our industry, and some are at Brown & Brown, but they're all over the place who have not seen a softening rate environment. So they came in as the market was going up. And so there are different dynamics in different parts of the cycle. So that's how we'd address it, Alex.

As a result, though, we are writing a ton of new business. So -- and the opportunities ahead, we believe, are very significant. And that's why Andy and I have spoken about the increased capabilities across the platform and why we're so excited about that. because our producers have more arrows in the quiver to help deliver for our customers and prospects. So all of that is a positive. But I'm just saying that there is a lot of activity out there, and we're trying to be more than just active if that makes sense.

Taylor Scott

Yes, that's helpful. Second question I had is on the increased synergy guidance, the $175 million, does that reflect revenue synergies? Or is that all expense synergies? And maybe you could you comment quickly on the revenue synergies you're focused on executing on.

R. Watts

Alex, yes, when we originally communicated, we said that the $150 million was again going to be predominantly all from expense synergies over time is most of that incremental '25 results were anticipated to come from expense synergies.

Operator

Our next question comes from Yaron Kinar from Mizuho.

Yaron Kinar

Should the increased admitted market appetite for business previously placed in the E&S market be a tailwind for the Retail segment? And if so, should we expect maybe a bit of a lift to 4Q organic outlook?

J. Powell Brown

I would say that in concept possibly slightly, I would rather guide you towards a neutral because there's so much change in a changing marketplace. And with the property rates being down, I wouldn't want to give you the impression that, that is an offset to the downward pressure on pricing rates. So I would caution you, Yaron, about that.

Yaron Kinar

Okay. That's helpful. And then for my follow-up, switching gears a bit. Free cash flow picked up meaningfully compared to the first half. M&A was modest. And, yes, buybacks remained steady at $250 million why not accelerate the repurchases given the strong free cash flow generation in the current share price?

J. Powell Brown

So typically, we have not we like to invest in our business out of cash flows generated and when it's generated. And so we've sort of taken the position that we would buy stock back as a if and when the prices appealing, but we have not seriously considered the idea of a leverage stock buyback.

Yaron Kinar

Yes. Just to be clear, I'm not talking about leverage on just talking about deploying the free cash flow that accelerated in the quarter.

J. Powell Brown

Yes. We -- as I said, Andy and I know Andy has outlined this, but we have some debt repayment that comes up in Q4 and December as well. And so we're working through how to do that as we consider how and what we might do in share repurchases as well. So we're thinking about deploying the free cash. I don't want anybody to think that we're not. But if you notice in the history of at least that I've been in this situation. We've bought now $850 million back in the last year. And prior to this year, I think we had bought -- purchased back total, was it Andy $267 million or something like that, total?

R. Watts

That would be higher.

J. Powell Brown

But the answer is we bought more back in the last year than in the history of the company. And so we will continue to try to deploy the capital in the best ways that we think makes sense and share repurchases right now are right near the top.

Operator

Our next question will come from Josh Shanker from Bank of America.

Joshua Shanker

Given the time constraints, both real quick, but related. When we talk about organic guidance out there, how should we think about unit volume versus a year ago or whatnot? Obviously, pricing is a headwind, but pricing is always going to be there. What does that mean for the actual amount of contracting and the amount of policies that you're seeing through? How does that change versus a year ago?

And you mentioned in the prepared remarks that more product was coming online in the admitted markets in the Florida and Texas markets, which was viewed as a positive. But also I would argue that in a difficult marketplace, that's really Brown & Brown's opportunity to shine and demonstrate value for their customers. How do those 2 things contrast to each other that, yes, there's more product, but when there's more product, there's also more competitors who can easily place that risk?

J. Powell Brown

All right. So let me talk about unit volume today versus a year ago and in construction and just in hiring. So first of all, if you take out as I know you've probably done all of these numbers and are more familiar than even we are. If you take out all the construction and/or spending as it relates to new technology and AI-related spends, that makes the economy look a lot different in terms of GDP growth. Number one.

Number two, as it relates to it is highly dependent on parts of the country as it relates to unit and volume growth equal I believe, leaders of businesses are much more cautious today in light of geopolitical and economic potential outcomes i.e., what do the midterms do? What is the situation in the next 2 years in the United States relative to economic policy.

And then global conflict. And so how does -- just think about oil going to -- if it went to $120 a barrel. And so what I would say is this is highly dependent on the business I think that the level of enthusiasm by business leaders that I talked to is more muted today. And I would point to if you take out all AI and frontier spending and related spending from GDP, what is it? It's at least 100, if not 150 basis points down is my understanding. So I look at that as it relates to more units.

And I want to make sure, Josh, I'm answering the question. When you're talking about more units in Florida, are you talking about 4 carriers writing the state or what are you talking about in terms of that?

Joshua Shanker

It's not about -- is Brown & Brown growing. When we talk about 1% to 2%, 3% organic growth guidance, that's not a lot of growth, but of course, pricing in that. I want to know how busy is Brown & Brown and the extent to which that number might hide or accurately show the extent that growth is really happening at the company. That's the first question.

