Asked for clarification on the earn-out impact on cash flow, specifically if it's a one-time event or ongoing.

Andy Watts confirmed it was a one-time item associated with earn-outs carried over from the acquisition, not expected to recur. He reiterated a long-term cash flow conversion of 24% to 27%. “Yes, Mike, our comment there was -- that was really a onetime item associated with earnouts that we carried over at the time of the acquisition. So we don't see that same level of impact to what the cash flow going forward.”

Questioned the 'great momentum' comment given specialty business performance and market rhetoric about price competition from MGAs impacting program business.

Powell Brown acknowledged increased competition in the E&S space from admitted markets and programs. He noted the company's discipline in underwriting and the shift towards casualty-driven programs, reiterating H2 organic growth guidance for specialty distribution of 2% to 4%. “In the E&S space, there is more competition today from admitted markets and programs than there has been in the past, and that is exactly what you would expect in a transitioning market.”

Asked about the accounting for contingents, specifically if it's real-time or lagged, and if price competition in property CAT will create a downward headwind for future contingents.

Powell Brown clarified that CAT property in E&S is not subject to profit sharing/contingency. Andy Watts explained that retail contingents are consistent but calculated later, while Specialty Distribution has good visibility and adjusts based on program profitability, focusing on delivering good profitability for carrier partners despite industry trends. “When you get to Specialty distribution, we actually have really good visibility within our programs. So we are adjusting those based upon how we're seeing our profitability on each program.”

BRO

Brown & Brown (BRO) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Financials· Jul 28, 2026

Source: earnings call transcript

Executive summary

Brown & Brown Q2 FY26 — Strong Organic Growth with Contingents and AI Partnerships

Brown & Brown reported a mixed Q2 FY26, with strong total revenue growth driven by acquisitions and robust contingent commissions, offsetting a decline in organic revenue excluding contingents. The company is actively investing in AI partnerships and talent acquisition to drive future organic growth and margin expansion, while navigating competitive insurance markets and managing the integration of Accession. Management remains confident in its capital allocation strategy, balancing share repurchases, debt reduction, and strategic M&A.

Highlights

Total revenues grew 30.4% to $1.7 billion in Q2 FY26.
Organic revenue, including contingents, increased 70 basis points.
Adjusted earnings per share grew nearly 4% to $1.07.
Retail segment delivered organic growth, including contingent, of 2.5%.
Cash flow from operations increased $70 million or 13% compared to H1 FY25.

Concerns

Organic revenue, excluding contingents, decreased 70 basis points.
Adjusted EBITDAC margin decreased 100 basis points to 35.7% due to lower interest income.
Specialty Distribution organic revenue was negative 1.6% with contingents and negative 3.5% without, impacted by $10 million of delayed new business revenue.
CAT property rates continue to decrease 15% to 35%.
Litigation impact from departed individuals resulted in an $18 million adjustment to retail organic revenue, with a full-year impact of $50 million to $60 million.

Guidance & targets

Category	Target	Timeline	Confidence
Retail organic growth (excluding contingents)	1.5% to 2.5% medium materiality	H2 FY26	High
Specialty Distribution organic growth (excluding contingents)	2% to 4% medium materiality	H2 FY26	High
Full-year 2026 revenue impact from litigation	$50 million to $60 million medium materiality	FY26	High
Accession annual revenue	$1.7 billion to $1.8 billion high materiality	FY26	High
Accession synergies	$30 million to $40 million medium materiality	FY26	High
Cash flow conversion	24% to 27% medium materiality	Long term	High
Debt maturity	$400 million medium materiality	Q4 · FY26	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Retail Growth driven primarily by acquisition activity and organic growth. Enhanced go-to-market sales model is building momentum. Margin increase driven by higher contingents, disciplined expense management, and the impact of synergies. Net benefit to margins of 30-50 bps due to individuals departing to a start-up broker. Organic growth (including contingent): 2.5%Organic growth (excluding contingent): 1.5%Negative impact from pharmacy consulting business on organic growth: 60 bpsCurrent period adjustment to organic revenue from litigation: $18 million	—	35.9%	—	EBITDAC margin: strong, expanding 230 bps
Specialty Distribution Growth driven by the acquisition of Accession and increased contingent commissions. Organic revenue negatively impacted by delayed new business revenue expected to be recorded substantially in the third quarter. Margin decrease primarily due to lower unit growth and investments in European capabilities, which more than offset higher contingent commissions. Organic revenue (with contingents): negative 1.6%Organic revenue (without contingents): negative 3.5%Negative impact on organic revenue from delayed new business: nearly 200 bps (approx. $10 million)	—	28.1%	—	EBITDAC margin: 42.7%, decreased 400 bps

Deals & partnerships

McKinsey, Accenture, and Anthropic Partnerships to accelerate AI initiatives and strategy.

