Good morning, everybody. Welcome to the first Investor Day for Brown & Brown. We're glad that you're here, and I just wanted to go over a couple items before we begin. A number of our senior leaders will be speaking this morning, and at the end of each of their prepared comments, there will be time for questions, and there will be time for questions afterwards and during lunch. Before we begin, I'd like to introduce everybody in the room that's from our team. Starting at my right, your left, you have Andy Watts, our CFO, who you know. To his right is Chris Walker, our President of National Programs. To his right would be Barrett Brown, one of our senior leaders in retail, and John Esposito, which is also a senior leader in retail. Barrett is predominantly East Coast. John is predominantly West Coast.
Having said that, if I go back right here in the front, one of our board members, Jim Hunt, right here, he's on the audit committee, and we're glad that, Jim, you're here. We have, let's see, Tony Strianese is in the back. He's the head of our wholesale division, president. Bob Lloyd next to him, which is our General Counsel. Next to him is Anthony Robinson, our Assistant General Counsel. Next to him is Scott Penny, who is our Chief Acquisitions Officer. To his right is Julie Ryan, our Chief People Officer. To her right would be Carl Owen, our Chief Investment Officer. To his right would be John Andresen, the head of FP&A, and to his right is Stephen Boyd, who is a Senior Vice President and another senior leader in national programs. We have right here Mike Conway, who's our Controller.
The gentleman in the back in the suit, Joe Jasminski, is on our technology team, and the lady out front that you met is Tessa Getch, who's our Director of Events and Planning. Before I begin and talk about Brown & Brown, I want to make a couple comments about the events that happened this weekend. As information becomes more available, we'll be able to talk about it, and you'll have better insight into it. Obviously, our thoughts and prayers go out to all the affected people, either individuals or organizations in the Carolinas. This is a huge flood event, and more information will be forthcoming. We have teams that are standing on the ready that cannot get in there to adjust claims already.
You may be reading about Wilmington and the surrounding areas, but there's a lot of places where they say that the rivers are not going to crest until maybe even two months. Having said that, we're working with our clients, and in some instances, people that are not clients to try to help them navigate through this difficult situation. We have very little information relative to claims because a number of people have not been able to even get to their homes or their businesses. We think of it more as a flood event versus a wind event, but we will see. Let me just start by saying Sorry. Perfect. We're in good shape. Why does somebody want to own Brown & Brown, and why are we different? Obviously, I know everybody in the room can read what's on the page.
We talk about a proven track record of growing our revenues organically and through acquisitions over a long period of time profitably. We talk about a deep, experienced leadership team of which you're going to meet and hear from, and you're going to hear about the time that all of us have been on the team. You're going to see a highly diversified and balanced portfolio. There's a lot of people that have thought about Brown & Brown in the past as a retailer, a big retailer, a middle market retailer. The answer is, yes, we do that, but there's a lot more to our business, and you're going to hear about that today. We have a platform operating model that you're going to hear more about and a strong liquidity and cash flow, which yields industry-leading, not only margins, but we think free cash, which we reinvest.
Why are we different? Why are we different as an organization? I think there's three or four key reasons. Number 1, we have teammates as opposed to employees. We have never had employees. We will never have employees as long as I'm part of the team. That's Number 1. Number 2, we have leaders. We don't have managers. That is a very distinct and important distinction. If I envision, so you can have a visual, I have four kids. I like to keep it simple. Think of an ostrich egg and someone sitting on the ostrich egg. That's a manager. That's not a person driving the business forward. Think of the point of the spear as the leader of a team, and that's how we think of it. The final thing is, we have 30% of our company is owned by teammates. Let me say that again.
30% of our organization is owned by teammates. We act like owners because we are. Now, somebody might ask the question, how many organizations are out there that have more than $1 billion in revenue and more than $7 billion in market cap? If you go and put that in your stock screen, I will tell you that we come up with 40 companies, four, zero, of all the public companies out there. If you look at the performance of those 40 companies over an extended period of time, I think that you'd be pleased to see the performance and how that performance outpaces the indexes, i.e., the S&P 500. Having said that We know that 60%, over 60% of our teammates own at least a share of stock.
It is not uncommon when I go into an office anywhere around the country, and the lady or the man who is sitting in the lobby, I call that individual the director of first impression, says, "Hello, Powell. How are you? What's up with the stock?" I know that that person owns a share of Brown & Brown or more than one. It is part of our cultural DNA. What is it that we do as an organization? We have four segments, as you know. Retail, the largest of our segments, where we go out and deal with the buyers of insurance. Most of the time, we're dealing with an owner or a CFO. On our larger account business, we may be using, or dealing with a risk manager, and in many instances, we do a lot of personal lines business, and we're dealing with a homeowner. Okay?
National programs, which Chris and Steve will talk about, is where we develop proprietary products on behalf of insurance companies and distribute them through a network of agents. Wholesale, that's where we have access into non-admitted markets. Think Lloyd's of London, AIG companies, and other related businesses. These would be things like coastal property, the D&O on a small fledgling technology company, or the general liability on an underwater demolition contractor in the tri-state area. Final thing is services. In our services business, which is roughly $180 million of revenue, it's really two things. Typically claims paying operations, TPAs, and two advocacy firms. We'll talk about that a little more later. I think the biggest thing that differentiates us is our culture. Brown & Brown, we talk a lot internally. We are a lean management team.
There are very few layers in our organization, we don't get caught up in titles. It's all about doing the right thing for our customer. If we do what's in the best interest of our customer, we will always win, and that's one of the reasons we write so much new business, is because we're exploiting the fact that we find a mistake that another agent has created or made. When you see these adjectives on this slide, you think about lean. That is our organization. Decentralized, we are a decentralized sales and service organization. The way we interface with the customer and the market is done locally, not somewhere way over here. We're all profit-oriented. Every leader in every business owns their P&L, and they're actually compensated directly off the performance of that P&L. Very important. Sales and service focused, we talked about that.
High quality integrity, that's what we look for fundamentally in teammates. We have about 9,100 teammates today and growing. We talk about it being an entrepreneurial organization and have an ownership culture. When 30% of the company is owned by teammates, you can see that, we don't like to think of ourselves as a big organization. We like to think of ourselves as smaller organizations under this umbrella called Brown & Brown. We actually leverage the capabilities of a national company but deliver that service and sales capability locally. Prideful relationships, highly competitive, and common goals. This is how I describe it. Three out of our four kids play competitive soccer. I never played soccer, neither did my wife.
I can tell you this, when we have two center backs and a new girl shows up to play on the team and she's a center back, if she's that good, we want her on the field. It doesn't matter if she plays center back. We may put her at midfield or wing or something. The answer is, think athletic team. Think we chart our performance. Every salesperson in the organization knows where she or he stands against every other salesperson every month. Every single leader of every business knows where she or he stands against every other leader quarterly. We are a very transparent organization where people can see our numbers internally. We share more information, we believe, than many others, but we don't know. It's very public inside of our organization. What is it that we want to be?
What does Brown & Brown want to be? When I started at Brown & Brown, our trailing 12 months revenue, which was 22 years, 23 years ago now, July 5, 1995, we were $100 million of revenue. Today, we're approaching rapidly $2 billion. We want to be the leading insurance broker delivering solutions to our customers, period. That's what we want to be. We're not trying to be bigger to be best. We want to be bigger and better. We don't think bigger is best. We want to be bigger and best. We have a strategic plan, which for those of you who have been shareholders for a long time or covered us I'll note the slight modification. We do 4 things in our strategic plan. Number 1, we're in the money-making business. Really, we're in the people recruiting enhancing business first.
That's the most important. We have 9,100 teammates. To get to the next level, we're going to have to hire or acquire a number of additional teammates to get there, thousands of them. Culture and the right teammates are number 1. 2, money-making business. 3, we do that through selling and servicing of insurance. 4, we're in the innovative solutions business. Now, for those of you who've been around a long time or followed us, friends of longstanding, as I like to say, the 4th pillar, which we moved to kind of a foundational role, is we want to be in the make no big mistakes business. What would a big mistake be in our business? 1, getting in the risk-bearing business. We do not want to bear risk like an insurance company under any circumstances, knowingly or unknowingly. 1. 2, a large failed acquisition.
3, a large E&O that exceeds our limits of liability. Those are 3 that come right to mind. As I alluded to just earlier, we have had the good fortune to invest in our business over a long period of time. We have a very disciplined capital allocation approach. You're going to hear from Scott Penny, our Chief Acquisitions Officer, later. As I like to say to our teammates, we do 3 things with the money that we make. Real simple. 3 things. 1, we invest it in teammates. I'm going to allude to this in the next slide. 2, we do acquisitions. 3, we return to shareholders. Sometimes people, not in this room, but outside, get caught up in either the number of transactions or the actual amount of revenue acquired in any 1 year. We do not.
We would tell you that we are always searching for people that fit culturally and make sense financially. That, over a very long period of time, has yielded the results that you see on this page. We're having some clicker difficulties. The question is: where do we play to win? Where do we want to be? The answer is, we're all up and down this value chain, as I like to call it. In the past, some people have thought of us as a small and middle market, middle market widely defined, insurance broker. That was true. Over the last 5 years, we've invested in capabilities that have enabled us to service the entire segment up and down that spectrum. Having said that, these are general statements in terms of margins, because we think our margins are industry leading.
As a general rule, that's where we see those margin profiles. You have commissions in the bottom and fees on the top. Typically, the fees are driven by risk managers, and we write a good bit of that business across the country. Then the rest is where we're dealing with an owner or a CFO or the sort, an HR leader, where it's commission-based. Having said that, I referred to earlier, what is it that we do with the money that we earn? First, let's talk about the internal investments. I like to say we, one, retain, reward Thanks. Great. Thanks. Appreciate that. We retain, reward, enhance existing teammates, and we hire new teammates that fit culturally that we believe can bring capabilities to our team, number one. Number one and most important.
Number two, we look at acquisitions that exceed certain hurdle rates over time. We try to expand our capabilities. Having said that, the most important thing that we do, most important thing in terms of acquisitions, is cultural fit. Okay? It's not all about the numbers, although the numbers are a big part of it. Ultimately, if we have a relationship with someone, when we are talking to them about a transaction, most of the time, we can come to the financial terms that are mutually agreeable. If it's purely an auction, that is not where we excel. Quite honestly, we typically don't want to because we typically cannot get as much information as quickly as we want it to make a fully baked offer. Final thing is return to shareholders. We've increased our dividends, as you know, for the last 24 years in a row.
Yield is low because we want to keep the money in the company so we can reinvest it in high-performing investments, which we've had the opportunity and the good fortune to do. We have periodically purchased shares back. Typically, the share repurchase is to just minimize creep, but periodically we will buy in shares when we think that opportunity exists and it looks attractive. This is a busy slide. What I want to kind of describe to you is this At the end of the day, we are a decentralized sales and service company. At the top of this graph, there are a number of things that we help do across the platform. All of those things are provided into the four divisions, or in the SEC parlance, segments. In the segments, we're working acquisitions, carrier relations, and the sort in each one of the divisions.
We're trying to, as I said earlier, leveraging our national scale, but selling and servicing locally. Somebody might say, "Well, what does that really mean? What does that mean?" The answer is, if you're in Santa Barbara, California, or Syracuse, New York, and if we have an opportunity to buy paper at a so-called discount to market, and it's 40% less than market, you are not required to buy it through that. The answer is, if you paid more than that, why are you paying more than that? We present opportunities to leaders who are selling and servicing clients to try to help them run their businesses as efficiently as possible. We're not saying you must. We're saying, here's the opportunities, and this helps drive your margin, which in turn, driving your margin in the top-line performance, increases your compensation.
I made a brief comment about being known historically or a long time ago as a retailer. Some of you in the room that have followed us for a long time might have even thought of us as a Florida-based retailer. Actually, at the time, that was true. A great amount of our revenue was based in Florida. Today, through acquisitions and organic growth, we have diversified the business both geographically and through our four divisions. If you think about it, today, we are about 52% retail. Somebody might say, "What is the threshold? Where do you think that is going to be over time?" The answer is, if you had asked me 5 years ago what you thought the mix of retail would be to the overall, I would have said 60%-70%.
The only reason I would have said that is because there is more availability of retailers. We did not, or maybe I should say, I did not anticipate the good fortune that we have had to buy 2 very large program administrators, Arrowhead and Wright. Okay. If we were presented with another Arrowhead tomorrow or another Wright, we would do them both. The point is there is not really too many of them out there. Having said that, we have, and we are not trying to force it to a number. That is not the case. I do not want anybody to think that. Over time, this number may move up and down slightly, but I do know this, that we are excited about the future and the growth potential, both organically and through acquisitions over a long period of time in all 4 of the segments.
What does that yield at the end of the day? Over time, we know that we do not control the stock price. We understand that it is important for us to grow the company organically and profitably, the market will price actually the company. We have been fortunate, as you can see, in a number of instances, to outperform our peer group and the S&P 500, not every measurement, but a number of measurements. Ultimately, what we think about is how do we do this every year, every 5 years, every 10 years? We are long-term thinkers. When we make investments in our company, we view it forever. Remember, there are buyers of businesses out there today that have 3 and 5 and 7-year horizons. We are a forever company, and we invest that way.
I am going to pause for a moment, and I know I have hit you with a lot of information, and I am going to ask if anybody has any questions on anything I have said to begin with, and then we will turn it over to Barrett and John to start with retail. Yes, John Fox. We need to get a. Sorry. We are going to let everybody ask the question for the viewers in web land.
Hi, thank you. I have two questions. First one is, you put up a slide that I've never seen before, which is on your shareholder base, short-term and long-term holders. I'm just curious about what's the definition of those two? How do you guys think about it? In all these meetings like this I've attended, I've never seen that type of breakout. I have an unrelated question.
Bring it back up. Just going to get back here, John. Okay. This may be semantics. Okay? That 11%, I call that the float. The float. It's out there in the market that's actively being traded. Having said that, if you look at our long-term institutional shareholders, of which you have been one, we think of long-term holdings differently than most. We think of long-term holders. five years, seven years, 10-year capability, not three months to three years or one month to three years. Having said that, if you look at our large institutional shareholders, there is a lot of consistency there. That doesn't mean there's not movement in size of the investment, but a lot of consistency in there.
People who have followed us over long periods of time, they know what they've got. That short term is people that are churning it. That's maybe the wrong term. That are investing short term, and they don't think long term like you do or other institutions.
Yeah. You answered, it's beyond three years, five to seven.
Yep.
The unrelated question is, you mentioned benchmarking every month, the salespeople and the leaders. The salespeople I can figure out, what are your sales at the end of the month. How are you benchmarking the leaders? Is that profit center, profit over last year, or what benchmarks do you use when you rank the leaders in the company? Thank you.
The question about what benchmarks do we use with profit center leaders, and the answer is we use a number. It could be everything from organic growth to profit margin, to revenue per teammate. It could be, we rank in all of our operating expenses as a percentage of revenue. We rank our salaries and related as a percentage of revenue. We have an average line, and I know that in this room, no one in this room probably thinks of themselves as average. At the end of the day, at Brown & Brown, when you have, let's say, 100 plus retail businesses, there are going to be people that are forced to the average or below based on their performance on one of those metrics.
Organic growth, operating margin, real operating profit dollars, salary and related expense as a percentage of revenues, operating expenses, individual operating expenses as a percentage of revenue. For example, and this is dated information, but we used to have a goal of having our rent as a percentage of revenue at 4% of revenue. As the economy slowed down, we went out and aggressively negotiated our rent cost down, and it came down to 3%, and it's going south of that. Now, we're not trying to stay in fancy A space, but we can have good B space or low A space typically.
Having said that would be an example, but everybody knows, and then if somebody is operating at X margin and they're four points below the average of that division, they go right into the book and they're like, "Huh, these are three areas where I'm outliers." We don't say, "You must do X," but what we say is, "You could go and talk to these other four people, and they are doing it. They're already above the average, and they're about your size or a little larger. Why don't you go talk to them?" There's a sharing. I call it a little bit of, unusual way to address it, a study group environment. We bring the leadership together three times a year where we share all this information, and it's a deep dive.
There's a lot of sharing, I call it, sometimes it's basic blocking and tackling, which is better for the entire team. Other questions? Greg, let's get you.
Thank you. You talked about investing in people, and you talked about the ownership level of your teammates in the company. I imagine given the success of the stock that you're going to go through a cycle where there's going to be some teammates that are going to be approaching retirement. Can you talk a little bit about your replacement cycle as teammates retire, and maybe touch on Brown & Brown University, et cetera?
Sure. Actually, as a broad statement in the industry, our industry is woefully prepared for the coming retirement of a number of talented people in the industry. That's a broad statement. All right? What I would tell you is that we are proactively approaching this. One of the people I introduced earlier is Julie Ryan, our Chief People Officer, and we're thinking at a very local level about strategies to implement where you're transitioning business from a retiring producer or service teammate to a new to the team, but a new person. It doesn't happen. These are not things that happen, like, in two months. These are years in the making. We have an active plan at the local level to work with, one, when people are thinking about retiring.
