Certain statements contained in this conference call that are not descriptions of historical facts are forward-looking statements, as such term is defined in the Private Securities Litigation Reform Act of 1995. Such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to, those discussed in filings made by the company with the Securities and Exchange Commission. Many of the factors that will determine the company's future results are beyond the ability of management to control or predict. Listeners should not place undue reliance on forward-looking statements, which reflect management's views only as of the date hereof.
The company undertakes no obligation to revise or update any forward-looking statements or to make any other forward-looking statements, whether as a result of new information, future events, or otherwise. Good day, welcome to the Brown & Brown Agreement to acquire The Wright Insurance Group conference call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Powell Brown, President CEO of Brown & Brown. Please go ahead, sir.
Thank you, Lori. Good morning, everybody. I'm here in Uniondale, N.Y., with Scott Penny and Tony Grippa, both senior leaders at Brown & Brown. In Daytona Beach, we have Cory Walker, Vaughn Stoll, and James Lanny. Vaughn Stoll is involved in acquisitions, and James Lanny is involved in tax. This morning we came to Uniondale, actually late last night, and we had a meeting with the management group here in Uniondale, and we're going to be meeting with our teammates this morning until around lunchtime. Then we're going to fly to St. Petersburg, and we're going to meet all of our new teammates in St. Petersburg this afternoon and around dinnertime. I would say, before we get into the deck, that we at Brown & Brown have had a relationship with Wright, and a number of people in this organization for a long time.
I personally have known several of the senior leaders at Wright for over the last two years. We at Brown & Brown have been fortunate enough to handle parts of their insurance. We have done business with them through the flood operations. Several of our senior leaders, specifically Tony Grippa, who's here with me in Uniondale, has known a number of these folks for 15-plus years. This process technically started, if you want to be exact, in the early part of November. I would tell you that we have known and worked with and around these people for a number of years. That's number one. Number two, this organization, on a combined basis, we don't typically talk premiums, but it does handle in excess of $1 billion of written premium annually.
We're very excited with all the skills and the new teammates that comes with this new combination. I also would be remiss as we begin if I didn't thank Jeff Greenberg personally and his team at Aquiline Partners for the open access, the transparency in this whole process because it's been a pleasure working with them, and all of the new teammates that will be joining Brown & Brown. Some of you will probably ask several questions around one, two, or three areas, which I'd like to acknowledge and address upfront. One will be risk-bearing, two will be the NFIP, and three would be tax benefits. Number one, in the risk-bearing, we will get into this in a moment. As you've heard us say, it is not our intent to be in the risk-bearing business.
There is a risk bearer, an insurance company that is being acquired, which is effectively an MGU for the federal government. At the present time, there is some excess flood that's written in it, which will be reinsured prior to closing of the transaction. NFIP, which was created as many of you may know in the late '60s, started to evolve and change and move towards a Write Your Own flood model in the early '80s. Wright is one of those Write Your Own flood companies, we're going to talk a little bit about that as well. In addition, relative to the tax benefits, this is a very simplistic overview, when we step into the shoes of Wright because of a favorable transaction in the past, there's about $167 million or $168 million of amortizable goodwill, and there's an additional $100 million of estimated step-up in basis.
That's kind of where that has come from. If you would start on page three in the deck, I'd say that, first of all, we believe that these three businesses, which are all program businesses, are extremely complementary to our growing programs platform. As you know, we've made some investments in that platform over the last several years. This will just go to enhance that platform. This organization is participating in several very attractive niche markets, many of which, or several of which we already do business with. They have, many of them, multi-year contractual nature in the contracts, in the business, and the concentration on sustained underwriting profitability and risk management. Wright Flood is a premier service provider to the NFIP.
Some changes recently to the NFIP plan, Biggert-Waters, we believe could expand the company's position through either increased penetration or, in some areas, rates move up towards actuarially sound rates. Some of you may have heard about or even talked about flood in general and the idea of private market flood. There is some private market flood, the private market would be competitive in those areas where the rates are close to actuarially sound. The issue with Biggert-Waters is addressing those areas that are not actuarially sound. Please think of areas like coastal communities in Florida and Louisiana and Texas, where there are homes that are close to the water, which if there was not affordable flood insurance, it will impact potentially the real estate markets in those areas.
If in fact there is a movement of rates upward, we believe that through our program expertise and talent, there are opportunities for us to partner with certain strategic organizations, which will enable us to write excess and primary flood if it makes financial sense. I want to make sure that you understand, this is a service provider to the NFIP through Write Your Own Flood, and we think it's a great opportunity. The other thing that I would like to highlight, as many of you know, is we write a lot of public entity business. We administer pools, JIFs, and trusts in a number of states around the country. We also broker reinsurance for pools, and we underwrite on behalf of several insurance carriers, professional liability for pools.
