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What changed in Baldwin Insurance Group, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Baldwin Insurance Group, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+394 added−371 removedSource: 10-K (2024-02-28) vs 10-K (2023-02-28)

Top changes in Baldwin Insurance Group, Inc.'s 2023 10-K

394 paragraphs added · 371 removed · 277 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

58 edited+11 added−9 removed51 unchanged
Biggest changeWe are continuously recognized for our people-first approach, our commitment to a culture of continuous learning, and for providing a place where our Colleagues learn, grow, and thrive. • BRP continued to be Great Place to Work-Certified™ and was ranked as a Fortune Best Workplaces in Financial Services and Insurance™ in 2022. • We were also recognized by Top Workplaces USA as a 2022 nationally recognized employer for making the world a better place to work by prioritizing a people-centered culture and giving employees a voice. 9 We have a variety of ways we promote our culture, support our communities, and take care of each other within the BRP family. • We sponsor a “Colleagues In Action” program that supports charities, events, and causes that are important and meaningful to our Colleagues. • We promote our Colleagues actively participating in community outreach by providing three days of Community Service PTO. • AHT Insurance's International Aid and Development Practice is enabling International Development Organizations and Non-Governmental Organizations to operate safely and securely, to help the most vulnerable communities in some of the highest risk communities in the world. • To help any qualifying Colleague experiencing extraordinary hardship, we set up the BRP True North Colleague Fund (operated by America’s Charities, a 501(c)(3) non-profit), to which Colleagues can also contribute by making a donation.
Biggest changeWe have a variety of ways we promote our culture, support our communities, and take care of each other within the BRP family. • We sponsor a “Colleagues In Action” program that supports charities, events, and causes that are important and meaningful to our Colleagues. • We promote our Colleagues actively participating in community outreach by providing three days of Community Service PTO. • AHT Insurance's International Aid and Development Practice is enabling International Development Organizations and Non-Governmental Organizations to operate safely and securely, to help the most vulnerable communities in some of the highest risk communities in the world. • To help any qualifying Colleague experiencing extraordinary hardship, we provide the BRP True North Colleague Fund (operated by America’s Charities, a 501(c)(3) non-profit organization), to which Colleagues can also contribute by making a donation.
BRP is a place for Colleagues to build a career, not just have a job, and we believe every Colleague should feel a sense of ownership in the firm. To promote that connection, we grant all newly-hired BRP Colleagues shares of BRP Group common stock.
BRP is a place for Colleagues to build a career, not just have a job, and we believe every Colleague should feel a sense of ownership in the firm. To promote that connection, we grant all newly-hired Colleagues shares of BRP Group common stock.
We take a number of actions to address relevant opportunities and risks. • Evolving Client Solutions: Climate-related issues can have an impact on our Clients in a number of ways, including offer relevant risk management guidance. • Promoting Client Safety: As a commitment to our Clients’ safety and well-being, we provide resources and information to help prepare for and protect against severe weather events. • Ensuring Operational Continuity: We recognize that workplace emergencies might result from extreme weather events, exacerbated by the impacts of climate change, including hurricanes, floods, tornados, and other natural or environmental disasters.
We take a number of actions to address relevant opportunities and risks. • Evolving Client Solutions: Climate-related issues can have an impact on our Clients in a number of ways, for which we can offer relevant risk management guidance. • Promoting Client Safety: As a commitment to our Clients’ safety and well-being, we provide resources and information to help prepare for and protect against severe weather events. • Ensuring Operational Continuity: We recognize that workplace emergencies might result from extreme weather events, exacerbated by the impacts of climate change, including hurricanes, floods, tornados, and other natural or environmental disasters.
The SEC also maintains an internet site that contains reports, proxy and information statements, and other information filed electronically by us with the SEC which are available at www.sec.gov. We may use our website as a channel of distribution of material company information. Financial and other material information regarding the Company is routinely posted on and accessible on our website.
The SEC also maintains an internet site that contains reports, proxy and information statements, and other information filed electronically by us with the SEC, which are available at www.sec.gov. We may use our website as a channel of distribution of material company information. Financial and other material information regarding the Company is routinely posted on and accessible through our website.
We believe our recent success attracting high quality Partners has validated our differentiated value proposition—we have consummated Partnerships with 35 firms since the beginning of 2020, for a total of $538.7 million of Acquired Revenue, which includes eight “Top 100” firms since 2020, more than any other peer in our industry.
We believe our success attracting high quality Partners has validated our differentiated value proposition—we have consummated Partnerships with 35 firms since the beginning of 2020, for a total of $538.7 million of Acquired Revenue, which includes eight “Top 100” firms since 2020, more than any other peer in our industry.
Available Information We make available free of charge our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after those reports are electronically filed with, or furnished to, the SEC.
Available Information We make available free of charge on our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after those reports are electronically filed with, or furnished to, the SEC.
Documented policies and procedures include, but are not limited to: • The Azimuth (our cultural and corporate constitution, available on our Company website); • Code of Business Conduct and Ethics (available in the “Governance” section of our Investor Relations website); • Whistleblower Policy, which governs reporting of concern related to accounting, auditing and ethical violations (available in the “Governance” section of our Investor Relations website); • Statement of Policy Concerning Trading in Company Securities, which prohibits Colleagues from trading BRP Group securities while in possession of Material Non-Public Information (available in the “Governance” section of our Investor Relations website); • Privacy Policy, which governs how we handle personal client information in a responsible manner (available at the bottom of our Company homepage); • Transparency & Disclosure Statement, which sets forth our commitment to fair dealings with our Clients (available at the bottom of our Company homepage); and • Anti-Corruption and Foreign Corrupt Practices Act (“FCPA”) Policy, which defines our commitment to adhere to the FCPA and avoid corrupt business practices. 11 Seasonality The insurance brokerage market is seasonal and our results of operations are somewhat affected by seasonal trends.
Documented policies and procedures include, but are not limited to: • The Azimuth (our cultural and corporate constitution, available on our Company website); • Code of Business Conduct and Ethics (available in the “Governance” section of our investor relations website); • Whistleblower Policy, which governs reporting of concerns related to accounting, auditing and ethical violations (available in the “Governance” section of our investor relations website); • Statement of Policy Concerning Trading in Company Securities, which prohibits Colleagues from trading BRP Group securities while in possession of Material Non-Public Information (available in the “Governance” section of our investor relations website); • Privacy Policy, which governs how we handle personal client information in a responsible manner (available at the bottom of our Company homepage); • Transparency & Disclosure Statement, which sets forth our commitment to fair dealings with our Clients (available at the bottom of our Company homepage); and • Anti-Corruption Policy, which defines our commitment to adhere to the Foreign Corrupt Practices Act (“FCPA”) and avoid corrupt business practices (available in the “Governance” section of our investor relations website). 11 Seasonality The insurance brokerage market is seasonal and our results of operations are somewhat affected by seasonal trends.
Our performance feedback processes enable every Colleague to have clear alignment with how we execute on our goals, maximize their performance potential, and also drive their own development and growth through individual development plans.
Our performance feedback processes enable every Colleague to have clear alignment with how we execute on our goals, maximize their performance potential, and drive their own development and growth through individual development plans.
Any information on our or the SEC's website or obtained through any such website is not part of this Annual Report on Form 10-K. Our Investor Relations Department can be contacted at ir@baldwinriskpartners.com by clicking on “Resources” and then “Contact IR,” or by telephone at (813) 259-8032. 13
Any information on our or the SEC's website or obtained through any such website is not part of this Annual Report on Form 10-K. Our Investor Relations Department can be contacted at ir@baldwinriskpartners.com by going to our investor relations website, clicking on “Resources” and then “Contact IR,” or by telephone at (813) 259-8032. 13
To access these filings, go to our investor relations website at ir.baldwinriskpartners.com, click on “Financials” and then click on “SEC Filings.” We also make available other reports filed with or furnished to the SEC under the Exchange Act, including our proxy statements and reports filed by officers and directors under Section 16(a) of the Exchange Act, as well as our Code of Business Conduct and Ethics, our Insider Trading and Whistleblower Policies, and charters for our Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee and Executive Committee.
To access these filings, go to our investor relations website at ir.baldwinriskpartners.com, click on “Financials” and then click on “SEC Filings.” We also make available other reports filed with or furnished to the SEC under the Exchange Act, including our proxy statements and reports filed by officers and directors under Section 16(a) of the Exchange Act, as well as our Code of Business Conduct and Ethics, our Insider Trading and Whistleblower Policies, and charters for our Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee, Technology and Cyber Risk Committee and Executive Committee.
We support our Clients, Colleagues, Insurance Company Partners and communities through the deployment of vanguard resources, technology and capital to drive both organic and inorganic growth. When we consistently execute for these key stakeholders, we believe that the outcome is an increase in value for our fifth stakeholder, our shareholders.
We support our Clients, Colleagues, Insurance Company Partners and communities through the deployment of vanguard resources, technology and capital to drive both organic and inorganic growth. When we consistently execute for these key stakeholders, we believe that the outcome is an increase in value for our fifth stakeholder, our stockholders.
Over time, our organic growth will be driven primarily by our ability to continue to add new Clients and win new business, our ability to offer and advise on a broader array of insurance solutions in an increasingly larger geographic footprint, and to capture an increasingly larger portion of the economics associated with the sale of insurance.
Over time, our organic growth will be driven primarily by our ability to continue to win new business, our ability to offer and advise on a broader array of insurance solutions in an increasingly larger geographic footprint, and to capture an increasingly larger portion of the economics associated with the sale of insurance.
The MainStreet Operating Group offers personal insurance, commercial insurance, and life and health solutions to individuals and businesses in their communities, with a focus on accessing clients via sheltered distribution channels, which include, but are not limited to, new home builders, realtors, mortgage originators/lenders, master planned communities, and various other community centers of influence.
Mainstreet Insurance Solutions Operating Group (“MIS”) MIS offers personal insurance, commercial insurance, and life and health solutions to individuals and businesses in their communities, with a focus on accessing Clients via sheltered distribution channels, which include, but are not limited to, new home builders, realtors, mortgage originators/lenders, master planned communities, and various other community centers of influence.
We have established numerous policies and procedures outlining our intention to live our values and do business in a responsible and ethical manner, including providing avenues for asking questions or reporting concerns about non-compliance. Many of these can be found publicly on our company website at baldwinriskpartners.com.
We have established numerous policies and procedures outlining our intention to live our values and do business in a responsible and ethical manner, including providing avenues for asking questions or reporting concerns about non-compliance. Many of these can be found publicly on our Company website at baldwinriskpartners.com or our investor relations website at ir.baldwinriskpartners.com.
We conduct employee benefits business within our Middle Market and MainStreet Operating Groups. Personal Lines Industry Personal lines brokers provide individual consumers with access to home, auto, umbrella and recreational insurance products. Similar to commercial lines agents, personal lines insurance agents generate revenues through commissions and fees for management and consulting services.
We conduct employee benefits business within our Insurance Advisory Solutions and Mainstreet Insurance Solutions Operating Groups. Personal Lines Industry Personal lines brokers provide individual consumers with access to home, auto, umbrella and recreational insurance products. Similar to commercial lines agents, personal lines insurance agents generate revenues through commissions and fees for management and consulting services.
We are a destination employer supported by an award-winning culture, powered by exceptional people and fueled by industry-leading growth and innovation. We represent over 1.2 million Clients across the United States and internationally.
We are a destination employer supported by an award-winning culture, powered by exceptional people and fueled by industry-leading growth and innovation. We represent over two million Clients across the United States and internationally.
Our revenues are generally highest in the first quarter due to a higher degree of first quarter policy commencements and renewals in Medicare and certain Middle Market lines of business such as employee benefits and commercial. In addition, a higher proportion of our first quarter revenue is derived from our highest margin businesses.
Our revenues are generally highest in the first quarter due to a higher degree of first quarter policy commencements and renewals in certain IAS and MIS lines of business such as employee benefits, commercial and Medicare. In addition, a higher proportion of our first quarter revenue is derived from our highest margin businesses.
We actively compete with numerous integrated financial services organizations as well as insurance companies and brokers, producer groups, individual insurance agents, investment management firms, independent financial planners and broker-dealers, including large, global participants, such as Aon plc, Marsh & McLennan Companies, Inc. and Willis Towers Watson plc and mid-sized participants, such as Arthur J.
We actively compete with numerous integrated financial services organizations as well as insurance companies and brokers, producer groups, individual insurance agents, investment management firms, independent financial planners and broker-dealers, including public participants, such as Aon plc, Marsh & McLennan Companies, Inc., Willis Towers Watson plc, Arthur J.
In addition, our portfolio of companies includes several registered investment advisors (“RIAs”), each of which are federally registered with the SEC. Our portfolio will also include a limited purpose broker dealer (“LPBD”), once registered with the SEC, and the Financial Industry Regulatory Authority (“FINRA”).
In addition, our portfolio of companies includes several registered investment advisors (“RIAs”), each of which are federally registered with the SEC. Our portfolio includes a limited purpose broker dealer (“LPBD”), registered with the SEC, and the Financial Industry Regulatory Authority (“FINRA”).
We have relationships with leading commercial writers, as well as regional insurers who have a presence in our target markets. We conduct commercial property and casualty business within our Middle Market, MainStreet and Specialty Operating Groups, which includes manufacturing our own proprietary products within our MGA of the Future platform.
We have relationships with leading commercial writers, as well as regional insurers who have a presence in our target markets. We conduct commercial property and casualty business within all of our Operating Groups, which includes manufacturing our own proprietary products within our MGA of the Future platform.
We have been intentional in recognizing and elevating this talent across the organization to build out world class industry-focused practice groups and product centers of excellence that can be leveraged by the firm as a whole.
We have been intentional in recognizing and elevating this talent across the organization to build world class industry-focused practice groups and product Centers of Excellence that can be leveraged by the entire firm.
In addition to negotiating competitive policy terms on behalf of clients, insurance brokers also serve as a distribution channel for insurers and often perform much of the administrative functions. We conduct personal lines business within our Middle Market (high net worth), MainStreet and Specialty Operating Groups.
In addition to negotiating competitive policy terms on behalf of clients, insurance brokers also serve as a distribution channel for insurers and often perform much of the administrative functions. We conduct personal lines business within all of our Operating Groups.
We highly value the powerful and innovative results that come from seeking and weighing a broad range of perspectives and we strive to hire and promote talent that brings wide ranging diversity of thought, background, and experience. • Approximately 62% of our executive leadership team joined BRP from other industries, bringing unique background and thoughtful insight on our continued best path to success. • As of December 31, 2022, women comprise 59% of our Colleague population and 48% of our leadership positions are held by women. • We benefit from a wide age range and experience level within the firm.
We highly value the powerful and innovative results that come from seeking and weighing a broad range of perspectives and we strive to hire and promote talent that brings wide ranging diversity of thought, background, and experience. • More than half of our executive leadership team joined BRP from other industries, bringing unique background and thoughtful insight on our continued best path to success. • As of December 31, 2023, women comprise 58% of our Colleague population and 50% of our leadership positions. • We benefit from a wide age range and experience level within the firm.
Named after a historical navigation tool used to find “true north,” the Azimuth asserts our core values, business basics and stakeholder promises. The ideals encompassed by the Azimuth support our mission to deliver indispensable, tailored insurance and risk management insights and solutions to our Clients.
In 2011, we adopted the “Azimuth” as our corporate and cultural constitution. Named after a historical navigation tool used to find “true north,” the Azimuth asserts our core values, business basics and stakeholder promises. The ideals encompassed by the Azimuth support our mission to deliver indispensable, tailored insurance and risk management insights and solutions to our Clients.
Various factors, including competition for market share among underwriting enterprises, increased underwriting capacity and improved economies of scale following consolidations, can result in flat or reduced property/casualty premium rates (a “soft” market). A soft market tends to put downward pressure on commission revenues.
Insurance premiums are cyclical in nature and may vary widely based on market conditions. Various factors, including competition for market share among underwriting enterprises, increased underwriting capacity and improved economies of scale following consolidations, can result in flat or reduced property/casualty premium rates (a “soft” market). A soft market tends to put downward pressure on commission revenues.
We offer comprehensive benefits such as health care and retirement savings through an employer-match 401(k) plan, along with a variety of other personalized benefits valued by our Colleagues, such as: • Summertime Friday half-days; • Employee assistance program services, including mental health; • Telemedicine benefits at no cost for Colleagues and their direct family members; • Expert referral services in legal and financial assistance; • Company sponsored BRP Vitality Wellness Program, including a partnership with Peerfit to provide customizable fitness benefits for Colleagues; • Health Savings Account with $600+ employer contribution; • Adoption assistance program; • Paid leave for new parents; and • Paid sick days and expanded holidays for 2022, including Juneteenth.
We offer comprehensive benefits such as health care and retirement savings through an employer-match 401(k) plan, along with a variety of other personalized benefits valued by our Colleagues, such as: • Summertime Friday half-days; • Employee assistance program services, including mental health; • Expert referral services in legal and financial assistance; • Company sponsored BRP Vitality Wellness Program, including a partnership with Aaptiv to provide customizable fitness benefits for Colleagues; • Health Savings Account with $600+ employer contribution; • Adoption assistance program; • Paid leave for new parents; and • Paid sick days and 11 nationally recognized holidays observed.
As a prominent growth driver for BRP, we have invested heavily in the expansion of our MGA of the Future product suite, which is now comprised of more than 12 products across both commercial and personal lines.
As a prominent growth driver for BRP, we have invested heavily in the expansion of our MGA of the Future product suite, which is now comprised of more than 12 products across both commercial and personal lines, including new product launches in 2023 (high-net-worth homeowners, flood and commercial property products).
Factors contributing to our organic growth include net new business growth, fees, rate increases, retention, exposure unit growth, and contingent commissions. Contributions to organic revenue growth from recent Partnerships begins after BRP has owned the Partner firm for 12 months. Our Partnership strategy has contributed meaningful inorganic growth to BRP. In 2023, we anticipate very little Partnership activity.
Factors contributing to our organic growth include net new business growth, fees, rate increases, retention, exposure unit growth, and contingent commissions. Contributions to organic revenue growth from recent Partnerships begins after BRP has owned the Partner firm for 12 months. We did not execute any Partnerships during 2023 and we continue to anticipate relatively little Partnership activity in 2024.
Powered by People As of December 31, 2022, BRP had more than 3,800 Colleagues, the vast majority of whom are full-time. There were 3,802 full-time Colleagues (98% of total Colleague population) and 86 part-time Colleagues. The firm also partners with over 4,400 independent contracted agents, primarily supporting our Medicare business.
Powered by People As of December 31, 2023, BRP had nearly 4,000 Colleagues, the vast majority of whom are full-time. There were 3,851 full-time Colleagues (98% of total Colleague population) and 76 part-time Colleagues. The firm also partners with over 4,500 independent contracted agents, primarily supporting our Medicare business.
Nurture and Grow Talent We care about our Colleagues and their families from a holistic perspective and genuinely believe that taking great care of our Colleagues allows them to live their best life.
We share “Give a Wows” with Colleagues during our quarterly Town Hall meetings. Nurture and Grow Talent We care about our Colleagues and their families from a holistic perspective and genuinely believe that taking great care of our Colleagues allows them to live their best life.
It is important to note that we also have a highly systematic and regimented integration process for all new Partners, supported by our fully dedicated integration team, the Navigators, which balances ensuring proper operational, financial and accounting, and technology and cybersecurity controls with business decision making autonomy and impact on new Colleagues.