Two, who would be the right person, and we get them involved in that strategy. Three, we're always developing, as you made reference to, talent, which could potentially be a replacement with that. You'd say, "Well, how does that occur?" Since the early 2000s, we've had something in place called Brown & Brown University, which is initially started as a sales and technical training school for property and casualty producers. That's what it initially started as. It has expanded into employee benefits, into personal lines, into wholesale. We have leadership segments in there for profit center leaders or waiting to be profit center leaders, there's additional expansion that we can do. A lot of this now is being done online for our service teammates. We are capturing an enormous amount of knowledge that we're putting in a system that they can access at their leisure.
We think a lot about, if you ask me what our greatest challenge is and our greatest opportunity, it's the same thing. It's people. Teammates. I think about it all the time. We as an organization think about it all the time. The point that you're making is spot on, we like to think that we're actually out in front and we're being proactive. I will tell you that not every time it works perfectly, as you can imagine, because people buy from people that they like and they trust. When you introduce new people, it has to be thoughtful over an extended period of time. I think we're doing a pretty good job at it, and we can always improve.
You probably haven't had much chance to look at the Marsh JLT deal, which happened this morning, it's a very big deal, 25 times earnings, one of the bigger properties out there. These are probably in spaces that you don't compete as much head-to-head with. You've stepped up your acquisition pace this year from where you've been over the last decade. Are we in a new wave of acquisitions? I know you got an acquisition panel coming, any thoughts you have on what this means strategically to the industry would be appreciated.
Sure. Let's make some broad statements and then bring it back to Brown & Brown. Number one, in the early 2000s, as many of you know, banks were big acquirers of businesses. Now there's really only one bank that's involved, now they've named the insurance operation something other than the bank. That's the only real bank that I know that seems to be committed to the insurance organization. Come the mid-2000s to 2008, 2009, 2010, when the economy slows down and private equity starts getting involved. Today, I believe there's somewhere between 27 and 29 private equity firms out there that are active in our space. If that is the case, which we believe that to be true, it's one of the most active PE spaces out there.
Having said that, they have a different time horizon, they think differently about the businesses than we do. When I talk about cultural fit, I believe that it's not only us assessing them, they're assessing us. The best time to realize that we don't want to do a deal together is at the beginning. It's not when you do the deal and you've already exchanged the money, then you realize maybe you don't like each other. That's problematic. I do think that in the industry, in the brokerage industry the insurance industry, there will continue to be consolidation, number one. Number two, in the brokerage space, there are lots of people that are out there doing deals, which they're trying to roll them up quickly, I don't know how much value they can bring.
They can take expense out, but how much value they bring, because many of these people are not truly operators, based on my experience. They may be financial people, but they may not be operators. Having said that, they want to sell it. Having said that, most of the firms that we talk to, they would either be very attracted to something like that or not at all and more attracted to something like us. We have a proven track record. You can see it. We do what we say and say what we do. We pay with cash, hard to argue with greenbacks, and we do it quickly. We do deals predominantly with our internal capabilities, and when we say we go, we giddy up and go. When we do due diligence, that is not a license to renegotiate your term sheet. Others do.
From our standpoint, I will tell you that we're not doing anything differently. Some people are like, "Wow, you've done $94 million, $95 million of revenue this year, and you haven't done as much in the last couple of years," and Scott's going to talk at length about that. I would tell you, here's the thing. Acquisitions are a little bit like farming or fishing. You're either planting seeds all the time or you're fishing, and sometimes the fish are biting and sometimes they're not. We may have talked to somebody 10 years ago, and it doesn't prove to come to fruition till today or next year. We might meet somebody two years ago, and then all of a sudden we have a two-year relationship of some sort, and then we do a transaction. Every one is different.
I think that there will continue to be a lot of consolidation in the industry. It's a lot about capabilities, not just in property and casualty, but P&C and other capabilities that you'll hear about today. I feel like we'll have plenty of opportunities in the years to come. I'm going to take one more question, and then we're going to move on. Do you have a question here in the front, Anthony? Then we'll move on to retail.
Sure. Thanks. You showed the slide of the segments and the revenue mix, and you sounded kind of indifferent to the growth over time. I was curious, are there any strategic capabilities you either feel kind of aren't at scale or m aybe you don't even offer today that you would like to offer. For example, you said now you service a larger account space, whereas five years ago that was less the case.
Let me make sure that we actually do care, and not indifferent, I know what you're saying there, but we do think seriously about each of those divisions. I think that we are looking at it as an allocator of our capital, and in doing so, we are somewhat agnostic, but we also think about capabilities. All right? Having said that, we have said historically, and we would say it today, we don't think about things geographically, we think about things for people that fit culturally. From a capability standpoint, we have not in the past, and we're not going to start today, talking about areas where we try to fill out our capabilities. The only reason that is not that it's a problem with you, but some our competitors will listen to this.
Having said that, we're just trying to make ourselves better in all of our segments. If that's property and casualty, if that's employee benefits, if that's personal lines, and as I've alluded to now, we have capabilities in employee benefits from zero to 50,000, as an example. We didn't have that five years ago. We weren't consciously trying to get to that big space until we found the right group that fit culturally, which we have. We're always looking for people that fit culturally first, and then look at those capabilities and how they come in. That does not mean that we don't assess capabilities that we need to enhance or embellish. We just don't talk about it publicly. Having said that, thank you for the question. There will be more time at the end, and I'll answer any questions you want.
I'd like to turn it over to John Esposito and Barrett Brown for the Retail Segment presentation.
Morning. My name is Barrett Brown. I'm a regional president within the Retail Segment of Brown & Brown. I have responsibilities for a number of businesses up and down the East Coast, some of our large account businesses which are more national in scope, and including our Bermuda operation. I've been in the insurance business 23 years. I started on the risk-bearing side with Chubb Group of Insurance Companies, been with Brown & Brown 19 years, and have had the opportunity with Brown & Brown to work all across the country, starting my career on the West Coast and then moving back to the East Coast. John?
Okay. Good morning. I'm John Esposito. I've been with Brown & Brown for 17 years, and I'm a regional president. Conversely to Barrett, I started my career on the East Coast with Brown & Brown up until I relocated nine years ago to Phoenix, where I'm currently based, and I have the pleasure of working with all of our retail teammates west of the Mississippi.
Over the next 20 minutes or so, John and I are going to focus on the following areas of Brown & Brown. We're going to give you some key financial indicators. We're going to give you an overview of the diversification of the business. We're going to give you some insight into our culture and how it relates to our teammates and our clients. We're going to review some of our capabilities and specialization that we have, that we deliver to our clients in the communities in which we serve. Then we'll finish off with a future enhancement profile of the business. With that, let's get busy on the key metrics. As we finished off 2017, our revenue growth was 2.8% for organics. That ticked up to 2.9%. Our EBITDA margin was 30%, and our revenue per teammate was $235,000.
As we look across our three- to five-year viewpoint, what do we see? We see positive revenue growth, including the fluctuations for individual or annual acquisition periods over that five-year term. We see industry-leading EBITDA margins in the 31% range as we continue to invest in our business. We see nice lift, positive lift, with our revenue per teammate over that period of time, and we finish off with positive organic growth from 1.9% to 2.9%. Our business mix, I would ask you to think about three numbers, 58, 32, 10. 10% of our Retail Segment is personal lines. Think home, auto, boat, personal liabilities, et cetera. 32% would be employee benefits, also known as health and welfare consulting, group health benefits, long-term, short-term disability, wellness, life, things of that nature.
The last would be 58%, which would be commercial lines, also known as property and casualty, property, general liability, auto, work comp, professional liability, cyber, et cetera. John?
Now that you've heard a little bit about our metrics and our business mix, I'm going to take the next few moments to talk to you about what really differentiates us, point out a few things in our market profile that you might find interesting, and then finish up with talking about the breadth and depth of expertise that we have in retail. What differentiates us? We could spend all morning talking about our culture. I won't spend a ton of time on it because Powell talked about the decentralized nature of our sales and service organization as well as the ownership culture, but it really is what drives our results in retail. All of our profits and our leaders own their P&L.
They have an entrepreneurial spirit, and they're able to make the decisions at the local level that they think benefit the teammates or clients without going through three and four and five layers of bureaucracy. With that ownership mentality, they really do own those results and those decisions. Then for the fact that 60% of our teammates own a share of stock, we're all pulling in the same direction, and that's the tie that binds us together in retail. Outside of that, what separates us from our competitors? Let's define what a competitor is to us. People assume that it's really the other publicly traded brokers, and that's who we compete against. It really isn't the case.
70%-80% of the time, our competition is the local agent or broker in the community that we're doing business in, and that's who we have a street fight with each and every day. What differentiates us from them? Our ability to write and work with an account that we were referred into as a startup and opening their doors all the way to a large multinational company, and everything in between. Not only do we have the services and capabilities to take care of all those types of accounts, but we can also handle each piece of insurance that they need, whether it's their property and casualty, their employee benefits, or their personal insurance. Not only can we deliver those solutions for each one of their needs, but we can do it with over 100 retail locations across the country.
We can do it with very close proximity in their local market. That's really what separates us apart from the competition. Finally, based off the amount of business and the size and strength of retail, we've been able to develop some proprietary specialized products for our client base that either have industry-leading limits or coverages or enhancements. We can bring that to a local level when we're competing with those local agencies that may not have those capabilities. A few things in our market profile, which might have been interesting. Our revenue is based off of hundreds of thousands of middle-market businesses. That's really geographically spread, so we're not overly focused in any one geographic area or with one or two or three handful of clients that drive a significant part of our revenue. It really is a diverse book of business.
Secondly, the businesses that we work with, they really do in the middle market, and each and every day gets more important to them. They value the services, the market access, the benchmarking, and the expertise that we can bring. When we bring in those national capabilities and take it down to the local level, that's what our clients are clamoring for. When we go into a prospect in the local communities that we're in, oftentimes they're working with one, I'm sorry, two or three brokers because the local broker they're working with may not have an employee benefits division, or they may not have a personal insurance division. They're having to work with two and three different trusted advisors, whereas when we get in there, we can handle all those needs, regardless of their size or what they need.
At the end of the day, we're very happy with how we're doing in our local communities as it relates to building a book of business amongst all three lines of our division, as you can see in our business mix. Let's talk about the breadth and depth of our expertise briefly. Years ago, we were thought of as a Florida property broker, while that really wasn't the case back then, it certainly isn't the case now. We have customers over hundreds of industries and our top 14 industries, we have hundreds of millions of dollars in those industries. Barrett will talk about a few of those industries in just a moment and talk about some real-life examples on how we help them. What are we placing for these clients? Well, we place business across every line of coverage.
Our top 15 lines, each one of those lines, hundreds of millions of dollars of premiums we're placing every year. What does that mean? Well, it means that we're working with a lot of insurance companies, as you can imagine, and our top 50, hundreds of millions of dollars are being placed with them every year. For our teammates and our clients, that's extremely important because it allows us to build some proprietary products, as I alluded to before, because we have such a good relationship with our carrier base. It allows us to go in and give some expertise to all of our clients in those industries or those lines of business, and maybe give them some enhanced coverages or products.
With that, Barrett's going to walk you through a little bit of our capabilities and give you some real-life examples on how we're doing this.
Thanks, John. The capabilities and client profiles of Brown & Brown are both broad and deep. We are firmly positioned in the middle market, upper middle market, and large account space. What does that mean? That means we're working with business leaders to handle their risk management and create risk tolerance. As it grows through that spectrum, it's the business leader, that could be an HR manager, that could be an operations leader, that could be a controller, until you grow to a risk manager, and then to a risk management department, procurement, legal, and a board of directors, and points in between. Our client profile for a business, as you look at this slide, I recognize it's busy. If you go to your left in the North South arrow, $1 million in annual revenue all the way to $5 billion plus.
For an employee base, as you go all the way to the right, of 50 employees or 50,000 or greater. Our capabilities must match our clients' risk profiles. It's that simple. That spectrum starts with true risk transfer for a fixed cost. Think about a paint store in your hometown, and that business owner wants to take all the variables off their balance sheet that they can. What does that really mean? I want the lowest deductible or no deductible for the limits that I feel cover my business for that fixed cost premium, so I don't have to think about it for the business year, all the way to shared risk.
In that environment, as businesses grow and businesses are more complex and businesses have the leadership and capability to invest in handling part of the insurance and taking on that and share it with the risk bearer, if they have performance, they get benefits, lower cost of insurance. Think large deductibles, large retentions, $25,000-$150,000 range, all the way to the far end, which will be true risk financing. Significant retention risk structures where the primary risk bearer is the mass majority, it is the client. As on the top of the screen, these are some of our focus industry segments that we're going to talk a little bit about. Nonprofits, healthcare, think the largest hospital groups all the way down to the minute clinic. Real estate could be an individual location, an apartment building in Paducah, Kentucky, to a large portfolio that's countrywide.
Public entities, that could be the exposure associated with state, city, a county, or a school district. Finance, bank, all the way to our very own carrier partners, those insurance carriers. Manufacturing, local, regional, national, multinational. Construction from the grader all the way to the GC or the owner and all points in between with the subs and the trade contractors. Educational institutions starting with a local charter school all the way to the largest private and public universities. Let's discuss a couple examples across some of our solutions that we have.
In the property world, yes, we provide property coverage for clients at a single location, and we might do that with a single risk bearer, such as the retail paint store example, all the way to a multinational footprint that has a shared and layered program that might have 42 or more participating risk bearers. What would that look like on a daily basis within our organization? Recently, we wrote a dealer open lot plan for a used car dealership in a rural area in the U.S. We're heavy in the condo space, oceanfront, anywhere in the country, all the way to, we have a manufacturing client that manufactures a product or part of a product in Asia, then they ship that unfinished good somewhere in the center of the U.S., complete it, and then they ship it to Eastern Europe where it's distributed.
We have to be able to educate and provide the options and handle the complexities of those local admitted requirements in Asia, transit to the U.S., completion of the product, all the way to Eastern Europe until it's sold and no longer their responsibility. Sometimes you have to have the combination of the capability and the specialization, and it has to be collaborative if you're going to grow with a client. As an example, in our educational institutions, we have a large public university. On average, over the last five years, they've had $500 million-$750 million of new ground-up construction every year. You have to bring the specialization of construction and of educational institutions in handling their physical plant and bring those together and marry them from the client to deliver, to create a long-term solution. Collaboration is key.
As we move on to workers' comp and some places in the casualty realm, what do we typically see as we're working with a business owner? They want information. Workers' compensation is commonly misunderstood, and we're educating and showing the drivers and plans where the prospect or our client can take charge and drive results, lower costs. That could be experience modifications, that could be rating agencies for varying states, because there's not just one consolidated operation in the U.S., all the way to handling claims and how do you try to keep them in medical only or have return to work programs. Claims management for results. All the way to the other end of the spectrum, we have a proprietary analytic process where we get to manage the retained losses differently than most of our competitors.
As an example, through this suite of analytics, we worked with a prospect that had a long-term relationship with a carrier and a long-term relationship with a broker, and they felt confidently that they had met and they were at the bottom of their retained losses averages over a five-year swing. We came in, got the opportunity to explain our capabilities. They gave us the opportunity, and over an 18-month period, we were able to save them $19 million, not the bottom. These are capabilities we have and are very excited about. In the professional liability world, cyber liability world, an industrial electrical contractor in a state that did not buy employment practices liability, wrongful hiring, firing, failure to promote, harassment, discrimination, and wasn't interested in buying it, quite truthfully.
Through benchmarking, explanation of what the coverage actually provides, claim payment, defense costs, and actual claims within their peer group in that state, we're able to show them that a business and another electrical contractor in that state actually went out of business, the same size, 75 employees, as a result of a discrimination claim. We give options, client makes decisions. Their decision was, "I'd like to have that risk transfer." They bought employment practices liability. All the way to we have some proprietary capabilities where we use a suite of analytics in order to find trends and patterns in product where we can provide risk solutions, D&O, E&O, et cetera. It gives expense management capabilities. It gives benchmarking knowledge. It gives enterprise risk management alignment for the client and a whole host of others.
In the cyber liability suite, we specialize in engagement to assist in defending your data, your reputation, and providing placement of protection to reduce exposures. A couple examples. Large side, we've had the ability of creating some of the largest towers of cyber liability and technology E&O in the world, in excess of $600 million. At the same time, we've worked with the local medical group that didn't buy cyber liability and didn't truly understand their exposures. Through that consultative approach, they bought a $5 million limit for the first time. Would like to ramp that up as it meets their budget over the foreseeable future. In the captive management, yes, we're in the captive management business in a big way.