We think this is a wonderful opportunity, I can tell you that I came in first contact with NYSIR and NYMIR about 10 years ago, and through our organization, was told about the quality of the people and the operations and the products that they've developed here for their clients. I've always been very impressed from afar, but now it's my opportunity to meet all these people in person. If you go to page four, I'd like to sort of just highlight what this is. The way I'd like you to think about it is a flood service provider, a public entity programs administrator, and a commercial programs underwriting facility. That's really what this operation is. NFIP, we talked about that, and we will handle approximately north of $675 million or 75,000 policies in force.
In terms of public entity business, there are several reciprocals, two of which I've referred to already, NYSIR and NYMIR in the state of New York, and other related public entity businesses that are serviced, and then Wright Specialty that develops commercial programs, not very dissimilar to some of the commercial programs we currently have on our program. Many of these products are distributed nationally through very good relationships with 8,500 agents and brokers, and distributed through over two dozen sales professionals, which we're very excited are joining our team. If you go to page five, from a highlight standpoint, we are paying $602 and a half million in cash for this operation.
It's comprised of payments for $587.5 million for the programs business, $7.5 million for the flood insurance company, which we're going to talk about in a moment, and then $7 and a half million for the statutory surplus, which is in that company. We talked about it yielding future tax benefits in the amount of roughly $108 million. The way we came up with that, so you know, is the $100 million of estimated step-up in basis and the $167 million of amortizable goodwill, you multiply that times 0.4, and that's $108 million. We anticipate this closing in the spring of this year, subject to Hart-Scott-Rodino and some insurance approval and the insurance department of the state of Texas. As I've said, we anticipate this being closed with 100% cash.
On page six, if you look at 2013 revenue, adjusted was $113.7 million and $53.7 million of EBITDA. Projected first 12 months is $121.1 million and $58.8 million of EBITDA, we anticipate the accretion in the $0.09-$0.10 range in the first 12 months. On to page seven, this is kind of a snapshot in terms of the revenue breakdown, premiums, flood being roughly 63% of that business. Remember, we write that flood through retail agencies out there, where our sales teammates go to a retail agent, whether it be Brown & Brown or an independent agent, and we service that flood on their behalf. That's who is the client, in the flood business. In the specialty business, these are, as you know, not unlike the dental program and the earthquake program and FIU.
These are commercial programs that are written across the country that we think have some exciting growth. It is, once again, it's the smallest piece in terms of especially just under 10%. Public entity, where we actually service businesses that are New York specific, several of the insurance reciprocals. We have some products which are in national distribution and scope, schools and municipalities. If you turn to page eight briefly, we're going to have 500 new teammates join Brown & Brown, upon closing of the transaction. As you can see, the majority of those are located in St. Pete, where we'll be this afternoon, 211. We have 187 new teammates here in the building that we're in, that Scott and Tony are in, up here. We have 13 teammates in upstate New York and Albany.
Going to page nine, I would just highlight a couple things on this page. Second bullet point, Wright has 19% market share across the 50 states. We're number one in the top five states for flood are actually Florida, Louisiana, and Texas. We're very excited about that. National Flood Insurance Services, think of that as an MGA or MGU for the federal government. Once again, that is the insurance company that is being purchased is called Wright National Flood Insurance Company. It's currently rated A-minus stable by AM Best. AM Best will, upon this process starting, they will get involved and render their feeling on that going forward. It is 100% reinsured the primary flood through the federal government.
Now, currently, there's a small amount of excess flood, so that would be excess of the primary, the government on an 80/20 quota share basis with Arch Re. We anticipate that being 100% reinsured by the time we close. The final thing is WRMAI is another insurance company which is not coming with the transaction. It will be staying with Aquiline. Those two businesses, although they do a little business together will be unhooked going forward. So we're buying one insurance company. It's called Wright National Flood Insurance Company. That's WrNFIC. Once again, the intent is to have no underwriting risk in that particular company going forward, because I know somebody's going to ask me, is that a change in philosophy? The answer is no, it's not a change in philosophy. The government requires you to have an insurance company.
It is not required to have an A rating or A rating. We feel, and what we've been told through our clients and knowing ourselves on a retail basis, we know and like the idea of doing business with an A-rated insurance company. Some agents, they would say that that is also from an E&O standpoint, and I understand how E&O policies operate. However, I would also say that it's insured or reinsured by the full faith and guarantee of the federal government. We have a very significant relationship with FEMA, and we have the largest in-house claims adjusting group in this flood operation of anyone else we know. If you go over to page 10, I wanted to highlight, in the public entity arena, the full service administration capabilities, and infrastructure of Wright here in Uniondale.
