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BRO Q3 Earnings Miss Estimates on Weak Growth, Margin Pressure
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Key Takeaways
BRO's Q3 revenues rose 7.4% to $1.72M, but missed the consensus mark by 2.3% as organic growth reached 1.2%.
Retail organic revenues grew 2.6%, while Specialty Distribution organic revenues declined 0.8%.
BRO raised Accession synergy targets to $175M by 2028, while quarterly share repurchases reached $250M.
Brown & Brown, Inc.’s (BRO - Free Report) third-quarter 2026 adjusted earnings of $1.07 per share missed the Zacks Consensus Estimate by 0.9%. The bottom line increased 1.9% year over year.
Revenues of $1.72 billion missed the consensus mark by 2.3% but increased 7.4% year over year on a reported basis. Acquisition activity supported the top line, while organic revenues increased 1.2%. Weakness in Specialty Distribution and margin pressure weighed on performance.
Brown & Brown, Inc. Price, Consensus and EPS Surprise
Commissions and fees increased 9.7% year over year to $1.70 billion, while investment and other income declined 55.4% to $25 million from $56 million.
Adjusted EBITDAC margin contracted 200 basis points (bps) to 34.6%. Adjusted EBITDAC increased 1.7% to $597 million, while adjusted income before taxes rose 1.3% to $479 million.
Adjusted net income attributable to the company increased 0.6% to $356 million. GAAP net income rose 5.7% to $240 million, while diluted GAAP earnings declined 1.5% to 67 cents.
Brown & Brown's Organic Revenue Growth Slows
Organic revenues increased 1.2% to $1.46 billion. Organic revenues with contingent commissions increased 1.5% to $1.54 billion, supported by higher profit-sharing commissions from insurance carriers.
Core commissions and fees increased 9.7% year over year to $1.62 billion. Organic growth remained modest as moderating insurance pricing and challenging conditions in certain specialty markets offset new business contributions.
BRO's Retail Segment Expands
Retail revenues increased 10.8% year over year to $978 million, primarily driven by acquisition activity and organic growth. Organic revenues advanced 2.6% to $854 million, while organic revenues with contingents increased 2.5% to $871 million.
Net new business and exposure-unit expansion supported organic growth, partially offset by moderating rates across several insurance lines. Employee benefits rates increased 9-11%, while standard property pricing ranged from a 5% decline to flat. Casualty rates increased 2-5%.
Adjusted EBITDAC climbed 11.3% to $275 million, while the margin expanded 10 bps to 28.1%, reflecting disciplined expense management and synergy realization.
Brown & Brown's Specialty Distribution Unit Softens
Specialty Distribution revenues increased 8.5% year over year to $739 million, primarily aided by acquisitions and higher organic contingent commissions. Organic revenues, however, declined 0.8% to $610 million, while organic revenues with contingents increased 0.3% to $672 million.
Declining catastrophe and difference-in-conditions property rates, challenging wholesale market conditions and the absence of significant flooding events weighed on organic growth. Strong performance in casualty programs partially offset these headwinds.
Adjusted EBITDAC rose 7% to $320 million, but the adjusted margin contracted 60 bps to 43.3%. Investments to expand European capabilities offset underlying margin expansion.
BRO's Costs and Margins
Total expenses increased 8.5% year over year to $1.41 billion. Employee compensation and benefits rose 8.1% to $857 million, while other operating expenses increased 11.2% to $307 million.
Amortization increased 18.3% to $110 million, and depreciation rose 28.6% to $18 million. Interest expense remained unchanged at $100 million.
Income before taxes increased 2.9% to $320 million, while the pretax margin contracted 80 bps to 18.6%. Expense growth outpaced revenue expansion, contributing to profitability pressure.
Brown & Brown's Cash Flow and Capital
Net cash provided by operating activities increased 13.3% to $1.14 billion during the first nine months of 2026. Cash and cash equivalents were $1.10 billion as of Sept. 30, compared with $1.08 billion at 2025-end.
The company repurchased $250 million of shares during the third quarter, bringing year-to-date repurchases to $750 million. Brown & Brown completed four acquisitions during the quarter and declared dividends of 16.5 cents per share, up 10% year over year.
BRO's Accession Integration and Market Outlook
Brown & Brown raised its estimated 2026 Accession integration synergies to approximately $50 million from the previous $30-$40 million range. Expected annual run-rate synergies increased to $175 million by the end of 2028 from approximately $150 million.
Estimated one-time integration costs increased to $250-$300 million from the previous $200-$250 million range. First-year Accession revenues were in line with the approximately $1.7 billion initially anticipated.