We're the third largest captive manager in the world, and it's a big slice of how we consult with our clients in the casualty space. Not for everybody, but when you fit, very sticky. As an example, we have a business in Georgia that has a large restaurant group. That large restaurant group has been interested in captives for three years. We've been communicating and educating, and now it's the right time. That entity is working with a portion of our captive team, which happens to be based in the great state of Vermont, in order to provide solutions for this restaurant group. In the health and welfare space, it's not much different than the P&C space. It's about helping people to think differently, using data and using product knowledge and specialization in order to drive the right behaviors and outcomes.
What are we typically seeing on the health side? We wrote a physicians group that has 75 employees in a rural area for their group health. What were they most interested in? Their pharmacy spend and how they handle some of the capabilities that they need for their constituency. All the way to a roofer with 143 employees. What were they most interested in? Flat out saving money, we worked through the marketplace and found solutions where we got the right coverage at the right cost to meet their tolerance level and take care of their employee base. All the way to a large hospital group with 4,500 employees, breaking a 20-year relationship. From a collaborative format, we have businesses in the country that have strong capabilities but are reaching out and utilizing other capabilities within the system.
The business in Texas work with a business in Massachusetts in order to come together. Now we have a client that has 28,000 employees as a result of it. Investing in the future, it's really three focus groups: capabilities, technology, and teammates. We talked a little bit about health and welfare. Employee benefits, technology, and compliance tools are very important as this environment continues to grow. The needs for technology and the desired results with technology for an under 100 life group is wildly different than somebody that's 500 lives or 10,000 lives. Compliance, particularly for middle market business, is very important because those businesses don't have the bandwidth to invest in all of the skill sets to watch compliance and how that ball moves daily. They're relying and asking for us to be a bigger part of that and do it effectively and efficiently for them.
Customer experience, we've got to continue to grow that. Stand still on that, probably isn't going to work out. Acquisitions. Interestingly enough, if you take that acquisitions point, you could put that anywhere on that slide. By doing the right acquisitions, typically we're finding capabilities, we're finding enhanced teammates, and we're finding technology systems and processes that can help us grow our business faster. Capabilities that we're focused on are with the client, internally across the Brown & Brown system, and with our carrier partners. Technology, data and analytics. It's about actionable analytics today. Data analytics is outdated. Telling somebody, "Here's what your analytics say," but not showing them what we can do and then actually implementing something with it to show a yield, doesn't work real well. That's where we're headed. We're focused today and have been better than we ever have in the history of our company.
You've heard us talk a lot about our standardized agency management system quarterly. We're very excited. We have access to information today that we didn't 10 years ago. In the near future, we will have even more, and we're utilizing it daily to the benefit of our teammates and our clients. Operational efficiency, always striving to touch on that and grow that across the platform. Last but not least, one of the most important, which is our teammates. We are an ownership company. You heard Powell talk about it. You'll probably hear others talk about it today. We believe that everyone has the ability to own a part of the company. You've heard that in our equity plans time and time again, and we're proud of that. It is our culture. Producer incentives with our producer incentive plan that you've heard about is very important.
Incremental performance earns incremental pay. We're pleased with where that's going. Brown & Brown University, which Gregory, nice question. Powell already took it, but it's a key part of our culture and part of our plan and infrastructure and where we're heading in the business. It's a sales and service focus, and we're continuing to grow it as you see fit. Bottom line is investing in developing in these three key areas is where we're headed, and this is not new information. With that, ask any questions for John or I. Yes.
Thank you. Yaron Kinar with Goldman Sachs. You mentioned in the beginning of the presentation that about 70% or 80% of the time you're competing with local brokers, smaller brokers. Have you seen that change over time, and do you see it changing going forward over time as you're growing on the one hand, and maybe some of your larger competitors are moving down market? If so, do you think that your competitive advantage against larger brokers still stands? Maybe you can talk about those competitive advantages.
Want to take that?
Sure.
A lot of different banners hang in the local environment, but typically, that's who we're touching and competing against every day. We feel very good about our local teams and what we're trying to accomplish there. Personally, I don't think that's going to change a lot. A large portion of our business forever is designed around the local communities that we serve. I don't anticipate that changing. As we continue competing against anyone and everyone, as we continue to invest in the business, we're going to continue to drive down the local level, but be more collaborative so we can utilize resources that can come to bear at the sales point with an individual client.
I failed to mention earlier, our industry is highly fragmented. In every location we're in, there isn't one or two or three dominant players. There's a host of them. As some get acquired, for every one gets acquired, there's one that is starting up. It really is a spawning pool. I agree with Barrett. I don't think it's going to change near term or long term. I think there will always be a highly fragmented marketplace, which is an opportunity for us both organically and obviously inorganically as these agencies perpetuate down the road.
Thank you. Maybe one more. On organic growth, it's been inching up the last couple of years, and you're almost at 3% now. We've heard from a bunch of industry players that kind of 3% would be the marker at which you can grow accretively. Could we get your thoughts on that?
Appreciate the question, that's not an area that we give guidance on. We're pleased with the performance of retail and where we're headed.
Thank you.
Two questions. First of all, can you give us an update on the rollout of the standard agency management platform? That's an important part of your evolution. Secondly, you gave us a bunch of examples of wins. Why don't we turn the tables, and why don't you give us some examples of why you lose business? I know you're focused on not losing business, give us some examples of why you lose business and who you might lose it to. Thank you.
Well, let's start with the losing.
All right.
Change is hard. I'd ask everybody in here to think about if you have something that you do frequently and somebody came and asked you to change it, how easy is that for you? When you have change in a team or with some of their key resources within their consulting team, that typically is hard. That's a hard hurdle to get over. We do it successfully a lot, but that usually is, I would say, the number one trigger for a client considering talking to somebody else or making a move. Historically, that's been number one.
Yeah, with the private equity playing in our space, not just acquisitions, but they're buying some of our clients as they grow and perpetuate. Anytime there's a change in ownership, that can spark a new decision or a new fight that we haven't had here before.
We feel good about the plan and the rollout on what we're doing, and I'm confident a number of offices that I'm involved with have gone through the transition, and very pleased with what it's doing in those offices and look forward to finishing out that over the next few years.
How long are you going to?
The rollout next few years.
Thanks. Meyer Shields.
Time for one last question.
Oh, perfect. Thanks.
Yeah.
Meyer Shields, KBW. I guess it's a two-pronged question as well. One, I don't know how to ask this well. Is there any rule of thumb about how much a company your size and the influence you have over carriers can actually translate into savings for customers? In other words, that you can twist the carrier's arms a little bit more efficiently? Second question, you talked about the 70%-80% competition representing smaller firms. Does that change as we get into national program, sorry, national accounts?
The national accounts piece, yes, it's different. In the larger accounts piece, it's typically a smaller group that you're competing against frequently, and it's kind of always been that way. Any other things you want to add to that?
Not on that one, no.
You want to take?
Yeah. As it relates to, we have a technical term for all this premium and relationship that we have with carriers. We call it butt weight. We have quite a bit of butt weight now. What does that do for us? I don't think you can really put a number on it, per se, so I wouldn't want to make one up up here and say this is what it does. What I can tell you is the relationships that we have with the carriers and the volume that we place allows us to build some proprietary products, which shows that they trust the business we're bringing to them and our expertise and the value we bring to the client.
With that, on any given day as we go to the marketplace, I feel that our business gets a top of the stack look and the best that they have to offer.
I would add one last thing to that. It's about confidence. Let's not forget, this is a people business. When you work with underwriting or leaders, decision-makers within our risk-bearing partners, and you have a track record of being successful in bringing business to them and growing it makes the conversation a little easier. It's about growth and profitable business with a carrier, not a leverage stick. It's the people business.
If I can make one comment, too, I think this is an important distinction. In our business, if you think about in retail, the property and casualty side versus the employee benefit side, the sales of those two products are fundamentally different. In the employee benefits side, you are selling a service platform that's capabilities to address their needs, and the insurance comes along with part of that platform. That's kind of overly simplifying it. I'm not trying to say that it's very competitive, but we get business on that service platform. Over here in property and casualty, it's typically a product-based sale. That doesn't mean it's price all the time, but what it means is it's a blend of price and coverage, and the service platform comes along with it. Remember, these are two sides of two big parts of our business. That's number one.
Number two, as it relates to our carrier relationships, at the end of the day, there are certain people that go and negotiate with hammers. If you negotiate with a hammer, one day you're going to actually be the bug and hit the windshield. Okay? As opposed to, we can agree to agree or agree not to agree, but we have spirited discussions with our carrier partners, particularly those that we have very deep relationships with. Deep is not only defined in premium volume.
Deep is if I have had the good fortune, or more specifically, Barrett or John have had the good fortune to do business with somebody for 15 years, and that individual, she started as an underwriter as they started as producers, and that person now runs the whole West Coast as an underwriting manager, they probably have a lot of confidence in what John's going to tell her. All right? That's something we take really seriously. We know that it takes years and years and years to build a reputation and about 15 seconds to blow it. Having said that, I do want to make the distinction, it's very important. Capabilities sale over here, this is a service platform for end benefits. P&C is a product sale.
The importance of personal relationships, long-standing, and doing the right thing by the customer, as opposed to That's how I describe it. Thank you both very much.
Thank you.
We're going to have more time for retail questions now. I'll turn it over to Chris Walker, our President of National Programs.
Good morning. Thank you for joining us today. I'm Chris Walker, along with my colleague, Steve Boyd, who you will hear from a little later today. We are responsible for the National Programs segment of Brown & Brown. I started in the insurance industry in 1980. I spent 23 years as a reinsurance broker, and I've been in programs now for about 15 years. I joined Brown & Brown via the Arrow acquisition in January of 2012. I want to start by just, there's a lot of acronyms used in the insurance business. I want to start just to kind of clear the air a little bit on what this is, program space, what we do. First of all, you'll hear us referred to as MGAs, which are managing general agents. You'll hear us referred to as GAs, general agents, MGUs, managing general underwriters, or PAs, program administrators.
They're all about the same. We're okay any way you cut it there. The key is that in all of our relationships, we have full underwriting authority from the insurance company. We have the pen. You'll hear that phrase used. We have their pen. I also want to distinguish a little bit between what is a binding authority and what is program business. You'll hear Tony Strianese, he's my colleague, after the break, will be talking about what they do in wholesale, and they have brokerage business and binding authority business. Generally speaking, when we're talking about binding authority business, which is done in our wholesale area, that type of business tends to originate at the insurance company level. The insurance company identifies the line of business, they vet it, they price it, they model it, they file the forms, and such with the insurance departments.
Then once they've got that finished product in that box, they deliver to the wholesale team. The wholesale team then has the authority to utilize that authority to write risks that fit in the box. Any risks that fit outside the box of that tightly defined box the insurance company has established would then be brokered into the market, or they go to the insurance company for an exception. They have to get approval. Program business is a little different, in that we tend to perhaps come up with the idea or come up with the new product line. It may come up from the insurance company. In many instances, it's a collaboration between the insurance company and our team coming up with the product idea.
We work with the insurance company to develop the definition of the product, to develop the rates, the forms we're going to use. We price it. We get our actuaries involved. We may even file the product with the state insurance departments alongside of the insurance company. We're really assisting and leading the process, if you will. Because we do it that way, we rarely have risks that fall outside of what our authority is. We rarely would have to go to the insurance company and seek approval or to find a new way to approach it. We even would get involved as we look at the marketplace in this product we've got.
We would get involved in saying there's some dynamics changing in the marketplace. Competition's changed, rates have changed. We would be proactive going to the insurance company and saying, "We've got to change the parameters a bit here. We've got to change our model." It's a very interactive, transparent relationship that we have with the carrier, that gives us, we think, much greater control over the formation, building, and management of the partnership. It also allows us, because we're involved in the formation and the building of the product, to bring in other carrier partners alongside. By doing that, it gives us greater growth potential, again, control our own destiny, also it means we don't necessarily always have all our eggs in one basket. We're not tied to one insurance company, we control that product.
Hopefully, all these acronyms and buying authority versus program business gives you a little feel for that. I next want to just take a look at the size of the program business space. And thankfully, Conning & Company just recently published a report titled "Property-Casualty Managing General Agents - The Golden Age Endures". Conning, looking at statutory statements and such, found that MGAs produced about $45.9 billion of premium, which is filed in 2017. It's about a $46 billion piece of an industry that's about $637.5 billion. We're about 7.2% of the P&C industry. The $45.9 or $46 includes about $6 million of crop business. Crop's a little different. It's a GA, but it's handled differently. I would take that off and just say that we're working with a floor here of about $40 billion in terms of in our space.
In that $40 billion, which Conning looked at, well, they call it the Golden Age Endures. They're very bullish on the space, and we share that enthusiasm. I think the good news about programs is that the growth in program is outpacing the overall insurance industry by 7% versus 5%. In program space, we're growing at a clip of about 7%. The entire industry is growing at 5%. Secondly, we really do see the insurance companies viewing our program business space as their growth engine. It's difficult, it's competitive to slug it out every day if you're insurance company on Main Street, et cetera. With our specialty niche, and I'll get into that a little bit, this is viewed as a growth engine. Third, the product development is robust in the program space. We're constantly upgrading our products. We're constantly revising our products.
We're viewing what competition is up to, where we can make a difference. We're revising that product in a robust way. Finally, we've had a lot of new entrants from Insurtech space and from capital markets. We've embraced both, they've been a big part of what we do. We share that optimism. There are things that can rise up as challenges for us. I want to just identify three areas that we think about that would be challenges in our program space. The first would be insurance carrier partner changes. We're very much aligned with those insurance carrier partners. If there's a change in management at an insurance carrier, they might change their strategy and not want to pursue the path we've led them down. There might be sales or acquisitions that change their appetite.
There might be market conditions that change that make a carrier partner not want to stay in the space. Our strategy around that is to try to employ multiple markets. Where it's appropriate, we have more than one market, if there is a change in appetite or a change in desire of the carrier partner, we've got a backup. If we don't have a market that's sharing in the risk on a particular program, we tend to have what we call bullpen markets. We've got somebody that we've talked to about a particular program that is, let's put 60% up to speed on what exactly we're doing. They understand how we distribute the product. They understand our pricing. They're not all the way there, but if we have a need, we've got somebody that doesn't have to start from scratch.
We call it having a bullpen market. That's how we try to manage around potential carrier partner changes. The second area would be if there's government intervention or new regulations. This would in particular affect our flood book. We have a large flood book. Powell referred to it earlier. It's the Wright group. If the government doesn't get their act together on the NFIP plan or what have you, or changes something, we've got to be very fluid on that. We also have a book of lender place business that comes under a lot of government scrutiny, we've got to be careful there. Our strategy there is, frankly, just to have a strong presence in Washington. We constantly have people there.
We use trade groups in the insurance industry, people like the CIAB, the Council of Insurance Agents & Brokers, to help us manage that process. We've done a good job there, we feel pretty good about that. The third area that could be a challenge for us is a major catastrophe. If we have that earthquake in L.A. or earthquake in San Francisco, or we have that major hurricane that blows into Florida or something happens in Texas, that's certainly going to cause disruption in our market. The result of something like that would cause a short-term moratorium on writing. We'd have to stop the presses, so to speak.
The good news about that, as we look at that, it's actually an opportunity, coming out the other side of that, with the amount of capacity we have in the industry these days, and with the introduction of capital markets and other ways to find capacity, we think that there would be, obviously, if there's a big loss, there'd be a lot of capacity. We come to the marketplace at much higher rates. When there's higher rates, we get paid a commission against higher rates, we win in the end in that scenario as well after that short-term moratorium. That would be just some things that we certainly think about in our business. Let me go forward here. In terms of the segment overview on National Programs, I'll let you look at those numbers for yourself, and you can read the picture there.
Obviously, our revenue growth is strong. We've had a good, strong margin. We believe it's a result of our strategy. Our strategy is to really focus on specialty niche businesses. We have very strong carrier partner relationships. They're our partner in all this business, obviously, and they're our lifeblood. We've got a vast distribution network. I'll talk about that in a minute, but we estimate over 15,000 distribution points around the country. Our diversified portfolio of businesses, from professional liability to property cat to personal lines, commercial lines, et cetera. We're very diversified. We've got great scope and size in the industry. We've really embraced technology to enhance our efficiencies. We've really embraced and have that embedded in what we do. We don't shy away from so-called difficult risks. We have coastal homeowners business. We're in about 22, 21 states. The business is on the coast.
It's wind or earthquake exposed. We've got a robust California earthquake book of business, both personal and commercial lines. We're in flood, I mentioned that. We're in lender-placed, I mentioned that. We're in California work comp business. Wind, we're in southeast wind business. It's businesses that what others might turn away, we thrive in. We find it to be less crowded. We can make a difference. We can get better pricing. We do partner with alternative markets. They help expand our capacity to write risk. We view the capital markets as an offensive and a defensive play. It's offensive in that it allows us to write more risk. It's defensive in that if we are doing business with the capital markets, they can't take that capacity to one of our competitors or somewhere else. So it's an offensive play and a defensive play.
