Good morning, and welcome to the Brown & Brown Incorporated second quarter earnings call. Today's call is being recorded. Please note that certain information discussed during this call, including information contained in the slide presentation posted in connection with this call, and including the answers given in response to your questions, may relate to future results and events or otherwise be forward-looking in nature. Such statements reflect our current views with respect to future events, including those relating to the company's anticipated financial results for the second quarter, and are intended to fall within the safe harbor provisions of the security laws. Actual results or events in the future are subject to a number of risks and uncertainties and may differ materially from those currently anticipated or desired, or referenced in any forward-looking statements made as a result of a number of factors.
Such factors include the company's determination as it finalizes its financial results for the second quarter that its financial results differ from the current preliminary unaudited numbers set forth in the press release issued yesterday. Other factors that the company may not have currently identified or quantified, and those risks and uncertainties identified from time to time in the company's reports filed with the Securities and Exchange Commission. Additional discussion of these and other factors affecting the company's business and prospects, as well as additional information regarding forward-looking statements, is contained in the slide presentation posted in connection with this call and in the company's filings with the Securities and Exchange Commission. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. In addition, there are certain non-GAAP financial measures used in this conference call.
A reconciliation of any non-GAAP financial measures to the most comparable GAAP financial measure can be found in the company's earnings press release or in the investor presentation for this call on the company's website at www.bbrown.com by clicking on Investor Relations and then Calendar of Events. With that said, I will now turn the call over to Powell Brown, President and Chief Executive Officer. You may begin.
Thank you, Jennifer. Good morning, everyone, and thanks for joining us for our second quarter earnings call. I'm on slide four. For the second quarter, we delivered $473.1 million of revenue, growing at 1.5% in total and 5.2% organically. Excluding the impact of the new revenue standard, our total revenues for the quarter grew 7.3%. As a diversified insurance broker, we're pleased that all four segments grew nicely for the quarter, and we're rapidly approaching our intermediate revenue goal of $2 billion. Our EBITDAC margin was 29.1%, which is down 320 basis points, with 180 basis points of impact from the new revenue standard. Andy will discuss the movement of our margins in detail later.
Our net income per share for the second quarter of 2018 increased to $0.26 from $0.23 in the second quarter of the prior year, driven by our strong organic growth and the ongoing benefit of the federal income tax reform, both partially offset this quarter by the impact of the new revenue standard. As we've said in the past, there can be fluctuations quarter-to-quarter in our organic revenue or margin, but over the year, it all works out. We also completed six acquisitions with annual revenues of approximately $39 million for the quarter. We're pleased with the quarter. We had good organic revenue growth across the company and in each segment, good earnings, expanded our capabilities, and increased our geographic footprint through six acquisitions. There is just a lot of positive momentum across the company.
Later in the presentation, Andy will discuss in more detail our financial results, excluding the impact of the new revenue standard. I'm on slide five. Before we talk in more detail about our divisional performance, I want to make some overall comments about exposure units, rates, capital in the market, and our investment initiatives. One, the middle market economy is doing well. Customers feel good about their prospects going forward and are investing in their businesses through increased hiring and capital investments. This results in increased exposure units. Rates for most lines continue to be flat, with the exception of automobile, which is up 3%-7%. We're seeing workers' compensation rates generally down 1%-3%. Cat property rates are flattish, with some downward pressure on the best accounts and upward pressure on those with bad loss experience.
Carriers don't want to lose renewals but are willing to walk away from them. As it relates to the M&A space, it continues to be very competitive out there. We were very busy during the quarter and closed six transactions with annualized revenues of $39 million. Through today, we've acquired 13 companies with annualized revenues of almost $83 million. Our largest acquisition during the quarter was Servco, which operates in the Hawaiian Islands and the Pacific Northwest. With this acquisition, we are now the number two broker in Hawaii and one of the largest retail brokers in Washington State. As you know, we're always looking for and talking with companies that fit culturally and make sense financially. Our investments to launch our new Arrowhead Core Commercial program and upgrade technology continue to progress as expected.
As a reminder, the technology investments are focused upon delivering a number of benefits that will support our continued growth and profitability. These include. One, standardizing certain systems across the company, such as having one agency management system for the retail segment. Two, upgrading our core infrastructure to current versions. Three, reducing inefficient technology spend. Four, continuing to gain better insight into our data across the company that we can use for the benefit of our customers, our carrier partners, and our teammates, ultimately to grow our business faster. The system upgrades in our retail segment are going well, and we're on a path to complete all offices over the next three years. Likewise, our wholesale segment is developing a new technology to simplify business for our retail customers.