The second question relates to your comments about more availability of product in the admitted lines and treating that as a good thing. But it's also when more product comes out of Brown & Brown being able to deliver with their clients, it's easier for everyone else to deliver for their clients as well.

J. Powell Brown

Yes. So let me assure you that we're working very hard at Brown & Brown. And there's no question about that. And number two, I try to look at that. I'm an optimist but I'm a realist, which means when you have more product to deliver to customers, you have better customer outcomes. And so we can control and try to control the controllables. We cannot control the economy. We cannot control pricing, but we can control the quality of the products and the thought process and the advice that we give to our customers and prospects. And so although the thought process is fine.

I think you're thinking about it one way. I actually would tell you and caution you about that because we actually look at it and say, okay, do we have enough new business inventory? Is our retention level, are they high enough? Do we have the right people in the right spots? How are you using technology to the benefit of our customers to deliver better outcomes. All of those are things we think about. And if, in fact, because of the dynamics, let's just use in Florida because of the amount of CAT property, it's hard to grow your business organically in, let's say, Southeast Florida and yet we're writing an inordinate amount of new business, and our policy counts are going up, that's telling you something.

And so it's -- there's a nuance there. And I know that you understand our business, but you got to be in it and see it to really understand that part because it is not easy in environments, particularly, let's just say you write condominiums and DeBoer and Palm Beach County. That's an extreme example, but it's tough to grow your business.

Joshua Shanker

Okay. Well. And so I guess, coming back to the first question, is there any way we can think about unit volume in regards to the guidance that you're giving of 1% to 2%, 3% organic growth?

R. Watts

Josh, that would presume from your standpoint, unit growth inside of there. But just remember, unit growth is only one component of the revenue growth, right? You've got rate in there, you've got exposures, limits, deductibles. There's a ton of moving parts. So I think to our earlier comments, we are seeing policies growing in a number of our programs. We are doing a good job of having a retail customer base also to all of it. That doesn't always play out perfectly though, in the actual revenue number because of all of the other moving parts back and forth. But we feel really good with the underlying performance of the things that we can control.

Operator

Our next question will come from Meyer Shields from Keefe, Bruyette, & Woods.

Meyer Shields

I'll try to be quick. I was just hoping you can get a sense as to the property pricing expectations that are underlying the specialty distribution 2027 organic outlook?

J. Powell Brown

Well, it's -- we are still working on those as we finalize our budget. But I would tell you that there is a feeling out there that property rates CAT property rates will be somewhere between 10% and 20% down in the industry. And I would tell you, if you ask me right now that I think it's on the high end of that. But we haven't finalized that into our -- and that's one of the reasons that Andy said, we will be finalizing our budgets this quarter, and then we'll give any additional feedback on our next call.

Meyer Shields

Okay. And really quickly, I guess, are we seeing any closure of the bid-ask spread in terms of M&A?

J. Powell Brown

The short answer is, in some cases, sellers' expectations, albeit were unrealistic. Some are trending down and some aren't. And the answer is I would tell you that ultimately, don't try to infer by headline price, be it high or low that the entire industry is pivoted. I think it's very specific to each individual business, the quality of the business, the growth of the business, the leadership in the business, the specialisms in the business, all of those other things. So that's a nice way of saying not really.

Operator

Our next question comes from Bob Huang from Morgan Stanley.

Jian Huang

So first question is on employee benefit pricing. Can you maybe just help us get a better sense of what's pressuring the market today? It seems like some folks have a workers' comp and disability loss trends that is not trending the right way. It feels like fair to say that you're seeing this trend is likely to continue in 2027. Just curious if that's going to be reflected in pricing going forward?

J. Powell Brown

Now wait a minute, Bob. You started with EB and then you finish with work comp. Are you trying to make sure we talk about the correlation between the 2? Or I thought you want to talk about pricing in EBT.

Jian Huang

Let's do the employee benefit, sorry about that.

J. Powell Brown

Okay. So let's start with -- these are very high-level comments about EB. So think about medical trend tie cost cements and specialty pharmacy, okay. So medical trend, 7% to 9%, depending on what you're talking to you typically, high-cost claimants highly dependent on the individual customer. You can have family that has premature babies. You can have all cancer, an organ transplant, but sometimes they have multiple things in a policy year.

And then pharmacy, specialty pharmacy, that is not excluding -- that is not just GLP-1 that is actually including all types of specialty pharmacy. As you can see in many, many, many programs out there, and we see this across our customer base, people that intended for GLP-1s to be used for weight loss have seen and used for other things. They see that there are benefits for it, and you have a wider usage or people were using it and not changing their dietary and or exercise routines. And so it was used for weight loss only as opposed to get you to the certain threshold and then you come off. And so a there's a lot of discussion around Specialty pharmacy pricing, and that is only going to continue.