We also have a highly systematic and regimented integration process for all new Partners, supported by our fully dedicated integration team, which balances ensuring proper operational, financial and accounting, and technology and cybersecurity controls with business decision-making autonomy and impact on new Colleagues. The financial impact of Partnerships may affect the comparability of our results from period to period.
BRP has pledged up to $250,000 to the fund and is honored to provide an additional dollar-for-dollar match for Colleague contributions up to another $250,000. • We believe in having fun at work and celebrating our successes by promoting peer recognition at all levels of the firm through our “Give a Wow” compliment program. • In 2022, our Colleagues were given the “gift of giving” wherein BRP made donations to six separate organizations on behalf of over 1,300 participants.
BRP has pledged up to $250,000 to the fund and is honored to provide an additional dollar-for-dollar match for Colleague contributions up to another $250,000. • We believe in having fun at work and celebrating our successes by promoting peer recognition at all levels of the firm through our “Give a Wow” compliment program.
Medicare Industry In the U.S., Medicare provides health insurance to retirees, who by definition lack coverage via an employer sponsored healthcare program. U.S. citizens typically become eligible for Medicare upon turning 65 years old.
We conduct wealth management and retirement services within our Insurance Advisory Solutions Operating Group. Medicare Industry In the U.S., Medicare provides health insurance to retirees, who by definition lack coverage via an employer sponsored healthcare program. U.S. citizens typically become eligible for Medicare upon turning 65 years old.
To achieve this, we have invested heavily in our sales leadership infrastructure and recruitment of sales talent, technology talent and solutions to deliver better, faster and more efficient insurance insights and solutions to our Advisors and Clients, and in our MGA of the Future platform, which will continue to deliver proprietary and technology-enabled insurance solutions that provide our Advisors and select external distribution partners speed, ease of use, and certainty of execution, while also delivering BRP an enhanced share of the economics associated with the underlying insurance transaction.
In our MGA of the Future platform, we continue to deliver proprietary and technology-enabled insurance solutions that provide our Advisors and select external distribution partners speed, ease of use, and certainty of execution, while also delivering BRP an enhanced share of the economics associated with the underlying insurance transaction.
Our more than 3,800 Colleagues include over 700 Risk Advisors, who are fiercely independent, relentlessly competitive and “insurance geeks.” We have approximately 125 offices in 23 states, all of which are equipped to provide diversified products and services to empower our Clients at every stage through our four Operating Groups. In 2011, we adopted the “Azimuth” as our corporate constitution.
Our nearly 4,000 Colleagues include approximately 700 Risk Advisors, who are fiercely independent, relentlessly competitive and “insurance geeks.” We have approximately 115 offices in 24 states, all of which are equipped to provide diversified products and services to empower our Clients at every stage through our three Operating Groups.
Medicare advisors assist in determining optimal coverage and healthcare/doctor access based on an individual’s healthcare needs and spending limitations. 6 Business Strategy Relative to our industry peers, we believe our business strategy is uniquely focused on investing aggressively in the growth of our business, which we believe over time produces better and more sustainable results for all of our stakeholders, including our Clients, Colleagues, Insurance Company Partners, the communities in which we work, live and play, and our Shareholders.
Medicare advisors within our Mainstreet Insurance Solutions Operating Group assist in determining optimal coverage and healthcare/doctor access based on an individual’s healthcare needs and spending limitations. 6 Business Strategy We believe our business strategy is centered around using the results of outstanding service to Clients to reinvest the vast majority of retained earnings into future growth, which we believe over time produces better and more sustainable results for all of our stakeholders, including our Clients, Colleagues, Insurance Company Partners, the communities in which we work and live, and our stockholders.
To support the ongoing growth and development of our Colleagues, we provide education and training on a variety of topics, including technical, professional, and business development, leadership development, client service experience, regulatory and compliance topics. • During 2022, we began development of the Azimuth Institute, which encompasses all things learning and development with BRP culture at the core of the training.
To support the ongoing growth and development of our Colleagues, we provide education and training on a variety of topics, including technical, professional and business development, client experience, leadership development, regulatory and compliance topics. • In 2023, we continued our development of the Azimuth Institute.
Examples of content include Cyber Risk Fundamentals, Professional Liability and Commercial Property. We also promote Colleague growth and development through an ongoing performance feedback model, including 90-day check-ins for new Colleagues, and a formal annual year-end review process for all Colleagues.
We also promote Colleague growth and development through an ongoing performance feedback model, including 90-day and 120-day check-ins for new Colleagues, and a formal year-end performance check-in for all Colleagues.
However, we recognize the significant challenges that climate change presents, and we are committed to good stewardship of the environment and our resources while managing the impact on our business.
We are committed to thoughtful stewardship of the environment and our resources while managing the impact on our business.
The Specialty Operating Group consists of two distinct businesses—our specialty wholesale broker businesses, which deliver specialty insurers, professionals, individuals and niche industry businesses expanded access to exclusive specialty markets, capabilities and programs requiring complex underwriting and placement, and our MGA of the Future platform (representing approximately 87% of Specialty's revenue during 2022), in which we manufacture proprietary, technology-enabled insurance products that are then distributed (in many instances via technology and/or application programming interface (“API”) integrations) internally via our Risk Advisors in Middle Market and MainStreet and externally via select distribution partners, with a focus on sheltered channels where our products deliver speed, ease of use and certainty of execution, an example of which is our national embedded renters insurance product sold at point of lease via integrations with property management software providers.
Through our MGA of the Future platform (representing approximately 90% of UCTS' revenue during 2023), we manufacture proprietary, technology-enabled insurance products that are then distributed (in many instances via technology and/or API integrations) internally via our Risk Advisors across our other Operating Groups and externally via select distribution partners, with a focus on sheltered channels where our products deliver speed, ease of use and certainty of execution, an example of which is our national embedded renters insurance product sold at point of lease via integrations with property management software providers.
Marketing income is earned through co-branded marketing campaigns with our Insurance Company Partners. Competition The business of providing insurance products and services is highly competitive. We compete for Clients on the basis of reputation, client service, program and product offerings, and our ability to tailor products and services to meet the specific needs of a Client.
We compete for Clients on the basis of reputation, client service, program and product offerings, and our ability to tailor products and services to meet the specific needs of a Client.
In 2022, our largest single Client represented less than 1% of our total revenues. 8 Human Capital BRP is an independent Colleague-centric insurance advisory firm fueled by relationships, powered by people, and exemplified by our Colleagues’ ability to deliver tailored insurance and risk management insights and solutions to our Clients.
In 2023, two Insurance Company Partners accounted for an aggregate of approximately 17% of our total core commissions and fees. Human Capital BRP is an independent Colleague-centric insurance advisory firm fueled by relationships, powered by people, and exemplified by our Colleagues’ ability to deliver tailored insurance and risk management insights and solutions to our Clients.
Our commitment to rewarding our Colleagues is evidenced by merit increases and bonuses we have continued to pay each year. BRP continues to make additional investments in ensuring we remain competitive in attracting top talent and all Colleagues are paid at least $15.00 per hour. We’re proud to be an employer leading by example when it comes to living wages.
Importantly, we hire for competency, capability, and potential, while maintaining a competitive culture that values and rewards results. BRP continues to make additional investments in ensuring we remain competitive in attracting top talent. All Colleagues are paid at least $15.00 per hour and we're proud to be an employer leading by example when it comes to living wages.
In recent years, there has been notable merger and acquisition activity in the insurance brokerage space. Despite the recent consolidation in the insurance brokerage industry, the industry remains highly fragmented, and the number of independent agencies has remained roughly constant since 2006. The fragmented industry landscape presents us with the opportunity to continue acquiring high-quality Partners.
Despite the recent consolidation in the insurance brokerage industry, the industry remains highly fragmented, and the number of independent agencies has remained roughly constant since 2006. The fragmented industry landscape presents us with the opportunity to continue acquiring high-quality Partners. Commission revenues are generally based on a percentage of the premiums paid by insureds and normally follow premium levels.
Ongoing investments to date include, but are not limited to, continued buildout of our MGA of the Future platform, continued buildout of our tech-enabled homeowners efforts (both in the MGA of the Future and in our MainStreet business), numerous enterprise-wide technology initiatives, pursuing potential alternative capacity, and continued hiring of Risk Advisors and sales leadership infrastructure in our Middle Market and MainStreet Operating Groups. 7 Operating Groups Our business is divided into four Operating Groups: Middle Market, Specialty, MainStreet and Medicare.
Ongoing investments to date include, but are not limited to, continued buildout of our MGA of the Future platform, continued buildout of our tech-enabled homeowners efforts (both in the MGA of the Future and in our Mainstreet Insurance Solutions business), numerous enterprise-wide technology initiatives, pursuing potential alternative capacity, and continued hiring of Risk Advisors and sales leadership infrastructure in our Insurance Advisory Solutions and Mainstreet Insurance Solutions Operating Groups. 7 Operating Groups We completed a strategic review of our organizational structure in January 2023 and determined that the chief operating decision maker, our chief executive officer, would change the way he manages and operates our MainStreet and Medicare businesses.
The Medicare Operating Group offers consultation for government assistance programs and solutions, including traditional Medicare, Medicare Advantage and Affordable Care Act, to seniors and eligible individuals, through a network of primarily independent contractor agents. In the Medicare Operating Group, BRP generates commissions and fees in the form of direct bill insurance placement and marketing income.
MIS also offers consultation for government assistance programs and solutions, including traditional Medicare, Medicare Advantage and Affordable Care Act, to seniors and eligible individuals through a network of primarily independent contractor agents. Competition The business of providing insurance products and services is highly competitive.
Clients Our Clients are highly diversified and include individuals, professionals, businesses, including those in niche industries, and specialty insurers. No material part of our business depends upon a single Client or on a few Clients. The loss of any one Client would not have a material adverse effect on our operations.
No material part of our business depends upon a single Client or on a few Clients. The loss of any one Client would not have a material adverse effect on our operations. In 2023, our largest single Client represented less than 1% of our total commissions and fees.
The first cohort will consist of a four-month comprehensive training program that takes commercial analysts through the core elements of policy coverage and the workflows necessary to process those in our agency management system. This training will be followed by six months of insurance acumen in the PRC designation program mentioned above.
The program consists of a 90-day comprehensive training program that takes new client service specialists through the core elements of policy coverage and the workflows necessary to process them in our agency management system. This training is followed by six months of insurance acumen in either the Professional Risk Consultant or Associate in Risk Management designation program.
For our Communities, our growth facilitates enhanced economic contribution, and the ability of our Colleagues to make charitable impacts. And for our Shareholders, while we believe our business will naturally accrete margin over time, we believe that more robust top-line growth, at the expense of near-term margin, generates more free cash flow over a relatively finite period of time.
For our communities, our growth facilitates enhanced economic contribution, and the ability of our Colleagues to make charitable impacts. And for our stockholders, we believe that revenue growth, along with margin accretion over time, will generate significant free cash flow and growth in firm value.
We anticipate putting approximately 100 BRP Colleagues through this course in fiscal year 2023. 10 • In February 2023, we launched our inaugural The Azimuth Institute’s North Star Program, which provides an innovative learning journey designed for newly hired, high-potential young professionals to equip them with the skills, knowledge, and behaviors needed to ensure continued success in their careers.
We began this three-to-five-year project in 2022 to provide both foundational training and a learning journey for all our IAS client-facing roles in the areas of job skills, system training, insurance acumen, power skills, business development and leadership training for leaders. • In 2023, we successfully launched our North Star Program within the Azimuth Institute, which provides an innovative learning journey designed for newly hired, high-potential young professionals to equip them with the skills, knowledge, and behaviors needed to ensure continued success in their careers.
In addition to the homegrown content mentioned above, we have contracted with LinkedIn Learning to access more than 9,000 soft skill courses across a broad array of topics that open up a whole new world of learning for our Colleagues. • In July 2022, we conducted our annual BRP Leadership Retreat by hosting a three-day training event where over 200 leaders (director level and above) participated in interactive leadership development sessions. • For new and developing Risk Advisors, we offer a 10-week intensive training course, SCORE, which is a combination of online, instructor-led and real-life application training aimed at developing their skills so they can be their best in providing exceptional service to our Clients. • We also support the continuing education and certification needs of our Colleagues by providing access to a variety of technical training courses.
We have expanded our adoption of the LinkedIn Learning platform that provides access to more than 9,000 skill courses across a broad array of topics that open up a whole new world of learning for our Colleagues. • We enhanced our sales training program, SCORE (Strategize, Connect, Obtain, Retain and Earn Referrals), for new and developing Risk Advisors—a 10-week intensive training offered as a combination of online, instructor-led and real-life application training to develop their skills for generating new business and providing exceptional service to our Clients, and added SCORE PRO—a 6-month advanced sales development program for Advisors interested in propelling their profession to the next level. • We support the continuing education and certification needs of our Colleagues by providing access to a variety of technical training courses.
We have invested deeply in talent, technology and capabilities across our MainStreet Operating Group, which includes our acquisition of Westwood, a national expansion of our distribution footprint, and enhanced digital capabilities focused on meaningfully improving the advisor and client experience.
We have invested deeply in talent, technology and capabilities across MIS, including in Westwood's homeowners solutions that are embedded in many of the top home builders in the U.S., the national expansion of our distribution footprint through our National Mortgage and Real Estate Center, and enhanced digital capabilities focused on improving the Advisor and Client experience.
Following completion of the program, participants will have a deeper understanding of the what, the how, and the why behind the core skills and behaviors needed to thrive in their new roles. • We offer a catalog of more than 650 training courses, all designed to support individual growth and development.
Following completion of the program, participants have a deeper understanding of the what, the how, and the why behind the core skills and behaviors needed to thrive in their new roles. 10 • In partnership with The Institutes, we entered into an enterprise agreement with the premier educational purveyor of technical acumen to the insurance industry.
We continue to make the investments designed to better service our Clients and establish a competitive advantage in the industry.
While we did not execute on any Partnership opportunities during 2023, we completed three Partnerships for an aggregate purchase price of $413.8 million during 2022, which contributed $143.6 million of revenue in 2023. We continue to make the investments designed to better service our Clients and establish a competitive advantage in the industry.
Adding new Partners significantly aids our ability to bolster our geographic footprint, product expertise, and end-Client industry expertise, while adding incremental industry-leading talent to our organization.
Though Partnerships have contributed meaningful inorganic growth to BRP and we expect them to contribute to our long-term growth strategy, we anticipate they will be more episodic in nature going forward. Adding new Colleagues through Partnerships can significantly bolster our geographic footprint, product expertise, and end-Client industry expertise, while adding incremental industry-leading talent to our organization.
The Middle Market Operating Group provides expertly-designed commercial risk management, employee benefits solutions and private risk management for mid-to-large-size businesses and high net worth individuals, as well as their families. We are privileged to have partnered with some of the best independent agencies in the country, each of which has brought strategic capabilities and expertise.
Insurance Advisory Solutions Operating Group (“IAS”) IAS provides expertly-designed commercial risk management, employee benefits and private risk management solutions for businesses and high-net-worth individuals, as well as their families. Risk management solutions typically involve the sale of a wide variety of both commercial and personal lines insurance products that mitigate risks for firms and individuals.
To the contrary, our BRP workforce continued to grow during 2022 as evidenced by more than 1,500 organic new hires and adding over 200 new Colleagues via Partnerships. We have also continued to maintain a relatively high annual retention rate, which was in excess of 80% for 2022.
We have also continued to maintain a relatively high annual retention rate, which was 77% for 2023. Our commitment to rewarding our Colleagues is evidenced by merit increases and bonuses we have continued to pay each year.
Gallagher & Co., AssuredPartners, Inc., Brown & Brown Inc., Hub International Limited and USI, Inc. In various parts of our business (mainly in our MGA of the Future and MainStreet businesses), we compete with smaller “Insurtech” participants such as Lemonade, Inc., Goosehead Insurance, Inc. and Hippo Holdings, Inc.
Gallagher & Co. and Brown & Brown Inc.; private company participants, such as AssuredPartners, Inc., Hub International Limited and USI, Inc.; and in our personal lines business, Goosehead Insurance, Inc. 8 Clients and Insurers Our Clients are highly diversified and include individuals, professionals, businesses, including those in niche industries, and specialty insurers.
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Commission revenues are generally based on a percentage of the premiums paid by insureds and normally follow premium levels. Insurance premiums are cyclical in nature and may vary widely based on market conditions.
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To achieve this, we have invested heavily in our sales leadership infrastructure and recruitment of sales talent, technology talent and solutions to better deliver insurance insights and solutions to our Advisors and Clients.
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Looking forward to 2024 and beyond, we will continue to identify attractive investment opportunities. As a result, while we anticipate that Partnerships will continue to contribute to our overall growth, we expect them to be more episodic in nature.
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Effective in the first quarter of 2023, our chief executive officer reviews the Medicare and Mainstreet businesses on a combined basis as one operating segment, also determined to be an Operating Group, Mainstreet Insurance Solutions, which is used by our chief executive officer to make decisions about the resources to be allocated to the Operating Group and to assess its performance.
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The financial impact of Partnerships may affect the comparability of our results from period to period. We completed three Partnerships for an aggregate purchase price of $413.8 million during 2022, which added $4.4 million of premiums, commissions and fees receivable, $223.7 million of intangible assets and $187.8 million of goodwill to the consolidated balance sheet.
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In addition, the Middle Market and Specialty Operating Groups were rebranded as Insurance Advisory Solutions and Underwriting, Capacity & Technology Solutions, respectively, effective in the first quarter of 2023. Effective in the first quarter of 2023, our business is divided into three Operating Groups: Insurance Advisory Solutions, Underwriting, Capacity & Technology Solutions and Mainstreet Insurance Solutions.
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We earn commissions and fees by facilitating the arrangement between Insurance Company Partners and individuals or businesses for the Insurance Company Partners to provide insurance to the Client.
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Employee benefits solutions can include health plans, dental plans, and retirement accounts for firms and their employees. We are privileged to have partnered with some of the highest quality independent insurance brokers across the country with vast and varied strategic capabilities and expertise.
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Our commissions and fees are usually a percentage of the premium paid by the Client and generally depends on the type of insurance, the particular Insurance Company Partner and the nature of the services provided. Under certain arrangements with Clients, we earn pre-negotiated service fees in lieu of commissions.
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Underwriting, Capacity & Technology Solutions Operating Group (“UCTS”) UCTS consists of three distinct businesses—our specialty wholesale broker business, our MGA of the Future platform and, as of the third quarter of 2023, our newly launched reinsurance brokerage business, Juniper Re.
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Additionally, we may also receive from Insurance Company Partners a profit-sharing commission, or straight override, which represents a form of variable consideration associated with the placement of coverage that is based primarily on underwriting results, but may also contain considerations for volume, growth or retention.
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Our specialty wholesale broker business, which is expected to be sold in the first quarter of 2024, delivers professionals, individuals and niche industry businesses expanded access to exclusive specialty markets, capabilities and programs requiring complex underwriting and placement.
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In the midst of a challenging labor market due in part to the impact of COVID-19 and the so-called “great resignation,” we did not institute any layoffs or furloughs or make any reductions to pay or benefits to Colleagues during 2022.
