Good morning. Welcome to the Brown & Brown, Inc. 2015 fourth 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 hosted in connection with this call, 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 fourth quarter of 2015, 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 fourth quarter of 2015, that its financial results differ from the current preliminary unaudited numbers set forth in the press release issued yesterday. 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 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.
With that said, I would now turn the call over to Powell Brown, President and Chief Executive Officer. You may begin.
Thank you, Kyle. Good morning, everybody. Thanks for joining us for our fourth quarter earnings call. I'd like to start on slide four. We delivered $404.7 million of revenue for the quarter, growing 3% in total and 2.5% organically. Each of our four divisions delivered organic growth again this quarter, our retail division saw continued improvement. We delivered $0.41 per share for the quarter and $0.38 on an adjusted basis, which is an increase of 5.6% over the prior year on that adjusted basis. Due to materiality of the Axiom Re disposal in Q4 of 2014, along with adjustments for non-cash stock-based compensation last year and this quarter, we will primarily focus on a discussion of adjusted earnings as we believe this provides a more meaningful comparison of the results of our operations to the prior year.
Andy will walk you through more detail on the financial slides later in this discussion. In the fourth quarter of 2015, we acquired four agencies with annual revenues of approximately $17 million. Our total for 2015 was $54 million of annual acquired revenue. We continue to look for organizations that fit culturally and make sense financially, while the acquisition marketplace continues to be very active and prices remain high. For the full year, we delivered $1.661 billion of revenue, growing 5.4% and 2.6% organically, with growth realized across all divisions. As part of our capital allocation plan, we invested in new teammates, made a number of acquisitions, and bought back our stock, which reduced our weighted average share count by 1.9% versus the full year in 2014. Our earnings per share for the year were $1.70 and $1.67 on an adjusted basis due to the items noted previously.
Andy will describe the underlying performance in more detail later. I'm now on slide five. With 2015 in the books and another year without a major hurricane hitting the U.S., there's a lot of excess capital out there. Rates for admitted markets remain generally flat to down 5%. The only exception is for commercial auto that's flat to up 5%, but that depends on loss experience on the account. We continue to see excess and surplus lines rates down 5%-15%, with cat property being down the most. Also, we didn't recognize any real impact on premium rates because of the Fed 25 basis point increase in the fourth quarter. Generally speaking, it's very similar to what we saw in Q3.
In summary, we view the fourth quarter as a good quarter, and as we realized continued improvement in all of our divisions, and we're seeing initial improvements from the retail realignment. We're optimistic about how the company is positioned for increasing organic and profitable growth. Now let me turn it over to Andy, who will discuss our financial performance in more detail.
Okay. Thank you, Powell, and good morning, everyone. Let's first discuss our financial results and the key metrics for the quarter. Then we'll recap our full-year results. I'm on slide six. This shows our GAAP reporter results for the fourth quarter, which, as Powell mentioned earlier, reflects certain large items, primarily the $47.4 million pre-tax loss on the sale of Axiom Re in the fourth quarter of last year, and credits related to non-cash stock-based compensation in the fourth quarter of last year and this year, which I'll explain these in more detail later. During the quarter, we continued buying our shares and entered into a $75 million accelerated share repurchase program, which was completed in January of this year with a final settlement of just under 400,000 shares.
As a result of our share buyback programs, which totaled $175 million over the past 12 months, we reduced our outstanding share count in the fourth quarter by 2.2% versus the prior year. As of today, we have $375 million of authorization for share buybacks under the $400 million approval received from the board of directors in July 2015. We will continue to evaluate share repurchases along with other options for deploying capital to drive shareholder returns, including the dividend increase we announced last quarter, which represents the 22nd consecutive year of dividend increases. Moving over to slide seven.