These are insurance reciprocals, which have been around a long time and have very valued client interaction and participation in these insurance reciprocals. One was NYSIR, New York Schools Insurance Reciprocal, which was formed in 1989, K through 12 public schools. Wright has managed it since its inception 24 years ago. NYMIR is New York Municipal Insurance Reciprocal, founded in 1993, Wright's been involved in that since inception. There's a third-party administration, TPA Services, which handle public entity related businesses in the state of N.Y. Outside of New York, there are, as I said, some municipal-- oh, I'm sorry. I've just been mentioned that NYSIR and NYMIR are both A-rated by AM Best, as an aside. There are businesses, as I said, schools and munis that are written nationally through a program as well.
In the programs businesses, which is just under $10 million, as I said, we have some franchise businesses and some other attractive markets that we're excited about. If you go to the final page 11, before we open it up to questions, I would just tell you that the Wright Specialty business has distinguished itself as an underwriting culture and has made money for their trading partners. We're excited about expanding our relationships with several of those trading partners, which we already do business with at Brown & Brown. We believe that the expansion of Brown & Brown programs could be helpful in sharing best practices internally and hopefully in terms of continuing to develop new products and services to provide for our retail agent client or distribution force in the future. I would say that in 2014, we will introduce a national municipal product.
I think I stated that that was there already. That hasn't actually been released yet, but I can tell you that the school has been, and it's currently written with a trading partner that's a very fine organization, which both organizations do a bunch of business with already. Having said that, the final thing in this program business, I would like to say that we do specialize in some food industry businesses, specifically franchises for things like McDonald's and other things. With that, Lori, I'd like to turn it over, open to questions, and thank you.
Certainly. If you would like to signal for a question, please do so by pressing star one on your telephone keypad. Again, that is star one for questions. Please be sure that your phone is not on mute, so your signal will reach us. We'll go first to Sarah DeWitt with Barclays.
Hi, good morning.
Sure.
First, I just wanted to learn a little bit more about the flood business here. Are there high barriers to entry in that business? Do you have to be appointed by the NFIP? How does that all work?
Yes, you do. There are a group of service providers of which we are one. Basically, you got to have, does that say five? I'm looking at Chris Connelly in here who runs the flood operation. Five years of seasoning in property and casualty before you can actually apply to be a Write Your Own flood business. I think the issue, you know, Sarah, is not just the ability to be a Write Your Own flood agent, but the infrastructure to actually issue policies and handle the flow of data that comes in. Can you get licensed? I believe that is not as difficult, but to get the infrastructure and the upfront cost is significant.
Okay, how many competitors are there in that business?
There are 80 companies, there are probably five to seven really large ones.
Okay, great.
We're the largest at approximately 19% of the market.
Right. Saw that. Okay. Just a couple of numbers questions. How much debt are you issuing to finance the deal?
We don't know yet because we don't know the date it'll close. We're going to use existing cash on the balance sheet. We're going to accrete the cash between now and close, then we're going to issue the remaining amount in debt.
Okay. Do you have a rough sense?
No, let me put it this way, Sarah. As you know, we are always talking to people all the time. As you know, in December, we did three acquisitions for $18 million of annualized revenue, the largest of which was roughly 13 and a half. We're always talking to acquisitions of all sizes and shapes, that amount is going to be highly impacted on if we do any other transactions prior to close, the size of those transactions, and how much free cash we have on the balance sheet at that point. I'm not trying to be evasive. I'm just telling you, as you know, we're always talking to people.
Right.
It's kind of like fishing, sometimes they're biting, and sometimes they're not. We're looking to continue to invest in high quality organizations run by very high quality people.
Okay. Maybe just put another way, how much debt capacity do you have?
Well, we believe that. Well, let me make it easy. We have over $1 billion of debt capacity.
Okay. Then if I can just sneak in one more. On the tax benefit, is that included in the $0.10 accretion, or is that additional?
In the accretion, the tax benefit is not factored in.
Okay. What's the timing on that?
We believe it's over the next 15 years, 13 to 15 years.
Okay. Great. Thanks very much for the answers.
We'll go next to Mark Hughes with SunTrust.
Thank you very much. Would you care to venture a forecast in terms of cash flow generation once this deal is done? Kind of what would be a rough run rate we could expect for cash flow?
You're talking about free cash flow from the business?
Yes. Business overall.
Oh.
Including Wright.
No. You're talking about Brown & Brown, or you're just talking about the acquisition?
The total entity.