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We have relationships with a significant number of Insurance Company Partners who contribute to the commissions and fees we generate. While we do not have a dependency on any one Insurance Company Partner, we derive a significant portion of our core commissions and fees from a limited number of Insurance Company Partners.
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We anticipate this being a three-to-five-year project in which all client facing roles will have fully-developed training programs that address job skills, system training, insurance acumen, soft skills and leadership training for leaders. • In partnership with The Institutes, we launched the Professional Risk Consultant (“PRC”) designation course in February 2023.
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We are continuously recognized for our people-first approach, our commitment to a culture of continuous learning, and for providing a place where our Colleagues learn, grow, and thrive. • BRP continued to be Great Place to Work-Certified™ and once again ranked as a Fortune Best Workplaces in Financial Services and Insurance™ in 2023. 9 • We were also recognized by Top Workplaces USA as a 2023 nationally recognized employer for making the world a better place to work by prioritizing a people-centered culture and giving employees a voice.
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Examples of topics include Emotional Intelligence, Managing Conflict, and Feedback Essentials.
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Today we provide access to over 200 of The Institutes course offerings across Commercial, Benefits and Private Risk, all of which are easily accessible through our learning management system. • We continue to offer a catalog of more than 400 custom-built training courses, all designed in-house to support individual growth and professional development.
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Examples of content include Cyber Risk Fundamentals, Professional Liability and Commercial Property. • During the fourth quarter of 2023, we successfully piloted a Leadership Development Workshop at our National Mortgage and Real Estate Center to further develop our MIS leadership group.
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In 2024, we will continue to focus on building leadership capability by implementing contemporary performance coaching and development practices designed to empower our leaders and enable our Colleagues to grow and thrive.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRISK FACTORS Summary Risk Factors Some of the factors that could materially and adversely affect our business, financial condition, results of operations or prospects, include the following: • Macroeconomic conditions, political events, other market conditions in the U.S. and around the world and a decline in economic activity could have a material adverse effect on our financial condition and results of operations. • Volatility or declines in premiums or other adverse trends in the insurance industry may seriously undermine our profitability. • Quarterly and annual variations in our commissions that result from the timing of policy renewals and the net effect of new and lost business production may have unexpected effects on our results of operations. • Conditions impacting our Insurance Company Partners or other parties with whom we do business may impact us. • Competition in our industry is intense and, if we are unable to compete effectively, we may lose Clients and our business, financial condition and results of operations may be negatively affected. • If we are unable to apply technology effectively in driving value for our Clients through technology-based solutions or gain internal efficiencies through the application of technology and related tools, our results of operations, client relationships, growth and compliance programs could be adversely affected. • Our inability to retain or hire qualified Colleagues, as well as the loss of any of our executive officers or senior leaders, could negatively impact our reputation and/or ability to retain existing business and generate new business. • Damage to our reputation could have a material adverse effect on our business. • The occurrence of natural or man-made disasters, health epidemics and pandemics, including the COVID-19 pandemic, and associated governmental responses, could result in declines in business and increases in claims that could adversely affect our business, financial condition and results of operations. • Partnerships have been, and may in the future continue to be, important to our growth.
Biggest changeRISK FACTORS Summary Risk Factors Some of the factors that could materially and adversely affect our business, financial condition, results of operations or prospects, include the following: • We may not have sufficient cash flows from operating activities, cash on hand and available capital sources to service any indebtedness, pay contingent earnout liabilities, or finance other working capital needs, which could force us to sell assets, cease operations or take other detrimental actions for our business. • We have debt outstanding that could adversely affect our financial flexibility and subjects us to restrictions and limitations that could significantly impact our ability to effectively operate our business. • We may incur significant additional indebtedness, which may affect our ability to satisfy our obligations under the JPM Credit Agreement. • Downgrades in our credit ratings could increase future debt financing costs and limit the future availability of debt financing. • Macroeconomic conditions, political events, other market conditions in the U.S. and around the world and a decline in economic activity could have a material adverse effect on our financial condition and results of operations. • Volatility or declines in premiums or other adverse trends in the insurance industry may seriously undermine our profitability. • Because the commissions and fees we earn on the sale of certain insurance products is based on premiums and commission rates set by our Insurance Company Partners, any decreases in these premiums or commission rates, or actions by our Insurance Company Partners seeking repayment of commissions, could result in commissions and fees decreases or expenses to us. • Quarterly and annual variations in our commissions that result from the timing of policy renewals and the net effect of new and lost business production may have unexpected effects on our results of operations. • Conditions impacting our Insurance Company Partners or other parties with whom we do business may impact us. • If we are unable to apply technology effectively in driving value for our Clients through technology-based solutions or gain internal efficiencies through the application of technology and related tools, our results of operations, client relationships, growth and compliance programs could be adversely affected. • Competition in our industry is intense and, if we are unable to compete effectively, we may lose Clients and our business, financial condition and results of operations may be negatively affected. • Our inability to retain or hire qualified Colleagues, as well as the loss of any of our executive officers or senior leaders, could negatively impact our reputation and/or ability to retain existing business and generate new business. • The occurrence of natural or man-made disasters, health epidemics and pandemics, and associated governmental responses, could result in declines in business and increases in claims that could adversely affect our business, financial condition and results of operations. • Our inability to successfully recover should we experience a disaster or other business continuity problem could cause material financial loss, loss of human capital, regulatory actions, reputational harm or legal liability. • If our ability to enroll individuals during enrollment periods is impeded, our business, results of operations and financial condition could be harmed. • Partnerships have been, and may in the future continue to be, important to our growth.
The trading price of our Class A common stock is likely to be volatile and subject to wide price fluctuations in response to various factors, including: • market conditions in the broader stock market in general, or in our industry in particular; • actual or anticipated fluctuations in our quarterly financials and results of operations; • introduction of new products and services by us or our competitors; • issuance of new or changed securities analysts’ reports or recommendations; • investor perceptions of us and the industries in which we or our Clients operate; • low trading volumes or sales, or anticipated sales, of large blocks of our Class A common stock, including those by our existing investors or our Partners; • concentration of Class A common stock ownership; • additions or departures of key personnel; • regulatory or political developments; • litigation and governmental investigations; • changing economic and political conditions; • the perceived adequacy of our ESG efforts; • our ability or perceived ability to: ◦ attract new Clients, successfully deploy and implement our products, obtain Client renewals and provide our Clients with excellent Client support; ◦ increase our network of Insurance Company Partners and the profit-sharing, override and/or contingent commissions that we earn from such Insurance Company Partners; ◦ adequately expand, train, integrate and retain our Colleagues, including our executive officers and senior leaders, and maintain or increase our sales force’s productivity; ◦ improve our internal control over financial reporting and disclosure controls and procedures to ensure timely and accurate reporting of our operational and financial results; 41 ◦ successfully introduce new products and enhance existing products; ◦ successfully deploy information technology assets for use by our Colleagues and interaction with our Clients and Insurance Company Partners; ◦ adapt to the ever-changing regulatory and legal landscape; ◦ protect sensitive, personal and confidential information and data within BRP’s custody from third party bad actors; ◦ successfully identify and acquire new Partners; ◦ successfully integrate Partnerships into the Company in an operationally efficient manner; ◦ service our existing indebtedness; ◦ access the capital markets or otherwise obtain access to capital to satisfy future needs of the Company; ◦ successfully introduce our products to new markets and geographies; and ◦ successfully compete against larger companies and new market entrants. • announced or completed acquisitions of businesses or technologies by us or our competitors; and • new laws or regulations or new interpretations of existing laws or regulations applicable to our business, including developments relating to the health care industry and the marketing and sale of Medicare plans.
The trading price of our Class A common stock is likely to be volatile and subject to wide price fluctuations in response to various factors, including: • market conditions in the broader stock market in general, or in our industry in particular; • actual or anticipated fluctuations in our quarterly financials and results of operations; • introduction of new products and services by us or our competitors; • issuance of new or changed securities analysts’ reports or recommendations; • investor perceptions of us and the industries in which we or our Clients operate; • low trading volumes or sales, or anticipated sales, of large blocks of our Class A common stock, including those by our existing investors or our Partners; • concentration of Class A common stock ownership; • additions or departures of key personnel; • regulatory or political developments; • litigation and governmental investigations; • changing economic and political conditions; • the perceived adequacy of our ESG efforts; • our ability or perceived ability to: ◦ attract new Clients, successfully deploy and implement our products, obtain Client renewals and provide our Clients with excellent Client support; ◦ increase our network of Insurance Company Partners and the profit-sharing, override and/or contingent commissions that we earn from such Insurance Company Partners; ◦ adequately expand, train, integrate and retain our Colleagues, including our executive officers and senior leaders, and maintain or increase our sales force’s productivity; ◦ improve our internal control over financial reporting and disclosure controls and procedures to ensure timely and accurate reporting of our operational and financial results; 42 ◦ successfully introduce new products and enhance existing products; ◦ successfully deploy information technology assets for use by our Colleagues and interaction with our Clients and Insurance Company Partners; ◦ adapt to the ever-changing regulatory and legal landscape; ◦ protect sensitive, personal and confidential information and data within BRP’s custody from third party bad actors; ◦ successfully identify and acquire new Partners; ◦ successfully integrate Partnerships into the Company in an operationally efficient manner; ◦ service our existing indebtedness; ◦ access the capital markets or otherwise obtain access to capital to satisfy future needs of the Company; ◦ successfully introduce our products to new markets and geographies; and ◦ successfully compete against larger companies and new market entrants. • announced or completed acquisitions of businesses or technologies by us or our competitors; and • new laws or regulations or new interpretations of existing laws or regulations applicable to our business, including developments relating to the health care industry and the marketing and sale of Medicare plans.
Pursuant to the terms of the Stockholders Agreement, so long as the Pre-IPO LLC Members and their permitted transferees (collectively, the “Holders”) beneficially own at least 10% of the aggregate number of outstanding shares of our common stock (the “Substantial Ownership Requirement”), the Holders have approval rights over certain transactions and actions taken by us and BRP, including: • a merger, consolidation or sale of all or substantially all of the assets of BRP and its subsidiaries; • any dissolution, liquidation or reorganization (including filing for bankruptcy) of BRP and its subsidiaries or any acquisition or disposition of any asset for consideration in excess of 5% of our and our subsidiaries' total assets on a consolidated basis; • the incurrence, guarantee, assumption or refinancing of indebtedness, or grant of a security interest, in excess of 10% of total assets (or that would cause aggregate indebtedness or guarantees thereof to exceed 10% of total assets); • the issuance of certain additional equity interests of the Company, BRP or any of their subsidiaries in an amount exceeding $10 million (other than pursuant to an equity incentive plan that has been approved by our board of directors); • the establishment or amendment of any equity, purchase or bonus plan for the benefit of employees, consultants, officers or directors; • any capital or other expenditure in excess of 5% of total assets; 37 • the declaration or payment of dividends on Class A common stock or distributions by BRP on LLC Units other than tax distributions as defined in the Amended LLC Agreement; • changing the number of directors on our board of directors; • hiring, termination or replacement of, establishment of compensation (including benefits) payable to, or making other significant decisions involving, our or BRP's senior management and key employees, including our Chief Executive Officer, including entry into or modification of employment agreements, adopting or modifying plans relating to any incentive securities or employee benefit plans or granting incentive securities or benefits under any existing plans; • changing our or BRP’s jurisdiction of incorporation; • changing the location of our or BRP’s headquarters; • changing our or BRP’s name; • changing our or BRP’s fiscal year; • changing our public accounting firm; • amendments to our or BRP’s governing documents; and • adopting a shareholder rights plan.
Pursuant to the terms of the Stockholders Agreement, so long as the Pre-IPO LLC Members and their permitted transferees (collectively, the “Holders”) beneficially own at least 10% of the aggregate number of outstanding shares of our common stock (the “Substantial Ownership Requirement”), the Holders have approval rights over certain transactions and actions taken by us and BRP, including: • a merger, consolidation or sale of all or substantially all of the assets of BRP and its subsidiaries; • any dissolution, liquidation or reorganization (including filing for bankruptcy) of BRP and its subsidiaries or any acquisition or disposition of any asset for consideration in excess of 5% of our and our subsidiaries' total assets on a consolidated basis; • the incurrence, guarantee, assumption or refinancing of indebtedness, or grant of a security interest, in excess of 10% of total assets (or that would cause aggregate indebtedness or guarantees thereof to exceed 10% of total assets); • the issuance of certain additional equity interests of the Company, BRP or any of their subsidiaries in an amount exceeding $10 million (other than pursuant to an equity incentive plan that has been approved by our board of directors); • the establishment or amendment of any equity, purchase or bonus plan for the benefit of employees, consultants, officers or directors; • any capital or other expenditure in excess of 5% of total assets; • the declaration or payment of dividends on Class A common stock or distributions by BRP on LLC Units other than tax distributions as defined in the Amended LLC Agreement; • changing the number of directors on our board of directors; • hiring, termination or replacement of, establishment of compensation (including benefits) payable to, or making other significant decisions involving, our or BRP's senior management and key employees, including our Chief Executive Officer, including entry into or modification of employment agreements, adopting or modifying plans relating to any incentive securities or employee benefit plans or granting incentive securities or benefits under any existing plans; • changing our or BRP’s jurisdiction of incorporation; • changing the location of our or BRP’s headquarters; 38 • changing our or BRP’s name; • changing our or BRP’s fiscal year; • changing our public accounting firm; • amendments to our or BRP’s governing documents; and • adopting a shareholder rights plan.
The risks we face include: • diversion of management time and focus from operating our core business to acquisition integration challenges; • excessive costs of deploying our business support and financial management tools in acquired companies; • delays in the successful integration of the Partner into our operations; • failure to successfully integrate the Partner into our operations, including cultural challenges associated with integrating and retaining Colleagues; • failure to achieve anticipated efficiencies or benefits, including through the loss of key Clients or personnel of the Partner; • failure to realize our strategic objectives for the Partner or further develop the Partner; and • the consequences of the conduct of our acquired companies prior to their acquisition by us, including the occurrence of data breaches or other cybersecurity attacks during the integration of information systems, as well as increased costs associated with implementing state and regulatory compliance procedures, including data privacy and cybersecurity protections.
The risks we face include: • diversion of management time and focus from operating our core business to acquisition integration challenges; • excessive costs of deploying our business support and financial management tools in acquired companies; • delays in the successful integration of the Partner into our operations; • failure to successfully integrate the Partner into our operations, including cultural challenges associated with integrating and retaining Colleagues; • failure to achieve anticipated efficiencies or benefits, including through the loss of key Clients or personnel of the Partner; • failure to realize our strategic objectives for the Partner or further develop the Partner; and 23 • the consequences of the conduct of our acquired companies prior to their acquisition by us, including the occurrence of data breaches or other cybersecurity attacks during the integration of information systems, as well as increased costs associated with implementing state and regulatory compliance procedures, including data privacy and cybersecurity protections.
While we still maintain a concentration in the Southeastern United States, our rapid growth has resulted in our having several regional concentrations of our business, such that adverse economic conditions, natural disasters, loss trends or regulatory changes in one of these regions could adversely affect our financial condition.” Our inability to successfully recover should we experience a disaster or other business continuity problem could cause material financial loss, loss of human capital, regulatory actions, reputational harm or legal liability.
While we still maintain a concentration in the Southeastern United States, our rapid growth has resulted in our having several regional concentrations of our business, such that adverse economic conditions, natural disasters, loss trends or regulatory changes in one of these regions could adversely affect our financial condition.” 22 Our inability to successfully recover should we experience a disaster or other business continuity problem could cause material financial loss, loss of human capital, regulatory actions, reputational harm or legal liability.
These are not guaranteed payments and our Insurance Company Partners may change the calculations or potentially elect to stop paying them at all on an annual basis. Over the last two years contingent commissions generally have been in the range of 7.0% to 9.0% of our current year’s total core commissions and fees.
These are not guaranteed payments and our Insurance Company Partners may change the calculations or potentially elect to stop paying them at all on an annual basis. Over the last two years contingent commissions generally have been in the range of 7.0% to 9.0% of the year’s total core commissions and fees.
Some insurance companies have agreed with regulatory authorities to end the payment of contingent commissions on insurance products, which could impact our commissions that are based on the volume, consistency and profitability of business generated by us. We cannot predict the impact that any new laws, rules or regulations may have on our business, financial condition and results of operations.
Some insurance companies have agreed with regulatory authorities to end the payment of contingent commissions on insurance products, which could impact our commissions that are based on the volume, consistency and profitability of business generated by us. 31 We cannot predict the impact that any new laws, rules or regulations may have on our business, financial condition and results of operations.
It is not always possible to prevent or detect E&O and other types of claims, and the precautions we take may not be effective in all cases. We have E&O insurance coverage to protect against the risk of liability resulting from our alleged and actual E&O.
It is not always possible to prevent or detect E&O and other types of claims, and the precautions we take may not be effective in all cases. 29 We have E&O insurance coverage to protect against the risk of liability resulting from our alleged and actual E&O.
Ensuring that our collection, use, retention, security, transfer, storage, disposition and other processing of personal information complies with applicable laws, regulations, rules and standards regarding data privacy and cybersecurity in relevant jurisdictions can increase operating costs, impact the development of new products or services, and reduce operational efficiency. 35 At the federal level, we are subject to, among other laws, rules and regulations, the GLBA, which requires financial institutions to, among other things, periodically disclose their privacy policies and practices relating to sharing personal information and, in some cases, enables retail customers to opt out of the sharing of certain personal information with unaffiliated third parties.
Ensuring that our collection, use, retention, security, transfer, storage, disposition and other processing of personal information complies with applicable laws, regulations, rules and standards regarding data privacy and cybersecurity in relevant jurisdictions can increase operating costs, impact the development of new products or services, and reduce operational efficiency. 36 At the federal level, we are subject to, among other laws, rules and regulations, the GLBA, which requires financial institutions to, among other things, periodically disclose their privacy policies and practices relating to sharing personal information and, in some cases, enables retail customers to opt out of the sharing of certain personal information with unaffiliated third parties.
We may need to expend resources to address questions or concerns regarding our relationships with these Insurance Company Partners, which diverts management resources away from business operations. 29 Our business is subject to risks related to legal proceedings, regulatory investigations, and governmental inquiries and actions.
We may need to expend resources to address questions or concerns regarding our relationships with these Insurance Company Partners, which diverts management resources away from business operations. Our business is subject to risks related to legal proceedings, regulatory investigations, and governmental inquiries and actions.
As a result, we may have to adjust our budgets for future acquisitions, capital expenditures, dividend payments, loan repayments and other expenditures to account for unexpected changes in commissions and fees, and any decreases in premium rates may adversely affect our business, financial condition and results of operations. 16 Because the commissions and fees we earn on the sale of certain insurance products is based on premiums and commission rates set by our Insurance Company Partners, any decreases in these premiums or commission rates, or actions by our Insurance Company Partners seeking repayment of commissions, could result in commissions and fees decreases or expenses to us.
As a result, we may have to adjust our budgets for future acquisitions, capital expenditures, dividend payments, loan repayments and other expenditures to account for unexpected changes in commissions and fees, and any decreases in premium rates may adversely affect our business, financial condition and results of operations. 18 Because the commissions and fees we earn on the sale of certain insurance products is based on premiums and commission rates set by our Insurance Company Partners, any decreases in these premiums or commission rates, or actions by our Insurance Company Partners seeking repayment of commissions, could result in commissions and fees decreases or expenses to us.