This presents our adjusted numbers after removing the impact of the Axiom Re loss last year of $47.4 million, non-cash stock-based compensation credits that were reported in the fourth quarter of last year for a total of $5.9 million and $8.1 million in the fourth quarter of this year. The $8.1 million credit for non-cash stock-based compensation was a result of forfeitures for certain grants where performance conditions were not fully achieved. Removing these adjustments, we believe, provides for a better comparison of underlying performance. For the quarter, we delivered 3% revenue growth and grew organically in all four divisions with a total organic growth rate of 2.5%. Our adjusted pre-tax income increased year-over-year by 5.4%. This larger rate of growth as compared to revenue, was primarily driven by reductions in amortization and depreciation expense due to assets being fully depreciated.
Interest expense is down slightly year-over-year as we paid down about $45 million in debt in the last 12 months. Our adjusted EBITDA for the fourth quarter was $125 million, compared to $121.6 million last year, an increase of 2.8%. Our adjusted EBITDA margin was steady compared to the prior year despite lower contingency commissions of $2.5 million. Adjusted net income increased by 1.1%, which is slightly lower than that of pre-tax income, which is driven by our 39% effective tax rate this quarter or in the fourth quarter of 2015 versus 36.4% in the fourth quarter of last year.
Please note that the Q4 2014 tax rate was impacted by the loss recorded on the disposal of Axiom Re last year. The 2015 effective rate has been impacted primarily by the new unitary tax filing requirements in New York State, which we have discussed during previous calls. Our full year effective tax rate for 2015 was 39.6%, which is just below the range we had previously given and was impacted by income apportionment based upon the fourth quarter performance. We expect our effective tax rate for 2016 to be in the range of 39.5%-39.7% and are continuing to seek opportunities to manage our effective and cash tax rates. Our adjusted earnings per share increased to $0.38 or 5.6% compared to the fourth quarter of 2014. Moving on to slide eight, I'd like to highlight the key components of our revenue performance for the quarter.
In the quarter, our contingencies and guaranteed supplemental commissions are down about $2.5 million as compared to the fourth quarter of last year. This decrease was primarily in our national programs division. Other revenues are down by $2.2 million due to gains realized on divestitures in 2014. As a reminder, we started recording in the fourth quarter of 2014, the net gains and losses on divestitures in the expense section of our income statement. For the fourth quarter of 2015, we recorded an expense of $700,000. From a year-over-year comparative, we had a net decrease of $2.9 million related to gains on divestitures. For the fourth quarter, we recognized an $11.7 million increase in revenue associated with acquisitions completed over the last 12 months and a $4.6 million decrease in revenues from disposed businesses over the last 12 months. Our organic revenue growth for the quarter was 2.5%.
The drivers of this growth by division will be discussed next. Our as-reported EBITDA margin increased to 32.9% from 20.4% in 2014. In order to arrive at comparative numbers, we've removed the loss on the sale of Axiom Re and the credits for non-cash stock-based compensation, which result in flat margins year-over-year for the quarter. We know everyone's going to ask about non-cash stock-based compensation outlook. We'll come back to this later in the presentation as we talk about certain other items. On to slide nine and moving from the total view of our company, we'll discuss each of our divisions in more detail. Let's start by looking at retail. Over the last three months, our retail division has delivered 7.8% revenue growth. The organic revenue growth for the quarter is 1.9%, which shows a continued trend of improvement. Retail's year-over-year EBITDA margin increased by 460 basis points.
However, when adjusting for the Q4 2015 SIP credit described earlier, along with losses recorded on the sale of two offices reported in the fourth quarter of 2014, our adjusted EBITDA margins increased by 60 basis points. Here are a few of the key items driving retail's results for the quarter. Internal growth was fueled by increases in new business, which was higher than last year's performance and an improvement in net retained business. As we've noted throughout the year, there have been changes in the state of Washington's regulation regarding bona fide associations that resulted in several of our association health plans terminating, as they were determined to be non-qualified. The changes continued to impact our revenue growth for the fourth quarter, with the revenue loss impacting overall retail organic growth by about 20 basis points for the quarter and 40 basis points for the full year.