I can tell you right now that Well, Cory, do you and Vaughn take a look at that? I know what it is for Wright. I could say it on a EPS basis, but I want to make sure that we're stating it, answering Mark's question correctly.
Yes.
I love it.
Our EBITDA is going to be 58.5, is projected next 12 months. Out of that, it's about $2 million of depreciation. Basically, you're talking about, that's in the 58. The interest is going to be anywhere between, say $18 million and $20 million.
Okay, good. How have rates influenced the flood revenue in recent years? Given your comments about some changes in the regulatory structure, how do you think rates will look going forward?
Well, let me make a comment, a broad comment. If you look at the last 10 years, the overall flood premiums have gone up in aggregate. I didn't say rates, I said overall, about 7%. The overall flood premium out there has grown roughly at a 7% rate over the last 10 years. That's number one. Number two, if the flood environment, let's call it, if it was a perfect market, which it is not, as a result of either past legislation or this current Biggert-Waters 12, rates in the areas that are so-called subsidized or not actually actuarially sound, I should say, then those rates would go to market rates. However, if you're going to be in some of the affected states, obviously their representatives are going to raise the issue and want to feather that in to the extent possible.
In the state of Florida, Texas, and Louisiana, if you have rates that, in order for them to be actuarially sound, have to go up two times, that is not real popular in those areas. Mark, it would be purely speculative on our part to say how much those rates will go up. At the present, the way it is worded is over the next five years, those flood areas that are not actuarially sound should go to actuarially sound rates. Having said that, only 20% of the flood market is actually so-called subsidized or below actuarially sound rates.
Okay. That's helpful. Thank you. The public entity business, how much growth potential is there? You've been in it a while. You're rolling out some new programs. Can you talk about the growth outlook?
Well, as you know, we don't give growth projections relative to organic growth. I would tell you that the most important thing in our public entity business is to do what's in the best interest of our clients, our valued clients. Number one. Having said that, do we think there could be some expansion in programs beyond the state of New York? Yes. I don't know as much about the growth opportunities, meaning I understand it, but it is slow and steady as it relates to in the state of New York and the existing insurance reciprocals. The most important thing is to do, as we've always talked about, what's in the best interest of our clients. Sometimes there will be needs that come up that will present opportunities for us to solve problems for our clients and continue to grow our business.
Thank you.
Our next question is from Ken Billingsley with Compass Point.
Good morning. Two questions. One, you announced that there's a contingent consideration of about $38 million regarding other transactions being closed prior to your closing. What are those other transactions?
Well, obviously, we're not at liberty to say the names, but at the end of the day, the selling partners have been in discussions, not unlike Brown & Brown, with organizations around the country that may or may not come to fruition, and if they do, then there would be a way to consummate that prior to the close of the deal, and then we would obviously pay for them as well. That's what the intent is, Ken.
Okay. Of the business that's being written through Wright Insurance Group, how much were Brown & Brown agents participating in Wright's policies and some of the programs?
Okay. If you had roughly $600 million. Of the $600 million written in Wright, Brown & Brown places roughly $13 million with Wright now. Flood, sorry.
The flood. How much is Brown & Brown writing maybe through competitors?
We believe that our flood premium is $28 million, probably, plus or minus.
That's another $15 million written through one of the other 80 competitors?
That's correct.
Do you see obviously, would there be an expectation that more was going to be written through Wright, or do you think the mix will still remain 50/50?
The answer is, ultimately, we have to do what's in the best interest of our customer. Obviously, we think very highly of the Wright platform, thus we're making this investment. I don't want anybody to assume that it all just moves over.
Understand.
It's not factored into our numbers. There's no expectation that any of that business moves.
Was there any other overlap with Wright, where you were doing business with them?
We do some business with them on the public entity business. We also do some business as a provider of flood claims adjusting services. If you recall, we own a business called Colonial Claims. Colonial Claims actually does work with Wright.
Okay. I would imagine that was kind of opposite, where they're using your services?
That's correct. Remember, when there's a natural disaster and they have clients which are affected, they can engage the services of Colonial to adjust those claims on behalf of.
Finally, just getting back to the other transactions, you were talking about the selling partners. Are these things something where it would be something you guys would be getting access to? Is it into different lines and segments that have not been discussed on the call so far?
First of all, the incentive would be for it to come with the transaction, first and foremost. Number two, what those are and how they manifest themselves is confidential until we actually announce them. As you know, Ken, we're looking to invest in our four divisions. This acquisition is all in the programs division, we don't like to use the term never or always. I don't think that we should make the comment that it will always be just in programs, we don't know.
Understand. Thank you.
Thank you. Have a nice day.
You too.