My colleague, Steve Boyd, who I mentioned earlier, he'll talk to you about how technology is an enabler for us. It's not a disruptor. We're embracing the technology to really enable us to be much more efficient. That size we have, the scope, and the diversification is really what's key to us. Our size allows us the opportunities to pursue new ventures that emerge in the marketplace, obviously in conjunction with our insurance carrier partners. I'll touch on what you may have heard about our Core Commercial program with QBE shortly. Initiatives, startups like that and others, they can take us 3 to 5 years to meet our margin expectations. We can do that because we have enough size to absorb the time it takes to build up those investments. Our diversification really means that we're somewhat protected from economic and market swings.
As an example, in a strong economy, our lender-placed business would tend to suffer. Now, why would that be? It's because in a strong economy, the families that buy the homes, that get the mortgage, they tend to have more cash flow, so they're paying their bills, and they can buy insurance. There's less defaults because we get paid, we place that business on behalf of the mortgage company, and if they don't give a proof of insurance, then we forcibly lender place it, and we get paid a little more money. In a tough economy, the people struggle to pay their bills, which results in more business in the lender place side, placed by us to protect that lender from default. In this case, the cost is simply rolled in their mortgage, and it's kind of out of sight, out of mind.
If we get hurt and lender-placed a little bit in the same strong economy, we might sell more personal earthquake insurance. It's amazing when you have these natural disasters around the world, and the consumer sees what's happened, whether it's a typhoon in Japan or the Philippines or Hurricane Harvey or earthquake in New Zealand, the California consumer in particular starts thinking about, do I have earthquake insurance on my home? They call their agent, and they realize they don't have it as part of their coverage, so they might start shopping in that strong economy where they've got a little more cash flow, and they're a little more observant of what's going on. They might buy more personal earthquake. We've got a tremendous breadth and depth of expertise and capabilities.
We really, in terms of the industry, we've got over 60 programs that we do, and I've referred to some of these already, whether it's commercial earthquake, residential earthquake, homeowners, professional liability, et cetera. We place about $2.8 billion into the marketplace. That's an interesting number. It's a big number. We think we're one of the, if not the largest program writer in the industry. I mentioned binding authority business earlier that Tony Strianese will be talking about. Some entities combine the binding authority and program business into one big bucket. We don't do that. It's separate. If we did that, we'd obviously be a much larger, probably by far the largest writer of the binding authority/program business. That's just program business. Our management team has got a wealth of experience. We hire underwriters.
The underwriters come from major insurance companies, so they've got a lot of expertise, and they sell very well when we create these programs, and we move forward. We've got turnkey solutions. We'll talk about next slide a little bit about some of those solutions we bring. Great underwriting expertise, product development. We've embraced technology. I mentioned earlier in terms of our, we've got about 40 different carrier relationships, major insurance company relationships. A great marketing team, and I mentioned our 15,000 or so distribution points. That's really true turnkey. Let me just give you an example of what happens, and I'll use our commercial earthquake book as an example of what might happen. We think we're the largest writer of commercial earthquake in the country, in the state of California, and we do a little bit in Oregon, a little bit in Washington.
We have roughly 10 carrier partners that participate on that program. When the risk comes in, our underwriters immediately model it, either using the RMS model or the AIR model, depending on what the carrier uses in their office. The risk will come in. They'll model the portfolio using that. We'll model individual risks against those models. We've got a predetermined amount of capacity we can utilize from each carrier partner, which we will then put in place on a particular risk. On some risks, we might use all 10 carriers if it's large enough. On other risks, we might use two or three carriers. We very rarely would use one, but it could happen, but it'd be two or three. It's interesting, the carriers that we have on these programs, a lot of them really view this as their diversification play. I'll give you an example.
They may be a regional insurance company that's got a very big book of business in the Midwest, and it could be commercialized, could be personalized, and they're looking for a way to grow. They would come to us and say, "We need to diversify. We'd like to grow. What do you have?" We might say, "Commercial earthquake." They might look at us like, crazy, but you talk about a good diversification play. If you're heavy in the Midwest, subject to tornadoes, and I'll exclude Oklahoma for their earthquake exposure, but if you've got rain, hail, and tornadoes, and now you start writing California earthquake, it's a totally different risk, obviously. We've had some instances where they've been very interested in that, and we've actually arrived at conclusions there. The other thing about the commercial earthquake space in California, as a side note, it's been pretty profitable.
Those of us old enough remember the Loma Prieta earthquake in 1989 during the World Series. We've had Napa, we've had some other shakes and rattles. That's the last sort of big earthquake we've had. I know we're due. I'm from Minnesota originally, and now live in San Diego, we're due. That certainly has been a while, it's been very profitable. We bring solutions. We bring technology, we bring underwriting, we do the billings, the claims, in some cases. We are involved in the operations, the mail, policy administration, the management and marketing, et cetera. We're that one-stop shop so that the carrier, the insurance company, can really focus on what they want to do with their capital, how they want to buy their reinsurance. They can manage it from a portfolio perspective.
They don't have to hire six underwriters to do a certain line of business. We've got those underwriters in place. They don't have to go and hire those people. They have people that monitor our underwriters and audit our underwriters. We get a lot of audits. They can really focus on that risk management and the portfolio. We're really bringing solutions to the table. I just want to touch on some final comments about what's referred to as the Arrowhead Core Commercial. It's something we launched in July of last year. A very exciting initiative for us. QBE's signed on. QBE is our market for this. They've signed on for a multi-year commitment for the Core Commercial. Let me just give you a little more color around what this is. QBE had been a very acquisitive company over a five to seven-year period.
Two of the companies they purchased were General Casualty and Unigard. General Casualty is a Midwestern-based company, very strong in the Midwest with the independent agency base. Unigard was more Pacific Northwest. They bought these companies. Again, very strong positions in their respective areas. Also this business, which we're calling Core Commercial, very profitable from an underwriting perspective. QBE really likes the business. They don't want to exit, they don't want to sell it. It needed a fresh approach. There were really three key areas that QBE identified, along with us, that we needed to attack for this business. First of all, they needed a refreshed consumer-friendly, agent-friendly product. We needed to refresh the product. Secondly, they needed to reengage, expand the relationship with the producer base, create a better customer experience with that producer base.
Third, they really needed to invest in technology, upgrade a bit, make it easier to do business with, make the experience, again, much more efficient and have less human interaction. Because we're talking about the targeted product is business that has $100,000 premium or less. It's Core Commercial type of business. Enter Arrowhead into the process. QBE partnered with us to re-engineer the business, to take it from that direct QBE program, where they're doing everything, to a program that's built around the program business. That would leverage our retail operation, leverage our technology, leverage our experience in the marketplace, in this business, et cetera. We didn't buy the business.
QBE transferred the premium, the relationships, the people, the authority to us at Arrowhead and within National Programs, this is all falling under the National Program umbrella, to run the program with QBE remaining as the carrier partner. QBE is the paper. Arrowhead is behind the scenes managing the entire process, similar to what I showed in the earlier slide, where we bring solutions. We call these lift-outs. We've done a couple of those, where the company is lifting out some of the expense. Maintaining their position as the carrier partner, and we do all the rest. Again, our investment is not an acquisition price. We didn't pay an acquisition price. We didn't buy it. Our investment is taking on the people. We have 40 people now around the country, predominantly in Sun Prairie, Wisconsin. Our investment is building out the technology.
Our investment is working to refresh the product. Our investment is making the new filings in conjunction with QBE to the various state insurance departments. As I mentioned earlier, these new ventures can take three to five years to really reach our anticipated expected margins, and this initiative fits right in that timeframe. We're making the investment. We've repiled the product. We've got the producer base excited. It's terrific. During this time, there's a lot of moving parts. We've seen revenues go backwards during the first 12 to 24 months, the growth starts, and we start accelerating. We're especially excited about this initiative and this program because it gives us a platform to bolt on other commercial products. Once this is fully built, this is going to be very robust, very technology-centric, and it allows just support other programs within the initiative.
You can see there that by 2021, we certainly expect that the EBITA margin will be commensurate with the rest of our margins, and we're leveraging and things like that. Again, we're very excited about what this has done for us, the splash it made in the marketplace, and obviously, the partnership with QBE is very important to us, and it's a strong one. With that, I'd be happy to answer any questions you may have about National Programs.
Thank you for your presentation, Chris. That was informative. Can you talk about the sustainability of the margins of your business longer term in the context of, you talked about InsurTech. It seems like there's a lot of new ideas that are coming from the technology space that would be targeting businesses like yours for disintermediation.
Yeah. We're going to talk about InsurTech after the break this afternoon, my colleague, Stephen Boyd, is very involved in that. I will say, initially, there was a lot of talk about disruption within the insurance space in general. Our space certainly fits into that when you see InsurTech. We've found actually, as this has evolved and it's become more ingrained, we've actually found it to be an enabler. Steve will get into that a little bit about some of the things we've done, some of the initiatives that we've taken to make ourselves more efficient by using InsurTech. Arrowhead and National Programs has been, the whole technology thing's been embedded in what we do. We're not new to the game, so to speak, in the technology play. InsurTech has just upped the ante and made it much more efficient for us.
I think we'll get into that a little later. We don't view it necessarily as a disruptor. It's an enabler, it's making us more efficient.
Just as a follow-up, the sustainability, the margins longer term of your business, given all the competitive threats. I mean, you-
Yeah, we don't really give guidance on that. I mean.
Yeah, I understand that.
Yeah.
How do you think about it longer term?
I'm really happy with what we've done thus far. We'll keep pushing the envelope, but I don't want to really get into the future of what that might or might not be, but we're very proud of what we've accomplished thus far.
Thanks. Do you have any insights on why the Programs business growth has been so much higher versus the rest of the P&C industry? I'm trying to get at whether we should expect that growth to continue into the future.
I think from an industry perspective, it's growing faster because of just the specialty nature of it. I can only speak from our perspective, our experience. We're very specialty-oriented. We're not going to go into a marketplace where we can't make a difference. What that means is if we can't get it to a certain level of premium penetration, and if we can't push the rate that we deem appropriate, we just won't get into it. An insurance company gives us the pen because they believe that ultimately we can do a better job than they could if they went out and hired a team of people. We have to perform to that level.
I think thus far, from our perspective, I can't speak for all of the people in Program space, but from our perspective, we've been able to deliver on that initiative and that promise. How about now? There we go. Keep in mind the floods that we talked about last year, so that's inflated the organic growth from an underlying basis. Remember, we launched the Core Commercial in July of last year, so we've had that as part of the lap. Just keep that in mind because that growth rate has definitely been impacted there. Okay? We've called out those numbers on the line.
Can I also?
Just make a comment, Mike, the other thing to your question about why insurance companies are not models of efficiency. Okay? If you have an industry over here that's looking for a double-digit return on equity, and you have alternative capital out here that's capable and accepting something less than that, let's say five points less, and they're distributing, they're just using their capital to go to somebody like Chris and Steve to achieve that return, there's less frictional cost. The carriers are looking at ways, we believe, they have to do fewer relationships, but deeper with people. Deeper with people that they trust and they like. All of a sudden, Steve and Chris run and have built an organization that, one, has technology woven through it from the beginning, and we're not just recently coming to the party.
Two, we have very, very deep carrier relationships. Three, over the years, both of them have had, and the rest of our teammates, we have a lot of goodwill and trust built up with these carrier partners, and they're saying, "Hey, this is an opportunity." Core Commercial will be a perfect example that we can partner, meaning the carrier saying, we can partner with a good partner in Brown & Brown, and they can run it more efficiently than we can. That's really the deal.
We have time for one more question.
Thanks. I just wanted to clarify one point. Do you deal directly with third-party capital providers, or are those sorry, funds aggregated by the insurance carriers you're dealing with?
We have a direct relationship with a couple, several of the capital market partners. Okay. Well, thank you very much. I think we'll take a 15-minute break. We'll be back in 15 minutes around, by my count, that's about 10 o'clock. Tony Strianese will be up next. I guess, I think refreshments are just outside the door. See you in 15 minutes. Thank you.
Okay, everybody. We're going to go ahead and get restarted here, please. For those in the back, we're going to get kicked off. Okay, Tony, you're up, sir.
Good morning, everyone. I'm Tony Strianese. I'm the president of the wholesale businesses at Brown & Brown. I appreciate all you folks making time for us and trekking over here from wherever you're joining us from. I think it would be appropriate to start off with a little bit of a historical walk as to how we got to where we are, and then fill in some details. Back in January of 2000, Brown & Brown Wholesale was in the neighborhood of $20 million in revenue. I believe the overall firm was about $175 million total. There were three major events over the last 20 years, I would say, that triggered some of the significant growth in Brown & Brown Wholesale. The first being the 9/11 World Trade Center event. That drove rates through the roof, multiples of rate.
That gave us a good launching pad to take off and grow rapidly. The second big event was the purchase of Hull & Company. That was in 3/1/2005. The final major acquisition was June 1, 2016. We acquired a firm in New York, Long Island, New York, corporately called Morstan. It was about $34 million in revenue. That gave us a platform in the New York City tri-state area. We have some satellite offices of Morstan in New Jersey, Manhattan, as well as two small ones in Florida. Over the 20-year period, we've shown continuous organic growth. I would say those were not the only acquisitions. Those two that I mentioned were the major acquisitions. Day to day, week to week, we have acquired those other businesses that are in the $3 million revenue to $10 million revenue range.
If you look at, if I find it. Help. Oh, I got it. The key metrics. As you can see, the wholesale division has grown nicely over a 5-year period, and I'm certain if we look back over 10 years. The organic growth has been consistent. EBITDA margin has been quite steady, and the revenue per teammate seems to be climbing a little bit. Our business overview is predominantly, we are an excess and surplus lines broker. That being said, that is a little bit of an old statement in that wholesalers do business outside of the excess and surplus lines markets. We do business with retail agents that may have one or two appointments such that they would come to us for a Travelers or a Chubb or any of the standard admitted markets as well.
A good way to think about it and look at it is, a retailer might go out this far with their capabilities in-house, and a wholesaler can just take them out that much further. Brown & Brown Wholesale specifically, because we have over 200 markets that we do business with. The business mix has been trending. The binding authority business, as Chris Walker nicely described, is growing very nicely, as is the brokerage business. The key difference in the binding authority business, to give it a little bit of a different explanation, is that firstly, we have about 20 binding authority contracts nationally. We maintain all of the underwriting authority for a given risk bearer. That puts the responsibility on us to produce the business, underwrite the business, issue the policy, loss control the policy, and in some cases, even pay the claims up to a small level.
I want to run through real quick our key go-to brands. One of the things at Brown & Brown, when we acquire a given business, if there's name recognition and name value in a given territory, we don't force anyone to take on a given name, whether it be Hull & Company or Peachtree, et cetera. If there's name value, we let them exist within their name. There's no reason to force-feed them a Brown & Brown brand. Apex Insurance is out of Chicago and Richmond, Virginia, predominantly. Apex is purely 100% a public entity business. Decus Insurance Brokers is a brokerage that we started ground up 10 years ago. Decus is our entrée to our access point into the Lloyd's market, European capacity, as well as Bermuda capacity. ECC is out of Chicago. It's predominantly a professional liability shop. Halcyon Underwriters is a different kind of organization.
Halcyon, if you think about it in this light, that they're dealing with second, third, fourth, fifth-tier retail agents that may only have one appointment. They might have built their business on an appointment with The Travelers. It enables them to access all the other standard markets, or many of the other standard markets, through Halcyon. Effectively, as long as they can maintain the relationship with the buyer, the actual insured, we have the capabilities to allow them to compete with large national retail agents. MacDuff Underwriters was one of the original Brown & Brown wholesale businesses. It's in Daytona Beach, Florida, and I would say that it's a real good mixture of binding authority and brokerage business. Hull & Company is predominantly binding authority, but when the business falls outside of the authorities that are granted to us by the risk bearers, then it becomes brokerage.
Internally, we might refer to it as brokerage light, because there might be one or two attributes of a risk that force it outside of binding authority, but other than that, it fits. Generally, those binding authority companies have a brokerage division, so it becomes sort of a referral. National Risk Solutions is in Tampa, Florida. It's a personal lines/predominantly homeowners play. What I would tell you most about National Risk Solutions is that it's really based on technology and our ability to, for lack of a better term, flip a lot of burgers and move a lot of policies and a lot of paper efficiently. Peachtree Special Risk, which was born in January of 2000, is 100% a transactional broker. Whether it be property, liability, professional liability, no binding authority exists. The people that work there are pure brokers.