We're also actively engaged with many insurtech initiatives across the company with the goal of identifying even better ways to engage with our customers and carrier partners, as well as improve our teammate experience and operating efficiencies. I'm pleased with our initiatives to leverage our data to help drive new business and retain more business, ultimately benefiting our customers and carrier partners. These are really important initiatives that will take multiple quarters to deliver, but each quarter, we're making more and more progress, and we're starting to realize the benefits. I'm on slide six. Let's talk about the performance of our four segments. We're pleased with the organic revenue growth in our retail segment for the quarter, which grew 4.3%. During the quarter, we realized solid growth across all lines of business as well as most customer segments.
Our retail incentive program continues to perform well and is helping drive our results. Our national programs segment had another great quarter, growing 6.4% organically. This was driven by a number of programs, and we'd like to highlight the continued growth in our core commercial program, as well as our commercial and residential earthquake programs. Development of our technology and filings for core commercial program are going well, and the projection is in line with our expectations. Our wholesale brokerage segment delivered solid organic revenue growth of 5.3% for the quarter, driven by expansion in both our brokerage and transactional binding businesses. This growth was delivered even with rates generally flat, with the exception of cat property if losses were sustained. We're really pleased with the organic growth of our wholesale business that's delivered over 5% growth for multiple years.
Our services segment had another great quarter with 7.1% organic revenue growth. We realized growth across most businesses. We did realize some year-on-year decrease in our claims processing businesses as claims activity was lower than 2017 since there were fewer spring weather related events. In summary, we're pleased with the performance of our businesses in each of the four segments for the quarter. Let me turn it over to Andy, who will discuss our financial performance in more detail.
All right. Thank you, Powell. Good morning, everyone. I'm over on slide number seven. On the following slides, we're going to discuss our GAAP results, then our adjusted results, excluding the impacts of acquisition earn-outs and the impact of the new revenue standard. As a reminder, we've excluded the impact of the new revenue standard for the calculation of organic growth in order to provide a better comparison with the prior year. We'll use this format for the remainder of 2018, and then in 2019, we'll be on a comparative basis. Slide seven presents our GAAP and certain non-GAAP financial highlights. For the second quarter, we delivered total revenue growth of 1.5% and organic growth of 5.2%, driven by solid organic growth in all four segments.
Our income before income tax decreased by 6.6%, our EBITDAC declined by 8.6%, both of which were materially impacted this quarter by the new revenue standard. Our net income grew by 11.8%, our diluted net income per share increased by 13% to $0.26 versus $0.23 in the second quarter of last year. The growth in our financial metrics, except for organic revenue, was impacted by the adoption of the new revenue standard this year, which we'll discuss more in detail in a few minutes. The growth in net income and diluted net income per share in excess of revenue growth and income before income taxes were primarily driven by our lower effective federal income tax rate that resulted from tax reform last year.
For the quarter, our effective tax rate was 26.7% as compared to 38.8% last year, with our effective tax rate benefiting from the 14% decrease in the statutory federal income tax rate. For the year, we've lowered the expectation for our effective tax rate to be in the 26.5%-27% range. Our weighted average number of shares outstanding decreased approximately 1% compared to the prior year due to the stock repurchases we completed in the second half of last year. Lastly, our dividends per share increased to $0.075 or $0.10 for 10% compared to last year. Over to slide number eight. This slide presents our results after removing the change in estimated acquisition earn-out payables for both years and the impact of the new revenue standard, resulting in the most comparative basis.
For the quarter, our revenues increased by 7.3%, income before income tax increased by 4%, EBITDAC increased by 2.6%. Our net income grew by 24.5%, diluted net income per share was $0.31 as compared to $0.24 in the prior year, growing by 29.2%. In a few slides, we'll talk about the components of our margin change year-over-year. For the quarter, the impact of the revenue recognition standard was higher than we estimated and reduced net income per share by approximately $0.01 versus our expectations. This difference is primarily related to the timing of incentives between the second quarter and the remainder of the year. Later, we'll talk about the quarterly and full-year expectations for the new revenue standard. We move over to slide number nine. This slide presents the key components of our revenue performance.