We'll go next to Charles Cyburt with BMO Capital Markets.
Good morning. Thank you.
Hey, Charles.
I was wondering if you could help me out or have some more color regarding Wright in 2012, what revenues and margins look like for the business and if Hurricane Sandy related claims had any effect on that year's revenue.
Yeah. Charles, I don't have the 2012 revenue right here at my fingertips. What I can tell you is we took the average claims expenses and related over the 10-year period. We took out any spike that might be created in 2012 as a result of something, and we blended that over and we took out Hurricane Katrina. That's in a 10-year period. The answer is we looked at it over a 10-year period, x those two big events.
Okay. That makes sense. Just another, on sort of the accretion, looking at the $0.09-$0.10 this year versus the $59 million in EBITDA. Seems to be, I guess, a lower transition to earnings than I would've thought. Just wondering if there's, I don't know, earn-outs or something else going through there that might detract from what hits the bottom line.
Well, I'm sorry you think that way because I'm pretty excited about $0.09-$0.10 of accretion.
No, I just mean the transition of going, if I look at $0.10 of accretion, it is about $14 million of net off of $59 million of EBITDA versus the current business. I would've thought that would've been about $25 million.
Well, if I get the drift, remember, we are very focused on doing tax-efficient transactions to the extent that we can. As you know, many of the acquisitions we do are asset purchases. This, we don't have that benefit for the entire deductibility. Having said that, if you look at our last two large acquisitions, Beecher Carlson and Arrowhead, we were able to capture some tax benefits, as we would in this particular transaction, which we're very pleased about both of those operations, as we've said in the past. So, we have tried to be as efficient as possible, Charles, but, like I said, we can only tell you what it is.
Okay.
Charles, if you look at the very last page of the investor deck, there is a summary that takes it from the $58 million to the pre-tax. You can see that we've used a high-end estimate of the interest and thrown in the amortization as well as depreciation-
Okay
on the tax impact to show you that number. It shows you the components there.
We'll take a look at that. One final, just on the additional $37 million or $38 million, I know you can't say the names or anything, but would just expect the margins to be roughly in line with the current Wright book is roughly a 49% EBITDA margin as it sits today or the expectation going forward. Would this $37 million or $38 million expect to be in that ballpark, or can it be basically anywhere across the various divisions that it might be more normal brokerage margins versus program margins?
I think it would be more of the latter, Charles. Like I said, it could be across the board. We don't know if and unless they actually materialize.
Okay, great. Thank you very much.
We'll go to John Campbell with Stephens Inc.
Thanks, guys. Good morning. Congrats on a nice deal.
Thanks, John.
Just curious about organic growth. I know this is winding back the clock a bit, I know, Powell, you said you didn't have the financials right in front of you, but just trying to get a rough sense for how Wright organic growth was just trending in the years kind of heading up to 2012, just prior to that, the Flood Insurance Reform Act. Just trying to get a sense for organic growth, kind of x that sharper rising rate environment.
All right. Remember, just to clarify, the rates that are being impacted are only in 20% of the areas where it's so-called subsidized. As it relates to the premiums for the flood business, over the last 10 years, they've averaged up 7% total premiums. Then in the public entity businesses, it's been low single digits. Low to mid.
All in, probably mid-single digit type growth for Wright.
Like I said, you're looking at a historical perspective, and the answer is yes.
Okay. Just bigger picture, Powell. You briefly touched on the M&A trends, but if we look at the last three years, should we look at that as a blueprint for you guys going forward, just kind of series of small deals here and there, a couple just with one large deal? I know that a lot of that's timing. Just also on leverage, what's the max debt-to-cap you guys are targeting?
Okay. John, on the first question, our teammates here, we talked about this last night, and this would be the third more robust or bigger organization that we've done in the last, let's say, two and a half years. It's the largest actual transaction in the history of our company. People try to say, "Well, is this a trend? Is this a this or a that or whatever?" The answer is, I don't think it's a trend. I think it is actually, most importantly, as we've talked about, it's about cultural fit. We believe good people create and run good businesses, and they hire more good people. At the end of the day, we're interested in cultural fit first. We've had the opportunity to invest in several larger businesses that heretofore we had not considered.
Because we have a conservative financial picture, that we've been able to do that. We feel good about it. We, as I said earlier, we did 3 transactions in December for $18 million of revenue, the largest of which was a specialty claims administration operation in Charlotte, N.C., ICA. Then 2 other transactions. We are always looking at businesses that are 4, 6, $10 million of revenue all over the country. Periodically, some of these will present themselves. Somebody will say, "You have got to be kidding me. They have done 3 in 3 years." The answer is, that is very possible we could go for several years and not do another larger transaction. It just depends on is there the cultural fit, and do we feel good about the long-term opportunities with that organization? That is number 1.