Management expects rate changes across most admitted insurance lines to remain relatively consistent, with some further moderation possible through the remainder of 2026.
Excess-and-surplus casualty rates are expected to continue increasing, while catastrophe property rates should remain under pressure in the fourth quarter due to abundant capital. Capital allocation priorities include talent investments, share repurchases, debt reduction and selective acquisitions.
Chubb Limited (CB - Free Report) reported third-quarter 2026 core operating earnings of $7.66 per share, which beat the Zacks Consensus Estimate of $6.53 by 17.3%. The bottom line increased 0.8% year over year. Revenues of $16.81 billion surpassed the consensus mark of $16.72 billion by 0.55%.
Consolidated net premiums earned rose 3.9% year over year to $14.92 billion. P&C underwriting income declined 8.8% year over year to $2.06 billion. The combined ratio deteriorated 230 basis points to 84.1%. The Zacks Consensus Estimate is pegged at 87.
W.R. Berkley Corporation (WRB - Free Report) reported third-quarter 2026 operating income of $1.17 per share, which beat the Zacks Consensus Estimate by 2.63%. The bottom line increased 6.4% year over year. Operating revenues of $3.76 billion rose 1.8% year over year but missed the consensus estimate by 1.19%. Net premiums earned jumped 1.8% year over year. W.R. Berkley’s net premiums written increased 1.3% year over year to $3.27 billion.
Net investment income grew 9.2% year over year to $383.5 million, supported by higher income from the core investment portfolio. Income from fixed-maturity securities increased 10.3%, while the core portfolio contributed $369.1 million, up 12% year over year. The Zacks Consensus Estimate was pegged at $398.2 million. Our estimate was pegged at $384.3 billion.
The Travelers Companies, Inc. (TRV - Free Report) reported third-quarter 2026 core earnings of $9.18 per share, which beat the Zacks Consensus Estimate of $7.07 by 29.8%. The bottom line increased 12.8% year over year. Revenues of $12.45 billion surpassed the consensus estimate of $12.40 billion by 0.4% and remained nearly flat year over year. Net written premiums totaled $11.48 billion during the quarter. Travelers generated core income of $1.95 billion, up 4.3% year over year, while net income increased 1.5% to $1.92 billion.
Net favorable prior-year reserve development increased to $234 million pre-tax from $22 million in the year-ago quarter. Catastrophe losses widened to $538 million pre-tax from $402 million. The combined ratio improved 50 basis points year over year to 86.8%.
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BRO Q3 Earnings Miss Estimates on Weak Growth, Margin Pressure
Key Takeaways
Brown & Brown, Inc.’s (BRO - Free Report) third-quarter 2026 adjusted earnings of $1.07 per share missed the Zacks Consensus Estimate by 0.9%. The bottom line increased 1.9% year over year.
Revenues of $1.72 billion missed the consensus mark by 2.3% but increased 7.4% year over year on a reported basis. Acquisition activity supported the top line, while organic revenues increased 1.2%. Weakness in Specialty Distribution and margin pressure weighed on performance.
Brown & Brown, Inc. Price, Consensus and EPS Surprise
Brown & Brown, Inc. price-consensus-eps-surprise-chart | Brown & Brown, Inc. Quote
BRO's Q3 Details
Commissions and fees increased 9.7% year over year to $1.70 billion, while investment and other income declined 55.4% to $25 million from $56 million.
Adjusted EBITDAC margin contracted 200 basis points (bps) to 34.6%. Adjusted EBITDAC increased 1.7% to $597 million, while adjusted income before taxes rose 1.3% to $479 million.
Adjusted net income attributable to the company increased 0.6% to $356 million. GAAP net income rose 5.7% to $240 million, while diluted GAAP earnings declined 1.5% to 67 cents.
Brown & Brown's Organic Revenue Growth Slows
Organic revenues increased 1.2% to $1.46 billion. Organic revenues with contingent commissions increased 1.5% to $1.54 billion, supported by higher profit-sharing commissions from insurance carriers.
Core commissions and fees increased 9.7% year over year to $1.62 billion. Organic growth remained modest as moderating insurance pricing and challenging conditions in certain specialty markets offset new business contributions.
BRO's Retail Segment Expands
Retail revenues increased 10.8% year over year to $978 million, primarily driven by acquisition activity and organic growth. Organic revenues advanced 2.6% to $854 million, while organic revenues with contingents increased 2.5% to $871 million.
Net new business and exposure-unit expansion supported organic growth, partially offset by moderating rates across several insurance lines. Employee benefits rates increased 9-11%, while standard property pricing ranged from a 5% decline to flat. Casualty rates increased 2-5%.
