Brown & Brown (BRO) 10-K risk factor changes: FY2017 vs FY2016

[removed: OUR] [added: OUR] BUSINESS, AND THEREFORE OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION, MAY BE ADVERSELY AFFECTED BY [removed: ECONOMIC] CONDITIONS THAT RESULT IN REDUCED INSURER [removed: CAPACITY.][added: CAPACITY.]

[removed: OUR] [added: OUR] GROWTH STRATEGY DEPENDS, IN PART, ON THE ACQUISITION OF OTHER INSURANCE INTERMEDIARIES, WHICH MAY NOT BE AVAILABLE ON ACCEPTABLE TERMS IN THE FUTURE [removed: AND] [added: OR] WHICH, IF CONSUMMATED, MAY NOT BE ADVANTAGEOUS TO [removed: US.][added: US.]

Acquisitions also involve a number of special risks, such as: diversion of management’s attention; difficulties in the integration of acquired operations and retention of personnel; increase in expenses and working capital requirements, which could reduce our return on invested capital; entry into unfamiliar markets or lines of business; unanticipated problems or legal liabilities; estimation of the acquisition earn-out payables; and tax and [removed: accounting issues, some or all of which could have a material adverse effect on the results of our operations, financial condition and cash flows.]

[removed: BECAUSE] [added: BECAUSE] OUR BUSINESS IS HIGHLY CONCENTRATED IN ARIZONA, CALIFORNIA, FLORIDA, GEORGIA, ILLINOIS, INDIANA, [removed: KANSAS,] KENTUCKY, MASSACHUSETTS, MICHIGAN, NEW JERSEY, NEW YORK, [added: NORTH CAROLINA,] OREGON, PENNSYLVANIA, TEXAS, VIRGINIA AND WASHINGTON, ADVERSE ECONOMIC CONDITIONS, NATURAL DISASTERS, OR REGULATORY CHANGES IN THESE STATES COULD ADVERSELY AFFECT OUR FINANCIAL [removed: CONDITION.][added: CONDITION.]

A significant portion of our business is concentrated in Arizona, California, Florida, Georgia, Illinois, Indiana, [removed: Kansas,] Kentucky Massachusetts, Michigan, New Jersey, New York, [added: North Carolina,] Oregon, Pennsylvania, Texas, Virginia and Washington.

For the years ended December 31, [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014,] [added: 2015,] we derived [removed: $1,571.9] [added: $1,677.2] million or [removed: 89.0%, $1,465.9] [added: 89.1%, $1,568.0] million or [removed: 88.3%] [added: 88.8%] and [removed: $1,376.5] [added: $1,458.5] million or [removed: 87.4%,] [added: 87.8%,] of our [removed: revenues,] [added: revenue,] respectively, from our operations located in these states.

[removed: headquarters),] [added: We are susceptible to losses and interruptions caused by hurricanes (particularly in Florida, where we have 41 offices and our headquarters, as well as in Texas, where we have 10 offices and Hurricane Harvey made landfall in August 2017),] earthquakes (including [added: in] California, where we [removed: maintain a number of] [added: have 23] offices), power shortages, telecommunications failures, water shortages, floods, fire, extreme weather conditions, geopolitical events such as terrorist acts and other natural or man-made disasters.

[removed: WE] [added: WE] DERIVE A SIGNIFICANT PORTION OF OUR COMMISSION REVENUES FROM A LIMITED NUMBER OF INSURANCE COMPANIES, THE LOSS OF WHICH COULD RESULT IN ADDITIONAL EXPENSE AND LOSS OF MARKET [removed: SHARE.][added: SHARE.]

For the year ended December 31, [removed: 2016,] [added: 2017,] no insurance company accounted for more than [removed: 6.0%] [added: 5.0%] of our total core commissions.

For the years ended December 31, [removed: 2015] [added: 2016] and [removed: 2014,] [added: 2015,] approximately [removed: 7.3%] [added: 6.0%] and [removed: 7.0%] [added: 7.3%,] respectively, of our total core commissions was derived from insurance policies underwritten by one insurance company.

Should this insurance company seek to terminate its arrangements with [added: us or to otherwise decrease the number of insurance policies underwritten it writes for] us, we believe that other insurance companies are available to underwrite the business, and we could likely move our business to one of these other insurance companies, although some additional expense and loss of market share could possibly result.

[removed: OUR] [added: OUR] CURRENT MARKET SHARE MAY DECREASE AS A RESULT OF [added: DISINTERMEDIATION WITHIN THE INSURANCE INDUSTRY, INCLUDING] INCREASED COMPETITION FROM INSURANCE COMPANIES, TECHNOLOGY COMPANIES AND THE FINANCIAL SERVICES [removed: INDUSTRY.][added: INDUSTRY, AS WELL AS THE SHIFT AWAY FROM TRADITIONAL INSURANCE MARKETS.]

[removed: QUARTERLY] [added: 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 [removed: OPERATIONS.][added: OPERATIONS.]

These commissions generally have been in the range of 3.0% to [removed: 5.0%] [added: 4.0%] of our previous year’s total core commissions and fees over the last three years.