Number 2. People in your world, John, talk high finance, and we like to sell and service insurance by the C and around the country, as you know. When people talk about the capital structure and specifically what does the debt look like, I have said publicly at investor conferences that we could have a debt-to-EBITDA in the 1.5 to 2 to 2.5 range. If we went above that, we would pay that down over time. We do believe that we are a net borrower in that case. Many of you have asked, when we have cash on the balance sheet or we have low leverage, what are we going to do about it? Our answer has been simply, we are going to keep doing what we are doing until we find the right opportunities to invest in. We feel good about our balance sheet.
We also feel good about our financial partners and their willingness to back Brown & Brown and the history that we have enjoyed because of the 7,000-plus teammates that are committed to providing the service for our valued clients.
Okay, great. Thanks for taking our questions.
Thanks, John.
We'll go next to Meyer Shields with KBW.
Thanks. Good morning.
Good morning, Meyer. How you doing?
I'm well. Yourself?
I'm great.
A mechanical question to begin with. Is Wright Flood compensated as sort of a flat commission off of premiums or is this some other mechanism?
Chris Connelly, I would say it's flat commission, right?
Yes.
Yes, it's flat commission.
Okay. Is that percentage sort of mandated?
Yes.
Okay. I was hoping that you'd explain how Biggert-Waters is expected to increase penetration. I understand the rate side. The penetration, I'm not sure I get.
Yeah. Okay. Think about it this way. When there is uncertainty in a marketplace, we believe that that actually creates opportunity for the prepared mind or firm or individual. It drives a different kind of discussion at a local level. Remember, we're in the solutions business, as you know, Meyer. The answer is, we have to be able to provide a solution for our flood customers. If in fact there's an area that is impacted directly, let's just make one up, Clearwater, Florida, and the rates go up substantially in Clearwater, Florida, and we handle a bunch of business there, or more importantly, we don't, and it's an opportunity for us to go and handle business there because we come up with a way that will be beneficial to the retail agent to handle that with their customers.
Once again, I don't want to give you the idea that rate increase alone creates deeper penetration. That is not the case. You're absolutely on top of that. Having said that, just like you've talked about and we've talked about in the Affordable Care Act, ACA, that has created a great deal of disruption, which has in turn created a great deal of opportunity for us.
Okay. That's helpful. One last question, I guess, for Cory. When we look at that table reconciling net income and EBITDA, does the $20.5 million of interest shown on that page, does that include the incremental interest associated with whatever debt you're going to have to raise, or is that sort of the current write run rate?
No. That is based on what we believe we would borrow money at. Basically, we're looking at $450 million plus or minus, depending on what happens on other acquisitions.
Okay. Thanks so much.
Meyer, I'd like to say one other thing. We're different from all the other flood servicing companies. We're a flood-only business, meaning Wright Flood, and we have a high level of expertise in the technical underwriting process. That's important. We have a lot of data as a result of that over a long period of time.
Okay. That would manifest itself in private flood if that grows, right?
Well, it could be, and once again, as I like to say, the luck favors the prepared mind.
Okay, perfect. Thank you so much.
Our next question is from Elyse Greenspan with Wells Fargo.
Hi, Elyse.
Hi. How are you? Just a couple of quick questions. First, I was just wondering, is there any seasonality associated with the revenue that we might see by quarter over the years?
Yes, that's a good question. The answer is, there is slightly in flood. Think about this. Flood season, if you want to be technical, would probably be in the area of May, June, July, August into September, and people buy flood in the months more of March through October, with it peaking around June, July, and August. Conversely, December and January would be slower months because people aren't thinking about the floods yet.
Okay, that makes sense. Just looking back, I guess you mentioned some of the larger deals that you had made, the last one being the Beecher Carlson deal, and I guess there was obviously that deal kind of had tracked below expectations to kind of start off. Did that kind of weigh on your decision to kind of enter into another very large deal, obviously this one being the largest? Also, if you just want to take some time, if you want to provide us an update on how that Beecher Carlson transaction has been trending since the last time we spoke last quarter on the call.
Okay. Elyse, as I like to say that we think about our investment opportunities based upon the actual group of individual and the business or businesses in question. The results of our other businesses do not necessarily determine whether we're going to make the investment or not. We have to look at it on a collective knowledge standpoint, but on in and of itself, on its own as well. Number two, as it relates to the organization, Beecher Carlson, I'd like to reiterate to everyone that we are very happy with all of the professionals that have joined our team at Beecher Carlson. As you know, we are not able to talk about the financial results in the fourth quarter at present because I would get in trouble, in terms of disclosing that.