Probably wouldn't want them to have binding authority based on the way they're wired and how they do business. Texas Security General is out of San Antonio, Texas. It is, when we acquired it, predominantly a binding authority shop. Maybe 10% of it was brokerage. As they've been on the team, they have grown and grown and grown, more than doubled, and become pretty much split commercial brokerage as well as the binding authority business. Areas of expertise are open market brokerage as well as binding authority. Because we have approximately 40 businesses nationally, including London, our teammates are very product specific, and they're in the market every day, all day, working on a given product. Whether that product be property or liability or professional liability, they really need to be the doctor and be able to fix things for our retail customers. We are true solution providers.
They have layering expertise in the large property area, modeling expertise in-house. Real briefly, as the business has evolved, modeling has become a significant part of large property CAT underwriting. There are many different types of models, but, in short, it gives the risk bearers an estimate of what could happen with a given schedule of property in a 100-year event, what could happen in a 250-year event. It's the way of the world. Back in the day, many moons ago, when I was underwriting, there was no such thing as modeling. Just running through a few of our products. High-risk property, casualty, professional liability, transportation, auto, garage, personal lines, very significant part of our business. Financial and professional liability, rental car programs, police department and public officials liability, marine, both wet and dry.
Dry would refer to inland transit as well as specialty coverages like a jewelry floater or a coin floater. Workers' compensation, environmental liability, to name several. Our distribution consists of over 16,000 retail agents nationally. We're in 50 states, including Canada, U.K., Europe, and Bermuda. As I stated earlier, we have 20 binding authority contracts, 20-plus binding authority contracts. We represent over 200 carriers in the marketplace. Two other things I'd like to talk about before I wrap up is how do we do it and what fuels our organic growth.
Like retail and other divisions, we have a division in Brown & Brown University. There's probably several ways to build a business. We're very well committed to bringing in young inexperienced folks, whether it be someone directly out of college in a risk management or a business program, or somebody that's been three to five years, say, in another industry, we're going to bring them in. If we cannot bolt a trainee, a newbie, to an experienced broker, we don't hire them. They need to be trained and developed. We're committed to that aspect. We're always looking for talented people. We're always hiring. We have a good number of newbies rolling out every year. To be clear, rolling out refers to individuals that are coming out of a training program, coming out of Brown & Brown University, starting their own book of business.
Whatever the number is, 15, 25, 30, it could be whatever number you choose. Whoever's rolling out to start their book of business in a given year has no renewals. There's absolutely no downside to their book of business. Whatever they write in that initial year and generally second year is going to be growth. Pure hunters. My final thoughts, just want to talk about some opportunities that we have going forward. The biggest one being quality people, finding more good people to add to the team. As Powell stated earlier, we don't have any predetermined, preconceived idea of where it's going to be. Certainly, we know where we have businesses, where we could add businesses, et cetera. We're just looking for very good, talented people. We'll figure out where and when it's appropriate for them to go out and sell.
Disintermediation in the personal lines and small account space. It's an area that we've managed, I think, managed effectively the last three to five years. There's various products and companies starting up and so forth. We have been able to spend as much time, if not more, working on efficiencies within our system to make that somewhat a non-event for us to this point. It's an area that's out there. There's people looking to capitalize on personal lines, small commercial accounts, et cetera. We'll continue to stay ahead of that curve and ahead of those folks. My final area of opportunities and future growth and development would be in the proprietary products area. The more proprietary products we can develop, the more effective it makes us as a wholesaler. With that, I'll open it up to any questions or comments.
Yeah, Tony, thank you. One of the things you see in the industry from time to time is the standard carriers looking to grow, coming into the E&S space. Their classic example is, what's a restaurant versus a white-collar restaurant versus a bar, et cetera. What do you see today in the market with the traditional carriers? Are they coming into your space? Is it more or less competitive than normal? Could you just talk about what you're seeing? Thank you.
I would say that what you're describing is the normal ebb and flow of soft market to hard market. For the recent past, standard markets are fairly aggressive in spaces that they may not have been three years ago. There's no rhyme or reason to that ebb and flow, and hopefully, they don't ebb too much into our space as we go down the path. Thank you.
Thanks, Tony. I'm going to talk about our Services space. As I said earlier, it's about $170 million business. You can describe it one of two ways. There are outsourced capabilities that an insurance company could provide to a customer. Remember, we're not bearing risk, so you might say, like what? Claims administration, TPA. We could adjust a property claim, a liability claim, a workers' compensation claim, as an example, or an automobile claim. All right? I made a comment at beginning today that we have adjusters waiting to go into North Carolina that have not been able to go in because of the water levels. They can't even start to file claims because they can't get there, as an example. That's 62% of our business. The other part of the business is advocacy business.
We have actually talked about Social Security disability advocacy work that we do on behalf of our customers, and Medicare Set-Aside business that we do on behalf of our customers. If you look at this business right here, you might say, "How are you going to grow in it? How does it fit in?" We look at it as another capability of ours that we actually can do for our customers. Nobody is mandated to do business with any of these firms internally. Nobody. The answer is, as a result of them differentiating their capabilities in their individual market space, they have earned a reputation and then therefore earn a portion of the business inside of Brown & Brown. We have always said, we always have to do what's in the best interest of our customer each and every time.
Remember earlier, some of my comments were obviously focused around Retail, but now you've heard about capabilities and National Programs with Chris and Steve, and in Wholesale with Tony, and now in Services with myself in regards to claims paying opportunities and advocacy work. We have $180 million business. We think it's got a good margin. We've got a lot of good leaders in this area, and we are always looking to invest in all four segments of our business. This would be one of them. I do believe there will continue to be other opportunities to acquire businesses in this space in the future going forward, and we will be servicing our customer directly. That could be a self-insured client where we're adjusting claims on their behalf, or we're working on behalf of an insurance carrier, many of whom we have very large trading relationships with.
That's how I want you to think about the services space. It is something that we don't talk as much about, although I can tell you that industry in claims adjusting has a much lower margin than this. We have specialty claims adjusting capabilities, we don't want to be a normal claims adjuster. We want to actually be a specialty claims adjuster, I think that we've done really well inside of our system up to this point, and that's all about people and leaders. The same thing in our advocacy businesses. Could we acquire something that's not a TPA or not an advocacy business going forward and be in the services space? Yes. I'm not trying to telegraph something because we're always trying to look for opportunities. We are looking for opportunities that actually fit in our wheelhouse, though.
We're in the sales and service of insurance through four divisions. This just happens to be one of them. I'm also batting cleanup on the timing, I'm going to stop with my comments on services and actually open it up to questions because I'd rather answer any questions you might have about the space, rather than something that I might think you want to hear.
Thanks. Two questions. One, you mentioned, I think this is true, that your service margins are above competitors. Do you see the business as being more scalable with more margin expansion potential, or is it driven by revenues?
First of all, I think that we're very pleased with the margin, let's put it that way. I don't think that particularly in the TPA space, there's a bunch of upward headroom. What I would tell you on the flip side of that is, Stephen Boyd will talk about this, I do believe that technology will impact the way people view claims adjusting operations, both in-house for insurance carriers and out-of-house, meaning outsourced like ours. More to come on that, but we're already adopting some of this very new developed technology to assist us in our claims paying operations now, Steve will talk about that in a little bit.
Okay, thanks. Second question. Are the advocacy businesses clients, are they Brown & Brown clients in any other facet necessarily, or is this a completely independent business?
The answer to the question is they can be Brown & Brown businesses, but let me describe how those relationships typically work. In a Social Security disability advocacy firm, we're working on behalf of an insurance company, and they have insureds that are trying to qualify for Social Security disability. We're advocating on their behalf. The way we get to that customer typically is through the insurance company, but we're working on behalf of that individual to get them moved over to SSD disability advocate, SSDI. In Medicare, it's the same thing. Medicare Set-Aside, before we bought this business, I didn't realize that you could qualify at age, let's say, 35 years old for Medicare. I just didn't think it was possible.
The answer, there are five ways, and I'm sorry, I can't relate and I can tell you all five, but if you qualify on one or two of these, you can qualify for Medicare at any age. Remember, we may have a relationship with a carrier, and they have an injured person on their books, which we are now working with to bring them over here. The answer to the question is, could one of those people that we're facilitating be currently a Brown & Brown client? Yes. They could. We would be getting them typically through the relationship with our customer, I mean our carrier partner, to get to that customer. That's how it typically works. We're not as active on the individual SSDI business.
For example, you sometimes see law firms, particularly in the Southeast and Florida, you'll see Social Security disability work, and you'll have call this phone number. That's one-off. We're usually working in large groups of people through the carriers. John.
Could you talk a little bit more about the claims side? Like you mentioned auto, and you made a reference to North Carolina. The first question is, I assume if I'm insured by Allstate or State Farm and I have a claim, I assume I'm talking to their employees. That may not be right. What are the types of insurance companies, small, mid-size, regionals, whatever, that will use you to outsource the claims?
Okay. Let's talk about how this could work. A perfect example would be, we have workers' compensation capabilities.
Sure.
Okay. Let's just use Florida, where we're based, there is an insurance company in Florida that we have been the claims administrator, I believe, since their inception. Okay. They actually started, we've done business with them for at least since 1990, but I don't know when they were founded, but I know at least since about 1990 or 1993 in that early period of time. We are their outsource claims business. You'd say, "Well, why did they choose to do that?
They made the decision that they wanted to outsource that and pay a fee as opposed to building up that infrastructure internally and assuming that cost head on and not being able to control it as much. Okay. That would be an example.
Sure.
There are examples where we actually, in our flood business, as an example, where we actually are not adjusting the claim. There are adjusters out adjusting claims, but we are actually filing and making sure we're taking care of those claims on their behalf.
That's because that's the government program?
That's the government program.
When you say you have people in North Carolina waiting to get in at the right time, they're.
I'm thinking specifically about.
That's Wright?
Well, it could be, but it could also be property people waiting to adjust homes. Homes and roofs and things like that. I mean, remember, you have a discrepancy, a coverage discrepancy. Is it wind? Is it flood?
Right.
Okay? That's going to dictate where you go. By the way, we already know that there will be some discrepancy between wind-driven rain versus flood. Then you have questions of, well, that car's been submerged for two days. That's done. That car, done. Boom. That truck, done. Boom. That truck, done. That roof is 80% damaged. Boom. They're going to get a new roof. By the way, it's flooded. Are they getting a roof first? There's all these things, and so at the end of the day, we have some really talented claims leaders who coordinate that effort. We have teams that get ready. So not only will we have teams ready back at the office, like Wright is based in St. Petersburg, but we'll have people going into North Carolina.
We have an operation in Charlotte that does, I mean, predominantly homeowners' claims. They're ready to go. They'll have people in Charlotte, but then they'll send people into the affected areas. That's kind of how it works.
In the North Carolina example, it's people doing traditional loss claim that a risk bearer has outsourced to you, then there's also people doing flood insurance where they check if they have the policy, then they help people go through the government paperwork and file the claim and all that.
That's true. You also have somebody that's, let's just say, a self-insured workers' compensation client somewhere in the country, and we're adjusting workers' compensation.
Right
claims on their behalf. Here's one thing that we didn't talk about, which is another capability. It's in Tony's area, Tony Strianese was instrumental in creating this business. We actually, in talking about capabilities, we have a capability where we can come to you. Let's just say, for sake of this discussion, you're a large resort in the island last year that blew away.
Okay? We can come to you pre-loss and talk to you about business interruption and truly calculate it like a forensic accountant. In this case, you blew away last year, and we show up, and we actually are the forensic accountants, and we're creating a claims submission on your behalf. We're actually applying to the insurance company.
on your behalf for you to get paid properly. Remember, if you think about this, I look at the claims paying as another capability inside of the Brown & Brown team. In Tony's case, they have work that is going on right now in the islands, just like I just described, because we have the capabilities to do that. It could be on behalf of a private owner, it could be a public company, it could be a REIT, it could be a whatever. Again, what we look at it as is, we want our customers, we try to have our teammates, it's like a plate. You can look at all these capabilities on the plate. You can take any at any time, but nothing's free.
Remember, if you're going to take something off the plate, be prepared to put something back on the plate when somebody calls you in San Francisco for help on a local account. That's how we look at it.
All right. Thank you.
Mike's got a question.
Thanks. One of your competitors recently had an investor day, and they were bullish on the claims outsourcing segment, because they said five, 10 years ago, it was tougher for them to have conversations with carriers about outsourcing their claims. They said now they're having more ease in terms of having some of those conversations. Just curious if that's something you guys are feeling as well?
Well, let's first off talk about historical margins in claims businesses, 8%-12%. That doesn't excite us. Okay? First. Number 2, I will tell you that different carriers have different views on claims paying. Some are getting rid of their claims people, and they're automating a lot of it or trying to, one. Two, some carriers may bring some back in that's been outsourced before. Don't know, but I'm saying look at that. Others are looking at, just like in Chris' comments earlier, a lift-out. They're basically saying, "Hey, can Brown & Brown's capabilities do it more efficiently than ours?" You have this whole spectrum, this whole gamut. Here's what we want to be able to do. We understand, whether it be in this space or any other space, that we have to add value into that equation.
If we can't figure out a way to deliver this value, we're not going to be paid properly, or they're not going to view it as they're willing to pay us properly. We prefer not to do it. That's not a claims comment, it's a overall comment. In my mind, yes, there are opportunities for us to do that. I believe with as many opportunities that we might talk to people about, there are other scenarios where companies are evaluating the impact of new scalable technology to decrease the size of their claims and operations. You say, like what? Chatbots in terms of first report of loss. There could be some sort of AI, and Steve's going to talk about all of this in a little bit, but there are ways to significantly address some of those internally.
Whether they work real well, we don't know yet, but we do know that there are people doing it. Any other questions? Yes, sir. Scott.
Thanks. Just wondering if you'd talk about the M&A opportunities. I know we have the panel coming up, you had mentioned it here, you guys on the Social Security Medicare side, you made a $15 million or $20 million revenue acquisition a few years ago. Is there more out there like that, or is it a lot of smaller ones under $5 million in revenue? Just if you could talk about that.
Well, what I would say is this. In the space, remember, retail has the most number of businesses out there. All right? On the services side, it's a much smaller universe. All right? In a smaller universe, the bigger ones are more limited, right? Most of those that are either competitors or could be maybe a possible fit, a complementary fit, we try to develop relationships with over a long period of time So with our size in both Social Security Disability Advocacy and Medicare Set-Aside, we kind of know all the firms in that space. It's a limited number of large firms, and depending on which one you're talking about, it might be a handful or two handfuls of size. That's how we think about it.
Once again, some of those businesses, although they may be good top-line businesses, maybe don't fit the financial expectations we would like them to achieve. We can still be friendly competitors or if something changes in their business, but we're not trying to change them totally. That's not what we're trying to do. We want to understand, do they actually know how to grow their top line and correspondingly grow their bottom line with that? Any other questions? All right. With that, I'll turn it over to Scott Penny, our Chief Acquisitions Officer.
Well, good morning, everyone. My name is Scott Penny, and as Powell said, I'm the Chief Acquisitions Officer. A little bit of history about how I joined the organization. I started in 1989, right out of college. Back in those days, Brown & Brown was privately held. Florida only and mostly retail. Our revenues were less, somewhere between $25 million and $30 million of total revenues as a company. As you've heard us talk today about, in 29 short years, the growth and more importantly, the diversity and the capabilities in our company has been tremendous. Back when I started, we truly were Florida only. Today, you can see that we're basically all over North America. Over my 29-year career, I actually have moved three times with the company. In addition to that, I've operated, I've had acquisitions and leadership roles in all four of our segments.
In 2002, I actually was made a senior leader of Brown & Brown, Inc. I was living in the Midwest at the time, and my task was to help build out our Midwest and Northeast presence. In 2011, I was made the Chief Acquisitions Officer. Think about one of the basis or core tenets of Brown & Brown is what we call dogged discipline. That's no different in the acquisition space. We've always been very disciplined. With the making of the Chief Acquisitions Officer role, it was really to bring more consistency in the acquisition space across all four of our segments and continue to remain disciplined. Think of me as Brown & Brown's own internal investment banker. Anything that we buy or we sell, I'm somehow involved with.
The main theme around that is really, as Andy and Powell have alluded to earlier, is capital allocation. What's the best use of our capital? How do we put it to work in the best fashion and be balanced around that? In the acquisitions department, one of our goals is to actually put us in a position to have the opportunity to speak to every agency out there before they actually sell. We never want to wake up and find that so-and-so sold without us having the opportunity to be there and figure out whether they either culturally or financially fit with us. As Powell said, that's not easy because just in the retail space alone, there's over 25,000 agencies in the U.S. The good news is, John Esposito mentioned this earlier, for every one agency that's bought, another agency is formed.
If you look at over time, the agency population has been stuck at about 25,000. That's good, fertile ground, and hence why we've had the influx of private equity and some other capital move into our marketplace. Powell mentioned this earlier, but our goal, as I said, is to get in front of every agency, even before they are for sale. The best time to get in front of an agency and get to know them is before they actually are for sale. We know that every agency isn't for sale, but we know that every agency is going to perpetuate over time. They might not call it a sale, but a perpetuation is a sale. Whether it be internal or external, it's a sale, and we just want to put ourselves in a position so when they do perpetuate, we are an option for them.