Because profit-sharing contingent commissions and override commissions materially affect our revenues, any decrease in their payment to us could adversely affect [removed: the] [added: our] results of [removed: our] operations, profitability and our financial condition.

[removed: WE] [added: WE] COULD INCUR SUBSTANTIAL LOSSES FROM OUR CASH AND INVESTMENT ACCOUNTS IF ONE OF THE FINANCIAL INSTITUTIONS THAT WE USE FAILS OR IS TAKEN OVER BY THE U.S. FEDERAL DEPOSIT INSURANCE CORPORATION [removed: (“FDIC”).][added: (“FDIC”).]

If one or more of the depository institutions with which we maintain significant cash balances were to [removed: fail,] [added: fail or be taken over by the FDIC,] our ability to access these funds might be temporarily or permanently limited, and we could face material liquidity problems and potential material financial losses.

[removed: OUR] [added: OUR] BUSINESS PRACTICES AND COMPENSATION ARRANGEMENTS ARE SUBJECT TO UNCERTAINTY DUE TO POTENTIAL CHANGES IN [removed: REGULATIONS.][added: REGULATIONS.]

[removed: Additionally, to a lesser extent, some of our offices are parties to override commission agreements with certain insurance] companies, which provide for commission rates in excess of standard commission rates to be applied to specific lines of business, such as group health business, and which are based primarily on the overall volume of business that such office or offices placed with those insurance companies.

[removed: WE] [added: WE] COMPETE IN A HIGHLY-REGULATED INDUSTRY, WHICH MAY RESULT IN INCREASED EXPENSES OR RESTRICTIONS ON OUR [removed: OPERATIONS.][added: OPERATIONS.]

The primary purpose of such regulation and supervision is to provide safeguards for policyholders rather than to protect the interests of our [removed: shareholders.][added: shareholders, and it is difficult to anticipate how changes in such regulation would be implemented and enforced.]

[removed: Specifically, recently adopted] [added: Certain] federal financial services modernization legislation could lead to additional federal regulation of the insurance industry in the coming years, which could result in increased expenses or restrictions on our operations.

[removed: PROPOSED] [added: PROPOSED] TORT REFORM LEGISLATION, IF ENACTED, COULD DECREASE DEMAND FOR LIABILITY INSURANCE, THEREBY REDUCING OUR COMMISSION [removed: REVENUES.][added: REVENUES.]

[removed: Legislative] [added: Other legislative] developments that could adversely affect us include: changes in our business compensation model as a result of regulatory developments (for example, the Affordable Care Act); and federal and state governments establishing programs to provide health insurance or, [added: in certain cases, property insurance in catastrophe-prone areas or other alternative market types of coverage, that compete with, or completely replace, insurance products offered by insurance carriers.]

These costs may adversely impact our [added: results of] operations and financial condition.

[removed: WE ARE SUBJECT TO LITIGATION WHICH, IF DETERMINED UNFAVORABLY TO US, COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, RESULTS OF OPERATIONS OR FINANCIAL CONDITION.][added: accounting issues, some or all of which could have a material adverse effect on our results of operations, financial condition and cash flows.]

[removed: OUR] [added: OUR] BUSINESS, RESULTS OF OPERATIONS, FINANCIAL CONDITION [removed: OR] [added: AND] LIQUIDITY MAY BE MATERIALLY ADVERSELY AFFECTED BY [removed: ERRORS AND OMISSIONS AND THE OUTCOME OF] CERTAIN ACTUAL AND POTENTIAL CLAIMS, [removed: LAWSUITS] [added: REGULATORY ACTIONS] AND [removed: PROCEEDINGS.][added: PROCEEDINGS.]

We are subject to various actual and potential claims, [removed: lawsuits] [added: regulatory actions] and other proceedings [added: including those] relating [removed: principally] to alleged errors and omissions in connection with the placement or servicing of insurance and/or the provision of services in the ordinary course of [removed: business.][added: business, of which we cannot, and likely will not be able to, predict the outcome with certainty.]

[removed: OUR] [added: OUR] BUSINESS, AND THEREFORE OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION, MAY BE ADVERSELY AFFECTED BY FURTHER CHANGES IN THE U.S.-BASED CREDIT [removed: MARKETS.][added: MARKETS.]

Although we are not currently experiencing any limitation of access to our revolving credit facility (which matures in [removed: 2019)] [added: 2022)] and are not aware of any issues impacting the ability or willingness of our lenders under such facility to honor their commitments to extend us credit, the failure of a lender could adversely affect our ability to borrow on that facility, which over time could negatively impact our ability to [removed: consummate significant acquisitions or make other significant capital expenditures.]

[removed: IF] [added: IF] WE FAIL TO COMPLY WITH THE COVENANTS CONTAINED IN CERTAIN OF OUR AGREEMENTS, OUR LIQUIDITY, RESULTS OF OPERATIONS AND FINANCIAL CONDITION MAY BE ADVERSELY [removed: AFFECTED.][added: AFFECTED.]

At December 31, [removed: 2016,] [added: 2017,] we believe we were in compliance with the financial covenants and other limitations contained in each of these agreements.