For the quarter, we had minimal net changes in investment income and other income, resulting in our total commissions and fees increasing by 1.6% as compared to the prior year. Our contingent commissions increased to $2.1 million as compared to the prior year, which was driven substantially by the adoption of the new revenue standard. As a reminder, we will now recognize contingent commissions upon the effective dates of the underlying policies throughout the year, rather than when received per our previous treatment. Excluding the impact of the new revenue standard, contingent commissions increased about $1 million year-over-year as we qualified for some new contingents. Last quarter, we provided guidance that we expected contingent commissions to decrease for the full year about $3 million-$5 million. Based upon what we know right now, we believe this is still a good range.
Guaranteed supplemental commissions were substantially flat year-over-year and were not impacted by the adoption of the new revenue standard. Our core commissions and fees increased by $5.7 million. When we isolate the $28 million impact of the new revenue standard and exclude the net impact of M&A activity, our organic revenue growth was 5.2%, driven by growth in all segments. Just going to move over to slide number 10. To provide insight into the components of our EBITDAC margin, we've included a walk of our quarterly EBITDAC margin from last year to this year and highlighted the main drivers. The new revenue standard negatively impacted our current quarter margin by approximately 180 basis points. As a reminder, it was a benefit in the first quarter of this year.
As we discussed in prior quarters, we're in the investment phase for our core commercial program that we launched in July 2017. The investment this quarter impacted our margin by approximately 60 basis points, which is in line with the expectations we previously communicated. During the quarter, we realized about a 20 basis point impact to our margin as non-cash stock compensation costs have increased due to our incremental financial performance and higher retention of teammates. While both of these are beneficial, they will increase stock compensation costs over the coming quarters. For the current quarter, the impact of our investment in technology was about 10 basis points and was less than we realized in the first quarter.
Consistent with our commentary in the first quarter, we are around full spend for our technology programs and do not anticipate any material full-year impact on our EBITDAC margins as compared to last year. Please refer back to the technology slide that we included in the fourth quarter results from last year. This will give you guidance on the future projections. Other is a combination of one-time items and some business mix. Similar to our earlier comments, we may have some variability on a quarterly basis from time to time. At the half-year mark, our underlying EBITDAC margins are about flat year-over-year. On the following slides, we present the results for our business segments on an as-reported basis, as well as excluding the impact of the new revenue standard. We've included a reconciliation by segment in the appendix to this presentation.
Let's go ahead and get started by looking at slide number 11 on retail. As a reminder, this segment is the one most impacted by the adoption of the new revenue standard, as we shifted approximately $24 million of revenues and almost $12 million of profit out of the second quarter to other quarters in the year. This movement was primarily to recognize revenues upon the binding of coverage rather than our past practice of recognizing revenue upon the later date of either build or effective, and to recognize contingent commissions throughout the year rather than when received. As a result, we've experienced a significant change in our revenues and margin for the first two quarters of this year and expect a smaller impact for the third and fourth quarters. Later in the presentation, we'll provide an update.
For the second quarter, our retail segment delivered total revenue growth excluding the revenue standard of 7.8% and 4.3% organic revenue growth. Our EBITDAC margin for the quarter, excluding the new revenue standard, declined by 100 basis points and was driven by increased intercompany allocations for technology as well as our investment to upgrade our agency management systems and, as we mentioned earlier, increased non-cash stock-based compensation as our equity plans are performing higher than expected, resulting in incremental cost. Excluding the impact of the new revenue standard, our income before income tax margin grew by 180 basis points, benefiting primarily from lower intercompany interest and lower changes in acquisition earn-out payables. Over to slide number 12. The primary impact for the quarter on our national program segment from the new revenue standard was related to contingent commissions.
For the quarter, we moved approximately $5 million of revenue and profit to other quarters. Excluding the impact of the new standard, total revenues increased by 8.7% and grew 6.4% organically. As discussed earlier, organic revenue benefited from approximately $4.4 million of revenue related to our core commercial program and strong growth realized by both our residential and commercial earthquake programs. EBITDAC grew by 6.3% due to the continued leveraging of our revenues, disciplined expense management, and increased contingent commissions, all which help partially offset the investment in our core commercial program. As a reminder, as of seven one, we'll pass the one-year mark since the establishment of this program. Since we're still in the investment phase, we'll have a negative impact on margins in the third quarter, then we will start to improve margins in the fourth quarter and into 2019 as we scale our investment.