As a reminder, the total annual impact was approximately $3.5 million. Since we're now on a comparable basis, we do not expect this type of downward pressure in 2016. For the quarter, our employee benefits business grew nicely, with our large employee benefits business performing better on an organic basis due to a combination of new business, rate increases, and some payroll expansion. Conversely, our small group businesses declined slightly. We define small employee benefits as employers with less than 100 employees. For this segment, we are continuing to see companies be very focused on managing their cost and trying to understand the implementation complexities of ACA, specifically how they manage cost via exchanges and/or private plans. Shifting to property rates, coastal or cat property renewal rates are continuing to decline 15%-25%.
We've been through two years of renewals at these ranges and don't expect this trend to materially change in 2016. Non-cat property renewal rates continued downward for admitted markets and are generally flat to down 5%. The 60 basis point margin improvement on an adjusted basis can be attributed to the incremental improvement in organic growth, along with continued disciplined expense management. For clarity, we do expect that margins can moderate between quarters based upon investments or variable costs. Please do not project or expect this type of increase every quarter. Moving over to slide 10. Our National Programs division's total revenues decreased by 6% related to the divestiture of ICG in the fourth quarter of last year and Axiom Re in the first quarter of 2015. For the quarter, our organic revenues increased by 2.4%, and adjusted EBITDAC margins increased by 20 basis points.
For the quarter, we realized solid growth in our lender-placed coverage business as we continue to benefit from the addition of new customers. While there is a lot of positive news across many of our programs, we do have a few programs facing material premium rate declines, including our Florida coastal property programs and California earthquake programs. During the fourth quarter, we announced the launching of a new all-risk program and will be writing business effective February 1st. On to slide 11. Our wholesale division had another really good quarter, reporting organic growth of 6.2%. The differential between organic revenue and total revenue is related to the sale of Axiom Re that we completed in the fourth quarter of last year. The binding authority and brokerage businesses both contributed to the positive results for the fourth quarter, and we continue to see growth across most business lines.
This continued growth was achieved even while facing major downward pressure on coastal property rates in the range of 15%-25%. After removing the loss on the sale of Axiom Re last year, the wholesale division delivered EBITDAC margin improvement of 460 basis points. The primary drivers of this improvement are revenue expansion, continued expense management, an increase in contingent commissions, and a favorable year-over-year change in foreign currency movement. We would not expect to see this type of quarterly margin improvement for the business as it does fluctuate on a quarterly basis. I'm moving on to slide 12, which is the services division. We delivered organic growth of 1.2% for the quarter. This growth is driven primarily by our Social Security advocacy claims processing business that continues to add new clients. For the fourth quarter, our adjusted EBITDAC margin declined 180 basis points.
This was driven by lower referrals in our Medicare set-aside business and a lower volume of property claims. During the quarter, we disposed of our Colonial Claims business. Due to the low activity on claims in 2015, there is minimal revenue and margin impact for the quarter or the year. On to slide 13. We wanted to provide an adjusted view of our full-year results in order to help you with your models for 2016. Our GAAP earnings are presented in our press release, and the reconciliations are included later in this deck. From a revenue perspective, we grew by $84.8 million, or 5.4%, and organically, we grew 2.6%. From an EBITDAC perspective, when we adjust for the Axiom Re loss and the credits for non-cash stock-based compensation, our margins decreased by 40 basis points.
This was primarily driven by contingent commissions being down about $6 million versus the prior years, which had an impact on our margins of about 25 basis points, and net gains on disposals were $4.4 million lower than the prior year, which impacted margins by about 15 basis points. On an underlying basis, margins were flat, even while we made incremental investments in revenue-producing teammates in the second half of 2014 and had a full year effect of these investments in 2015. We believe it is our disciplined approach to managing costs that ensures we maintain industry-leading margins. Finally, our earnings per share increased to $1.67, a 2.5% increase, which was primarily impacted by the year-on-year incremental interest expense of $9.8 million, or an equivalent of about $0.04.