Defending or enforcing our trademark rights, branding practices and other intellectual property could result in the expenditure of significant resources and divert the attention of management, which in turn may materially and adversely affect our business and results of operations, even if such defense or enforcement is ultimately successful. 33 Failure to obtain, maintain, protect, defend or enforce our intellectual property rights, or allegations that we have infringed, misappropriated or otherwise violated the intellectual property rights of others, could harm our reputation, ability to compete effectively, business, financial condition and results of operations.
Defending or enforcing our trademark rights, branding practices and other intellectual property could result in the expenditure of significant resources and divert the attention of management, which in turn may materially and adversely affect our business and results of operations, even if such defense or enforcement is ultimately successful. 34 Failure to obtain, maintain, protect, defend or enforce our intellectual property rights, or allegations that we have infringed, misappropriated or otherwise violated the intellectual property rights of others, could harm our reputation, ability to compete effectively, business, financial condition and results of operations.
These requirements may also apply to transfers of information among our affiliates, as well as to transactions we enter into with unaffiliated third-parties. 34 Cybersecurity risks have significantly increased in recent years, in part, because of the proliferation of new technologies, the use of the internet and telecommunications technologies to exchange information and conduct transactions, and the increased sophistication and activities of computer hackers, organized crime, terrorists, and other external parties, including foreign state actors.
These requirements may also apply to transfers of information among our affiliates, as well as to transactions we enter into with unaffiliated third-parties. 35 Cybersecurity risks have significantly increased in recent years, in part, because of the proliferation of new technologies, the use of the internet and telecommunications technologies to exchange information and conduct transactions, and the increased sophistication and activities of computer hackers, organized crime, terrorists, and other external parties, including foreign state actors.
The need to service our indebtedness will also reduce our ability to use cash for other purposes, including working capital, dividends to stockholders, acquisitions, capital expenditures, share repurchases and general corporate purposes.
The need to service our indebtedness will also reduce our ability to use cash for other purposes, including earnouts, working capital, dividends to stockholders, acquisitions, capital expenditures, share repurchases and general corporate purposes.
If we identify material weaknesses or substantial deficiencies in our internal control over financial reporting in the future, or if we are unable to comply with the demands that will be placed upon us as a public company, including the requirements of Section 404 of the Sarbanes-Oxley Act, in a timely manner, we may be unable to accurately report our financial results, or report them within the timeframes required by the SEC.
If we identify material weaknesses or significant deficiencies in our internal control over financial reporting in the future, or if we are unable to comply with the demands that will be placed upon us as a public company, including the requirements of Section 404 of the Sarbanes-Oxley Act, in a timely manner, we may be unable to accurately report our financial results, or report them within the timeframes required by the SEC.
New competition as a result of these or other competitive or industry developments could cause the demand for our products and services to decrease, which could in turn adversely affect our business, financial condition and results of operations. 19 Our inability to retain or hire qualified Colleagues, as well as the loss of any of our executive officers or senior leaders, could negatively impact our reputation and/or ability to retain existing business and generate new business.
New competition as a result of these or other competitive or industry developments could cause the demand for our products and services to decrease, which could in turn adversely affect our business, financial condition and results of operations. 21 Our inability to retain or hire qualified Colleagues, as well as the loss of any of our executive officers or senior leaders, could negatively impact our reputation and/or ability to retain existing business and generate new business.
Interruption or loss of our information processing capabilities or adverse consequences from implementing new or enhanced systems could have a material adverse effect on our business, financial condition and results of operations. 36 In the course of providing financial services, we may electronically store, transmit or otherwise process personally identifiable information, such as social security numbers or credit card or bank information, of Clients or employees of Clients.
Interruption or loss of our information processing capabilities or adverse consequences from implementing new or enhanced systems could have a material adverse effect on our business, financial condition and results of operations. 33 In the course of providing financial services, we may electronically store, transmit or otherwise process personally identifiable information, such as social security numbers or credit card or bank information, of Clients or employees of Clients.
We compete for Clients on the basis of reputation, Client service, program and product offerings and our ability to tailor products and services to meet the specific needs of a Client. 18 We actively compete with numerous integrated financial services organizations as well as Insurance Company Partners and brokers, producer groups, individual insurance agents, investment management firms, independent financial planners and broker-dealers.
We compete for Clients on the basis of reputation, Client service, program and product offerings and our ability to tailor products and services to meet the specific needs of a Client. 20 We actively compete with numerous integrated financial services organizations as well as Insurance Company Partners and brokers, producer groups, individual insurance agents, investment management firms, independent financial planners and broker-dealers.
Regardless of final costs, these matters could have a material adverse effect on us by exposing us to negative publicity, reputational damage, harm to client relationships or diversion of personnel and management resources. In addition, we may from time to time be subject to certain litigation brought by one or more of our shareholders.
Regardless of final costs, these matters could have a material adverse effect on us by exposing us to negative publicity, reputational damage, harm to client relationships or diversion of personnel and management resources. In addition, we may from time to time be subject to certain litigation brought by one or more of our stockholders.
Risks Relating to our Organizational Structure We are a holding company with our principal asset being our 53% ownership interest in BRP, and our Pre-IPO LLC Members, whose interest in our business may be different from yours, have approval rights over certain transactions and actions taken by us or BRP.
Risks Relating to our Organizational Structure We are a holding company with our principal asset being our 55% ownership interest in BRP, and our Pre-IPO LLC Members, whose interest in our business may be different from yours, have approval rights over certain transactions and actions taken by us or BRP.
We are a holding company, and our principal asset is our direct or indirect ownership of 53% of the outstanding LLC Units. We have no independent means of generating commissions and fees. Further, we are a party to a Stockholders Agreement entered into in connection with the initial public offering with the Pre-IPO LLC Members.
We are a holding company, and our principal asset is our direct or indirect ownership of 55% of the outstanding LLC Units. We have no independent means of generating commissions and fees. Further, we are a party to a Stockholders Agreement entered into in connection with the initial public offering with the Pre-IPO LLC Members.
Strategic acquisitions to complement and further expand our business, which we refer to as Partnerships, have been an important part of our competitive strategy. The acquisition landscape is competitive and accordingly we do not expect that Partnerships will be as important to our growth in 2023, although we will remain active in pursuing potential transactions.
Strategic acquisitions to complement and further expand our business, which we refer to as Partnerships, have been an important part of our competitive strategy. The acquisition landscape is competitive and accordingly we do not expect that Partnerships will be as important to our growth in 2024, although we will remain active in pursuing potential transactions.
Because profit-sharing contingent commissions and override commissions materially affect our commissions and fees, any decrease in their payment to us could adversely affect our results of operations, profitability and our financial condition. 17 See “—Our business had historically been highly concentrated in the Southeastern United States.
Because profit-sharing contingent commissions and override commissions materially affect our commissions and fees, any decrease in their payment to us could adversely affect our results of operations, profitability and our financial condition. 19 See “—Our business had historically been highly concentrated in the Southeastern United States.
As of December 31, 2022, we had total consolidated debt outstanding of approximately $1.3 billion, collateralized by substantially all the Company’s assets, including a pledge of all equity securities the Company holds in each of its subsidiaries.
As of December 31, 2023, we had total consolidated debt outstanding of approximately $1.3 billion, collateralized by substantially all the Company’s assets, including a pledge of all equity securities the Company holds in each of its subsidiaries.
We rely on third parties, and in some cases subcontractors, to provide services, data, and information, such as technology, information security, funds transfers, data processing and administration and support functions, that are critical to our business operations.
We rely on third parties, and in some cases subcontractors, to provide services, data, and information, such as technology, information security, billing systems, funds transfers, data processing and administration and support functions, that are critical to our business operations.
In addition, the JPM Credit Agreement limits the amount of distributions that BRP can make to us and the purposes for which distributions could be made. Accordingly, we may not be able to pay dividends to our Class A common stockholders even if our board of directors would otherwise deem it appropriate.
In addition, the JPM Credit Agreement limits the amount of distributions that BRP can make to us and the purposes for which distributions could be made. Accordingly, we may not be able to pay dividends to our Class A common stockholders even if our board of directors would otherwise deem it appropriate. Refer to Item 7.
These provisions could also make it more difficult for stockholders to nominate directors for election to our board of directors and take other corporate actions. 40 Certain statutory provisions afforded to stockholders are not applicable to us.
These provisions could also make it more difficult for stockholders to nominate directors for election to our board of directors and take other corporate actions. 41 Certain statutory provisions afforded to stockholders are not applicable to us.
Our revenues are generally highest in the first quarter due to the impact of contingent commission payments received in the first quarter from Insurance Company Partners that we cannot readily estimate before receipt without the risk of significant reversal and a higher degree of first quarter policy commencements and renewals in Medicare and certain Middle Market lines of business such as employee benefits and commercial.
Our revenues are generally highest in the first quarter due to the impact of contingent commission payments received in the first quarter from Insurance Company Partners that we cannot readily estimate before receipt without the risk of significant reversal and a higher degree of first quarter policy commencements and renewals in certain IAS and MIS lines of business such as employee benefits, commercial and Medicare.
Our business depends on information processing systems. Data breaches or other security incidents with respect to our or our vendors' information processing systems may hurt our business, financial condition and results of operations.
Data breaches or other security incidents with respect to our or our vendors' information processing systems may hurt our business, financial condition and results of operations.
If we experience material weaknesses or substantial deficiencies in the future, or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of our common stock.
If we experience material weaknesses or significant deficiencies in the future, or otherwise fail to maintain an effective environment of internal controls, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of our common stock.
The actual increases in tax basis with respect to future taxable redemptions, exchanges or purchases of LLC Units, as well as the amount and timing of any payments we are required to make under the Tax Receivable Agreement will depend on a number of factors, including the market value of our Class A common stock at the time of future redemptions or exchanges, the prevailing federal tax rates applicable to us over the life of the Tax Receivable Agreement (as well as the assumed combined state and local tax rate), the amount and timing of the taxable income that we generate in the future and the extent to which future redemptions, exchanges or purchases of LLC Units are taxable transactions. 39 Payments under the Tax Receivable Agreement are not conditioned on BRP’s LLC Members’ continued ownership of us.
The actual increases in tax basis with respect to future taxable redemptions, exchanges or purchases of LLC Units, as well as the amount and timing of any payments we are required to make under the Tax Receivable Agreement will depend on a number of factors, including the market value of our Class A common stock at the time of future redemptions or exchanges, the prevailing federal tax rates applicable to us over the life of the Tax Receivable Agreement (as well as the assumed combined state and local tax rate), the amount and timing of the taxable income that we generate in the future and the extent to which future redemptions, exchanges or purchases of LLC Units are taxable transactions.
For example, Virginia and Colorado have recently adopted comprehensive data privacy laws similar to the CCPA, which will go into effect in January and July of 2023, respectively.
For example, Virginia and Colorado have recently adopted comprehensive data privacy laws similar to the CCPA, which went into effect in January and July of 2023, respectively.
If our ability to market and sell Medicare-related health insurance and individual and family health insurance is constrained during an enrollment period for any reason, such as technology failures, reduced allocation of resources, any inability to timely employ, license, train, certify and retain our Colleagues and our contractors and their health insurance Risk Advisors to sell health insurance, interruptions in the operation of our website or systems or issues with government-run health insurance exchanges, we could acquire fewer members, suffer a reduction in our membership and our business, results of operations and financial condition could be harmed. 21 Partnerships have been, and may in the future continue to be, important to our growth.
If our ability to market and sell Medicare-related health insurance and individual and family health insurance is constrained during an enrollment period for any reason, such as technology failures, reduced allocation of resources, any inability to timely employ, license, train, certify and retain our Colleagues and our contractors and their health insurance Risk Advisors to sell health insurance, interruptions in the operation of our website or systems or issues with government-run health insurance exchanges, we could acquire fewer members, suffer a reduction in our membership and our business, results of operations and financial condition could be harmed.
In addition, there have been and may continue to be various trends in the insurance industry toward alternative insurance markets, including, among other things, greater levels of self-insurance, captives, rent-a-captives, risk retention groups and non-insurance capital markets-based solutions to traditional insurance.
In addition, there have been and may continue to be—including as a result of substantial increases in insurance premiums— various trends in the insurance industry toward alternative insurance markets, including, among other things, greater levels of self-insurance, captives, rent-a-captives, risk retention groups and non-insurance capital markets-based solutions to traditional insurance.
Further, effective in most material respects starting on January 1, 2023, the California Privacy Rights Act (“CPR”) (which was passed via a ballot initiative as part of the November 2020 election) will significantly modify the CCPA, including by expanding California residents’ rights with respect to certain sensitive personal information.
Further, effective in most material respects starting on January 1, 2023, the California Privacy Rights Act (“CPRA”) (which was passed via a ballot initiative as part of the November 2020 election) has significantly modified the CCPA, including by expanding California residents’ rights with respect to certain sensitive personal information.
We advise our Clients on and provide services related to a wide range of subjects and our ability to attract and retain Clients depends greatly on the external perceptions of our level of service, trustworthiness, business practices, financial condition and other subjective qualities.
Our reputation is one of our key assets. We advise our Clients on and provide services related to a wide range of subjects and our ability to attract and retain Clients depends greatly on the external perceptions of our level of service, trustworthiness, business practices, financial condition and other subjective qualities.
Risks Relating to our Business Operations and Industry Macroeconomic conditions, political events, other market conditions in the U.S. and around the world and a decline in economic activity could have a material adverse effect on our financial condition and results of operations.
Macroeconomic conditions, political events, other market conditions in the U.S. and around the world and a decline in economic activity could have a material adverse effect on our financial condition and results of operations.
For example, legislators in the United States are proposing new and more robust cybersecurity legislation in light of the recent broad-based cyberattacks at a number of companies.
For example, legislators in the United States have passed new and more robust cybersecurity legislation in light of the recent broad-based cyberattacks at a number of companies.
We believe our revenue growth depends on a number of factors, including, but not limited to, our ability to: • attract new Clients, successfully deploy and implement our products, obtain Client renewals and provide our Clients with excellent Client support; • increase our network of Insurance Company Partners and the profit-sharing, override and/or contingent commissions that we earn from such Insurance Company Partners; • adequately expand, train, integrate and retain our Colleagues, including our executive officers and senior leaders, and maintain or increase our sales force’s productivity; • improve our internal control over financial reporting and disclosure controls and procedures to ensure timely and accurate reporting of our operational and financial results; • successfully introduce new products and enhance existing products; • successfully deploy information technology assets for use by our Colleagues and interaction with our Clients and Insurance Company Partners; • adapt to the ever-changing regulatory and legal landscape; • protect sensitive, personal and confidential information and data within BRP’s custody from third party bad actors; • successfully identify and acquire new Partners; • successfully integrate Partnerships into the Company in an operationally efficient manner; • service our existing indebtedness; • access the capital markets or otherwise obtain access to capital to satisfy future needs of the Company; • successfully introduce our products to new markets and geographies; and • successfully compete against larger companies and new market entrants. 26 We may not successfully accomplish any of these objectives and, in particular, the ongoing COVID-19 pandemic and ongoing macroeconomic and geopolitical uncertainty may impact our ability to successfully accomplish any of the above, and as a result, it is difficult for us to forecast our future results of operations.
We believe our revenue growth depends on a number of factors, including, but not limited to, our ability to: • attract new Clients, successfully deploy and implement our products, obtain Client renewals and provide our Clients with excellent Client support; • increase our network of Insurance Company Partners and the profit-sharing, override and/or contingent commissions that we earn from such Insurance Company Partners; • adequately expand, train, integrate and retain our Colleagues, including our executive officers and senior leaders, and maintain or increase our sales force’s productivity; • improve our internal control over financial reporting and disclosure controls and procedures to ensure timely and accurate reporting of our operational and financial results; 26 • successfully introduce new products and enhance existing products; • successfully deploy information technology assets for use by our Colleagues and interaction with our Clients and Insurance Company Partners; • adapt to the ever-changing regulatory and legal landscape; • protect sensitive, personal and confidential information and data within BRP’s custody from third party bad actors; • successfully identify and acquire new Partners; • successfully integrate Partnerships into the Company in an operationally efficient manner; • service our existing indebtedness; • access the capital markets or otherwise obtain access to capital to satisfy future needs of the Company; • successfully introduce our products to new markets and geographies; and • successfully compete against larger companies and new market entrants.
E&O claims against us, and other incidents, claims, risks, exposures and/or liabilities that require us to make claims against our insurance policies, may negatively affect our business, financial condition and results of operations.
Risks Relating to Legal, Compliance and Regulatory Matters E&O claims against us, and other incidents, claims, risks, exposures and/or liabilities that require us to make claims against our insurance policies, may negatively affect our business, financial condition and results of operations.
As of the date of this Annual Report on Form 10-K, Lowry Baldwin through the Voting Agreement beneficially owns 29.8% of the voting power of our common stock.
As of the date of this Annual Report on Form 10-K, Lowry Baldwin through the Voting Agreement beneficially owns 25.4% of the voting power of our common stock.
Cyber threats are constantly evolving, which makes it more difficult to detect cybersecurity incidents, assess their severity or impact in a timely manner, and successfully defend against them. The ongoing COVID-19 pandemic generally is increasing the attack surface available to criminals, as more companies and individuals work remotely and otherwise work online.
Cyber threats are constantly evolving, which makes it more difficult to detect cybersecurity incidents, assess their severity or impact in a timely manner, and successfully defend against them. The hybrid and remote work environment is increasing the attack surface available to criminals, as more companies and individuals work remotely and otherwise work online.
We may experience additional disruption due to system upgrades, outages, an increase in remote work or other impacts as a result of health epidemics or pandemics, including the COVID-19 pandemic.
We may experience additional disruption due to system upgrades, outages, an increase in remote work or other impacts as a result of health epidemics or pandemics.
We may not be able to successfully identify and acquire Partners or integrate Partners into our company, and we may become subject to certain liabilities assumed or incurred in connection with our Partnerships that could harm our business, results of operations and financial condition.
Partnerships have been, and may in the future continue to be, important to our growth. We may not be able to successfully identify and acquire Partners or integrate Partners into our company, and we may become subject to certain liabilities assumed or incurred in connection with our Partnerships that could harm our business, results of operations and financial condition.
While we still maintain a concentration in the Southeastern United States, our rapid growth has resulted in our having several regional concentrations of our business, such that adverse economic conditions, natural disasters, loss trends or regulatory changes in one of these regions could adversely affect our financial condition. • We derive a significant portion of our commissions and fees from a limited number of our Insurance Company Partners, the loss of which could result in additional expense and loss of market share. • We rely on third parties to perform key functions of our business operations, enabling our provision of services to our Clients.
While we still maintain a concentration in the Southeastern United States, our rapid growth has resulted in our having several regional concentrations of our business, such that adverse economic conditions, natural disasters, loss trends or regulatory changes in one of these regions could adversely affect our financial condition. • We derive a significant portion of our commissions and fees from a limited number of our Insurance Company Partners, the loss of which could result in additional expense and loss of market share. • Our business may be harmed if we lose our relationships with Insurance Company Partners, fail to maintain good relationships with Insurance Company Partners, become dependent upon a limited number of Insurance Company Partners or fail to develop new Insurance Company Partner relationships. • We rely on third parties to perform key functions of our business operations, enabling our provision of services to our Clients.