J. Powell Brown mentioned this concept. We call it really farming. What does that really mean? We are out all the time planting seeds. We're actually having meetings every day. Not just our team, but our entire leadership group. All of our teammates out having meetings, getting to know folks, whether it be company functions, whether it be industry events, or maybe it's just folks that they used to work with at some point in time. We continue to water those seeds, so we stay in contact. We stay in constant communications with them, just checking in, making sure that we are there again, if and when they decide to perpetuate or officially go out for sale. In doing that, we don't know how many are going to germinate. We don't know how many are going to bear fruit.
We ultimately want to be there, and even if they germinate and bear fruit. They've got to make sense culturally and financially, both. They're not independent of each other. It's both. If you think about the sources of our acquisitions, we have over 9,000 teammates. That is the number one source of our acquisitions, internal sourcing. Whether that be from the director of first impressions that Powell alluded to earlier, whether it be from myself, whether it be another member of the senior leadership team, a local leader, a regional leader, it's all of us. It's part of our DNA. It's part of what we do. We also get opportunities from the external sources, which would be the outside investment bankers, consultants, and traditional brokers. If I turn to the next slide here, or the first slide, when we talk about really the strategic rationale.
The strategic rationale is really long-term shareholder value. How do we do that? First and foremost, as we've talked about earlier, we spend the money like it's ours, because indeed, 30% of every dollar that we spend is ours. We spend it like it's ours. We have that mindset, that ownership mentality. In addition to that, we need to make sure that one and one equals three or more. There's lots of opportunities to go out and say one and one equals two. If you're just getting a revenue grab, we're not interested. What does long-term shareholder value mean to us? When we look at deals, we don't look at how the market's going to respond in the first 100 days. We don't look at how the market's going to respond in the first year.
We actually anticipate how the market is going to respond three years, five years, 10 years from now. When Powell talked about earlier long-term shareholders, we're aligned in that aspect that we're looking to have our acquisitions perform for the future. As I've mentioned, we're trying to find high-quality firms with people that fit culturally and financially. What does that mean? Culturally, are the firms doing what's in the best interest of the client each and every day? How do they treat their teammates? How do they treat their carrier partners? Do they know what it's like to be part of a team, a winning team, and not just an individual out on an island? On the financial side of the house, we evaluate a number of hurdles based on size, based on strategic rationale, and then the risk associated with each individual transaction.
The risk of doing a $1 million fold-in to an existing business where we have a $10 million presence is different than the risk where we're actually going to go into a new state and have $8 million of revenue under one roof in a new state with that new acquisition. After evaluating the culture and financial fit, we spend a lot of time with these sellers. We get to know them personally and professionally. We are brutally honest up front. We'd rather run a deal off up front than actually have a surprise on the back end. No one can accuse us of not knowing exactly what it's going to look like on day one when the switch is turned on, because we spend a lot of time, and we're very clear about that.
As far as the M&A screening and integration process, I think there's two things that are unique about our approach. The first is we identify a sponsor, a senior leader for every deal. I call that the top-down and the bottom-up approach. As I mentioned earlier, the number one source of our leads comes from the field. Many of them actually come from our regional leaders and from our profit center leaders. Not always, but in many cases, if you identify it, you're going to sponsor it. You're actually involved from the sourcing, you're involved from the ground up through building the pro forma, you're involved with the term sheet, along with the acquisitions team, and you're involved with the integration. We're co-dependent on one another. If the field wants to do a deal, they don't have the authority to write the check.
If the acquisition teams want to do a deal, we have the authority to write the check, we won't write the check without the sponsor signing off. The sponsor ultimately is the one that's accountable for delivering and executing on the results and achieving the hurdles that we set for each individual deal. The second thing that I think differentiates us is that we have a very consistent due diligence process across all of our segments. It doesn't matter really what division it's in. Our due diligence process is very consistent, and the majority of our due diligence we do all in-house. The due diligence is done with a combination of corporate resources. It's done with a combination of either the segment or the regional or the sponsor's resources.
We actually do it in tandem as opposed to actually going out and doing a transaction and then going to the senior leader and handing them a gift that they don't know anything about. I think that's a little unique to us. I would say that when I first started, when you think about integration and standardization and how do we integrate agencies, we used to just basically say to the seller, there's two things that are going to change post-close that we can categorically tell you. The one is, your benefits are going to change because we have a centralized benefits platform. The other is that your financial reporting will change ever since going public in 1993. The third thing we can tell you that will change today is IT. Some of that is because of the efficiencies that we're gaining in the system.
Some of it is because of New York Cyber, and Chris and Steve are going to talk a little bit more about that after me. When I look at this slide here, the 10-year total acquired revenue, you can see that in the last 10 years, we've acquired $888 million. What this slide, though, tells me is that we've made acquisitions in all four of our segments. Number one, we've talked about the reason why retail would be larger, because there's more retail prospects out there. This basically says that we truly are interested in acquiring in all four of our segments. When I flip and look at it by year, you can see that over the last 10 years, we've averaged $89 million worth of acquired revenue over the last 10 years. Four of those 10 years, we've actually exceeded $100 million.
Five of those years, we've actually exceeded the average. What also jumps out at me— well, I would say, and it's hard to see behind these numbers, we have had a good pipeline in every one of those years. Don't think that the scorecard here that you look at is indicative of the pipeline. It's not. It's indicative of us finding cultural fit that financially makes sense. I would say the only time that we actually had our weakest pipeline was in 2009, and that was strategic for us because the economy was melting down. Exposure rates were going down 10%, 15%, 20% year on year, and we didn't know what we could pay for an agency that was declining that much. We strategically sat on the sidelines during that year until we figured out what we thought was going to happen to the economy.
I would also say that if you look at 2018 in comparison to 2017, I know some of you have commented that we're more active this year. We just found more that strategically fit that financially makes sense. If you look at the press releases this morning, we can update. We actually announced another transaction this morning, a fold-in into Jacksonville, Florida. The Van Doren Agency is a 120-year-old agency. We've now acquired 17 businesses and $96 million a year to date. The last slide here is just a potpourri of some of the transactions that we've done this year. It doesn't list all 17. What does this slide say to me? Well, it says that we're actually diversifying our acquisitions. Geographically, we're all over the map. If you look at divisionally, we're focusing on each division.
If you look at behind the scenes here, when I think of how these deals were sourced, some of them were sourced internally, some of them were sourced externally. It's a combination. Some of them are standalones, some of them are fold-ins. The ones that we've depicted here just happen to be those that are larger in nature for year to date 2018. Those are my prepared comments or remarks. I'll open it up to any questions. Anthony?
A numbers question. What financial benchmarks do you use, IRR, discounted cash flow, and how has your cost of capital changed over time as interest rates have come down?
Yeah. What I would say is we don't divulge the metrics that we use. I think you could probably guess on some of them. We are very consistent in the metrics that we use, and as I mentioned, we adjust them. It takes into consideration size, strategic nature, and also the risk of the individual transaction.
What's your best big deal that you've done that's had the most meaningful impact to the company, and why?
Oh, wow. A lot of them. One that I've personally done or one that we've done-
The company's. What's the best acquisition that's been the most meaningful to bottom line?
We've done a lot of good ones. They're hard. I think about not the numbers, but basically the talent that we've received. I think that one that was transformational for us, obviously, I was a very small shareholder in 1993, was Poe & Associates. Some might not consider that an acquisition. It was a reverse merger. They became Poe & Brown. We didn't really know how strategic it was at the time, but it got us into the programs business. I catapult all the way to 2012 where we actually were not in the programs business in 1993 until we got together with Cohen & Associates, and then we happened to bump up against Chris and Steve, and the whole crew in San Diego at Arrowhead.
You think about transformational and what that's allowed us to do, the talent that we got, the technology that we got, the leadership, the growth, the lift-outs. Now those folks at Arrowhead, the core group of those leaders are actually running our entire programs business, which as you know, is over 25% of our business. Those two come quickly to mind.
Yeah. Hi, Scott. Thank you for your presentation. What's the definition of pipeline? What are the metrics for a deal to get into the pipeline? Is it number of meetings? They're saying, "Gee, we're thinking about selling," in some definitive period of time.
Right.
The fact that you think they're a cultural fit. You always say Powell always says the pipeline is good.
Right.
How does something get in the pipe? I understand that. How does something get in the pipeline in your guys' minds? What's the definition of that?
Well, the pipeline, as you know, does have different definitions. We need to be out on the street planting seeds. That's one way how many meetings are we actually having? Then we evaluate those meetings based on either initial meetings or we just actually know relationships that we have. I'm working on a transaction right now that the first time I met the individual goes back to 2004. I'm a sales guy. I was selling insurance before I got into this role. It's not because we're doing the wrong thing, it's just the firm just hasn't been ready. We look at some of the metrics would be signing of non-disclosures, indication of interest, committed term sheets, things of that sort. It's all over the board.
It's basically, as we go through, how many meetings have we had and the like from A to Z. Pipeline has a very large context.
Okay. Thanks for your presentation. First question is around your success this year. Arthur J. Gallagher has also reported improved success close rates on acquisitions-
Right
this year. Is there something environmentally that's happened skewing it more in favor to you and Gallagher versus private equity? Is there just I'm trying to understand environmentally why you guys are having more success this year, or Gallagher's having more success this year.
Right.
What's going on?
I don't know if we could predict that. It's a little bit like fishing. Some days you're catching and some days you're just casting. We're not doing anything different today than we were a year ago or two years ago.
Does the change in the tax code have any effect on sellers who are willing to-?
Not that we see that from our perspective.
Yeah.
When you see private equity taking out private equity-
Yeah
it's still a pretty frothy market.
Great. Thanks. The second question is, you talked about the involvement of teammates in the process, the M&A process. It begs the question that's taking them away from their core responsibility, which is selling new business. How are you compensating teammates that get involved in the M&A process?
When we talk about teammate and the referral, we actually have an internal referral source that any of our teammates are eligible for. If a producer, as an example, sources a deal, he or she probably is not going to be that sponsor. They source it, they're still in communication because they have a relationship. They're still out selling insurance. Ultimately, we're very mindful about who's going to sponsor it. We are in the sales and service business, but, oh, by the way, we do strategic acquisitions as well. There is a balance and our profit center leaders and our senior leaders' compensation is reflective upon growth and organic growth.
Thank you.
Okay, one more question.
Thanks. Is there a near-term margin impact from M&A? Like when you do an acquisition, does it impact the margin of that business?
Every deal is different. Generally, over a long period of time, I would say no. Could there be, depending on the size? Do all deals come in at our historical margins on day one? No. Do some come in higher than our historical margins? Yes. Do some come in lower? Yes. We're very cautious. If we're going to get involved with a deal that's going to come well below our historical margins, number one, we have to ask ourselves, is this a good use of our capital? In some cases, it might be yes because strategically, it's bringing us a capability that's going to allow us to do some other things. We actually just need to commit to a plan that we know that we're going to bring them in at below historical norm, but we actually will get it up in due course.
When you do have to get the acquired companies or acquired businesses margins up, is there a timeframe that you usually think about? Is it like an 18-month period?
That's part of our internal evaluation that we actually hold ourselves and the sponsor accountable for, and we don't divulge it.
Thank you.
Okay. Thank you.
Good morning. I'm Carl Owen. I'm the Chief Information Officer here for Brown & Brown. I've been here for almost four years and have been a part of the technology transformation that we've undertaken from the start. What I thought I'd do is walk through our thought process around our evolution of our environment, give you a perspective on where we are on the journey, then touch on the financials, then turn it over to my colleague, Steve Boyd, to talk about our plans around innovation. Let's start with our approach. We're making technology investments in those areas that best align our technology environment with our key business drivers. Those business drivers are driving organic growth, improving retention, reducing operating costs, and enabling better business intelligence. As we've adopted this approach, we further focused our attention in three areas: standardization, optimization, and innovation.
By doing this, we're able to continue to standardize our environment, while at the same time optimizing our business systems and delivering innovative solutions to our businesses to enable our businesses to grow. As you know, we're a decentralized sales and service organization, and it's critical that we don't lose sight of that. As we standardize our platforms and business systems and provide centralized management of those systems, we're also providing our teammates with a robust set of tools, data, and analytics that allow them to better meet the needs, and at the same time, grow their business. With not having to be concerned with core technology platforms, and through partnerships with this technology group, we're able to create a collaborative environment that allows our teammates to more quickly deliver innovative solutions that they may not have been able to deliver before.
This isn't just a hardware and software discussion, though. We're talking about people, process, and technology, and the role that each one of them plays in meeting the needs of our teammates, customers, and carrier partners. We're investing in all three of these areas in order to grow and mature our technology organization. Through those efforts, we're confident that we're going to be able to reduce our operating costs, drive revenue, and position our company for growth. What is the solution that we're talking about? We call it the Connected Teammate. Simply put, it's an enterprise platform that allows our teammates to have access to those tools that they need to better perform in their roles. It incorporates standardized business systems, line of business applications, network connectivity, enterprise voice solutions, business productivity and collaboration tools, and enhanced data and analytics capabilities, all delivered with a focus on security.
It's also a cloud-based strategy that will help us minimize the infrastructure required within the profit centers going forward, and at the same time allow for us to more quickly respond should we want to deploy something. Why is this important? It's important because it makes our teammates more productive, makes them more collaborative, it gives them access to tools and information they need to do their job, and lastly, it allows them to be mobile and work from anywhere. Said differently, it drives engagement and business growth. We've always invested in technology. What's different now is that we have a more enterprise perspective, more enterprise view. We're working to eliminate any redundancy that may be out there in the environment, and in the process, drive down the total cost of ownership for IT.
The more we can reduce redundant efforts and the more solutions that are in the environment, the more cost that we can drive out. Mitigating risks has always been a big part of what we do. In spite of that, we're working to enhance our capabilities around cybersecurity and compliance. As I'm sure you know, this is an area that's ever-changing, and you have to be diligent. The minute you think you have it, something changes. It changes on a daily basis. We continue to review our programs and have made several enhancements in that area, and will continue to do so going forward. Security isn't a one-and-done thing, so continued diligence is necessary. We value our data as a strategic asset.
We constantly mine our data to provide better insights into our customers, teammates, and carrier partners, and view that as a core part of our business, and have for a long time. Again, we are enhancing our capabilities in this area, providing enhanced analytics to our teammates and delivering it faster than we have in the past, so we can win more business, retain more business, and collaborate with our carrier partners to offer new solutions. We're also delivering a set of collaboration tools that better allow our teammates to work together across profit centers. The ability to reach out to teammates in this manner will improve their productivity, knowledge-sharing, and continue to drive growth across the company. Steve Boyd will tell you a little bit more about our strategy around innovation in a minute. What I thought I'd point out, though, is-
The majority of them we're looking at, obviously, enabling and helping to further differentiate our solutions in the marketplace today. Of what's left, there is a subset in there that would be viewed as MGAs, similar to as Chris described. What do I see when I look at that? There's a lot of great ideas. Most of them probably will fail. I think it's exciting. I think it's interesting. I think it's important for incumbents to look at that and use that as a barometer for innovation of what we're doing to differentiate our products and modernizing what we're doing. I can tell you today that we are actively engaged with multiple markets in terms of not just modernizing product and distribution of that product, but collaborating with Insurtech startup companies.
The way that I would describe it, when I think of our value proposition, Carl touched on data, obviously existing revenue and clientele, certainly at our scale, expertise and knowledge, and infrastructure. In many ways, you could look at the Arrowhead platforms and ones like that within Brown & Brown as platforms for startups to sit on top of. Some of those conversations we're having are around that. I think you got to be careful not to underestimate the incumbents' ability to navigate through the legal and regulatory challenges in our industry. It's complicated. That's some of the strength and benefit we have to some of these startup companies. Somebody could ask, Brown & Brown, as you look at some of these Insurtech related MGAs, are they potential acquisition targets? Maybe. Insurtech funds, same thing.
At the end of the day, we're going to look at that as we are any other acquisition. We have our certainly return targets and our capital allocation strategy. That would have to fit into that to explore it, but certainly something we may consider or look at. Let me go forward a little bit here. In terms of our focus, right? Continued advances in AI machine learning, along with growing access to newly available data sources, it's created a lot of opportunities for certainly everybody in our industry. In early 2017, we joined a large incubator in California. Since that time, we've been a very active participant within the startup community. Today, we have a number of teammates across all four divisions that are focused and dedicated in innovation-oriented roles.