Now I'll make one interesting comment just since you made the question, which is depending on the way your workers' compensation plan is set up. Sometimes, you can see movement between if we handle the workers' compensation and the employee benefits, you can see movement from one area to the other, depending on the design of the platform. So if you have a more restrictive EB platform in some -- or offering sometime you'll see higher work comp claims and sometimes those higher work comp claims will move over into the EB area. So there is a correlation, and I'm not saying direct, you got to walk through there. but it is threading the needle. And in EB, we are talking to all of our clients about plan design to manage cost because cost is a major issue.

R. Watts

And Bob, just again, I want to make sure that clear, we've been talking about this for a number of years. I mean, this trend has been going on for over 5 to 10 years, and it doesn't appear to be slowing down.

Jian Huang

Got it. Really appreciate that. Second question is on some of the things you mentioned a little bit earlier. Can you maybe help us unpack a little bit more details on the capitation and the construction programs. What are some of the -- like I know you talked about a little bit, but just curious if there's any additional color on what that is trending going forward?

J. Powell Brown

Sure. Well, let's just say -- and these are anecdotal evidence. So -- and because I'm not in this every day like I used to be. In Southeast Florida, when rates go up for 5 or 6 years and then in actually 2 years, the rates come down from 2024, '25 levels to the equivalent rate in 2020 -- 2015 or 2016, that's pretty darn dramatic. And that's a 30% decrease on a 30% decrease.

What's a little bit misleading there is in that period of time, underwriters also were increasing insurance to value. So when somebody says we can replace the apartment building for $200 a square foot everybody knows you can't build an apartment complex in Southeast Florida of good construction for $200 a square foot. So if you -- so you have something built in there. So quite honestly, if you take out the adjustment for increased cost of construction, these rates are way back into the early 2000s would be the equivalent. And so that's a dramatic fall, right? So that's number one.

Number two, as it relates to what I was alluding to on construction, is, in my mind, construction is all about what is your workload or log in the next 12 months. And more specifically, do you have anything beyond, let's say, 9 months. And you see in periods as the economy would slow or when things have been really hot you might see in areas of the country where all of a sudden contractors don't have as much workload. And so is that telling you that they are actually just down? Or is the economy slowing down.

And so you got to look at it, and it's different in different parts of the country. So I'm not trying to draw a parallel and say, because this is happening in Orlando, that's indicative of the entire country. That's not what we're saying. But the answer is rates are continuing to be down and have additional countrywide in property liability is typically up or flat, and particularly in umbrella, is higher. And then in construction, we have a lot of good contractors and a lot of them are growing, but I'm just saying, the question that we have is what's our inventory look 12 months out.

Crystal, we're going to take a final question then go ahead and wrap, okay.

Operator

And our last question will come from Michael Zaremski from BMO.

Michael Zaremski

Kudos to you all for extending the call given the demand. I'll just go with one question. Powell, when I kind of hear your comment about the '27 outlook in retail being 2% to 4% organic growth relative to the rate environment. To me, it sounds like more business as usual. I'd be curious if you agree or disagree. And if you're -- you mentioned Steve Hearn rolled out a plan in 1Q, and it's your go-to-market strategy right now. I don't know if you're willing or able to kind of reflect a bit of kind of what [indiscernible] thinks kind of Steve Hearn's plan, you're all kind of attempted to fix to kind of bring your organic back to much healthier levels relative to the market.

J. Powell Brown

Yes. I think the way I'd answer the question, Michael, is the following. Number one, we had a lot of really good capabilities prior to Steve Hearn, leadership and retail. Having said that, I think we are collaborating and using those capabilities better. That's what I would basically say. And so there's not a criticism on 3 post Steve. That's not where I'm going. I just think that, again, it's complemented by the addition of 5,000 new teammates and the capabilities that came with a Accession and we're all on now. So let's not lose sight of that.

But again, somebody earlier asked when you bring a large organization into your organization, there's a lot of people focused on some things that were internally and you got to do that. And so I think that we're through a great deal of that, not all of it, but a great deal of that. And we're just focusing on executing better. And I think Steve and the senior leadership team retail are doing a great job of leveraging the capabilities, delivering for our customers and doing it in a way that's helping deliver better customer outcomes with our carrier printers and our distribution partners. So I'm very positive on our business.

I would wrap up Crystal and making my final comments as we wrap up by saying this. Number one, in my history at Brown & Brown, that's 31 years. I'm the most pleased with the leadership team and the way we're delivering for our customers than I ever have been. Number one. Number two, do I think that we could execute a little bit better and were we a little bummed on the underperformance in one of our divisions? Sure. But the answer is we're going to work our way through that because both of our divisions are very good businesses.

And number three, I would tell you, it's all about people. We are going to continue to allocate our capital in the best way we see fit, but we're always looking for talented people, and we got a lot of them on the team, and we're excited about what the future presents. So thank you all very much, and we look forward to talking to you in January. Thank you, Crystal, and have a nice day, everyone.

Operator

This concludes today's conference call. Thank you for your participation. You may now disconnect.