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Partnerships for further discussion of our strategic acquisitions. 22 The provision of advisory services to clients with respect to captive insurance, and specifically, utilization of an 831(b) election, is subject to numerous, complex and frequently changing laws, regulations and governmental interpretations of the same, and non-compliance or changes in laws and regulations or governmental interpretations of the same, could harm our business, results of operations and financial condition.
The provision of advisory services to Clients with respect to captive insurance, and specifically, utilization of an 831(b) election, is subject to numerous, complex and frequently changing laws, regulations and governmental interpretations of the same, and non-compliance or changes in laws and regulations or governmental interpretations of the same, could harm our business, results of operations and financial condition.
We cannot predict or guarantee that we will successfully identify suitable acquisition candidates, consummate any Partnership or integrate any Partner. Any failure to do so could have an adverse impact on our business, results of operations and financial condition. See Item 7.
We cannot predict or guarantee that we will successfully identify suitable acquisition candidates, consummate any Partnership or integrate any Partner. Any failure to do so could have an adverse impact on our business, results of operations and financial condition. An impairment of goodwill could have a material adverse effect on our financial condition and results of operations.
If the IRS were to disallow 831(b) elections, modify its guidance around 831(b) elections, or otherwise investigate our business and conclude that we are a tax shelter promoter, such actions, whether or not merited, could harm our business, results of operations and financial condition.
If the IRS were to disallow 831(b) elections, modify its guidance around 831(b) elections, or otherwise investigate our business and conclude that we are a tax shelter promoter, such actions, whether or not merited, could harm our business, results of operations and financial condition. If we fail to manage future growth effectively, our business could be materially adversely affected.
In addition, a group comprised of Lowry Baldwin, our Chairman, Baldwin Insurance Group Holdings, LLC, an entity controlled by Lowry Baldwin, Elizabeth Krystyn, Laura Sherman, Trevor Baldwin, our Chief Executive Officer, Kris Wiebeck, our Chief Strategy Officer, John Valentine, our Chief Partnership Officer, Dan Galbraith, our Chief Operating Officer, and Brad Hale, our Chief Financial Officer, and certain trusts established by such individuals, have entered into a Voting Agreement, as amended, with Lowry Baldwin, our Chairman, pursuant to which, in connection with any meeting of our shareholders or any written consent of our shareholders, each such person and trust party will agree to vote or exercise their right to consent in the manner directed by Lowry Baldwin.
A group comprised of Lowry Baldwin, our Chairman, Baldwin Insurance Group Holdings, LLC, an entity controlled by Lowry Baldwin, Elizabeth Krystyn, Laura Sherman, Trevor Baldwin, our Chief Executive Officer, Dan Galbraith, President, BRP and Chief Executive Officer, Retail Brokerage Operations, and Brad Hale, our Chief Financial Officer, and certain trusts established by such individuals, have entered into a Voting Agreement, as amended, with Lowry Baldwin, our Chairman, pursuant to which, in connection with any meeting of our stockholders or any written consent of our stockholders, each such person and trust party will agree to vote or exercise their right to consent in the manner directed by Lowry Baldwin.
It also reported that a gradual change in investor sentiment regarding climate risk introduces the possibility of abrupt tipping points or significant swings in sentiment, which could create unpredictable follow-on effects in financial markets.
Federal Reserve recently identified the climate as a systemic risk to the economy. It also reported that a gradual change in investor sentiment regarding climate risk introduces the possibility of abrupt tipping points or significant swings in sentiment, which could create unpredictable follow-on effects in financial markets.
Additionally, we may not be able to effect such actions, if necessary, on favorable terms, or at all. We may not be able to refinance any of our indebtedness on favorable terms, or at all.
Additionally, we may not be able to effect such actions, if necessary, on favorable terms, or at all.
Refer to the Liquidity and Capital Resources section under Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information. 42 Short selling could increase the volatility of our stock price of our Class A Common Stock.
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources for additional information. 43 Short selling could increase the volatility of our stock price of our Class A Common Stock.
If they do so, compliance with new regulations along with any sanctions that might be imposed for past practices deemed improper could have an adverse impact on our future results of operations and inflict significant reputational harm on our business. Certain of our results of operations and financial metrics may be difficult to predict as a result of seasonality.
If they do so, compliance with new regulations along with any sanctions that might be imposed for past practices deemed improper could have an adverse impact on our future results of operations and inflict significant reputational harm on our business.
The demand for insurance generally rises as the overall level of economic activity increases and generally falls as such activity decreases, affecting both the commissions and fees generated by our Middle Market, MainStreet, Medicare and Specialty Operating Groups.
The demand for insurance generally rises as the overall level of economic activity increases and generally falls as such activity decreases, affecting both the commissions and fees generated by our IAS, MIS and UCTS Operating Groups.
Given the unpredictability of E&O and other claims and of litigation that could flow from them, it is possible that an adverse outcome in a particular matter could have a material adverse effect on our results of operations, financial condition or cash flow in a given quarterly or annual period. 32 Efforts to reduce healthcare costs and alter healthcare financing practices could adversely affect our business.
Given the unpredictability of E&O and other claims and of litigation that could flow from them, it is possible that an adverse outcome in a particular matter could have a material adverse effect on our results of operations, financial condition or cash flow in a given quarterly or annual period.
Other legislative developments that could adversely affect us include: changes in our business compensation model as a result of regulatory developments (for example, the Patient Protection and Affordable Care Act), and federal and state governments establishing programs to provide health insurance or other alternative market types of coverage, that compete with, or completely replace, insurance products offered by insurance carriers.
We are unable to predict whether any such laws or regulations will be enacted and to what extent such laws and regulations would affect our business. 30 Other legislative developments that could adversely affect us include: changes in our business compensation model as a result of regulatory developments (for example, the Patient Protection and Affordable Care Act), and federal and state governments establishing programs to provide health insurance or other alternative market types of coverage, that compete with, or completely replace, insurance products offered by insurance carriers.
For the year ended December 31, 2022, two Insurance Company Partners accounted for an aggregate of approximately 15% of our total core commissions.
For the year ended December 31, 2023, two Insurance Company Partners accounted for an aggregate of approximately 17% of our total core commissions and fees.
The JPM Credit Agreement contains covenants that, among other things, restrict our ability to make certain restricted payments, incur additional debt, engage in certain asset sales, mergers, acquisitions or similar transactions, create liens on assets, engage in certain transactions with affiliates, change our business or make certain investments and require us to comply with certain financial covenants.
We may not be able to refinance any of our indebtedness on favorable terms, or at all. 16 The JPM Credit Agreement contains covenants that, among other things, restrict our ability to make certain restricted payments, incur additional debt, engage in certain asset sales, mergers, acquisitions or similar transactions, create liens on assets, engage in certain transactions with affiliates, change our business or make certain investments and require us to comply with certain financial covenants.
These actions have created uncertainty concerning longstanding methods of compensating insurance brokers. Given that the insurance brokerage industry has faced scrutiny from regulators in the past over its compensation practices, and the transparency and discourse to Clients regarding brokers’ compensation, it is possible that regulators may choose to revisit the same or other practices in the future.
Given that the insurance brokerage industry has faced scrutiny from regulators in the past over its compensation practices, and the transparency and discourse to Clients regarding brokers’ compensation, it is possible that regulators may choose to revisit the same or other practices in the future.
Risks Relating to Legal, Compliance and Regulatory Matters Non-compliance with or changes in laws, regulations or licensing requirements applicable to us could restrict our ability to conduct our business and/or could adversely affect our business, financial condition and results of operations. The industry in which we operate is subject to extensive regulation.
Non-compliance with or changes in laws, regulations or licensing requirements applicable to us could restrict our ability to conduct our business and/or could adversely affect our business, financial condition and results of operations. The industry in which we operate is subject to extensive regulation. We are subject to regulation and supervision both federally and in each applicable local jurisdiction.
The marketing and sale of Medicare Supplement plans are principally regulated on a state-by-state basis by state departments of insurance.
The marketing and sale of Medicare Advantage and Medicare Part D prescription drug plans are principally regulated by CMS. The marketing and sale of Medicare Supplement plans are principally regulated on a state-by-state basis by state departments of insurance.
In addition, as our organization grows and we are required to implement more complex organizational structures, or if we experience a change in management, management philosophy or business strategy, we may find it increasingly difficult to maintain the beneficial aspects of our corporate culture, such as our Partnership operating model, which could negatively impact our future success.
In addition, as our organization grows and we are required to implement more complex organizational structures, or if we experience a change in management, management philosophy or business strategy, we may find it increasingly difficult to maintain the beneficial aspects of our corporate culture, which could negatively impact our future success. 28 Our results may be adversely affected by changes in the mode of compensation in the insurance industry.
Negative perceptions or publicity regarding these or other matters, including our association with Clients or business partners who themselves have a damaged reputation, or from actual or alleged conduct by us or our Colleagues, could damage our reputation. Any of these matters could have a material adverse effect on our business, financial condition and results of operations.
Negative perceptions or publicity regarding these or other matters, including our association with Clients or business partners who themselves have a damaged reputation, or from actual or alleged conduct by us or our Colleagues, could damage our reputation.
We have experienced significant growth in recent periods, and our recent growth rates may not be indicative of our future growth. As our costs increase, we may not be able to generate sufficient revenue to achieve and, if achieved, maintain profitability. We have experienced significant revenue growth in recent periods.
As our costs increase, we may not be able to generate sufficient revenue to achieve and, if achieved, maintain profitability. We have experienced significant revenue growth in recent periods. In future periods, we may not be able to sustain revenue growth consistent with recent history, or at all.
During the year ended December 31, 2022, we had debt servicing costs of $115.1 million, inclusive of $50.5 million in principal repayments and $62.7 million of interest payments. 23 The level of debt we have outstanding during any period could adversely affect our financial flexibility. We also bear risk at the time debt matures.
During the year ended December 31, 2023, we had debt servicing costs of $394.9 million, inclusive of $284.4 million in principal repayments and $105.4 million of interest payments. The level of debt we have outstanding during any period could adversely affect our financial flexibility. We also bear risk at the time debt matures.
In addition, the Holders’ significant ownership in us and approval rights under the Stockholders Agreement may discourage someone from making a significant equity investment in us, or could discourage transactions involving a change in control, including transactions in which you as a holder of shares of our Class A common stock might otherwise receive a premium for your shares over the then-current market price. 38 We are dependent upon distributions from BRP to pay dividends, if any, and taxes, make payments under the Tax Receivable Agreement and pay other expenses.
In addition, the Holders’ significant ownership in us and approval rights under the Stockholders Agreement may discourage someone from making a significant equity investment in us, or could discourage transactions involving a change in control, including transactions in which you as a holder of shares of our Class A common stock might otherwise receive a premium for your shares over the then-current market price. 39 In certain circumstances, BRP will be required to make distributions to us and the other holders of LLC Units, and the distributions that BRP will be required to make may be substantial.
Furthermore, during inflationary periods, interest rates have historically increased, which would have a direct effect on the interest expense in case we decide to refinance our existing long-term borrowings, including the JPM Credit Agreement, or incur in any additional indebtedness.
During higher inflationary periods, our rent expenses may increase significantly, which may adversely affect to our business, financial condition, results of operations, and cash flows. 17 Furthermore, during inflationary periods, interest rates have historically increased, which would have a direct effect on the interest expense in case we decide to refinance our existing long-term borrowings, including the JPM Credit Agreement, or incur in any additional indebtedness.
As a result, the progress of our Medicare operations could be slowed or we could be prevented from operating aspects of our Medicare commissions and fees generating activities altogether, which would harm our business, results of operations and financial condition, particularly if it occurred during the Medicare annual enrollment period.
As a result, the progress of our Medicare operations could be slowed or we could be prevented from operating aspects of our Medicare commissions and fees generating activities altogether, which would harm our business, results of operations and financial condition, particularly if it occurred during the Medicare annual enrollment period. 32 We have received, and may in the future receive, inquiries from CMS or state departments of insurance regarding our marketing and business practices and compliance with laws and regulations.
However, should any regulatory agency take a contrary position and prevail, we will be required to change the manner in which we pay fees to such Colleagues or principals or require entities receiving such payments to become registered or licensed. 28 State insurance laws grant supervisory agencies, including state departments of insurance, departments of financials services, and similar regulatory authorities, broad administrative authority.
However, should any regulatory agency take a contrary position and prevail, we will be required to change the manner in which we pay fees to such Colleagues or principals or require entities receiving such payments to become registered or licensed.
The cost to defend such litigation may be significant. There may also be adverse publicity associated with litigation, regardless of whether the allegations are valid or whether we are ultimately found liable.
The cost to defend such litigation may be significant. There may also be adverse publicity associated with litigation, regardless of whether the allegations are valid or whether we are ultimately found liable. As a result, litigation may materially adversely affect our businesses, financial condition and results of operations.
As a result, litigation may materially adversely affect our businesses, financial condition and results of operations. 30 The marketing and sale of Medicare plans are subject to numerous, complex and frequently changing laws and regulations, and non-compliance or changes in laws and regulations could harm our business, results of operations and financial condition.
The marketing and sale of Medicare plans are subject to numerous, complex and frequently changing laws and regulations, and non-compliance or changes in laws and regulations could harm our business, results of operations and financial condition. The marketing and sale of Medicare plans are subject to numerous laws, regulations and guidelines at the federal and state level.
As we continue to grow, we must effectively integrate, develop and motivate a large number of new Colleagues, while maintaining the beneficial aspects of our Company culture.
We have experienced rapid growth. This growth has placed significant demands on management and our operational infrastructure. As we continue to grow, we must effectively integrate, develop and motivate a large number of new Colleagues, while maintaining the beneficial aspects of our Company culture.
Partnerships can significantly impact Adjusted EBITDA and Adjusted EBITDA Margins in a given year and may increase the amount of seasonality within the business, especially results attributable to Partnerships that have not been fully integrated into our business or owned by us for a full year. 27 Climate risks, risks associated with the physical effects of climate events, and risks associated with governmental responses to climate risks, could adversely affect our business, results of operations and financial condition.
Partnerships can significantly impact Adjusted EBITDA and Adjusted EBITDA Margins in a given year and may increase the amount of seasonality within the business, especially results attributable to Partnerships that have not been fully integrated into our business or owned by us for a full year. Damage to our reputation could have a material adverse effect on our business.
If these or similar efforts are successful, our business and operations could be materially adversely affected. In addition, changing political, economic and regulatory influences may affect healthcare financing and reimbursement practices. If the current healthcare financing and reimbursement system changes significantly, our business could be materially adversely affected.
These proposals include “single payor” government funded healthcare and price controls on prescription drugs. If these or similar efforts are successful, our business and operations could be materially adversely affected. In addition, changing political, economic and regulatory influences may affect healthcare financing and reimbursement practices.
Management reviews the carrying value attributed to each reporting unit at least annually to determine if the facts and circumstances suggest that there is impairment. We may in the future be required to take additional goodwill or other asset impairment charges. Any such non-cash charges could have a material adverse effect on our financial condition and results of operations.
We may in the future be required to take additional goodwill or other asset impairment charges. Any such non-cash charges could have a material adverse effect on our financial condition and results of operations.
Increasing scrutiny and changing expectations from investors, Clients and our Colleagues with respect to our environmental, social and governance (“ESG”) practices may impose additional costs on us or expose us to new or additional risks.
Any of these matters could have a material adverse effect on our business, financial condition and results of operations. 27 Increasing scrutiny and changing expectations from investors, Clients and our Colleagues with respect to our environmental, social and governance (“ESG”) practices may impose additional costs on us or expose us to new or additional risks.
The U.S. healthcare industry is subject to increased governmental regulation at both the federal and state levels. Certain proposals have been made at the federal and state government levels in an effort to control healthcare costs, including proposing to lower reimbursement under the Medicare program. These proposals include “single payor” government funded healthcare and price controls on prescription drugs.
Efforts to reduce healthcare costs and alter healthcare financing practices could adversely affect our business. The U.S. healthcare industry is subject to increased governmental regulation at both the federal and state levels. Certain proposals have been made at the federal and state government levels in an effort to control healthcare costs, including proposing to lower reimbursement under the Medicare program.
In addition, the Tax Receivable Agreement provides that, upon certain mergers, asset sales or other forms of business combination, or certain other changes of control, our or our successor’s obligations with respect to tax benefits would be based on certain assumptions, including that we or our successor would have sufficient taxable income to fully utilize the increased tax deductions and tax basis and other benefits covered by the Tax Receivable Agreement.
As a result, in such circumstances, we could make payments to BRP’s LLC Members under the Tax Receivable Agreement that are greater than our actual cash tax savings and we may not be able to recoup those payments, which could negatively impact our liquidity. 40 In addition, the Tax Receivable Agreement provides that, upon certain mergers, asset sales or other forms of business combination, or certain other changes of control, our or our successor’s obligations with respect to tax benefits would be based on certain assumptions, including that we or our successor would have sufficient taxable income to fully utilize the increased tax deductions and tax basis and other benefits covered by the Tax Receivable Agreement.
Data breaches or other security incidents with respect to our or our vendors’ information processing systems may hurt our business, financial condition and results of operations. • We are a holding company with our principal asset being our 53% ownership interest in BRP, and our Pre-IPO LLC Members, whose interest in our business may be different from yours, have approval rights over certain transactions and actions taken by us. • In certain circumstances, BRP will be required to make distributions to us and the other holders of LLC Units, and the distributions that BRP will be required to make may be substantial. • We will be required to pay BRP’s LLC Members and any other persons that become parties to the Tax Receivable Agreement for certain tax benefits we may receive, and the amounts we may pay could be significant. • We may issue a substantial amount of our common stock in the future, which could cause dilution to investors and otherwise adversely affect our stock price. • Short selling could increase the volatility of our stock price of our Class A Common Stock.
Data breaches or other security incidents with respect to our or our vendors’ information processing systems may hurt our business, financial condition and results of operations. • We are a holding company with our principal asset being our 55% ownership interest in BRP, and our Pre-IPO LLC Members, whose interest in our business may be different from yours, have approval rights over certain transactions and actions taken by us. • In certain circumstances, BRP will be required to make distributions to us and the other holders of LLC Units, and the distributions that BRP will be required to make may be substantial. • We will be required to pay BRP’s LLC Members and any other persons that become parties to the Tax Receivable Agreement for certain tax benefits we may receive, and the amounts we may pay could be significant. 15 Risks Relating to our Business Operations and Industry We may not have sufficient cash flows from operating activities, cash on hand and available capital sources to service any indebtedness, pay contingent earnout liabilities, or finance other working capital needs, which could force us to sell assets, cease operations or take other detrimental actions for our business.
Inquiries and proceedings initiated by the government could adversely impact our health insurance licenses, require us to pay fines, require us to modify marketing and business practices, result in litigation and otherwise harm our business, operating results or financial condition. 31 In May 2021, CMS changed its process for the submission and approval of marketing materials related to Medicare Advantage and Medicare Part D prescription drug plans.
Inquiries and proceedings initiated by the government could adversely impact our health insurance licenses, require us to pay fines, require us to modify marketing and business practices, result in litigation and otherwise harm our business, operating results or financial condition.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThese offices are generally located in shopping centers, small office parks and office buildings, with lease terms expiring within one to eight years. These facilities are suitable for our needs and we believe that they are well maintained.
Biggest changeThese offices are generally located in shopping centers, small office parks and office buildings, with lease terms expiring through the next seven years. These facilities are suitable for our needs and we believe that they are well maintained.