For the quarter, our income before income tax increased 26.5%, impacted by the EBITDAC drivers we just mentioned, as well as lower intercompany interest expense. You can move over to slide number 13. In contrast to the national program segment, the impact of the new revenue standard on the wholesale segment was a decrease in revenues and operating profit of approximately $2 million. This adjustment was primarily for contingent commissions. Excluding the impact of the new revenue standard, the wholesale brokerage segment delivered total revenue growth of 3.5% and organic revenue growth of 5.3%. During the quarter, we continued to realize a decrease in contingent commissions, as well as some timing between the first and second quarter. Our EBITDAC, excluding the new revenue standard, decreased by 6.8% for the quarter.
The decrease is attributable to additional expenses associated with intercompany technology allocations, foreign exchange, non-cash stock-based compensation, and lower contingent commissions. Income before income taxes decreased 4.5%, impacted by the same factors contributing to the EBITDAC contraction but was partially offset by lower estimated acquisition earn-out payables. Moving over to slide number 14. The services segment, excluding the new revenue standard, delivered revenue growth of 7% and organic revenue growth was 7.1% versus the prior year. This increase was driven by strong growth in most of our businesses with some offset for lower claims activity. The impact of the new revenue standard was an increase in revenues of approximately $1.5 million and $1 million of profit. For the quarter, our EBITDAC, excluding the new revenue standard, increased 2.8% and was less than the revenue growth due to new client onboarding costs and lower claims activity.
Moving over to slide 15. We've included an updated outlook for the remaining quarters associated with the new revenue standard. We've broken down the impact between core commissions and fees, contingent commissions, employee compensation and benefits, and other operating expenses. For the second quarter, we had estimated the negative impact upon revenues to be in the range of $18 million-$23 million, and the actuals were approximately $27 million. The higher impact was driven primarily by the timing for the receipt of incentive commissions versus our expectation. We estimated the impact upon income before income taxes to be in the range of $13 million-$14 million, and the actuals were about $17 million, which equates to about $0.01 less of income per share.
We've updated our outlook for the remaining two quarters and the full year and expect revenues to increase $4.8 million and income before income taxes to increase $5 million-$9 million as a result of implementing the new revenue standard. With that, let me turn it back over to Powell for closing comments.
Thank you, Andy. Great report. In closing, we're pleased with our performance for the second quarter and where we're positioned at the midpoint of the year. I want to thank all of our teammates for all of their efforts delivering the results that we've talked about. I'd like to make several broad comments about our company. We believe the economy remains on a good path, and that should help drive exposure unit growth. That's a positive for Brown & Brown. As it relates to the M&A landscape, we've started the third quarter with good momentum and have already closed five transactions with annual revenues of approximately $30 million. That is in that $83 million that we talked about. We remain actively engaged with many companies and are optimistic that we'll be able to close more transactions over the coming months.
As we've stated before, nothing is done until it's signed. From a capital allocation standpoint, we've deployed all the cash we generated during the first half of the year and utilized some of the cash on our balance sheet. For the first six months, we've deployed over $140 million for acquisitions and prepaid $100 million of debt during the quarter. We're well-positioned with our capital structure and have access to sufficient capital through our $800 million revolver and cash on our balance sheet to fund our growth. We remain focused upon our investments in technology and evaluating the insurtech landscape as we believe these initiatives will help us provide the platforms and capabilities to support our growth and profitability in the future. As you know, our company is defined by our culture, our teammates, and our discipline.
It is a combination of these three that delivers our consistent financial performance. With that, I'll turn it back over to Jennifer for the Q&A segment.
Thank you. If you'd like to ask a question on today's call, that is star one on your telephone keypad. We'll go first to Greg Peters with Raymond James.
Good morning. Thanks for the call. If we could circle back to slide 10, where you go through your EBITDAC margin walk. One, there wasn't any significant mention of the 5 for 5 program. Two As we think about just the year-to-date results, it seems to be the EBITDAC margin's running on an adjusted basis below your longer-term 33%-35% range. As we think about the outlook for the next several quarters, can you talk about where we might get some tailwind, where some of the investments and expenses might work to benefit the margins going forward?
I'm going to take that, yeah. Greg, number 1, if you're looking at page 10 and you're specifically thinking about the other segment down there of 50 basis points-
Yes
I would tell you about 40 basis points of that are what I would call one time in nature. There are some recurring basis points in there as well, but about 40 basis points of the 50 is non-recurring. That's number 1. Number 2, I would encourage you to know that if you think about the performance on a year-to-date basis, if you remember, in the first quarter, we were talking about somebody had asked questions about organic growth and retail, and how that should look long term. If you look at our margins actually year to date against last year, and you take out the 60 basis points for impact of Core Commercial, we're basically flat. I think we're within 20 basis points year to date. Having said that, we have talked about, and will continue to talk about, making investments in our business.