On the next page, which is slide 14, we've included a full year analysis of our revenue and EBITDAC margins to help you with comparability to the prior year. A couple quick comments regarding the outlook for 2016. This year, we're expecting to implement a new long-term stock incentive program that will issue equity grants on an annual basis rather than our historical approach of issuing larger grant pools every two and a half years. The new plan will continue to be performance-based and will vest over a five-year period rather than some of our plans that vest over a seven to 10-year period. Taking the new plan into account and the performance of the equity grants we discussed earlier, we estimate our non-cash stock-based compensation should be in the range of $23 million-$26 million in 2016.
For simplicity and standardization of reporting, in 2016, we'll be combining non-cash stock-based compensation with employee compensation and benefits. Interest for the fourth quarter should give you a good indication of our run rate and when annualized is a good proxy for 2016. No, we don't have an estimate or guidance for contingencies. Lastly, our effective tax rate for 2016 should be in the range of 39.5%-39.7%. Okay, that wraps up the financial piece. Let's switch gears and talk about technology. We committed to share more about our technology strategy and related investment. As we mentioned previously, we've hired a new CIO, Carl Owen, about one year ago, and he and his team have been working with the business to refine our technology strategy.
We are pleased to say these plans are substantially complete, and we can discuss the approach, investment, and expected returns. Moving on to slide number 15. We've developed a strategy that aligns our technology spend with our key business goals of driving organic growth, improving customer retention, reducing operating cost, and enabling better business intelligence. It's through this strategy we're focusing our investments in three areas: standardization, optimization, and innovation. This approach allows us to continue our efforts to standardize our technology environment while focusing on optimizing our business systems and delivering innovative solutions that help our teammates continue to grow our business and improve the customer experience.
Over the past few years, we've been standardizing our platforms within each of our retail, wholesale, and national programs divisions, as well as standardizing many of our business systems, such as implementing a company-wide human resource information system, a learning management system, and a payroll system over the past two years. We will continue this type of effort across all of our infrastructure platforms, including such things as the consolidation of data centers and implementation of common collaboration platforms. The next primary focus will be to optimize and upgrade our internal business systems, such as our agency management systems for our retail division and our financial and management reporting system. In 2016, we'll be implementing a new company-wide financial management and reporting system that will give us additional insight, analytics, and efficiency.
For our retail division, we will be upgrading our systems to improve workflow, efficiency, analytics, and the customer experience. We anticipate this program will take two to three years. We'll continue to investigate innovative solutions that allow us to better improve our customer experience through mobility solutions and provide better insights of our business through the use of data and analytics. From a financial investment standpoint, we believe this next phase of optimization will cost about $30 million to $40 million in total over the next two to three years and will have a payback in four to six years from the commencement of the programs. During this investment phase, we expect our margins to be impacted by 35 to 60 basis points, depending upon the speed with which we ramp up the programs.
For 2016, the margin impact should be in the range of 40 to 50 basis points versus our 2015 adjusted EBITDAC margins. We believe this disciplined and coordinated approach toward technology investments will improve our margins slightly once the projects are completed, enabling us to operate within our long-term EBITDAC range of 33%-35% and also enhance our foundation for ongoing organic growth and scale. Let me turn it back over to Powell for closing comments.
Thank you very much, Andy. Great report. We remain optimistic about 2016 and the outlook for our businesses. I'm pleased with the improvements we made in 2015 and would like to thank all of our teammates for their efforts throughout the year. We do expect rates in 2016 to remain under pressure and are watching the economy very closely for signs of further expansion or contraction. From an M&A perspective, there's a lot of activity out there. We've seen a number of announcements in 2015, maybe the most active year of acquisitions ever. We can tell you that prices remain high, some at levels that don't make sense to us. We continue to look for partners that fit culturally and make sense financially.