ITEM 2. PROPERTIES Our corporate headquarters is located in leased offices in Tampa, Florida. The leases consist of approximately 105,000 square feet and expire in August 2030. Our insurance brokerage business leases office space in approximately 125 operating locations located in 23 states throughout the U.S.
ITEM 2. PROPERTIES Our corporate headquarters is located in leased offices in Tampa, Florida. The leases consist of approximately 105,000 square feet and expire in August 2030. Our insurance brokerage business leases office space in approximately 115 operating locations located in 24 states throughout the U.S.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS We are involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on our consolidated financial position, results of operations or liquidity. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 43 PART II
Biggest changeITEM 3. LEGAL PROCEEDINGS We are involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on our consolidated financial position, results of operations or liquidity. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 46 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSales of Unregistered Securities None. 44 Issuer Purchases of Equity Securities The following table provides information about our repurchase of shares of our Class A common stock during the three months ended December 31, 2022: Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Value that may yet be Purchased under the Plans or Programs October 1, 2022 to October 31, 2022 17,938 $ 26.54 — $ — November 1, 2022 to November 30, 2022 349 27.59 — — December 1, 2022 to December 31, 2022 48,154 30.59 — — Total 66,441 $ 29.48 — $ — __________ (1) We purchased 66,441 shares during the three months ended December 31, 2022, which were acquired from our employees to cover required tax withholding on the vesting of shares granted under the BRP Group Omnibus Incentive and Partnership Inducement Award Plans.
Biggest changeSales of Unregistered Securities None. 47 Issuer Purchases of Equity Securities The following table provides information about our repurchase of shares of our Class A common stock during the three months ended December 31, 2023: Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Value that may yet be Purchased under the Plans or Programs October 1, 2023 to October 31, 2023 71,730 $ 22.08 — $ — November 1, 2023 to November 30, 2023 349 20.17 — — December 1, 2023 to December 31, 2023 52,093 17.62 — — Total 124,172 $ 20.20 — $ — __________ (1) We purchased 124,172 shares during the three months ended December 31, 2023, which were acquired from our employees to cover required tax withholding on the vesting of shares granted under the BRP Group Omnibus Incentive and Partnership Inducement Award Plans.
The graph assumes that $100 was invested on October 24, 2019 and the reinvestment of dividends, if any. The share price performance presented below is not necessarily indicative of future results. 45 ITEM 6. RESERVED
The graph assumes that $100 was invested on October 24, 2019 and the reinvestment of dividends, if any. The share price performance presented below is not necessarily indicative of future results. 48 ITEM 6. RESERVED
Performance Graph The following performance graph compares the cumulative total shareholder return of an investment in our Class A common stock since October 24, 2019 (first day of trading) through December 31, 2022 to the cumulative total return of the Russell 2000 Index and the Standard & Poor (“S&P”) Composite 1500 Insurance Brokers Index.
Performance Graph The following performance graph compares the cumulative total shareholder return of an investment in our Class A common stock since October 24, 2019 (first day of trading) through December 31, 2023 to the cumulative total return of the Russell 2000 Index (“Russell 2000”) and the Standard & Poor Composite 1500 Insurance Brokers Index (“S&P 1500”).
On February 20, 2023, there were 121 shareholders of record of our Class A common stock and 62 shareholders of record of our Class B common stock. The number of record holders does not include persons who held shares of our Class A common stock in nominee or “street name” accounts through brokers.
On February 20, 2024, there were 123 stockholders of record of our Class A common stock and 58 stockholders of record of our Class B common stock. The number of record holders does not include persons who held shares of our Class A common stock in nominee or “street name” accounts through brokers.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeWe have entered into a Tax Receivable Agreement with BRP’s LLC Members that provides for the payment by us to BRP’s LLC Members of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize as a result of (i) any increase in tax basis in BRP Group’s assets resulting from (a) the purchase of LLC Units from any of BRP’s LLC Members using the net proceeds from any future offering, (b) redemptions or exchanges by BRP’s LLC Members of LLC Units for shares of our Class A common stock or (c) payments under the Tax Receivable Agreement and (ii) tax benefits related to imputed interest deemed arising as a result of payments made under the Tax Receivable Agreement.
Biggest changeThe Tax Receivable Agreement with BRP’s LLC Members provides for the payment by us to BRP’s LLC Members of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that BRP Group actually realizes as a result of the transactions listed in the preceding paragraph.
Our most critical accounting policies and estimates, as discussed below, govern the more significant judgments and estimates used in the preparation of our consolidated financial statements. Revenue Recognition Commission revenue is earned at a point in time upon the effective date of bound insurance coverage, as no performance obligation exists after coverage is bound.
Our most critical accounting policies and estimates, as discussed below, govern the more significant judgments and estimates used in the preparation of our consolidated financial statements. Critical Accounting Policies Revenue Recognition Commission revenue is earned at a point in time upon the effective date of bound insurance coverage, as no performance obligation exists after coverage is bound.
We account for the effects of these increases in tax basis and associated payments under the Tax Receivable Agreement arising from future redemptions or exchanges as follows: 60 • we record an increase in deferred tax assets for the estimated income tax effects of the increases in tax basis based on enacted federal and state tax rates at the date of the redemption or exchange; • to the extent we estimate that we will not realize the full benefit represented by the deferred tax asset, based on an analysis that will consider, among other things, our expectation of future earnings, we reduce the deferred tax asset with a valuation allowance; and • we record 85% of the estimated realizable tax benefit (which is the recorded deferred tax asset less any recorded valuation allowance) as an increase to the liability due under the Tax Receivable Agreement and the remaining 15% of the estimated realizable tax benefit as an increase to additional paid-in capital.
We account for the effects of these increases in tax basis and associated payments under the Tax Receivable Agreement arising from future redemptions or exchanges as follows: • we record an increase in deferred tax assets for the estimated income tax effects of the increases in tax basis based on enacted federal and state tax rates at the date of the redemption or exchange; • to the extent we estimate that we will not realize the full benefit represented by the deferred tax asset, based on an analysis that will consider, among other things, our expectation of future earnings, we reduce the deferred tax asset with a valuation allowance; and • we record 85% of the estimated realizable tax benefit (which is the recorded deferred tax asset less any recorded valuation allowance) as an increase to the liability due under the Tax Receivable Agreement and the remaining 15% of the estimated realizable tax benefit as an increase to additional paid-in capital.
While the actual increase in tax basis, as well as the amount and timing of any payments under the Tax Receivable Agreement, will vary depending upon a number of factors, including the timing of redemptions or exchanges, the price of shares of our Class A common stock at the time of the redemption or exchange, the extent to which such redemptions or exchanges are taxable, the amount and timing of our income, the tax rates then applicable and the portion of our payments under the Tax Receivable Agreement constituting imputed interest.
The actual increase in tax basis, as well as the amount and timing of any payments under the Tax Receivable Agreement, will vary depending upon a number of factors, including the timing of redemptions or exchanges, the price of shares of our Class A common stock at the time of the redemption or exchange, the extent to which such redemptions or exchanges are taxable, the amount and timing of our income, the tax rates then applicable and the portion of our payments under the Tax Receivable Agreement constituting imputed interest.
LIQUIDITY AND CAPITAL RESOURCES Our primary liquidity needs for the foreseeable future will include cash to (i) provide capital to facilitate the organic growth of our business and to fund future Partnerships, (ii) pay operating expenses, including cash compensation to our employees and expenses related to being a public company, (iii) make payments under the Tax Receivable Agreement, (iv) pay interest and principal due on borrowings under the JPM Credit Agreement, (v) pay contingent earnout liabilities, (vi) pay income taxes, and (vii) fund potential investments in third party businesses that support the growth of our business, which may include the sponsorship of, and a minority, non-controlling interest in, an investment fund, the purpose of which may include facilitating the establishment of additional and alternative capacity that supports the growth of our MGA of the Future business.
LIQUIDITY AND CAPITAL RESOURCES Our primary liquidity needs for the foreseeable future will include cash to (i) provide capital to facilitate the organic growth of our business and to fund future Partnerships, (ii) pay operating expenses, including cash compensation to our Colleagues and expenses related to being a public company, (iii) make payments under the Tax Receivable Agreement, (iv) pay interest and principal due on borrowings under the JPM Credit Agreement, (v) pay contingent earnout liabilities, (vi) pay income taxes, and (vii) fund potential investments in third party businesses that support the growth of our business, which may include the sponsorship of, and a minority, non-controlling interest in, an investment fund, the purpose of which may include facilitating the establishment of additional and alternative capacity that supports the growth of our MGA of the Future business.
Our contingent earnout obligations are measured at fair value at each reporting period based on the present value of the expected future payments to be made to Partners in accordance with the provisions outlined in the respective purchase agreements. The recorded obligations are based on estimates of the Partners' future performance using financial projections for the earnout period.
Our contingent earnout obligations are measured at fair value each reporting period based on the present value of the expected future payments to be made to Partners in accordance with the provisions outlined in the respective purchase agreements. The recorded obligations are based on estimates of the Partners’ future performance using financial projections for the earnout measurement period.
Organic Revenue Growth is the change in Organic Revenue period-to-period, with prior period results adjusted to include commissions and fees that were excluded in the prior period because the relevant Partners had not yet reached the twelve-month owned mark, but which have reached the twelve-month owned mark in the current period.
Organic Revenue Growth is the change in Organic Revenue period-to-period, with prior period results adjusted to include commissions and fees that were excluded from Organic Revenue in the prior period because the relevant Partners had not yet reached the twelve-month owned mark, but which have reached the twelve-month owned mark in the current period.
A 10% decrease in the estimated fair value of any of our reporting units would not have resulted in a different conclusion. 64 Description Judgments and Uncertainties Effect if Actual Results Differ from Assumptions Valuation of Contingent Consideration Substantially all of our Partnerships and certain acquisitions of select books of business that do not constitute a complete business enterprise include contingent consideration arrangements, which are based on the acquired company achieving thresholds related to revenues, total insured value or number of rented units.
A hypothetical 10% decrease in the estimated fair value of any of our reporting units would not have resulted in a different conclusion. 69 Description Judgments and Uncertainties Effect if Actual Results Differ from Assumptions Valuation of Contingent Consideration Substantially all of our Partnerships and certain acquisitions of select books of business that do not constitute a complete business enterprise include contingent consideration arrangements, which are based on the acquired company achieving thresholds related to revenues, total insured value or number of rented units.
We have recorded a full valuation allowance against the deferred tax assets at BRP Group as of December 31, 2022, which will be maintained until there is sufficient evidence to support the reversal of all or some portion of these allowances.
We have recorded a full valuation allowance against the deferred tax assets at BRP Group as of December 31, 2023, which will be maintained until there is sufficient evidence to support the reversal of all or some portion of these allowances.
Given the recent rise in inflation, we anticipate the inflation rate increase for the upcoming year to be higher than those of past years. Despite this anticipated increase, we do not anticipate the inflation rate increase for 2023 to have a material impact on our results of operations.
Given the recent rise in inflation, we anticipate the inflation rate increase for the upcoming year to be higher than those of past years. Despite this anticipated increase, we do not anticipate the inflation rate increase for 2024 to have a material impact on our results of operations.
EXECUTIVE SUMMARY OF 2022 FINANCIAL RESULTS We are a rapidly growing independent insurance distribution firm delivering solutions that give our Clients the peace of mind to pursue their purpose, passion and dreams.
EXECUTIVE SUMMARY OF 2023 FINANCIAL RESULTS We are a rapidly growing independent insurance distribution firm delivering solutions that give our Clients the peace of mind to pursue their purpose, passion and dreams.
For example, revenues from a Partner acquired on June 1, 2021 are excluded from Organic Revenue for 2021. However, after June 1, 2022, results from June 1, 2021 to December 31, 2021 for such Partners are compared to results from June 1, 2022 to December 31, 2022 for purposes of calculating Organic Revenue Growth in 2022.
For example, revenues from a Partner acquired on June 1, 2022 are excluded from Organic Revenue for 2022. However, after June 1, 2023, results from June 1, 2022 to December 31, 2022 for such Partners are compared to results from June 1, 2023 to December 31, 2023 for purposes of calculating Organic Revenue Growth in 2023.
Deferred Tax Assets To determine the realizability of our deferred tax assets, we analyzed if the Company was in a cumulative pre-tax income or loss position over a three-year period (2020, 2021 and 2022).
Deferred Tax Assets To determine the realizability of our deferred tax assets, we analyzed if the Company was in a cumulative pre-tax income or loss position over a three-year period (2021, 2022 and 2023).
Financial Statements of this Annual Report on Form 10-K for a discussion of recent accounting pronouncements that may impact us. 61 CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our consolidated financial statements are prepared in accordance with GAAP, which requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Financial Statements and Supplementary Data of this Annual Report on Form 10-K for a discussion of recent accounting pronouncements that may impact us. 66 CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our consolidated financial statements are prepared in accordance with GAAP, which requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Deferred tax assets have been reduced by a full valuation allowance at December 31, 2022 due to a determination that it is more likely than not that all of the deferred tax assets will not be realized based on the weight of all available evidence. 67
Deferred tax assets have been reduced by a full valuation allowance at December 31, 2023 due to a determination that it is more likely than not that all of the deferred tax assets will not be realized based on the weight of all available evidence.
These events and circumstances include, but are not limited to: higher than expected attrition for relationships; a current expectation that a long-lived asset will be disposed of significantly before the end of its previously estimated useful life, such as when we classify a business as held for sale; a significant adverse change in the extent or manner in which we use a long-lived asset; or a change in the physical condition of a long-lived asset.
These events and circumstances include, but are not limited to: higher than expected attrition for relationships; a current expectation that an intangible asset will be disposed of significantly before the end of its previously estimated useful life, such as when we classify a business as held for sale; or a significant adverse change in the extent or manner in which we use an intangible asset.
During the last three years, we have not made any changes in the accounting methodology used to evaluate the impairment of long-lived assets or to estimate the useful lives of our long-lived assets.
During the last three years, we have not made any changes in the accounting methodology used to evaluate the impairment of intangible assets or to estimate the useful lives of our intangible assets.
It consists of (a) base compensation comprising salary, bonuses and benefits paid and payable to Colleagues, commissions paid to Colleagues and outside commissions paid to others; and (b) equity-based compensation associated with the grants of restricted and unrestricted stock awards to senior management, Colleagues, Risk Advisors and directors.
It consists of (i) base compensation comprising salary, bonuses and benefits paid and payable to Colleagues, commissions paid to Colleagues and outside commissions paid to others; and (ii) equity-based compensation associated with the grants of restricted and unrestricted stock awards to senior management, Colleagues, Risk Advisors and directors.
We believe that Adjusted EBITDA is an appropriate measure of operating performance because it eliminates the impact of income and expenses that do not relate to business performance, and that the presentation of this measure enhances an investor’s understanding of our financial performance. 50 Adjusted EBITDA Margin is Adjusted EBITDA divided by commissions and fees.
We believe that Adjusted EBITDA is an appropriate measure of operating performance because it eliminates the impact of income and expenses that do not relate to business performance, and that the presentation of this measure enhances an investor’s understanding of our financial performance. Adjusted EBITDA Margin is Adjusted EBITDA divided by total revenues.
Our operating lease agreements expire through December 2030. These obligations do not include leases with an initial term of 12 months or less, which are expensed as incurred. We may extend, terminate or otherwise modify or sub-lease facilities as needed to best suit the needs of our business.
Our operating lease agreements expire through February 2031. These obligations do not include leases with an initial term of twelve months or less, which are expensed as incurred. We may extend, terminate or otherwise modify or sub-lease facilities as needed to best suit the needs of our business.
The Company makes its best estimate of direct bill commissions at the policy effective date, particularly in employee benefits within the Middle Market Operating Group, which is subject to change based on enrollment and other factors over the policy period. Commissions revenue is recorded net of an allowance for estimated policy cancellations.
The Company makes its best estimate of direct bill commissions at the policy effective date, particularly in employee benefits within IAS, which is subject to change based on enrollment and other factors over the policy period. Commission revenue is recorded net of an allowance for estimated policy cancellations.
The lease term is the non-cancelable period of the lease and includes options to extend or terminate the lease when it is reasonably certain that an option will be exercised. Borrowings under our JPM Credit Agreement include $838.1 million under the Term Loan B and $505.0 million on the Revolving Facility.
The lease term is the non-cancelable period of the lease and includes options to extend or terminate the lease when it is reasonably certain that an option will be exercised. Borrowings under our JPM Credit Agreement include $998.7 million under the Term Loan B and $341.0 million on the Revolving Facility.
The Revolving Facility and the New Term Loans are collateralized by a first priority lien on substantially all the assets of BRP, including a pledge of all equity securities of certain of its subsidiaries.
The Revolving Facility and the Term Loan B are collateralized by a first priority lien on substantially all the assets of BRP, including a pledge of all equity securities of certain of its subsidiaries.
Our commissions and fees are usually a percentage of the premium paid by the insured and generally depends on the type of insurance, the particular Insurance Company Partner and the nature of the services provided. Under certain arrangements with Clients, we earn pre-negotiated service fees in lieu of commissions.
Our commissions and fees are usually a percentage of the premium paid by the insured and generally depend on the type of insurance, the particular Insurance Company Partner and the nature of the services provided. Under certain arrangements with Clients, we earn pre-negotiated service fees for insurance placement services.
We may not be able to successfully identify and acquire Partners or integrate Partners into our company, and we may become subject to certain liabilities assumed or incurred in connection with our Partnerships that could harm our business, results of operations and financial condition.” JPM Credit Agreement As of December 31, 2021, our JPM Credit Agreement provided for senior secured credit facilities in an aggregate principal amount of $1.325 billion, which consisted of (i) a term loan facility in the principal amount of $850.0 million maturing in October 2027 (the “Term Loan B”) and (ii) a revolving credit facility with commitments in an aggregate principal amount of $475.0 million maturing in 2025 (the “Revolving Facility”).
We may not be able to successfully identify and acquire Partners or integrate Partners into our company, and we may become subject to certain liabilities assumed or incurred in connection with our Partnerships that could harm our business, results of operations and financial condition.” JPM Credit Agreement As of December 31, 2023, our JPM Credit Agreement provides for senior secured credit facilities in an aggregate principal amount of $1.62 billion, which consists of (i) a term loan facility in the principal amount of $1.02 billion maturing in October 2027 (the “Term Loan B”) and (ii) a revolving credit facility with commitments in an aggregate principal amount of $600.0 million maturing in April 2027 (the “Revolving Facility”).
Our board of directors may change our dividend policy at any time. See Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—Dividend Policy.
Our board of directors may change our dividend policy at any time. Refer to Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—Dividend Policy for additional information.
Any changes in the estimated fair value of contingent considerations and adjustments to the estimated fair value related to unobservable inputs will be recognized within change in fair value of contingent consideration in the consolidated statements of comprehensive loss. We recognized $32.3 million of expense related to the change in fair value of contingent consideration in 2022.
Any changes in the estimated fair value of contingent considerations and adjustments to the estimated fair value related to unobservable inputs will be recognized within change in fair value of contingent consideration in the consolidated statements of comprehensive loss. We recognized $61.1 million of expense related to the change in fair value of contingent consideration in 2023.
Commissions and Fees We earn commissions and fees by facilitating the arrangement between Insurance Company Partners and individuals or businesses for the carrier to provide insurance to the insured party.