5 for 5, we're very pleased with. We're very pleased with the organic growth for retail in the quarter. Like I said, periodically on quarter-over-quarter, we'll have some fluctuations in the organic growth and the earnings in each of those divisions. We have not revised our situation or our position on our targeted range. I will tell you this, and I know you know this, Greg, when we make acquisitions are typically at margins that are lower than our company average, and many times they're lower than the divisional average or segment average.
Okay.
Over time, we try to bring those up to the average or in excess of the average.
I know that we haven't done as many acquisitions in the last couple of years, but I'm just saying that relative to the business that we've acquired. All of that kind of rolls up into the impact on our numbers.
Hey, Greg, I want to add on the retail incentive program, just as a reminder how that program was designed and how it is performing. The largest impact on our margin would be last year. We were going to get a little bit of benefit in 2018, and then we get back to about breakeven by the end of 2019. It is difficult to see it on any one individual quarter. It will be easier to probably measure it on a full-year basis as we look through. As what we can see underlying last year performed right in line with our expectations and at the half year mark, it is doing the same. We feel really good with the program.
Great. Just a point of clarification on the Arrowhead Core Commercial. Will that be a margin headwind or tailwind in 2019?
That will actually be a tailwind in 2019. Let me just go back just to make sure we clarify, because it is a little bit confusing on the moving parts. We started this in July of last year. This is why we have had a benefit to the organic growth for the past four quarters, but it is also been a drag on the margins. Okay? As we make the lap here, July 1st is the organic will moderate down a little bit. We are going to have some additional expense in the third quarter building out the platform. As we head to the fourth quarter, the margins start to increase a little bit, and that will just continue kind of every year thereafter. It is going to move around a little bit by quarter based upon some of the seasonality of the business underlined.
You want to look on a full-year basis. As we said before, by the time we get out to the end of 2021, we should be at commensurate margins with national programs. Again, it is performing right in line with expectations.
Great. Thanks for the clarity. My second question would be just around organic revenue as we think about the next several quarters. It's clearly been doing very well. I know at the end of last year and the beginning of this year, you did benefit from some weather-related activities, and I'm just curious if we should be thinking about those unusual non-recurring type of activities as we think about organic in specifically the fourth quarter of this year and perhaps the first quarter of next year.
Yeah. The answer, Greg, to your question is yes. In Q3 and Q4, you should be thinking about that. Remember, back on the core commercial program, that's not included. I mean, it's in organic growth going forward, but not the organic growth because we got that given to us. That represents about 100 basis points of organic growth. You need to be thinking about that in national programs and/or in other segments of the business that could have, and specifically those that are adjusting claims if we don't have weather-related events in Q3 and Q4.
Greg, when you look at programs, if you go back to the earnings calls from third and fourth quarter of last year, and even look at Q1 of this year, we called out the incremental revenues on there. You probably will anyway, but just take those into consideration when doing your projections to get to an underlying.
Great. Thank you for the answers. Thank you.
We'll go next to Elyse Greenspan with Wells Fargo.
Hi. Good morning. My first question, I guess this is going back to one of Greg's questions on margins. You said 40 basis points was about one time in nature this quarter. Could we get a little bit of additional color on what was one time? I'm just curious, are all those one-time expenses showing up in the other operating expense line? Because that looked a bit higher than where it had been running.
Good morning, Elyse. It was a combination of one-time items both in salary related as well as down in other.
Can you just give an example, what would put something as one time in nature that you wouldn't necessarily expect to continue from here?
Someone leaving the company.
Okay. Then in terms of the retail growth, pretty strong in the quarter, and you guys called out commercial and employee benefit growth. Is it possible to get a little bit of color in terms of the growth that both of those businesses are running at on an organic basis?
We don't break out lines of business organic growth, as you know, so like I said, we don't break that out.
Okay. One wasn't significantly better than the other?
No. They both were positive. We didn't clarify, we just highlighted because they both were positive towards the organic growth.