Lastly, our disciplined capital deployment strategy across internal investments, acquisitions, and returns to shareholders remains a top priority to help us drive long-term shareholder value. With that, Kyle, I'd like to turn it back over to you to open it up for questions.
Thank you. If you have a question on today's conference, please press star one on your telephone keypad. If you are on a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, that is star one, and we'll pause for just a moment to assemble a queue. We'll take our first question from Kai Pan with Morgan Stanley.
Good morning. Thank you. First question on the technology investment. The question just on a high level to say, why do you do it? The second question, why now?
Hi, Kai. Good morning, Kai. We've been working on technology all along, as we mentioned in our comments. We think that at this stage, where we are as an organization and as we continue to grow, we need to refresh a few of those around our financial management systems, as well as in the retail space. Just as any company goes through over time, you just need to do normal upgrades and refreshes on those. That's what's driving that at this time.
Okay. The timing of it, normally you would say probably make the investment when the sort of organic growth is stronger, then you have the leeway, not impact your margin, and at the same time, be able to reinvest in the system. I just wonder, given we're now facing some pricing pressure, why would not wait until sort of maybe when the environment get a bit better and then without impact margin improve it? Why you take the opportunity right now?
Yeah, Kai, we take a long-term view on our business, we're not trying to manage quarter by quarter on these. We think this is the right thing to do for our organization. Therefore, if we need to take a short-term margin impact, we think that's okay, to make sure that we're ready for the next levels we continue to grow.
Okay, that's great. A bit of math behind the numbers, like $30 million-$40 million potential investments over two or three years. If you run the math of, let's say, three years, each year, $10 million on about $1.8 billion revenue, that's probably around the 60 basis points. I just wonder each year, so I just wonder your interim margin impact, like 35-60 basis point, is that including any offsetting factors?
What do you mean by offsetting factors, Kai?
Just means like a potential saving for somewhere else. Because if you just run a math, if you do $10 million investments in each year-
Okay
next three years on $1.8 billion revenue, that itself is about 66 or close to 60 basis points. I just don't know if the margin impact you've given there is that-
That's why we've given the ranges of 35 to 60 on it, Kai. We gave tighter ranges on 2016. As the programs do commence along through implementation, we will be able to start to realize some of the benefits, and that's really what got to our comment is when we get to the end of the programs, our margins will then increase back up to where they were before and increase slightly. We will be seeking some on the back end.
Okay.
You won't get all that on day one, because with any of these, there's a little bit of bubble cost that you have to go through.
Okay, that's great. Can you tell us since you already make some progress here to date, making some changes, how much investment you've already made in the standardization phase?
We'll come back to you on that one, Kai. We haven't quoted that exactly.
Okay, that's great. If I may, let's switch topic to the organic growth. Powell, one of your peers recently said that because of pricing pressure, the organic growth probably will be low single digits. I don't know from your perspective, what you've seen so far, what give you confidence that we can maintain or even improving upon the organic growth you're having, like a 2% or 3% you achieve in 2015?
Well, let's back up and say that as you know, we don't give organic growth guidance. I would restate what we've said all along, which is we believe that our business is a low to mid-single digit organic growth business over a long period of time, particularly in a steady state economy. I've also said that same comment about our retail business. Once again, as you know, our business is a proxy for the middle market economy. That's really important. Some others, their businesses may or may not reflect the middle market economy as much as ours do. Once again, we are going to continue to grow our business organically and make acquisitions where they make sense. We don't give organic growth guidance.
Just think about qualitatively, how do you compare the environment going forward, compare that with 2015? Because you mentioned the pricing side was continuing under some pressure, and on the exposure side, you've seen some improvements, but nothing dramatic. Are we seeing in a similar environment going into 2016 as we were in 2015?