Commissions and Fees We earn commissions and fees by facilitating the arrangement between Insurance Company Partners and Clients for the carrier to provide insurance to the insured party.
During 2022, we exchanged 1,841,134 LLC Units of BRP on a one-for-one basis for shares of BRP Group's Class A common stock and cancelled the corresponding shares of BRP Group's Class B common stock. We receive an increase in our share of the tax basis in the net assets of BRP due to the interests being redeemed.
During 2023, we exchanged 2,082,424 LLC Units of BRP on a one-for-one basis for shares of BRP Group's Class A common stock and cancelled the corresponding shares of BRP Group's Class B common stock. We receive an increase in our share of the tax basis in the net assets of BRP due to the interests being redeemed.
If all remaining revenue, insured value and rental units targets were achieved, our Partners would be entitled payments of up to $132.5 million in calendar year 2023 for achieving targets through September 30, 2023; $480.4 million in calendar year 2024 for achieving targets through September 30, 2024; $331.4 million in calendar year 2025 for achieving targets through September 30, 2025; and $10.0 million in calendar year 2026 for achieving targets through September 30, 2026.
If all remaining revenue, insured value and rental units targets were achieved, our Partners would be entitled to payments of up to $408.8 million in calendar year 2024 for achieving targets through September 30, 2024; $188.5 million in calendar year 2025 for achieving targets through September 30, 2025; and $10.0 million in calendar year 2026 for achieving targets through September 30, 2026.
The fair values of the earnout arrangements are estimated by discounting the expected future contingent payments to present value using a variation of the income approach, specifically using a Monte Carlo Simulation approach. We have 35 acquisitions with a corresponding contingent consideration liability still outstanding.
The fair values of the earnout arrangements are estimated by discounting the expected future contingent payments to present value using a variation of the income approach, specifically using a Monte Carlo Simulation approach. We have 26 Partners with a corresponding contingent consideration liability still outstanding at December 31, 2023.
Change in Fair Value of Contingent Consideration Change in fair value of contingent consideration was a $32.3 million loss for the year ended December 31, 2022 as compared to a $45.2 million loss for the same period of 2021.
Change in Fair Value of Contingent Consideration Change in fair value of contingent consideration was a $61.1 million loss for the year ended December 31, 2023 as compared to a $32.3 million loss for the same period of 2022.
The interest rate cap agreements in place at December 31, 2022 mitigate the interest rate volatility on $300.0 million to a maximum base rate of 1.50% and mitigate the interest rate volatility on $1.2 billion of debt to a maximum base rate of 7.00%.
The interest rate cap agreements in place at December 31, 2023 mitigate the interest rate volatility on $300.0 million of debt to a maximum base rate of 1.50% through March 2024 and mitigate the interest rate volatility on $1.2 billion of debt to a maximum base rate of 7.00% through November 2025.
The outstanding borrowings on the Revolving Facility of $505.0 million had an applicable interest rate of 7.41% at December 31, 2022. The Revolving Facility is also subject to a commitment fee of 0.40% on the unused capacity at December 31, 2022.
The outstanding borrowings on the Revolving Facility of $341.0 million had an applicable interest rate of 8.46% at December 31, 2023. The Revolving Facility is also subject to a commitment fee of 0.40% on the unused capacity at December 31, 2023.
Tax Receivable Agreement On October 28, 2019, BRP Group entered into the Tax Receivable Agreement with BRP’s LLC Members that provides for the payment by BRP Group to BRP’s LLC Members of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that BRP Group actually realizes as a result of (i) any increase in tax basis in BRP assets resulting from (a) previous acquisitions by BRP Group of BRP’s LLC Units from BRP’s LLC Members, (b) the acquisition of LLC Units from BRP’s LLC Members using the net proceeds from any future offering, (c) redemptions or exchanges by BRP’s LLC Members of LLC Units and the corresponding number of shares of Class B common stock for shares of Class A common stock or cash or (d) payments under the Tax Receivable Agreement, and (ii) tax benefits related to imputed interest resulting from payments made under the Tax Receivable Agreement.
Tax Receivable Agreement BRP Group is a party to the Tax Receivable Agreement with BRP’s LLC Members that provides for the payment by BRP Group to BRP’s LLC Members of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that BRP Group actually realizes as a result of (i) any increase in tax basis in BRP assets resulting from (a) previous acquisitions by BRP Group of LLC Units from BRP’s LLC Members, (b) the acquisition of LLC Units from BRP’s LLC Members using the net proceeds from any future offering, (c) redemptions or exchanges by BRP’s LLC Members of LLC Units and the corresponding number of shares of Class B common stock for shares of Class A common stock or cash or (d) payments under the Tax Receivable Agreement, and (ii) tax benefits related to imputed interest resulting from payments made under the Tax Receivable Agreement. 64 Holders of LLC Units (other than BRP Group) may, subject to certain conditions and transfer restrictions described above, redeem or exchange their LLC Units for shares of Class A common stock of BRP Group on a one-for-one basis.
Organic Revenue and Organic Revenue Growth The following table reconciles Organic Revenue and Organic Revenue Growth to commissions and fees, which we consider to be the most directly comparable GAAP financial measure: For the Years Ended December 31, (in thousands, except percentages) 2022 2021 Commissions and fees $ 980,720 $ 567,290 Partnership commissions and fees (1) (280,660) (272,272) Organic Revenue $ 700,060 $ 295,018 Organic Revenue Growth (2) $ 132,610 $ 54,004 Organic Revenue Growth % (2) 23 % 22 % __________ (1) Includes the first twelve months of such commissions and fees generated from newly acquired Partners.
Organic Revenue and Organic Revenue Growth The following table reconciles Organic Revenue and Organic Revenue Growth to commissions and fees, which we consider to be the most directly comparable GAAP financial measure: For the Years Ended December 31, (in thousands, except percentages) 2023 2022 Commissions and fees $ 1,211,828 $ 980,720 Partnership commissions and fees (1) (44,696) (280,660) Organic Revenue $ 1,167,132 $ 700,060 Organic Revenue Growth (2) $ 187,213 $ 132,610 Organic Revenue Growth % (2) 19 % 23 % __________ (1) Includes the first twelve months of such commissions and fees generated from newly acquired Partners.
As of December 31, 2022, our cash and cash equivalents were $118.1 million and we had $95.0 million of available borrowing capacity on the Revolving Facility under the JPM Credit Agreement.
As of December 31, 2023, our cash and cash equivalents were $116.2 million and we had $259.0 million of available borrowing capacity on the Revolving Facility under the JPM Credit Agreement.
In addition, a higher proportion of our first quarter revenue is derived from our highest margin businesses. 47 Partnerships can significantly impact Adjusted EBITDA and Adjusted EBITDA Margins in a given year and may increase the amount of seasonality within the business, especially results attributable to Partnerships that have not been fully integrated into our business or owned by us for a full year.
Partnerships can significantly impact Adjusted EBITDA and Adjusted EBITDA Margins in a given year and may increase the amount of seasonality within the business, especially results attributable to Partnerships that have not been fully integrated into our business or owned by us for a full year.
Our impairment evaluations require us to apply judgment in determining whether a triggering event has occurred, including the evaluation of whether it is more-likely-than-not that a long-lived asset will be disposed of significantly before the end of its previously estimated useful life.
Our impairment evaluations require us to apply judgment in determining whether a triggering event has occurred, including the evaluation of whether it is more-likely-than-not that a intangible asset will be disposed of significantly before the end of its previously estimated useful life. Incorrect estimation of useful lives may result in inaccurate amortization charges over future periods leading to future impairment.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements as of December 31, 2022 and 2021 and for the years ended December 31, 2022, 2021 and 2020 and the related notes and other financial information included elsewhere in this Annual Report on Form 10-K.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements as of December 31, 2023 and 2022 and for the years ended December 31, 2023, 2022 and 2021 and the related notes and other financial information included in Item 8.
We believe Adjusted Diluted EPS is useful to investors because it enables them to better evaluate per share operating performance across reporting periods. 51 Adjusted EBITDA and Adjusted EBITDA Margin The following table reconciles Adjusted EBITDA and Adjusted EBITDA Margin to net loss, which we consider to be the most directly comparable GAAP financial measure: For the Years Ended December 31, (in thousands, except percentages) 2022 2021 Commissions and fees $ 980,720 $ 567,290 Net loss $ (76,748) $ (58,120) Adjustments to net loss: Amortization expense 81,738 48,720 Interest expense, net 71,072 26,899 Share-based compensation 47,389 19,193 Transaction-related Partnership and integration expenses 34,588 19,182 Change in fair value of contingent consideration 32,307 45,196 (Gain) loss on interest rate caps (26,220) 123 Depreciation expense 4,620 2,788 Severance 1,255 871 Income tax provision 715 19 Other (1) 25,774 8,038 Adjusted EBITDA $ 196,490 $ 112,909 Adjusted EBITDA Margin 20 % 20 % __________ (1) Other addbacks to Adjusted EBITDA include certain expenses that are considered to be non-recurring or non-operational, including certain recruiting costs, remediation efforts, professional fees, litigation costs and bonuses.
We believe Adjusted Diluted EPS is useful to investors because it enables them to better evaluate per share operating performance across reporting periods. 54 Adjusted EBITDA and Adjusted EBITDA Margin The following table reconciles Adjusted EBITDA and Adjusted EBITDA Margin to net loss, which we consider to be the most directly comparable GAAP financial measure: For the Years Ended December 31, (in thousands, except percentages) 2023 2022 Revenues $ 1,218,555 $ 980,720 Net loss $ (164,019) $ (76,748) Adjustments to net loss: Interest expense, net 119,465 71,072 Amortization expense 92,704 81,738 Change in fair value of contingent consideration 61,083 32,307 Share-based compensation 56,222 47,389 Transaction-related Partnership and integration expenses 28,748 34,588 Severance 18,514 1,255 Depreciation expense 5,698 4,620 (Gain) loss on interest rate caps 1,670 (26,220) Income tax provision 1,285 715 Other (1) 28,834 25,774 Adjusted EBITDA $ 250,204 $ 196,490 Adjusted EBITDA Margin 21 % 20 % __________ (1) Other addbacks to Adjusted EBITDA include certain income and expenses that are considered to be non-recurring or non-operational, including certain recruiting costs, professional fees, litigation costs and bonuses.
It is currently anticipated that Lowry Baldwin, our Board Chair, will fund half of this commitment. 59 Effects of Inflation Certain of our lease agreements feature annual rent escalations either fixed or based on a consumer price index or other index, which, historically, have not had a material impact on our results of operations, including our results of operations for the years ended December 31, 2022, 2021 and 2020.
Effects of Inflation Certain of our lease agreements feature annual rent escalations either fixed or based on a consumer price index or other index, which, historically, have not had a material impact on our results of operations, including our results of operations for the years ended December 31, 2023, 2022 and 2021.
Our revenues are generally highest in the first quarter due to a higher degree of first quarter policy commencements and renewals in Medicare and certain Middle Market lines of business such as employee benefits and commercial.
Our revenues are generally highest in the first quarter due to a higher degree of first quarter policy commencements and renewals in certain IAS and MIS lines of business such as employee benefits, commercial and Medicare. In addition, a higher proportion of our first quarter revenue is derived from our highest margin businesses.
The aggregate estimated contingent earnout liabilities included on our consolidated balance sheet at December 31, 2022 was $266.9 million, of which $23.9 million must be settled in cash and the remaining $243.0 million can be settled in cash or stock at our option.
The aggregate estimated contingent earnout liabilities included on our consolidated balance sheet at December 31, 2023 was $276.5 million, of which $10.8 million must be settled in cash and the remaining $265.7 million can be settled in cash or stock at our option.
(2) Organic Revenue for the year ended December 31, 2021 used to calculate Organic Revenue Growth for the year ended December 31, 2022 was $567.5 million, which is adjusted to reflect revenues from Partnerships that reached the twelve-month owned mark during the year ended December 31, 2022. 52 Adjusted Net Income and Adjusted Diluted EPS The following table reconciles Adjusted Net Income to net loss attributable to BRP Group and reconciles Adjusted Diluted EPS to diluted loss per share, which we consider to be the most directly comparable GAAP financial measures: For the Years Ended December 31, (in thousands, except per share data) 2022 2021 Net loss attributable to BRP Group $ (41,772) $ (30,646) Net loss attributable to noncontrolling interests (34,976) (27,474) Amortization expense 81,738 48,720 Share-based compensation 47,389 19,193 Transaction-related Partnership and integration expenses 34,588 19,182 Change in fair value of contingent consideration 32,307 45,196 (Gain) loss on interest rate caps, net of cash settlements (24,012) 123 Amortization of deferred financing costs 5,120 3,506 Depreciation 4,620 2,788 Severance 1,255 871 Other (1) 25,774 8,038 Adjusted pre-tax income 132,031 89,497 Adjusted income taxes (2) 13,071 8,860 Adjusted Net Income $ 118,960 $ 80,637 Weighted-average shares of Class A common stock outstanding - diluted 56,825 47,588 Dilutive effect of non-vested restricted shares of Class A common stock 3,526 1,982 Exchange of Class B common stock (3) 55,450 51,811 Adjusted dilutive weighted-average shares outstanding 115,801 101,381 Adjusted Diluted EPS $ 1.03 $ 0.80 Diluted loss per share $ (0.74) $ (0.64) Effect of exchange of Class B common stock and net loss attributable to noncontrolling interests per share 0.08 0.07 Other adjustments to loss per share 1.80 1.46 Adjusted income taxes per share (0.11) (0.09) Adjusted Diluted EPS $ 1.03 $ 0.80 ___________ (1) Other addbacks to Adjusted Net Income include certain expenses that are considered to be non-recurring or non-operational, including certain recruiting costs, remediation efforts, professional fees, litigation costs and bonuses.
(2) Organic Revenue for the year ended December 31, 2022 used to calculate Organic Revenue Growth for the year ended December 31, 2023 was $979.9 million, which is adjusted to reflect revenues from Partnerships that reached the twelve-month owned mark during the year ended December 31, 2023. 55 Adjusted Net Income and Adjusted Diluted EPS The following table reconciles Adjusted Net Income to net loss attributable to BRP Group and reconciles Adjusted Diluted EPS to diluted loss per share, which we consider to be the most directly comparable GAAP financial measures: For the Years Ended December 31, (in thousands, except per share data) 2023 2022 Net loss attributable to BRP Group $ (90,141) $ (41,772) Net loss attributable to noncontrolling interests (73,878) (34,976) Amortization expense 92,704 81,738 Change in fair value of contingent consideration 61,083 32,307 Share-based compensation 56,222 47,389 Transaction-related Partnership and integration expenses 28,748 34,588 Severance 18,514 1,255 (Gain) loss on interest rate caps, net of cash settlements 12,588 (24,012) Depreciation 5,698 4,620 Amortization of deferred financing costs 5,129 5,120 Other (1) 28,834 25,774 Adjusted pre-tax income 145,501 132,031 Adjusted income taxes (2) 14,405 13,071 Adjusted Net Income $ 131,096 $ 118,960 Weighted-average shares of Class A common stock outstanding - diluted 60,135 56,825 Dilutive effect of unvested stock awards 3,874 3,526 Exchange of Class B common stock (3) 53,132 55,450 Adjusted diluted weighted-average shares outstanding 117,141 115,801 Adjusted Diluted EPS $ 1.12 $ 1.03 Diluted loss per share $ (1.50) $ (0.74) Effect of exchange of Class B common stock and net loss attributable to noncontrolling interests per share 0.10 0.08 Other adjustments to loss per share 2.64 1.80 Adjusted income taxes per share (0.12) (0.11) Adjusted Diluted EPS $ 1.12 $ 1.03 ___________ (1) Other addbacks to Adjusted Net Income include certain income and expenses that are considered to be non-recurring or non-operational, including certain recruiting costs, professional fees, litigation costs and bonuses.
Other Operating Expenses Other operating expenses include travel, accounting, legal and other professional fees, placement fees, rent, office expenses and other costs associated with our operations. Our occupancy-related costs and professional services expenses, in particular, generally increase or decrease in relative proportion to the number of our Colleagues and the overall size and scale of our business operations.
Our occupancy-related costs and professional services expenses, in particular, generally increase or decrease in relative proportion to the number of our Colleagues and the overall size and scale of our business operations.
The applicable interest rate on the Term Loan B at December 31, 2022 was 7.79%. Borrowings under the Revolving Facility accrue interest at SOFR plus 210 bps to SOFR plus 310 bps based on total net leverage ratio.
At December 31, 2023, the outstanding borrowings on the Term Loan B of $998.7 million had an applicable interest rate of 8.97%. 62 Borrowings under the Revolving Facility accrue interest at SOFR plus 210 bps to SOFR plus 310 bps based on total net leverage ratio.
As of December 31, 2022, we have a commitment to USF to donate an aggregate $4.7 million through October 2028. The gift will provide support for the School of Risk Management and Insurance in the USF Muma College of Business.
The maximum estimated exposure to the contingent earnout liabilities was $607.4 million at December 31, 2023. As of December 31, 2023, we have a remaining commitment to USF to donate $4.2 million through October 2028. The gift will provide support for the School of Risk Management and Insurance in the USF Muma College of Business.
At December 31, 2022, we had $1.4 billion of goodwill. Our goodwill is included in each of our Operating Groups at the following amounts: Middle Market — $906.1 million Specialty — $271.4 million MainStreet — $213.6 million Medicare — $30.9 million A quantitative goodwill impairment analysis was performed for each of our reporting units as of October 1, 2022.
At December 31, 2023, we had $1.4 billion of goodwill. Our goodwill is included in each of our Operating Groups at the following amounts: Insurance Advisory Solutions—$906.1 million Underwriting, Capacity & Technology Solutions—$261.9 million Mainstreet Insurance Solutions—$244.3 million A quantitative goodwill impairment analysis was performed for each of our reporting units as of October 1, 2023.
At December 31, 2022, we recorded $266.9 million of contingent consideration liabilities related to the 35 contingent consideration arrangements still outstanding and the total potential maximum of the contingent consideration payments is $954.3 million.
At December 31, 2023, we recorded $276.5 million of contingent consideration liabilities related to the 26 contingent consideration arrangements still outstanding and the total potential maximum of the contingent consideration payments is $607.4 million.
At December 31, 2022, we had $1.1 billion of intangible assets, which are included in each of our reporting units at the following amounts: Middle Market—$725.4 million Specialty—$129.3 million MainStreet—$209.8 million Medicare—$32.4 million We performed a qualitative analysis of each of our reporting units as of October 1, 2022 and determined that there were no events or changes in circumstances that had occurred to indicate that the carrying amount of our long-lived assets may not be recoverable.
At December 31, 2023, we had $1.0 billion of intangible assets, which are included in each of our reporting units at the following amounts: Insurance Advisory Solutions—$678.2 million Underwriting, Capacity & Technology Solutions—$109.4 million Mainstreet Insurance Solutions—$221.7 million We performed a qualitative analysis of each of our asset groups as of October 1, 2023 and determined that there were no events or changes in circumstances that had occurred to indicate that the carrying amount of our intangible assets may not be recoverable.
We define Adjusted EBITDA as net income (loss) before interest, taxes, depreciation, amortization, change in fair value of contingent consideration and certain items of income and expense, including share-based compensation expense, transaction-related Partnership and integration expenses, severance, and certain non-recurring items, including those related to raising capital.