Having said that, what I would tell you is this, as we said on the last call, we are very pleased that the folks at Beecher Carlson are a part of Brown & Brown, and that will, we believe, be a very good opportunity for our organization in the future. I know that everybody at Beecher takes that kind of in a little different light when you ask that. Steve Denton, and Dan Donovan, they didn't need to hear the message, but they heard it. I could tell you, I'm very pleased with Beecher.
Okay, thank you.
And Al-
Just one last question. You did obviously there were some questions addressing your flexibility, just both on the debt front and the ability to do future acquisitions. How would you just describe, I guess, the pipeline of deals, just small and large, just kind of starting up this year, especially since we have seen you announce four acquisitions in a short time frame?
Okay. I'm going to answer that in a moment. Cory, did you have something you wanted to say to Elyse?
No, pal. Sorry.
Okay. Elyse, the answer, I know you're not going to like this, the pipeline is good. The answer is, if you ask me that in six months, it's going to be good in six months, and it was good six months ago. I'm not trying to be flippant, but we cannot telegraph what it looks like in the sense that we're always talking to people about opportunities. Sometimes it takes years for people to be ready to sell their business, and sometimes it doesn't take as long. At the end of the day, good operations and why and when people sell, they make their minds up. I can tell you whenever they do, and they're different for every organization.
If you look back over the last 10 years or so, we've done in excess of $100 million of annualized revenue in six of the 10 years. That said, you might counter and say, "Hmm, you've done two big ones in the last two years in Arrowhead and Beecher Carlson." The answer is yes. We're very pleased with both of them. You might say, as John asked earlier, is this a trend? The answer is, do three potential acquisitions, two consummated and this being consummated in the spring, create a trend? I think it's based on availability. What I would tell you is we feel really good about our financial position and the teammates at Brown & Brown, all 7,100, they're going to welcome the new 500 teammates from Wright as we go towards our next goal of $2 billion in revenue.
When we get there, we're going to have another goal, we're going to just keep going, keep going. We like this. This is fun stuff. You knew that, Elyse, have a nice day.
Yeah. Thanks so much.
We'll go next to Ron Bauman with Capital Returns.
Hi, good morning. Congrats. I'm glad to see Cory Walker still putting in a full day. I had one quick question. The 58.5 or 58.8 of EBITDA projected, does that include any synergies? Thanks. That's it for me.
Yeah. Thanks, Ron. Good morning to you. The short answer is there are very little synergies contemplated. As you know, we're a decentralized organization, and these businesses will run independently as they currently do. When I was meeting with our new teammates this morning, the management team here in Uniondale, I said to them, I said, "Usually when we talk to people, the one area of the business that we know categorically has to change is the accounting function." With Sarbanes-Oxley and internal controls, that's a given. The answer is they run a great business already, so very little other things may change. I say that because, no, there are not significant synergies contemplated.
Thanks and good luck. Hope it continues.
Thanks, Ron.
We'll go next to Dan Farrell with Sterne Agee.
Hi, good morning. Just a numbers clarification. On the deals that Wright is expected to close, that you're paying the contingent payment for, is the closing of those deals assumed in the $58.8 million of EBITDA, or is it excluded?
That's excluded.
Okay, great. I also just want to ask you, over the past few years, you've made a lot of investments in your program platform. I'm wondering how much those investments and that expansion of the capabilities position you to be able to sort of get this deal. Now that you've done this deal and added further, do you think these improvements continue to position you better to be a destination of choice for other potential targets?
Well, thank you for the question, Dan. Number one, we are very, very pleased with our programs platform. Number one, the diversity of product, the quality of the teammates, and the ability or capabilities going forward. That's number one. Number two, I think one of the things that can be said about Brown & Brown relative to our acquisition strategy, there are three things that come right to mind, which are all good. Number one, we do what we say, and we say what we do. Number two, when we make up our minds, we can do it quickly. Number three, we pay with cash. It's hard to argue with greenbacks. We've done that for a long time. When we actually get into due diligence, a term sheet is not a license to renegotiate the terms in due diligence.
That said, I think that that keeps us in good stead in the community that potentially thinks of selling down the road. I will also say the idea of the decentralized organization attracts a certain entrepreneurial spirit that we seek, which I think is appealing to a certain group of people. Number three, our financial picture, a conservative nature, and the idea of us being long-term. Long-term is very powerful because many of these other organizations, some of which are shorter term. Shorter term are three to five to seven years. We are not three to five to seven years. We are doing this forever. That is a much different message. We're excited about it.
Great. Thank you very much.
Thanks, Dan.