Adjusted EBITDAC climbed 11.3% to $275 million, while the margin expanded 10 bps to 28.1%, reflecting disciplined expense management and synergy realization.
Brown & Brown's Specialty Distribution Unit Softens
Specialty Distribution revenues increased 8.5% year over year to $739 million, primarily aided by acquisitions and higher organic contingent commissions. Organic revenues, however, declined 0.8% to $610 million, while organic revenues with contingents increased 0.3% to $672 million.
Declining catastrophe and difference-in-conditions property rates, challenging wholesale market conditions and the absence of significant flooding events weighed on organic growth. Strong performance in casualty programs partially offset these headwinds.
Adjusted EBITDAC rose 7% to $320 million, but the adjusted margin contracted 60 bps to 43.3%. Investments to expand European capabilities offset underlying margin expansion.
BRO's Costs and Margins
Total expenses increased 8.5% year over year to $1.41 billion. Employee compensation and benefits rose 8.1% to $857 million, while other operating expenses increased 11.2% to $307 million.
Amortization increased 18.3% to $110 million, and depreciation rose 28.6% to $18 million. Interest expense remained unchanged at $100 million.
Income before taxes increased 2.9% to $320 million, while the pretax margin contracted 80 bps to 18.6%. Expense growth outpaced revenue expansion, contributing to profitability pressure.
Brown & Brown's Cash Flow and Capital
Net cash provided by operating activities increased 13.3% to $1.14 billion during the first nine months of 2026. Cash and cash equivalents were $1.10 billion as of Sept. 30, compared with $1.08 billion at 2025-end.
The company repurchased $250 million of shares during the third quarter, bringing year-to-date repurchases to $750 million. Brown & Brown completed four acquisitions during the quarter and declared dividends of 16.5 cents per share, up 10% year over year.
BRO's Accession Integration and Market Outlook
Brown & Brown raised its estimated 2026 Accession integration synergies to approximately $50 million from the previous $30-$40 million range. Expected annual run-rate synergies increased to $175 million by the end of 2028 from approximately $150 million.
Estimated one-time integration costs increased to $250-$300 million from the previous $200-$250 million range. First-year Accession revenues were in line with the approximately $1.7 billion initially anticipated.
Management expects rate changes across most admitted insurance lines to remain relatively consistent, with some further moderation possible through the remainder of 2026.
Excess-and-surplus casualty rates are expected to continue increasing, while catastrophe property rates should remain under pressure in the fourth quarter due to abundant capital. Capital allocation priorities include talent investments, share repurchases, debt reduction and selective acquisitions.
Zacks Rank
Brown & Brown currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Insurers
Chubb Limited (CB - Free Report) reported third-quarter 2026 core operating earnings of $7.66 per share, which beat the Zacks Consensus Estimate of $6.53 by 17.3%. The bottom line increased 0.8% year over year. Revenues of $16.81 billion surpassed the consensus mark of $16.72 billion by 0.55%.
Consolidated net premiums earned rose 3.9% year over year to $14.92 billion. P&C underwriting income declined 8.8% year over year to $2.06 billion. The combined ratio deteriorated 230 basis points to 84.1%. The Zacks Consensus Estimate is pegged at 87.
W.R. Berkley Corporation (WRB - Free Report) reported third-quarter 2026 operating income of $1.17 per share, which beat the Zacks Consensus Estimate by 2.63%. The bottom line increased 6.4% year over year. Operating revenues of $3.76 billion rose 1.8% year over year but missed the consensus estimate by 1.19%. Net premiums earned jumped 1.8% year over year. W.R. Berkley’s net premiums written increased 1.3% year over year to $3.27 billion.
Net investment income grew 9.2% year over year to $383.5 million, supported by higher income from the core investment portfolio. Income from fixed-maturity securities increased 10.3%, while the core portfolio contributed $369.1 million, up 12% year over year. The Zacks Consensus Estimate was pegged at $398.2 million. Our estimate was pegged at $384.3 billion.
The Travelers Companies, Inc. (TRV - Free Report) reported third-quarter 2026 core earnings of $9.18 per share, which beat the Zacks Consensus Estimate of $7.07 by 29.8%. The bottom line increased 12.8% year over year. Revenues of $12.45 billion surpassed the consensus estimate of $12.40 billion by 0.4% and remained nearly flat year over year. Net written premiums totaled $11.48 billion during the quarter. Travelers generated core income of $1.95 billion, up 4.3% year over year, while net income increased 1.5% to $1.92 billion.
Net favorable prior-year reserve development increased to $234 million pre-tax from $22 million in the year-ago quarter. Catastrophe losses widened to $538 million pre-tax from $402 million. The combined ratio improved 50 basis points year over year to 86.8%.