Other companies in our industry may define or calculate these non-GAAP financial measures differently than we do, and accordingly, these measures may not be comparable to similarly titled measures used by other companies. 53 We define Adjusted EBITDA as net income (loss) before interest, taxes, depreciation, amortization, change in fair value of contingent consideration and certain items of income and expense, including share-based compensation expense, transaction-related Partnership and integration expenses, severance, and certain non-recurring items, including those related to raising capital.
Policy fee and installment fee revenue represents revenue earned by our Specialty Operating Group for acting in the capacity of an MGA and providing payment processing and services and other administrative functions on behalf of Insurance Company Partners. Policy fee and installment fee revenue increased $35.5 million year over year primarily due to organic growth.
Consulting and service fee revenue increased by $13.4 million, or 22%, year over year, driven by growth in service fees earned by our legacy risk management and captive businesses. 51 Policy fee and installment fee revenue represents revenue earned by our UCTS Operating Group for acting in the capacity of an MGA and providing payment processing services and other administrative functions on behalf of Insurance Company Partners.
The following is a summary of our 2022 financial results: Revenues for the year ended December 31, 2022 were $980.7 million, an increase of $413.4 million, or 73%, year over year.
The following is a summary of our 2023 financial results: Revenues for the year ended December 31, 2023 were $1.2 billion, an increase of $237.8 million, or 24%, year over year.
A risk of significant reversal exists for renewal policies and is influenced by external factors outside of our control including (1) policyholder discretion over plans and Insurance Company Partner relationships, (2) political influence, and (3) a contractual provision, which limits our right to receive renewal commissions to ongoing compliance and regulatory approval of the relevant Insurance Company Partner and compliance with the Centers for Medicare and Medicaid Services.
However, we have applied a constraint to renewal commissions that limits revenue recognized when a risk of significant reversals exists based on: (i) historical renewal patterns; and (ii) the influence of external factors outside of our control, including policyholder discretion over plans and Insurance Company Partner relationship, political influence, and a contractual provision, which limits our right to receive renewal commissions to ongoing compliance and regulatory approval of the relevant Insurance Company Partner and compliance with the Centers for Medicare and Medicaid Services.
The allowance for estimated policy cancellations is determined based on an evaluation of historical and current cancellation data. We are entitled to commissions each year for multi-year Medicare contracts. We are required to estimate the total expected value of future renewal commissions for all new policies in the year in effect.
The allowance for estimated policy cancellations is determined based on an evaluation of historical and current cancellation data. Medicare contracts in the Mainstreet Insurance Solutions Operating Group are multi-year arrangements in which we are entitled to renewal commissions.
Net cash provided by financing activities decreased $304.5 million year over year driven by a decrease in net proceeds of $268.3 million from an equity raise completed during 2021, an increase in payments of contingent earnout consideration up to the amount of purchase price accrual of $40.6 million and a decrease in net borrowings on our credit facilities of $9.3 million.
Net cash provided by financing activities decreased $445.8 million year over year to net cash used in financing activities of $26.2 million, driven by a decrease in net proceeds from borrowings on our credit facilities of $464.9 million, offset in part by an increase in cash from fewer payments of contingent earnout consideration up to the amount of purchase price accrual of $20.4 million.
In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under Item 1A. Risk Factors.
Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under Item 1A. Risk Factors. The following is a discussion of our consolidated results of operations for the years ended December 31, 2023 and 2022.
During the last three years, we have not made any changes in the accounting methodology used to evaluate the realizability of the deferred tax assets.
During the last three years, we have not made any changes in the accounting methodology used to evaluate the realizability of the deferred tax assets. We review and re-assess our cumulative three-year loss before income taxes on a quarterly basis.
The substantial increase in intercompany commissions, employee compensation and benefits expense for 2022 is related to the QBE Program Administrator Agreement. We expect that commissions, employee compensation and benefits expense relating to this agreement will continue to grow as we serve as the MGA on more intersegment revenue such as homeowners insurance sold through the MainStreet Operating Group.
The substantial increase in intercompany commissions and fees year over year is related to the QBE Program Administrator Agreement, which was effective May 1, 2022. We expect revenue recognized from this agreement to continue to grow as we serve as the MGA on more intersegment revenue such as homeowners insurance sold through MIS.
We have determined that there are significant judgments and uncertainties included in the application of guidance for valuation of acquired relationships; impairment of long-lived assets and goodwill; valuation of contingent consideration; share-based compensation related to performance-based restricted stock unit awards; and valuation allowance for deferred tax assets.
Critical Accounting Estimates We have determined that there are significant judgments and uncertainties included in the application of guidance for impairment of intangible assets and goodwill; valuation of contingent consideration; and valuation allowance for deferred tax assets.
See the “Impairment of Long-Lived Assets” critical accounting estimate for information about impairment evaluations. 63 Description Judgments and Uncertainties Effect if Actual Results Differ from Assumptions Impairment of Long-Lived Assets We evaluate our amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.
The nature of the estimates and assumptions used and the impact the estimates and assumptions could have on our actual results are discussed in the tables below. 67 Description Judgments and Uncertainties Effect if Actual Results Differ from Assumptions Impairment of Intangible Assets We evaluate our definite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.
Operating lease expense was $19.9 million and $13.1 million for the years ended December 31, 2022 and 2021, respectively. (2) Represents scheduled debt obligation and interest payments under the JPM Credit Agreement. (3) Includes $266.9 million of current and non-current estimated contingent earnout liabilities at December 31, 2022.
Operating lease expense was $23.2 million and $19.9 million for the years ended December 31, 2023 and 2022, respectively. (2) Represents scheduled debt obligation and interest payments under the JPM Credit Agreement. (3) Represents the total expected future payments to be made to Partners at December 31, 2023.
Therefore, we concluded that there were no indicators of impairment. Impairment of Goodwill Goodwill is not amortized but rather tested at least annually for impairment, or more often if events or changes in circumstances indicate it is more-likely-than-not that the carrying amount of the asset may not be recoverable.
We did not record impairment charges for intangible assets in 2023, 2022 or 2021. 68 Description Judgments and Uncertainties Effect if Actual Results Differ from Assumptions Impairment of Goodwill Goodwill is not amortized but rather tested at least annually for impairment, or more often if events or changes in circumstances indicate it is more-likely-than-not that the carrying amount of the asset may not be recoverable.
Other income, net, increased as a result of a gain on interest rate caps recorded in connection with rising interest rates and market estimates for future rate increases. Net loss for the year ended December 31, 2022 was $76.7 million, an increase of $18.6 million as compared to net loss of $58.1 million in the same period of 2021.
Other income (expense), net, for the year ended December 31, 2023 was $(0.7) million, a decrease of $26.9 million year over year. Other income (expense), net, decreased as a result of a fair value gain recognized on interest rate caps in 2022 in connection with rising interest rates and market estimates for future rate increases.
Additionally, we earn policy fees for acting in the capacity of an MGA and fulfilling certain administrative functions on behalf of Insurance Company Partners.
In addition, UCTS generates policy fee and installment fee revenue for acting in the capacity of an MGA and fulfilling certain administrative functions on behalf of Insurance Company Partners, including delivery of policy documents, processing payments and other administrative functions.
Sources and Uses of Cash The following table summarizes our cash flows from operating, investing and financing activities for the periods indicated: For the Years Ended December 31, Variance (in thousands) 2022 2021 Net cash provided by (used in) operating activities $ (2,462) $ 40,129 $ (42,591) Net cash used in investing activities (414,357) (678,473) 264,116 Net cash provided by financing activities 419,553 724,059 (304,506) Net increase in cash and cash equivalents and restricted cash 2,734 85,715 (82,981) Cash and cash equivalents and restricted cash at beginning of year 227,737 142,022 85,715 Cash and cash equivalents and restricted cash at end of year $ 230,471 $ 227,737 $ 2,734 Operating Activities The primary sources and uses of cash for operating activities are net income (loss) adjusted for non-cash items and changes in assets and liabilities, or operating working capital, and payment of contingent earnout consideration.
As the Company emerges from its cumulative loss position, we will reassess the realizability of our deferred tax assets and the necessity for a full valuation allowance. 65 Sources and Uses of Cash The following table summarizes our cash flows from operating, investing and financing activities for the periods indicated: For the Years Ended December 31, Variance (in thousands) 2023 2022 Net cash provided by (used in) operating activities $ 44,644 $ (2,462) $ 47,106 Net cash used in investing activities (21,922) (414,357) 392,435 Net cash provided by (used in) financing activities (26,230) 419,553 (445,783) Net increase (decrease) in cash and cash equivalents and restricted cash (3,508) 2,734 (6,242) Cash and cash equivalents and restricted cash at beginning of year 230,471 227,737 2,734 Cash and cash equivalents and restricted cash at end of year $ 226,963 $ 230,471 $ (3,508) Operating Activities The primary sources and uses of cash for operating activities are net income (loss) adjusted for non-cash items and changes in assets and liabilities, or operating working capital, and payment of contingent earnout consideration.
Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K filed with the SEC on March 1, 2022.
Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K filed with the SEC on February 28, 2023 and the Company's Current Report on Form 8-K (relating to the Company's reclassification of historical segment information) filed with the SEC on May 9, 2023.
Net cash provided by operating activities decreased $42.6 million year over year driven by an increase in cash payments for contingent earnout consideration in excess of the liability recognized at the acquisition date of $45.1 million from Partnerships that have outperformed on our platform since the date of Partnership.
Net cash provided by operating activities increased $47.1 million year over year, driven by an increase in cash related to lower contingent earnout consideration payments in excess of the liability recognized at the acquisition date of $25.6 million and better operating leverage year over year.
We expect to continue to experience a general rise in commissions, employee compensation and benefits expense commensurate with expected growth in our revenue and headcount. We operate in competitive markets for human capital and need to maintain competitive compensation levels as we expand geographically and create new products and services.
In addition, we operate in competitive markets for human capital and need to maintain competitive compensation levels as we expand geographically and create new products and services.
Adjusted EBITDA for the year ended December 31, 2022 was $196.5 million, an increase of $83.6 million year over year. Adjusted EBITDA Margin was 20% for each of 2022 and 2021. Organic Revenue for the year ended December 31, 2022 was $700.1 million as compared to $295.0 million for the same period of 2021.
Adjusted EBITDA Margin was 21% for 2023 compared to 20% for 2022. Organic Revenue for the year ended December 31, 2023 was $1.2 billion as compared to $700.1 million for the same period of 2022. Organic Revenue Growth was $187.2 million, or 19%, for 2023 compared to $132.6 million, or 23%, for 2022.
Interest expense, net, increased as a result of the higher interest rate environment during 2022 in addition to higher average borrowings outstanding under the JPM Credit Agreement. Other income, net, for the year ended December 31, 2022 was $26.1 million, an increase of $25.7 million year over year.
Interest expense, net, for the year ended December 31, 2023 was $119.5 million, an increase of $48.4 million, or 68%, year over year. Interest expense, net, increased as a result of the higher interest rate environment during 2023 and, to a lesser extent, higher average borrowings outstanding on our credit facility.
We believe that Adjusted Net Income is an appropriate measure of operating performance because it eliminates the impact of expenses that do not relate to business performance. Adjusted Diluted EPS measures our per share earnings excluding certain expenses as discussed above and assuming all shares of Class B common stock were exchanged for Class A common stock.
Adjusted Diluted EPS measures our per share earnings excluding certain expenses as discussed above and assuming all shares of Class B common stock were exchanged for Class A common stock on a one-for-one basis. Adjusted Diluted EPS is calculated as Adjusted Net Income divided by adjusted diluted weighted-average shares outstanding.
Interest payable on outstanding borrowings on the Term Loan B and Revolving Facility in the table above was calculated based on applicable interest rates at December 31, 2022 of 7.79% and 7.41%, respectively, through their respective expiration dates of October 2027 and April 2027.
Interest payable on outstanding borrowings on the Term Loan B and Revolving Facility in the table above was calculated based on applicable interest rates at December 31, 2023 of 8.97% and 8.46%, respectively, through their respective maturity dates of October 2027 and April 2027. 63 Substantially all of our Partnerships and certain acquisitions of select books of business that do not constitute a complete business enterprise include contractual earnout provisions.
Net cash used in investing activities decreased $264.1 million year over year driven by a decrease in cash consideration paid for Partnership activity of $280.0 million due to fewer Partnerships completed during 2022, offset in part by an increase in capital expenditures of $16.7 million as a result of software development projects for infrastructure to support our business, including key customer relationship management software, and other purchases to support our growth. 58 Financing Activities The primary sources and uses of cash for financing activities relate to the issuance of our Class A common stock; debt servicing costs in connection with the JPM Credit Agreement, as well as purchases, sales and settlements of interest rate caps to mitigate interest rate volatility on that debt; payment of contingent earnout consideration; and other equity transactions.
Financing Activities The primary sources and uses of cash for financing activities relate to the issuance of our Class A common stock; debt servicing costs in connection with the JPM Credit Agreement, as well as purchases, sales and settlements of interest rate caps to mitigate interest rate volatility on that debt; payment of contingent earnout consideration; and other equity transactions.
Major Sources of Commissions and Fees The following table sets forth our commissions and fees by major source by amount for the years ended December 31, 2022 and 2021: For the Years Ended December 31, Variance (in thousands, except percentages) 2022 2021 Amount % Commission revenue $ 786,794 $ 472,495 $ 314,299 67 % Profit-sharing revenue 66,091 37,392 28,699 77 % Consulting and service fee revenue 61,244 30,182 31,062 103 % Policy fee and installment fee revenue 55,362 19,903 35,459 178 % Other income 11,229 7,318 3,911 53 % Total commissions and fees $ 980,720 $ 567,290 $ 413,430 Commission revenue primarily represents commission revenue earned by providing insurance placement services to Clients.
Major Sources of Commissions and Fees The following table sets forth our commissions and fees by major source for the years ended December 31, 2023 and 2022: For the Years Ended December 31, Variance (in thousands, except percentages) 2023 2022 Amount % Commission revenue $ 967,552 $ 786,794 $ 180,758 23 % Profit-sharing revenue 93,437 66,091 27,346 41 % Consulting and service fee revenue 74,637 61,244 13,393 22 % Policy fee and installment fee revenue 65,386 55,362 10,024 18 % Other income 10,816 11,229 (413) (4) % Total commissions and fees $ 1,211,828 $ 980,720 $ 231,108 Commission revenue represents commissions earned from providing insurance placement services to Clients.
Substantially all of our Partnerships and certain acquisitions of select books of business that do not constitute a complete business enterprise include contractual earnout provisions. We record an estimation of the fair value of the contingent earnout obligations at the Partnership date as a component of the consideration paid.
We record an estimation of the fair value of the contingent earnout obligations at the Partnership date as a component of the consideration paid.
We expect to recognize additional compensation expense of $4.9 million for PSUs related to relative performance goals. 66 Description Judgments and Uncertainties Effect if Actual Results Differ from Assumptions Valuation Allowance for Deferred Tax Assets We record a tax provision for the anticipated tax consequences of the reported results of operations.
If the actual achievement of contingent consideration payments in 2024 through 2026 was at the maximum target amounts, we would record an additional $330.9 million of expense over the next three years. 70 Description Judgments and Uncertainties Effect if Actual Results Differ from Assumptions Valuation Allowance for Deferred Tax Assets We record a tax provision for the anticipated tax consequences of the reported results of operations.
Our Colleague-related costs have risen as a result of the increasingly competitive market and the inflationary environment. In addition, our compensation arrangements with our Colleagues contain significant bonus or commission components driven by the results of our operations. Therefore, as we grow commissions and fees, we expect compensation costs to rise.
We expect to continue to experience a general rise in commissions, employee compensation and benefits expense commensurate with expected revenue growth as our compensation arrangements with our Colleagues and Risk Advisors contain significant bonus or commission components driven by the results of our operations.
Organic Revenue Growth was $132.6 million, or 23%, for 2022 and $54.0 million, or 22%, for 2021. Refer to the Non-GAAP Financial Measures section below for reconciliations of Adjusted EBITDA, Adjusted EBITDA Margin, Organic Revenue and Organic Revenue Growth to the most directly comparable GAAP financial measures.
Refer to the Non-GAAP Financial Measures section below for reconciliations of Adjusted EBITDA, Adjusted EBITDA Margin, Organic Revenue and Organic Revenue Growth to the most directly comparable GAAP financial measures. 49 RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022 For a discussion of our 2021 financial results and a comparison of financial results for the years ended December 31, 2022 to 2021, refer to Part II, Item 7.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe have entered into interest rate cap agreements to limit the potential impact of interest rate changes on cash flows. The interest rate caps limit the variability of the base rate to the amount of the cap.
Biggest changeBorrowings under the Revolving Facility accrue interest at SOFR plus 210 bps to SOFR plus 310 bps based on total net leverage ratio. We have entered into interest rate cap agreements to limit the potential impact of interest rate changes on cash flows. The interest rate caps limit the variability of the base rate to the amount of the cap.
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK Market risk is the potential loss arising from adverse changes in market rates and prices, such as premium amounts, interest rates and equity prices. We are exposed to market risk through our investments and borrowings under the JPM Credit Agreement.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk is the potential loss arising from adverse changes in market rates and prices, such as premium amounts, interest rates and equity prices. We are exposed to market risk through our investments and borrowings under the JPM Credit Agreement.
These borrowings bear interest on a floating basis tied to either the prime rate or one of various other variable rates as defined in the JPM Credit Agreement. The variable rate currently in effect for the Term Loan B and the Revolving Facility is LIBOR and SOFR, respectively.
These borrowings bear interest on a floating basis tied to either the prime rate or one of various other variable rates as defined in the JPM Credit Agreement. The variable rate currently in effect for each of the Term Loan B and the Revolving Facility is SOFR.
Taking the interest rate cap agreements into consideration, an increase of 100 basis points on the variable interest rates in effect at December 31, 2022 would increase our annual interest expense for the JPM Credit Agreement by $10.4 million. 68
Taking the interest rate cap agreements into consideration, an increase of 100 basis points on the variable interest rates in effect at December 31, 2023 would increase our annual interest expense for the JPM Credit Agreement by $10.4 million. 72
The fair values of our invested assets at December 31, 2022 and 2021 approximated their respective carrying values due to their short-term duration and therefore, such market risk is not considered to be material. At December 31, 2022, we had $838.1 million and $505.0 million of borrowings outstanding under the Term Loan B and the Revolving Facility, respectively.
The fair values of our invested assets at December 31, 2023 and 2022 approximated their respective carrying values due to their short-term duration and therefore, such market risk is not considered to be material. At December 31, 2023, we had $998.7 million and $341.0 million of borrowings outstanding under the Term Loan B and the Revolving Facility, respectively.
The interest rate cap agreements in place at December 31, 2022 mitigate the interest rate volatility on $300.0 million of debt to a maximum base rate of 1.50% and mitigate the interest rate volatility on $1.2 billion of debt to a maximum base rate of 7.00%.
The interest rate cap agreements in place at December 31, 2023 mitigate the interest rate volatility on $300.0 million of debt to a maximum base rate of 1.50% through March 2024 and mitigate the interest rate volatility on $1.2 billion of debt to a maximum base rate of 7.00% through November 2025.
Added
The Term Loan B accrues interest at term SOFR plus a credit spread adjustment between 11 bps and 43 bps based on the term SOFR rate plus an applicable margin of 350 bps, subject to a term SOFR floor of 50 bps.

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