Our next question is from Josh Shanker with Deutsche Bank.
Yeah, good morning, everyone.
Morning, Josh.
My first question, Hurricane Sandy hit in 2012. Was 2013 a particularly big growth year? Does it take a large event to sort of challenge the way buyers think about flood?
No. Remember, Josh, let's level set for a minute. There are two scenarios here. Our customer at Wright is the retail agent.
Yep.
We're going to the town you grew up in, there is a local independent agent, and they write some flood business, and hopefully they write them through the right firm, be it Wright. Wright is right. We want you to keep that in mind if you have a flood issue because we can help sell you some flood insurance. That is part of the growth. Think about it. We have salespeople who are very professional, who go out and meet with independent agents all the time, who are very technically knowledgeable and equipped, and it is a very strong relationship business whereby there's a trust that's garnered or gained through a personal relationship, and then we're able to pick up and service their flood needs. Also, part of that is an education of the process, because as this thing changes, who knows more about it?
Well, we're going to need to know more about it if we're the ones that's the service provider, and we can help the retail agents.
Understood. One other question. I'm just surprised, maybe I don't understand how the product's sold. I assume that State Farm has a flood product as well through the government. You guys are the number 1 seller. I would just assume there's a captive audience in State Farm agencies that they would develop the market share leadership by just the numbers. Maybe I'm misunderstanding how the product is sold to some extent.
No. Let's back up. You've named a captive agent for a moment.
Okay? Fair statement. There are standard carriers that you could name by name, large P&C companies, that either have had Write Your Own flood organizations or have had them and gotten out of them. Remember, they typically are not servicing those. They are actually facilitating the service under their so-called banner. They can outsource that with somebody else. Another service provider may be providing the service. They may just be saying, "We can provide the flood," and actually, it's through someone else. In this particular case, remember, you've got government flood, so think $500,000 and below, just for a second. Then think excess flood, which would be many times in the private market. When the excess flood is three times the primary premium, not as many people want to buy it.
Many times, when you have a mortgage, as you know, they're going to require you to have flood insurance if you're in a flood zone. Whether it be a captive agent like that one that you named or other captive agents, those would be potential clients for Wright. You could be a captive agent or a P&C organization. We could actually do the service work on their behalf. I know that's kind of a little different.
Okay. I can take it offline, do you do it better than they could do it themselves?
They don't have the infrastructure. That's the point. My point is, if you use that firm that you named, they might have three people that handle flood. You know that they're not doing the servicing work and the issuance of policies and the claims and all that other stuff. Remember, let me back up and give you an interesting statistic. We paid, the Wright teammates, paid over $1 billion in Hurricane Sandy claims. That's pretty powerful. Pay on behalf of the government. That's a big number. Remember, this is where it happens. Maybe at that company, they just facilitate it. Think, I'm trying to give you a really extreme example, in that firm, direct distribution, they don't write a lot of homeowners in cat-prone areas anymore because they want to sell other financial products. Very fine organization.
That said, if they did, they got three people sitting somewhere who help facilitate the flood, and they're basically kind of like the quarterback kind of saying, "Okay, take those things and go over here to Wright or some other service provider.
Okay. That is a very helpful explanation. I appreciate it.
Absolutely, Josh.
Thank you.
Yep.
We'll go next to Mike Nannizzi with Goldman Sachs.
Thanks. Just a couple of quick ones. Is there any overlap in infrastructure between Wright and Brown kind of legacy as far as the businesses that they write together? Whether it's cost or more infrastructure.
Not that we're aware of, no.
From a margin standpoint, I guess leading into my second question, can we talk a little bit about, or just get some ideas as far as what the margins are in the different products, flood specialty, and the public entity program services area?
Mike, I appreciate the question. As you know, these three businesses are going to go into the program space.
Okay.
All three of those are efficiently run businesses. We're not breaking out the margin on any of them. It's all in with the EBITDA that you see.
Okay. Got it. Thanks.
There are no other questions in queue. Mr. Brown, I'll turn it back over to you for any additional or closing comments.
Yes. Thank you very much, everybody, for your time. We're very excited about the 500 new teammates in Albany and St. Petersburg and in Uniondale and around the country, as salespeople joining Brown & Brown. I will tell you that we're excited about the growth and the addition into our programs division, and the opportunities that will present in the future. A final thing that I would say to each and every one of you, as you know, we're a sales and service organization, and we grow organically by selling insurance. If you have an insurance need or a friend or your firm that could benefit from the service of Brown & Brown, we'd love to talk to you about it. Thank you all very much, and we look forward to talking to you next month with our fourth quarter results. Have a nice day.
That does conclude today's conference. Thank you all for your participation