Okay, great. As we think about margins from here, Andy, I believe you said that non-cash stock compensation might be a little bit higher in the back half. Is there any way that you can help us quantify the potential hit to margins, I guess, as we're thinking through the items that you called out? It seems like you did say the core commercial will be a hit in the third and then benefit in the fourth quarter. I guess in terms of the non-stock compensation, it seems like that's the only hit in the back half of the year as I guess the tech investment will be a benefit to come to that full year net neutral. I just want to make sure I'm thinking through the three components correctly for the back half of the year margin impact.
Sure, yeah. I think on the non-cash stock compensation, it was with a 20 basis point impact this quarter. That's probably a good proxy for right now, and then it may move around a little bit based upon overall performance.
Okay, in terms of the IT investment, am I thinking about that correctly? If you said it'll be net neutral for the full year, do you get a benefit in the second half of the year, or is there still going to be a hit to margins in the second half of the year?
No, there'll be a minimal impact in the third quarter. That's third quarter year-over-year, and then there'll be a little bit of a benefit in the fourth quarter year-over-year. Full year will be about flat. Just going back, first quarter, we were 20 basis points of impact, 10 basis points this quarter. That'll start to reverse back out in the third and fourth.
Okay, great. One last quick question. Sorry, go ahead.
Just one other thing. Just make sure you keep in mind impact of contingent commissions on a full year and the impact on margins. I know you probably do because you got it in there, just want to remind you of it.
Okay. In terms of, you guys called out, I was a little bit surprised, called out currency in your wholesale segment. I wouldn't think that would have had a major impact on margins. Was it just calling it out because there was a slight impact, I guess, stemming from your U.K. business in the quarter?
Yeah, if you remember, we called it out last year, this is kind of a flip back to the other side. Not that it's a lot, but it's just we had one was a debit last year. We had a credit this year, you kind of got the inverse. Generally, not a lot.
Okay. That's what I thought. Thank you very much.
We'll go next to Meyer Shields with KBW.
Thanks. Good morning. On the M&A front, I guess two questions in terms of margins. One, does the pickup in deals being closed have any impact on quarterly expenses?
A little, I would say it's not that material. Yeah, it depends on the individual acquisition, Meyer, and what we have in the way of integration costs. We have historically not broken any of those out, just we leave them in our number coming through. Again, just depends on the individual.
Okay, great. Can you give us a sense of the timeline? I know it'll vary by deal, but the timeline for getting these lower margin acquisitions up to overall Brown & Brown level or segment level margins?
Okay. I think it's different by business
It's all about leadership and discipline over a long period of time. Think about what we've talked about in the past. Many of these are S corporations where there are a number of expenses in there that are being taken out and normalized shareholder or leader compensation. In doing so, as we've said, many of those, the target is 25% operating margin, and over time, during an earn-out, they actually have an incentive to grow not only the top line but to grow the bottom line. Going forward as well, and the way our incentive or our compensation plans work, there's a profit pool driven off the profit in that individual office. Growing that can grow your compensation. It depends. There's no stated, this is how long it takes, Meyer.
I know you want to be able to say, okay, three years, and there can be lots of different things that impact that. It could be geography, it could be classes of business that they write. It could be the economy. If you write a lot of construction and the economy turns down, if you are in the property space and rates have come down substantially over the last three years. There's a number of factors that go in there, but I would say multiple years, and it's more than three, but you can't say, here's the number.
Okay. No, that's fair. That's helpful, and I certainly understand the complexity. One final question. When we used to have more dramatic hard and soft markets, there was some pushback from the carriers in terms of overall commission rates. I know we're talking about fairly modest rate changes now, but I'm wondering if there's any of that pressure emerging.
Well, let me put it this way. As you know, insurance carriers, many of them are not models of efficiency, so they're trying to look at expenses wherever they can. However, there's so much capital out there and so many carriers want the premium that buffers that. I would tell you that we have very little conversation with our trading partners about reductions in commissions. I think ultimately they're thinking about, excuse me, and particularly the big standard carriers in the U.S. are thinking about how they can do more with fewer, and that means fewer and deeper relationships with their trading partners. As we continue to get bigger, and we are quite large in many of those instances, that bodes well for us. That's how we look at it. No, Meyer, we haven't seen that.
Okay, fantastic. Thanks so much.
As a reminder, that's star one for questions. At this time, there are no further questions.
All right. I'd like to say thanks again for everybody, and we look forward to talking to you next quarter. Have a great day. Thank you very much.
This does conclude today's conference. We thank you for your participation.