As you remember, we think that exposure units have the biggest impact on our business versus rates. However, if rates fall precipitously, then that's a different story. Right now, the only place we're seeing that is in catastrophic property. I think the rate environment was similar in Q3 of 2015 and Q4 of 2015. Based upon what we're seeing right now, the area that will continue to have the greatest amount of pressure on it will be catastrophic property because we haven't had a storm in a long time and people have short memories. That said, you'd see the carriers are continuing to try to look at getting rate where it makes sense, particularly on automobile and personal lines, workers' compensation in certain areas of the country as well.
I think based on, that's a long-winded answer of saying I think it's more of the same based upon what we can see right now.
Okay. Thank you. Lastly, if I may, can you tell us what your potential exposure to your business related to the energy sector?
Yes. The answer is our energy exposure is very minimal. We do some business in our retail segments in the Gulf Coast, so down in Louisiana and down into Texas. We do a little bit in wholesale, and we do some sustainable energy in some of our larger accounts segment. As a general statement, compared to the size of the company, it's minimal.
Great. Well, thank you so much for all the answers.
Yes, absolutely. Thanks, Kai.
We'll take our next question from Elyse Greenspan with Wells Fargo.
Good morning. I wanted to shift back to the technology, the investments that you guys mentioned. Just as we're thinking about margins for next year, this year, you guys had also pointed to hiring that you were making in terms of adding onto your employee count, and that was a little bit of a headwind on margins. When we think about our models going forward, as we factor in the spend that you guys are making on the technology side, do you also expect to see some hits as to see some additional expenses as your employee count goes up?
Elyse, this is Powell. We allocate money internally to hire people that are not already in our budgets. We've talked about that before in our corporate assistance plan. We anticipate, obviously, continuing to make those investments this year and years going forward. I know Andy articulated what he thought the margin impact was going to be for technology, specifically in 2016. Based upon as we see it right now, we're thinking around a normal amount of investment in people and capabilities this year. If in fact the right opportunities come along, then we'll consider those just like anything else. Remember, we look at the hiring of people as our teammates are the single most important thing in our company. We ended the year right around 8,000 teammates. I don't have the exact number with me, but right under 8,000 teammates.
In order to get to the next level and the next level, we're going to have to acquire, hire, train, retain, reward more high quality teammates. That's critical.
Elyse, I'd probably add to that. Unless we make kind of, let's call it step investments at certain stages, as we talked about in the second quarter of 2014 earnings call. That was one where we had brought on some investment in certain areas. Those are where you might see impact on margins. Our comments earlier in the call, that's why we kind of highlighted the 40 basis points down for the year. What kind of the two main components of that. We were basically flat on underlying margins, and that was with this continued investment in our business.
Okay, thank you. As we think about 2016, I know you highlighted the hit just from technology about the 40-50 basis points. When you look at your underlying book, I guess kind of excluding the technology spend, how do you kind of see the margins just ex that 40-50 basis points hit?
We think it, ex that, we think that it continues to be in the range that we've given the guidance.
Yeah, probably on the lower end of the range.
Okay, great. In terms of on outlook for capital management, you guys completed the ASR in January. Just as you think about capital going forward, I know the strategy usually has been to put in a new ASR program after the prior one is complete. Can you just kind of talk about a timeframe, thoughts around putting a new program and capital management outlook, I guess, for 2016?
Elyse, as you remember, we don't have a stated plan where it says every quarter we're buying back X amount. We continue to evaluate that versus other options that we have at present or in the near to intermediate future. You're correct that we finished the ASR, and we'll continue to evaluate all of our opportunities, one of which may be share repurchases, but we have not made that determination yet. As you know, we got a $375 million authorization from the board, kind of in the waiting. We do have that flexibility, but we will continue to evaluate that versus our other options as well.
Lastly, I know you mentioned it's too early to kind of have an outlook on contingents. Can you, anything in terms of directionally without giving a full number, if you think 2016 might be higher or lower than 2015? Or can you just give at least an outlook for the Q1?
Yeah. No, I guess it's kind of back to our earlier comments, Elyse. Your estimate would be just as good as our estimate on this one.