That team of people works with our innovation committee to really set our overall agenda within Brown & Brown. The six items I've listed up here on the screen kind of really have been our hot points within the last 12 months. Starting with AI-based platforms, which again, they're at the heart of most Insurtech companies. Really our focus has been around the customer experience and the servicing side. An example of that, I think Pal mentioned earlier, could be chatbots for first notice of loss and deploying that into our claims and services area. Another example of that would be in quality control within our Retail and Wholesale business, the policy checking backroom management process. That's expensive. It's timely. It takes an awful lot of resource looking at various solutions with AI and machine learning embedded to help streamline that process.
With the National Programs, as an example, how can we deploy some of that technology around automating the underwriting process, pulling in third-party data sources, and improving our risk evaluation? Two, I mentioned earlier, which is product development, and the collaborative nature of our relationship, primarily in programs in wholesale with our trading partners, and the ability to bring together a lot of these new technologies in a way to differentiate our product in the marketplace. Three, robotic process automation or intelligent process automation. A lot of opportunities within our industry in general to deploy that. We are certainly looking at that in a variety of places. Predictive analytics. We have a dedicated data insight team that works with business leaders across all of our organizations to provide deeper levels of insight into our business.
Examples of areas that we are looking at are fraud detection and claims, certainly marketing and distribution optimization, underwriting and pricing, and a number of backroom operational improvements. Powell mentioned during the services conversation, claims and claims automation and settlement. We are absolutely staring that one in the face and making a number of proof of concept decisions. In some cases, actually have rolled a few things out around automating the claims settlement process, primarily in the auto side of the field today. Lastly, I had mentioned data pre-fill. That is an area that we have a lot of interest in, leveraging external data sources, streamlining the overall experience at point of sale, improving our application process, cutting that down to a minimal number of questions wherever possible. This slide, the martini glass or funnel, however you want to look at it, really talks about our engagement level and our approach.
Much like the disciplined approach we may take to M&A, it is really no different here when we think about the engagement with the Insurtech startup community. Really, it is about identifying, I mentioned already, we are tracking 1,200+ companies. That is both through our incubator relationships, but also with other outside firms, trading partners, and our own resources that are tracking that. Then engaging. Over the course of the last year, we have directly engaged with over 100 Insurtech-oriented firms in a variety of different areas, primarily in those that I already mentioned. We go into that deeper evaluation. That might go into the non-disclosure point, and then from there into the proof of concept. The proof of concept being a multi-week or multi-month rollout within a specific part of our business. From there, we look to operationalize them where they make sense.
I think the key point within innovation at Brown & Brown, we do not view innovation in a vacuum. Innovation requires sponsorship. It requires strong business participation. As we get further into that funnel, that is where the various businesses come in and join. Okay. With that, I would like to have Carl come on up and we will take some questions.
Oh, let me get him up here.
Talk a little bit about some of the ideas out there that are disrupting the market and ones that you think really have potential and maybe some company names? Thank you.
Well, I'll leave the company names for you guys to find. There are plenty out there. When I think about, again, in that space, and I wouldn't say that I'm personally tracking all 1,200 closely, but when I think of those in the disrupting space, I look at companies going into the gig economy and different ways to approach certainly changing the traditional nature of product. From my perspective, I think that's a great opportunity for all of us in our industry to take a look at that, whether it's companies that are targeting the Vrbo market, whether it's individual devices and you insure over the weekend and then you're free and clear the next week. That's a different take in terms of risk assignment and product development. That's an area that I have a lot of interest in personally.
Can we go back to slide 37, please?
Sure thing.
This is the information technology update. Yeah, there you go. Thank you very much. We're probably going to cut into a little bit about what Andy might say, but can you just help us as we think about the back half of 2018 and 2019. Will you be spending more than you did a year ago? In the back half of 2018, are you going to spend more in the back half of 2018 than you did in 2017 on technology? When we think about 2019, are you going to spend more or comparable amounts relative to '18?
Well, '18 to '19 will be flat.
Okay.
That is the plan. We are right on plan for '18, so it's right as we had planned.
The back half of 2018 relative to the back half of 2017, is it more comparable? Is it flat?
I believe it's slightly more because of the investment in the back half.
Yeah, I figured we were going to go into that with your comments.
No worries. We'll go ahead and tackle it now. As part of what we've been talking about on the earnings calls is that in 2018, we were around full spend on technology. As you see up here on the graph and what really the checkered line is supposed to represent is
How do we start to gain the benefit or the synergies out of the programs? That slowly starts to occur in the back end of 2018, and starts to slowly climb in 2019. If you look in the first quarter of this year, we had about a 20 basis point drag. We had about a 10 basis point drag in the second quarter. That starts to level out in the third quarter, and fourth quarter slowly starts to climb.
When I think about 2019, Andy, if it's climbing in the third into the fourth quarter, theoretically it should, as your chart points out.
Right.
There should be a tailwind in 2019 versus 2018.
Right. We'll get a little bit of lift in 2019 versus 2018.
Just remind me, I know you've quantified it before, but what's the basis point tailwind expectation for 2019 versus 2018?
I think in order to answer that probably the right way, Greg, is you got to go all the way back to when we started this on 2016.
Okay.
It's probably easier, in all honesty, is think about what you have modeled for 2018, and then assume a little bit of benefit from technology-
Going into 2019. Okay. Each year, as we started, when we launched this into Q1 of 2016, we slowly brought the margins down as we made full investment, and then we'll start pulling back out of it.
Thank you for those.
That's probably an easier way for you.
Yeah. All right. Yaron Kinar.
Thanks. It's clearly an exciting time with Insurtech. You guys are looking at 1,200 different companies. Obviously, a lot of them probably won't pan out in terms of the value add. Us as analysts, we're focused on the technology update. It's evolved a little bit over time. Just curious, given there's so much going on in the space, should we be thinking about maybe there's technology update number 2 that's coming down the road after 2019, 2020, depending on what pans out in some cases?
From our perspective, we are where we are. There's nothing else out there at this point. If something else comes up, we will certainly have a discussion with our investors and talk about the impact of that. At this point, there's nothing on our horizon.
Thank you very much.
Good morning, everyone. Nice to see everyone here in the room. For all those on web land, I'm Andy Watts. I'm our Chief Financial Officer. Thank you. I'm going to go through some overall comments on financial performance. We're going to talk about some outlook. Powell is going to make closing comments, and then we'll go ahead and take closing comments or questions from everyone. Hopefully this morning, what we've been able to do is give you better insight into Brown & Brown from a strategic standpoint, as well as an operations standpoint. What I want to try to do is now talk you through what does this mean financially for our organization? What's our performance been over the last 5 to 10 years? Let's start out with revenue growth.
One of the questions that we get quite often is our revenue growth in line or better than the peers? Many people say that it's actually not. I think the numbers actually speak to the contrary. Last year, we delivered total growth of a little over 6%. That was with us doing $18 million of acquisitions annualized revenue. 5-year average, 9%. The peer group, 4%, the S&P 500, 4%, and our 10-year average, 7% top line growth. If you take that on a compounded basis, we have almost doubled the organization in the last 10 years on top line. We think that's quite impressive for us as an organization. If we're going to grow the top line, the measure that we think a tremendous amount about are our margins.
We're really proud of the fact that we have industry-leading margins as an organization. Last year, we finished at 32% EBITDA margins. Our five-year average is 33%, and our 10-year average, 34%. How does that match up versus the peer group? If you look back over time, we average anywhere from 50%-75% better than everybody else in the industry. Think about this for a second. We've been able to do it one year, five years, 10 years, and if you go back further, we've been able to do it again. Quite often people ask us, as you grow bigger, won't your margins continue to go down? We would say, we think the financial performance speaks to the power of our operating model, the discipline that we have inside the organization, and how we deploy our capital each and every day.
Growing the top line is really good. Our margins are really impressive, we think that what really speaks to the power of Brown & Brown is cash conversion. What's this mean? This is the amount of revenue that we convert into cash flow from operations every year. We were 22% last year. Our five-year average is 23%. Our 10-year average, 24%. We're somewhere around 100% better than the industry average, and we continue to do that. Think about this for a second. We're about a $2 billion organization. We generate about $500 million a year in cash. That's the equivalent of a company that is twice our size. That's how much cash we generate each and every year as an organization. We're very, very proud. Something we focus on all the time.
Not only the operations, it's also how we manage our working capital and how we think about that deployment. With all the cash flow that we generate, we think about yield. Last year, we generated a dividend yield, or excuse me, a cash flow yield of 7%. Our 10-year average, 8.3%. How does that match up versus the peer group? Our public peers, 5.5%, and the S&P 500, 6.7%. In seven of the last 10 years, we've averaged anywhere from 25%-50% better than anybody else out there in the industry. To a strong cash generation that we've been able to provide over the last 10 years, we've more than doubled the cash for this organization. We finished last year at $444 million. In 2007, we were just a little over $200 million as an organization.
We grew our top line on a compounded basis, 7%. We grew our cash 7.5% over that entire time period. That speaks to the power of our model and the leverage that we're able to get off of our revenues each year. Our diluted net income per share, this is on an as-reported basis. Over the last 10 years, we've been able to grow our earnings per share. Specifically, if you look at this, the top line itself has grown about 96%. We've grown our earnings per share by 108%. If you look at 2017, we delivered $2.81. Last year, we had the benefit of $0.85 associated with revaluing of our deferred tax assets associated with tax reform last year. We think it's actually helpful if we go look at our earnings per share on an adjusted basis.
One of the things that we try not to do as an organization is make a lot of changes to our numbers. We still believe that reporting GAAP is a very good measuring stick for everyone. If you look back over the last 10 years, we've made very few adjustments to our numbers. A few of them that we think are probably important to do on a consistent basis is to think about adjusting for our change in acquisition earn-outs, because those can move up and down by year. Back in 2014, we had a loss on the sale of our former reinsurance business called Axiom Re. We took that out of there. In 2017, we had a legal settlement, which was a gain. We took that out, and we also took out the adjustment for revaluing our deferred tax assets.
We think this is a good representative of our business underneath. You might look at that on top level and say, "Well, you only grew it by 3.6%, and you grew your top line by 7% CAGR." If we look at the time period between 2008 and 2011, our earnings per share was relatively flat. That was the Great Recession. While we were purchasing companies during that timeframe, the underlying organic was actually going back relatively flat. Coming off the heels and the improvement of that during 2011, we have grown our earnings per share each and every year, substantially in line with the top line as an organization. Let's talk about capital deployment. What do we do with our money each year?
First and foremost, we think about our cash as a pool of money, and how do we try to deploy that in order to get the best potential returns for our shareholders? What have we been able to do over the last 10 years? We generated $3.3 billion worth of cash. We deployed $3.7 billion. We're a net deployer of cash. Maybe not in any one year, we may not have deployed it, last year, we had a lot of questions that we were putting all kinds of money onto our balance sheet. Actually, we put very little on our balance sheet relative to the size of the organization. What this says, over the long term, we're a net deployer of capital. Where do we deploy most of that capital? $2.4 billion we deployed in the initial purchase price of acquisitions.
Those approximately $900 million annualized revenues that Scott talked about earlier, that's $2.4 billion. We also paid out about $170 million for acquisition earn-outs. Put those two together, in the last 10 years, about $2.6 billion for all of our acquisitions. Our next largest distribution that we've had is about $550 million for dividends. We're now in our 24th year of consecutive dividends, and in those last 24 years, we've increased our dividends anywhere from 5% to 10% each year. We've got a modest dividend yield of about 1.2%, 1.3%, but we're really proud of the fact that there are very few companies that have been able to increase their dividends for 24 consecutive years. Next, share repurchases. Here's how we think about share repurchases as an organization, is we bought back about $385 million, three ways.
First is we try to manage the dilution that we have from our equity plan each year. We need to try to buy those back, and we'll try to keep it within a little bit of a corridor inside there. Two, we think about buying back shares when we believe the price is opportunistic for the organization, and we did that back in 2014 and 2015. We were very underpriced at that point. We also think about buying back shares when we do not have better alternatives to deploy our capital to generate higher returns. We've talked about this on some of our earnings calls over the last few quarters, and people say, "Why don't you buy back a certain dollar amount or a certain percentage every quarter?" We don't think that's in the best interest of driving long-term shareholder value.
We think if we can look at our cash projections over the coming 12 months and potentially where we could deploy it, we're going to try to get it to all of those places. You're going to find our buybacks will, in fact, move up and down over time, but that's the philosophy that we have underlying on there. Lastly, capital expenditures. We spent about $175 million over the last 10 years. Over the last few years, we've been averaging somewhere around $15 million-$20 million per year in CapEx. A couple items to note is we announced that we're going to be building a new campus in Daytona Beach for all of our teammates. We've been in our current facility since 1983, and we are busting at the seams, we're going to be building a new facility down there.
The CapEx over the next two years will probably increase somewhere in the range to $55 million-$65 million. That's for 2019, 2020, we'll probably come back down to our historical levels. Our goal is to be in the building by the back end of 2020. We are going to increase to $55 million-$65 million per year from what was an average somewhere around $15 million-$20 million a year. That will be for 2019 and 2020. Okay. Our outstanding debt. As you look and you think about our organization, you heard it from Powell earlier, is one of the things that we operate the organization by is make no big mistakes. We're conservative by nature, and that is exactly how we think about the debt and how much leverage we put on our earnings every year.
In 2014, we acquired The Wright Insurance Group, we also acquired a number of other companies. That was the increase that we had in the amount of outstanding debt and the leverage. Since that timeframe, we've continued to pay down our debt with the natural maturity that we have in all of those instruments in order to give us the flexibility that we're looking for as an organization. We never want to be in a position where we put so much leverage on our earnings that if, in fact, the economy ever took a downturn, that we're paying out a disproportionate amount of our earnings in interest. We think that gives us a lot of flexibility, a lot of options as an organization.
More than likely over the coming years, we would continue to pay down our debt based on just natural maturity that's out there, barring any large acquisition that would come along to us. Talk about our leverage as an organization. What we've tried to do is put a very flexible and balanced capital structure underneath of the organization. We started this back in 2014 when we put a multi-bank facility in place in order to give us the flexibility so that therefore we had access to floating debt, but also we had access to an $800 million revolver as an organization. In May of last year, we extended that for another five years. We've also been able to go out there, and in the second quarter of this year, we paid off $100 million of debt that was going to come due in September of this year.
We found it opportunistic at that point to prepay that debt, save ourselves some interest as an organization. If you now look over the next five years, we've got a very balanced maturity ladder. We try not to get ourselves in a position whereby we would have a significant amount of debt come up for maturity in any one year to make sure that we can either refinance it or pay it off, and we think we're in a very good shape, and we'll continue to manage that over time.
When we look at the lineup of the banks that we have, the relationships on the private placement, the access into our revolver, and the approximate $500 million a year that we generate in cash, we think we're really well-positioned as an organization to fund pretty much any acquisition that comes at us in any one year if we so need it that's out there. Let's talk about our leverage policy as an organization. Over the last few years, we've stated our policy that we would want to be on a net debt to EBITDA ratio of 1.5 to 2.5, and on a gross basis, 2 to 3. We think that those parameters are probably too tight for our organization. What we really try to think about it as a debt minimization model.
What we're trying to do is we don't want to carry excess debt as an organization to pay the extra interest if we don't need the debt. There's no reason to put the burden on our earnings because ultimately it slows our earnings per share, and that's what we're trying to drive as an organization. We're changing our policy. On a net debt to EBITDA ratio, we will now be 0 to 2.5. On a gross basis, we'll be 0 to 3. We think that's reflective of our organization. Will there at times potentially be an opportunity in the future that we would spring over that? Yes. I'm not foreshadowing anything at all, so please don't read anything into that. We think anything below 2.5 on a net basis or 3 is a very comfortable range for us as an organization. Let me transition and talk about outlook.
Five different items that we want to go over this morning, then we'll open it up for Q&A after Powell's closing comments. First, the economy. Economy is doing quite well. We continue to see across the entire U.S. and almost every industry, every community that's out there's expansion going on. It is really uncommon to go to almost any city in the U.S. and not see construction somewhere. That's really good. That means expansion of exposure units. That means hiring. That means people going to restaurants. That means people buying cars. All of those fuel expansion of exposure units and ultimately more companies. We feel really good on that front. We are keeping an eye as to what's going to happen with the global economy and specifically with tariffs.
Seems as though every day there's another debate or a volley back and forth on the tariff front. We need to keep an eye on that because depending upon what ultimately happens there could be a ripple effect to the companies that operate here in the U.S. Like many good things in life, there's generally some sort of downside, and Chris touched on this earlier. One of our businesses, our lender-placed business, is countercyclical. The economy's doing really well. That business normally goes down over time. Why? People are able to pay their insurance that's out there. There's less lender place on behalf of our financial customers that are out there. That business, as we look out over the coming 6 to 12 months, we anticipate will be negative on organic growth. That will actually pull down on the organic growth of the National Programs division.