These partners are helping us accelerate the work we've already done with AI and helping us think more broadly pertaining to the holistic application of these solutions. Each organization is a leader in its field and bring specific expertise that will support our ongoing AI strategy.

Risks & headwinds

Declining CAT property rates Q2 FY26, similar to Q1 FY26, expected to continue in H2 FY26

decrease 15% to 35%

Mitigation:Customers benefiting from lower pricing, redirecting savings to change structures, limits, or deductibles. Company maintains underwriting discipline.

Litigation impact from individuals departing to start-up broker Q2 FY26 and FY26

$18 million adjustment to Q2 retail organic revenue; full-year 2026 revenue impact of $50 million to $60 million

Mitigation:Hiring new talented people to replace positions, leveraging the event to galvanize the team.

Geopolitical instability, inflation, and potential for higher interest rates H2 FY26

heightened levels

Mitigation:Business leaders will remain cautious, pursuing growth opportunities while navigating challenges.

E&S market competition from admitted markets and programs current

more competition today

Mitigation:Company maintains disciplined underwriting, leveraging new casualty-driven programs.

Uncertainty of future AI costs and utilization future

not fully understood

Mitigation:Consciously moving costs from 'running the business' to data analytics, innovation, and AI; value management office to ensure clear KPIs and value drivers for AI initiatives.

What to watch in Q3 FY26

Retail organic growth (excluding contingents)

H2 FY26

Current 1.5%

Target 1.5% to 2.5%

Why it matters

Indicates the underlying health and momentum of the core retail brokerage business, crucial for overall organic growth.

we continue to believe organic growth will improve in both divisions and are anticipating retail organic growth excluding contingents to be in the range of 1.5% to 2.5%

Find out whether BRO delivers this. Inve re-checks your case every morning.

Q&A highlights

Inquired about Accession's revenue contribution and if there's seasonality, and how Accession's margin impacts the overall company margin.

Andy Watts clarified that Accession's revenues are relatively balanced quarterly, with July being a big month. He stated Accession runs around a 35% margin, which aligns with the overall company margin, primarily impacting Specialty Distribution's weighting.

“On the revenues, the guidance that we gave over a few different quarters, we said, revenues are relatively well balanced between each of them. July is a big month for the business on placements for us. And so that's probably one of the areas has some seasonality to it that moves the revenues around. But I think we were right in the range of about [ 440, 445 ] in the first quarter and [ 410 ] in the second.”

asked by Michael Zaremski · answered by R. Watts

2 min read 6 chapters

Detailed narrative

AI and Technology Strategy

Brown & Brown has partnered with McKinsey, Accenture, and Anthropic to accelerate its AI initiatives, focusing on transforming sales, service, underwriting, and support functions. The company believes AI will enhance teammate capabilities and customer outcomes, not replace risk advisors. They anticipate incremental organic growth and margin expansion over the coming quarters and years as AI becomes more embedded in workflows, without immediate incremental technology spend due to resource reallocation.

Insurance Market Conditions

Commercial insurance pricing remained broadly consistent with Q1 FY26, with some moderation. Admitted market rates were generally flat to down 5% for workers' comp and non-CAT property. Primary casualty and professional liability were up 5%, while excess casualty experienced more rate pressure. CAT property rates continued to decrease 15% to 35%, similar to Q1, driven by significant capital seeking to underwrite risk.

Economic Outlook

Economic conditions remained stable, with consistent customer spending patterns and modest capital investment. Positive audit premium activity suggests business growth. Key concerns for customers include inflation, oil prices, and geopolitical matters. Management expects cautious business leadership and similar investment/hiring levels in the second half of the year.

Capital Allocation Strategy

The company's capital allocation priorities include hiring talented people for organic growth, share repurchases (viewed as attractive), and strategic acquisitions that offer specialism rather than just scale. Debt reduction and technology investments are also key components of their strategy to drive long-term shareholder value.

Contingent Commissions Dynamics

Contingent commissions grew by $40 million, with $24 million from Accession, driven by minimal storm claims and higher underwriting profitability, especially in Specialty Distribution. Retail also saw strong contingents due to enhanced carrier engagement. The company emphasizes that its organic growth with contingents is a closer comparison to other brokers who do not break out these commissions.

Accession Integration

Accession contributed approximately $410 million in total revenues for the quarter, with margins in line with expectations. The integration is progressing well, with management confident in delivering $30 million to $40 million in synergies this year. The company noted a one-time earn-out payment impact on cash flow but expects strong underlying cash flow going forward.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.