Remember, the thing that's difficult is the industry could be trending one way, and our business, because of the performance in the individual offices, could be trending the other way. Conversely, it could be going the opposite direction for the companies, and we could be going the opposite direction as well. It's not that easy to say. I'm sorry to say that. I know that frustrates you, but that's the truth.
Yeah. If there's ever any big items, I think similar to how we telegraphed what we thought the fourth quarter would be, we'd share those if we have that insight, but we don't have any additional insight at this stage, Elyse.
Okay. Thank you very much.
Mm-hmm. Thank you.
We will take our next question from Quentin McMillan with KBW.
Hi. Thanks very much for taking the question, guys. I just had a question following up on Elyse's capital management question. More just a philosophical question about how you guys are thinking about return on invested capital here. If you could just sort of help us to understand what the multiples that you're sort of seeing in M&A land are, versus, I know that you don't probably have a specific ROIC target for your own stock repurchase, but how we might be able to think about the difference on the ROIC basis of you repurchasing your own stock at what look like attractive levels versus M&A at maybe whatever multiple, eight, nine, 10 times.
Okay. Let's start with the M&A marketplace. Depending on the size of the business and the growth and profitability profile, you're going to see eight, nine, 10, 11, 12, depending on what. Remember, I believe that a pro forma is a pro forma on the trailing 12 or the projected 12, not the pro forma of the pro forma of 2018. Our number on a multiple of operating profit or EBITDA might be different than somebody else's. They run their models, we run our models. Obviously, when we look at an acquisition, we look at the talent that comes with it, the capabilities, how that helps us service not only our existing clients, if that can expand that capability or bring new capabilities to something that we don't already do.
We obviously look at how we view our share repurchase compared to the multiples that are being paid in the acquisition space. We also think about it in financial terms, which we don't disclose, meaning we run our own internal analysis on all of that. At the end of the day, Quentin, we look at it and say, what are the opportunities in each of the three areas, and where do we want to invest that? Last year, as an example, we did both. If you think about the capital management last year, we paid $68 million of dividends. We paid CapEx of about $18. Is that right?
Yeah.
18.
Buybacks, $175.
$175, then the remaining on acquisitions. We felt like last year, that was the best allocation of the cash generated by the organization. That does not mean that's exactly what we're going to do this year. It means based upon the opportunities that we have, we'll make those decisions at that time.
Okay, great. Then you just spoke about the CapEx number. It looks like the CapEx range has been sort of between $10 and maybe a little bit below $20 over the past several years, and the technology investment strategy spending that you're going to be doing will be kind of lumped into that. Is the CapEx spend going to go up meaningfully from where you were in line with what this spending would be, or do you think about this holistically that the CapEx might be more flattish, and you've just diverted your dollars from one CapEx spend to another?
Yeah, no, I don't want you to think about that. I think that it's important to look at this as an incremental spend, meaning it's on top of. If you look at our CapEx spend over an extended period of time, I would say $12 million to $20 million a year, barring some large purchase or something. That's basically what it's been over time. I think you need to think about it in that $10 million to $12 million or $13 million range additionally a year for the next three years. And he's giving you an indication of $30 million to $40 million of total spend, and that will be incremental.
Yeah.
Quentin, let's step back. Let's talk about philosophy just for a second because I think this will help you guys. The way that we are thinking about technology and the implementation of it is our goal is to be able to basically take it off the shelf as much as possible, configure it to our organization. We'll customize it where it absolutely has to because that's one we believe will provide us with the best long-term cost of ownership. By doing that, it also means that we need to evaluate what we're going to buy as software as a service or in the cloud versus kind of traditional. One of the things we just don't know exactly right now is the geography, how much will be expense versus CapEx inside of there. The range that I gave you is pretty good one for right now.