Keep that in mind. Carrier changes. If you remember back in the middle of 2017, we talked about the fact that we were making a carrier change for one of our education programs, and we talked about the downtick in the revenues, and we said it was around $5 million-$7 million. We have a couple programs right now where carriers are going through some appetite changes. We anticipate that that's going to run for about two or three quarters. Again, those are going to cause some downdraft on the organic growth for National Programs. This is just a cycle that we go through, then we'll come right back out of this. We want to make sure that you incorporate that. We have got a tremendous number of programs that are doing really, really well within National Programs.
When we kind of step back and we look at what the outlook is for at least the next couple quarters, when you isolate the potential impact for what flood claims could or could not do to the organization, we think we'll probably be around flat on organic growth to slightly negative. Again, that's excluding any impacts of what could occur on the flood front. Technology investments, Core Commercial. We touched on some of this earlier. We feel like we're in a really good place on all of our technology investments. We're now at our full spend. We think it's right in line with what we anticipate. We don't expect anything unusual on that front. We think the returns are going to come right in line with what we expect and what you saw on the previous slide. We have a lot of confidence on that front.
We don't have any concerns over a phase two. A lot of people have asked us that question. If there is a phase two, we'd come talk to our investor base out there, but we don't see anything on that front. Core Commercial, Chris touched on this earlier this morning, is the program is operating kind of right in line of what we think. There are a lot of moving parts in a program of that size and the lift out that we're doing with our QBE partner. For the third and fourth quarter of this year, you should expect that the margins will be down in the third quarter, and they'll be up in the fourth quarter. Our guidance on the full year still holds right in line with what we said.
Again, the actual investment will be more year-over-year in the third quarter, and then we have an incentive payment coming in the fourth quarter, so we'll actually get a lift on that. Keep in mind, as we go into 2019, and as you think about these programs, don't think about their growth as linear in nature. It's just not how they actually work. We will slowly start to get some benefits in 2019, but we're still going through the filing process. We're still converting policies over from QBE systems. During that time, Chris mentioned this, there's a lot of moving parts. It won't be surprising to us as we've done all these, there's also some impact on the top line as we get through this.
We'll expect that we'll get right in line with National Programs. Acquisition impact. We had one of those questions earlier this morning on, are there times when acquisitions will have an impact on our margins? Yes. Sometimes they're positive, sometimes they're negative. We've done a couple medium-sized acquisitions this year that have margins that are lower than the margins for their peer group in their applicable segment. We have a proven track record of buying acquisitions within any applicable segment and increasing those over time. Tony talked about an acquisition that we did in the second quarter of 2016, and we talked to everybody about that at that time and said, "That acquisition has lower margins than what we have in the wholesale division." What have we done since that time? We've slowly stepped those margins up.
For the acquisitions that we've also done this year, they're going to have some downward pressure on our margins. We will, over time, step those margins up commensurate with their applicable segment. Again, keep that in mind. Weather-related events. Before we get into talking about anything on the financial impact, let's first pause for a second and make sure that our thoughts and prayers go out for everybody that's impacted by these storms. That is a massive storm that came aboard. It's still raining down there today. Florence just hit the shores on Friday of last week We're trying to get in there and help out all of our customers. The thing that we think about all the time is personal safety is number one for us. Two is working with all of our customers. The financial stuff is going to sort itself out. Okay.
That's the first thing that we think about. For the fact that this just came on Friday of last week, we have no idea what the impact of this storm is going to look like at this stage. The reason why we say we have no idea, we can't even get some of our adjusters in there. Bridges are blown out, roads are washed through. We'll have a better idea when we come to earnings on October 23rd. We'll have an estimate. We'll be able to talk you through potentially what the shape of this storm looks like and the financial impact in the back end of the year and into 2019, and we can give a better view at that stage. With that, those are all my closing comments.
We'll just say we've got a lot of great momentum across Brown & Brown, across all four of our segments. We're really optimistic about the back end of the year and heading into 2019. I'll hand over to you for closing comments, and we'll do Q&A.
Thanks, Andy. Great report. This morning, we've talked about a lot of interesting things, and we hope that you have gotten a better idea and understanding of our diversified company. A couple of things that kind of come to mind that I would share with you before we wrap up. One, you've heard about a customer-obsessed, solution-driven model. Barrett said, and several other senior leaders said earlier, we're not necessarily selling someone more insurance. We're talking to them about the solutions that they can either transfer insurance or bear that risk. It's not necessarily about selling more insurance, it's about giving them options, and we have to give them solutions to solve those issues. Two, we talk about being a disciplined allocator of capital, and we don't think about this in a 13-week scorecard.
We think in this about a year and five years and 10 years down the road, and how some of these investments have positively impacted our business, or more importantly, will positively impact our business going forward. I think I'll come back to some of the things I said earlier in terms of what are the things that differentiate Brown & Brown? Remember, teammates versus employees. We have leaders versus managers. We have 30% of our outstanding stock is owned by teammates. In aggregate, we are the largest single investor. As an investor, you are investing alongside of us. We are in this together. I will tell you that we've had a company, and you've seen this over time, where we've delivered organic growth, we have good operating margins, and we have great free cash flow yield. Okay.
We invest that and take that obligation very seriously on behalf of our teammates across the country. We have 9,100 teammates, and to get to the next level, we're going to have to hire or acquire another 10,000 teammates to grow to the next level. Having said that, culture and cultural fit is the most important thing. I'll tell you, we're very pleased with the acquisitions that we've done year to date. I do get a kick out of, I have to tell you, that some people think that we're doing something differently, and we're really not.
We're out there just talking to people about our business, and usually, in most instances, when there's a transaction that's going to occur, the people typically can figure out what kind of organization they want to be with, and then they can go off and try to cut a deal with them. I would tell you, if you owned an agency today and said, "I'm thinking about selling our business," whether it's to Brown & Brown or not, I've said this to a number of agency owners, I would say find the firm that you fit the best with culturally, and then go get in a corner and make a deal. If you go with the highest price exclusively, you will not be there in three years.
That's a nice way of saying probably private equity may pay a little bit more, but my experience and what we have seen is the owner or owners, they don't want to be involved three years from there. They pull the plug. It depends on what's important to you. I really appreciate the discussion, and we thought it was important that we talk to you a little bit about technology today and not just so much about what we're doing internally to run the systems, but in turn also and protect our systems and our data. Equally as important is how we're thinking about technology and Insurtech and how that can be a positive to Brown & Brown. We don't want to be a technology company. We actually want to partner with firms that have this technology.
I will tell you, we believe the half-life of technology, I think it's Moore's Law, is 18 months. The answer is, if we can buy it as software as a service, then we believe that's a good thing for Brown & Brown. If there's ways to adapt and adjust if need be when there's a new, better solution, whether that be with that particular partner at the time or with somebody else, we want to do that. Also, in terms of technology, I boil it down really to two things. When we talk about our technology strategy, and we talked about this, but it wasn't stated in these two terms. I put it in two buckets. Put the whole strategy in two buckets. How does it improve our teammate experience? Number two, how does it improve our customer experience?
There's a lot of flavors of the month, and there's a lot of things out there that sound really cool, and 85% of all those Insurtech firms will probably go broke. But they're well-funded. There's all kinds of interest in them, and we want to make sure that if that has some technology that can help us, whether it's on a company that doesn't ultimately make it, we can figure out a way to work with them or whatever's left. Some that are starting to get traction, and some of those that are getting traction will be able to help us, and some won't. I think that there's a lot of interesting things coming on the horizon as it relates to technology. I think that Steve and Chris say it the best. We do believe that there is a disruptive nature in technology, categorically, absolutely.
We also think that it's an enabler. We can either choose to embrace it and look at things that are outside the norm for us and try to figure out how to integrate those into our system. We can actually put our head in the sand, which we're not, like an ostrich, and then it is going to run us over. Having said that, I want to thank everyone here. We're going to have questions, but I'd like to thank everybody now while I have you, for your time today and your interest in our organization. This is the first time we've ever done this, and our goal was to give you insight into something that maybe you haven't seen before.
Some of you, or many of you, have met some of the people in this room, but nobody's ever seen this whole group assembled together. We've always had a great team of people, but I feel the best about our team today than I ever have. We have a lot of excitement about the organization. As you see, we have a lot of long-term tenured people. Some have come through acquisition. Some came from another organization and have created a major impact on the organization over a long period of time. This is all about we. We do everything. If we make a mistake, it's my mistake. When we succeed, we succeed as a team, and that's how it's felt across this entire senior leadership team and across the entire platform.
The enthusiasm that you see today and even see in my remarks is indicative of how the organization feels, not just the senior leaders. Having said that, I know that people will have questions for Andy and myself and maybe some of the other senior leaders. We'll open it up. Greg's got one here.
This question is for you, Powell. Maybe Andy will have some thoughts on it as well. When you became CEO, around that time, maybe not long after, you established the target of getting to $2 billion of revenue. You're on the cusp of getting there. I know you're forward-thinking about this, I assume you're establishing or thinking about establishing the next benchmark of growth. Are there businesses that you're not in today that you think you might be interested in longer term and/or geographies? Specifically, it doesn't look like you have a lot of international exposure, and your peers are all there. Can you talk a little bit about that?
Let's go back to the point that you made first, which is, when we were $960 million and we put a goal together of $2 billion, that was really an internal rallying cry. A lot of people, not in this room today, but a lot of people in the investment community tried to drill me as the new CEO and say, "How long is it gonna take to get there?" I said, quote, unquote, "We're going to get there when it makes sense." Everybody wanted a number. The answer is, if we wanted to do from $1 billion to $2 billion, we could have done it 3 to 5 years ago, but it wouldn't have been the right thing to do for the shareholders.
You know that, but I'm just saying that's an important thing. Whether we go from $2 billion to $4 billion and how long it takes us to get there, the time is irrelevant in my mind. It is more the quality of the organization and the people that join us and how we grow organically. That's number one. Number two, as it relates to, we don't like to use the terms never or always. Those are kind of extreme. I like to think that we're open-minded leaders in our organization. You asked a question about international. A lot of people, that sounds sexy. For all of you that have flown, which probably most of you have, internationally, I don't know if you sleep on airplanes, but I don't sleep on airplanes.
It's not about me, but I'm just using me as the example. I get to London, and I'm tired. I get 4 hours of sleep if I'm lucky. The first day is a tough day. If we were going to think about something, when people buy things far away and they sound exotic and sexy, what happens when something breaks down there? Someone has to go down there and fix it. This is not a criticism; this is an observation. Do you know that there are more people who live in the state of Texas than there are in the entire country of Australia? That's true. If something breaks in Texas, we can get there in 2 hours. If it breaks in Australia, it's a day to get down there.
That doesn't mean we don't want to do it doesn't mean that we don't look. We look with caution. Think about things. Probably countries that have a rule of law, it would be good. All right? I'm not trying to be overly dramatic, but I'm trying to say something like our business in London is different than doing business in Cameroon or some of these other countries. We proceed with great caution. Number two, we think that there's lots of opportunity right here in the United States. Could we double the company in the United States in a period of time? Yes, I think we could. That doesn't mean we won't be presented with opportunities that either have part of their business outside the United States or all of their business outside the United States.
It goes back to the core fundamentals when we talk about, one, cultural fit. Okay? We place a lot of value in people that we know and we trust. Okay? Particularly when they're far afield, one. Two, I would tell you that we believe one day, don't know when, that the interest rates are going to go up. We're in a very unusual time. Debt's cheap. It continues to be cheap. And that has enabled certain firms to use enormous amounts of leverage, which is counter to the way we look at things, to grow their businesses. When the interest rates do go up, their model changes a little bit if they have a lot. That does not mean they stop. I don't want anybody to think that.
The private equity world is here to stay, in my opinion, and they're trying to reinvent themselves, and try to cast themselves in a different light. The answer is, it's still private equity. It's still short term, and they're not doing something to build something lasting, typically. Does that answer your question?
It does. Thank you.
On your last point, you mentioned earlier that there's almost 30 private equity shops. It sounds like lots of them aren't the culture that you would value. Just curious, since there's so many and they will have to exit eventually, do you have people on the ground looking at some of these shops where you think there could be a cultural fit down the road?
Okay. Let me make sure that we're clear. We don't think philosophically there are that many similarities because they're short term and we're long term. However, there are instances where private equity-backed firms acquire businesses that we think could fit at Brown & Brown. It could be a scenario where we find a business that fits culturally, and they pay what I call a whack-a-mole price. Okay? That would be very high. Doesn't make sense to us, but they did, and that's okay. People are going to do that. The answer is, we have a disciplined strategy around that. Do we look at private equity businesses? Absolutely, we have. Do we look carefully in terms of how they keep people together and the culture that they have fostered? Absolutely.
Do we have people looking at them when they come available? Yes.
Okay, great.
Yeah, Mike, I'd probably add to that. Think about the three large transactions. Arrowhead we purchased in 2012, Beecher Carlson in 2013, Wright Insurance Group in 2014. Those were all private equity backed.
Okay.
Okay. We've done a number of those.
That's helpful. Andy, you talked about potential to increase leverage levels up to 2.5x. Historically, was that 2.0x was the limit?
No. What we said is, historically, when we talked about our net debt to EBITDA ratio, it was 1.5x-2.5x. On a gross basis, it was 2x-3x. All we've done is we've just changed the bottom end of the rung. We took that down to 0x-2.5x. That's our net debt. On a gross, it's now 0x-3x.
We're not operating, though, like a manufacturer that says we're going to operate in this window. If we don't have that, then we're going to buy stock or we're going to do this. That's not how we're operating. We're operating and saying, we're going to invest in businesses when we find those that fit culturally and make sense financially. There could be some movement in that, but it's underneath that cap, as opposed to saying it's always going to be 1.5 to 2.5. The answer is, look at our net debt today. It's less than 1.5.
Okay. Remind me, I think the rating agencies hold you to lower debt levels than some of your peers due to, I think they claim it's diversification. You're less diversified versus others. Is that the case or no?
They want us to be international.
Okay. Over to you.
When you think about the rating process itself, there's a number of things that you have to go through. One of those is global diversification. That's just something that we don't have as a percentage of the company, so we don't actually gain enough of the quote, "The check marks inside of there." One of the pieces that we've really tried to talk to everybody about is this idea of saying we have this really tight corridor, and as a result, we're going to drive our truck right down the middle every time. We just don't think that's the right way to run the organization. As it relates to Brown & Brown, others have a different model, and that's okay. Ours is, we'd rather have a little bit wider, have a little more flexibility to be able to do the right thing for our shareholders.
John, you have a question?
Thank you. My question's for Andy. That was a great slide presentation. Those are a lot of the metrics that we look at when we look at businesses. One that we look at that wasn't in the slides is return on invested capital for the whole organization. I was wondering if you could talk about that, how you guys think about what type of returns you're earning on the capital versus your cost of capital, and just how you think about returns on capital overall. Thank you.
We do think about that quite a bit, and we figured the question would come from you, John. Return on capital is a very important thing for the organization. When we're looking at any deployment of capital that we have inside the company, it doesn't matter if we're making an internal investment, if we're acquiring companies, if we're also looking at buying back shares, can do that on an ROIC model. All of those are about how do we return capital and are we making sure that over the appropriate period of time, that we're actually covering our cost of capital. That's going to float based upon the nature of the investment inside of there. It doesn't mean that it's got to be in the first 6 months, 12 months, however the case may be.
We look at that tremendously over time, and we've continued to put more rigor in that over the past few years as an organization. If you look at our return on invested capital, it has come down from where we were 10 or 15 years ago, and we're probably close to 10%, and it's all data you can pull from out there in the marketplace. It's something we're very cognizant of. We bought some larger businesses a few years ago that's pulled that down, but they're all performing very well.
Okay. Thank you.
Thank you. As a follow-up question to that, one way to maybe improve your ROIC or your returns relative to your cost of capital would be to increase debt, and yet you seem to be less interested in that. Maybe you can walk us through the thought process behind your debt allocation.
I think the question on that actually is probably two-pronged, right? One is, if you increase your amount of debt, it's going to lower your WACC, correct, on that. That's one piece of it. We're not trying to drive financial engineering inside the organization. We could do that if we wanted to, but that would go counter to how we think about debt inside of the organization. We're going to carry the appropriate amount of debt that we need as a company inside of our overall cost of capital. As we think about the buyback or how much debt we put onto transactions, ideally, if we can fund them out of cash, that would be the best way for us as an organization. If we do deploy debt, again, generally, we're going to try to pay that down over time.
Okay. All right.
Okay.
Well, that means we have lunch. Is that lunch next door?
Okay.
Five. In room five, and we have table seatings, and if you want to talk to Tessa out here, I think. Did everybody know where they're sitting?
Yeah. On the back of everybody's badges, you've got a number there. That will be the table that you are at. For all those that joined us via the webcast today, thank you very much. If anyone has any follow-up questions, just reach out to us directly. Contact information is inside of the deck that we used today. We'll go ahead and sign off on the webcast. Okay, Joe? Thank you.