Thanks. Andy, just a numbers question just so I make sure I understand what you guys had just mentioned. The non-stock based comp of your guidance for $23 million-$25 million in 2016, you said you're going to stop reporting and it's just going to kind of go into the comp and benefits line. Is that correct? Or did I mishear that?
Nope, you got it correct.
Okay. We'll just lump that all together and you won't be reporting that number going forward?
Correct. Yeah. It's consistent with all the other brokers that are out there.
Yeah. Agreed. If I can sneak one last one in, I apologize. It's just in terms of what you guys have on the all-risk program, I know you probably don't want to speak about specific clients, but is there any sort of qualitative guidance you could give us in terms of maybe what benefit that could have for organic within the programs division or anything that you might want to talk about there?
We're not going to speculate on that, Quinn. What I would tell you is, as you know, an all-risk program is going to be writing property in cat prone areas, places like Florida, Texas, California. To that earlier comment that Andy made in his remarks, it's already a pretty competitive space. It's too early to say. We're starting that this quarter, writing new business. It's too early to say. We look at it as a de novo program out at Arrowhead, we're very excited about our teammates and the capabilities and the capacity that we have lined up, obviously we have to execute on it. No speculation on growth impact.
Okay, great. Thanks very much, guys.
Thank you.
We'll take our next question from Ryan Burns with Janney Capital.
Hi. Yeah, good morning, everybody. Just follow up on the non-cash comp. I may have missed it, but did you guys note what the kind of $8.1 million event was this quarter?
We didn't. It was not a single event. It was a combination of offices or individuals not meeting certain performance requirements.
That's across the segments or any segment in particular?
It cuts across all, that's correct.
Okay. I was intrigued by the footnote there that you guys sold Colonial Claims. That had been a pretty good margin business, obviously following Sandy. Just trying to understand your rationale for selling that business. It doesn't seem like it had much revenue or negative expense impact when it wasn't on full cylinders. Just want to get your thoughts there.
Sure. Well, first of all, it is a good business. It's lumpy. At the end of the day, the investment community doesn't like lumpy income streams. We think highly of the organization, continue to have a relationship with them, and all that. At the end of the day, we were not given credit when it went up, but we were penalized when it went down. We decided that it would be best with somebody else that's not measured that way, and we'll redeploy that money in something that would be more consistent with a consistent revenue stream that we can talk about on the call and not have to call out every quarter if we miss or not miss. That's kind of the story.
Okay, great. Thanks. That's all I had.
Thanks, Ryan.
Once again, star one for any questions. We'll take our next question from Jeff Schmitt with William Blair.
Hi. Good morning, everyone.
Morning.
I apologize if I missed it, but could you touch on the level of cat activity you saw at Wright this year and how that compares to historical levels?
Yep. We did not touch on it. The answer is it was very low relative to historical levels. It's a good question. As you know, we looked at a 10 year model, and that was roughly around $7 million-$7.5 million of revenue on average. It was very low. That would be another area where we were impacted. We didn't call that out directly, but that is another area that was impacted because of a light storm season.
Right. Okay. Thank you. On the workers' comp front, did you mention sort of the level of rate decreases you're seeing in California in particular?
No, we didn't mention that. Remember, what we said in Q3, and what I would say now about workers' compensation is we didn't talk about rate impact. We talked more about certain carriers changing their risk appetite. Let me make it simpler. That means that there are certain places in the state, i.e., the Los Angeles area, where they think the risk profile is different than if you're outside of Los Angeles. It's not so much the rate, it was the change in appetite which impacted our ability to either write new business or more importantly, renew the business that we already have that's in that area.
Okay. That's helpful. Thank you.
That's all I had.
Thanks, Jeff.
Thank you.
We have no further questions in queue at this time. I would now like to turn the conference back over to Powell Brown for any additional or closing remarks.
Thank you, Kyle. Wish everybody a wonderful day. We look forward to talking to you again after the first quarter. Have a nice day. Thank you.
This does conclude today's conference call. Thank you all for your participation. You may now disconnect.