[removed: CERTAIN] [added: CERTAIN] OF OUR AGREEMENTS CONTAIN VARIOUS COVENANTS THAT LIMIT THE DISCRETION OF OUR MANAGEMENT IN OPERATING OUR BUSINESS AND COULD PREVENT US FROM ENGAGING IN CERTAIN POTENTIALLY BENEFICIAL [removed: ACTIVITIES.][added: ACTIVITIES.]

[removed: OUR] [added: OUR] CREDIT RATINGS ARE SUBJECT TO [removed: CHANGE.][added: CHANGE.]

[removed: WE] [added: WE] HAVE OPERATIONS INTERNATIONALLY, WHICH MAY RESULT IN A NUMBER OF ADDITIONAL RISKS AND REQUIRE MORE MANAGEMENT TIME AND EXPENSE THAN OUR DOMESTIC OPERATIONS TO ACHIEVE OR MAINTAIN [removed: PROFITABILITY.][added: PROFITABILITY.]

We have operations in the United Kingdom, [removed: Bermuda] [added: Bermuda, Canada] and the Cayman Islands.

[removed: | • |] [added: -] Difficulties in staffing and managing foreign operations; [removed: |]

[removed: | • |] [added: -] Political and economic instability (including acts of terrorism and outbreaks of war); [removed: |]

[removed: | • |] [added: -] Coordinating our communications and logistics across geographic distances and multiple time zones; [removed: |]

[removed: | • |] [added: -] Unexpected changes in regulatory requirements and laws; [removed: |]

We present these risk factors grouped by category, and the risks factors contained in each respective category are presented in order of their relative priority to us.

Risks Related to Our Business

OUR CORPORATE CULTURE HAS CONTRIBUTED TO OUR SUCCESSS, AND IF WE CANNOT MAINTAIN THIS CULTURE, OR IF WE EXPERIENCE A CHANGE IN MANAGEMENT, MANAGEMENT PHILOSOPHY, OR BUSINESS STRATEGY, OUR BUSINESS MAY BE HARMED.

We believe that a significant contributor to our success has been our corporate culture as a lean, decentralized, highly competitive, profit-oriented sales and service organization.

As we grow, including from the integration of employees and businesses acquired in connection with previous or future acquisitions, we may find it difficult to maintain important aspects of our corporate culture, which could negatively affect our profitability and/or our ability to retain and recruit people of the highest integrity and quality who are essential to our future success.

We may face pressure to change our culture as we grow, particularly if we experience difficulties in attracting competent personnel who are willing to embrace our culture.

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 decentralization, which could negatively impact our future success.

consummate significant acquisitions or make other significant capital expenditures.

Risks Related to Our Industry

Additionally, to a lesser extent, some of our offices are parties to override commission agreements with certain insurance

Risks Related to Investing in our Securities

We present these risk factors grouped by macroeconomic factors, market factors, and operational factors and not in any order of potential magnitude of impact.

We are susceptible to losses and interruptions caused by hurricanes (particularly in Florida, where we have 41 offices and our

CHANGES IN LAWS AND REGULATIONS MAY INCREASE OUR COSTS.

The Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley”) and the Dodd-Frank Act enacted in 2010 have required changes in some of our corporate governance, securities disclosure and compliance practices.

In response to the requirements of these Acts, the SEC and the New York Stock Exchange have promulgated and may continue to promulgate new rules on a variety of subjects.

These developments have increased (and may increase in the future) our compliance costs, may make it more difficult and more expensive for us to obtain director and officer liability insurance and may make it more difficult for us to attract and retain qualified members of our Board of Directors or qualified executive officers.

From time to time new regulations are enacted, or existing requirements are changed, and it is difficult to anticipate how such regulations and changes will be implemented and enforced.

We continue to evaluate the necessary steps for compliance with regulations as they are enacted.

in certain cases, property insurance in catastrophe-prone areas or other alternative market types of coverage, that compete with, or completely replace, insurance products offered by insurance carriers.

We are and may be subject to a number of claims, regulatory actions and other proceedings that arise in the ordinary course of business.

We cannot, and likely will not be able to, predict the outcome of these claims, actions and proceedings with certainty.

An adverse outcome in connection with one or more of these matters could have a material adverse effect on our business, results of operations or financial condition in any given quarterly or annual period.

While we currently have insurance coverage for some of these potential liabilities, other potential liabilities may not be covered by insurance, insurers may dispute coverage or the amount of our insurance may not be enough to cover the damages awarded.

In addition, some types of damages, like punitive damages, may not be covered by insurance.

Insurance coverage for all or some forms of liability may become unavailable or prohibitively expensive in the future.

In addition, claims, lawsuits and other proceedings may harm our reputation or divert management resources away from operating our business.

| | |

| --- | --- |

We believe that the development and implementation of new technologies may require us to make additional investments in the future.

[removed: General][added: General]

We have increased revenues every year from 1993 to [removed: 2016,] [added: 2017,] with the exception of 2009, when our revenues dropped 1.0%.

Our revenues grew from $95.6 million in 1993 to [removed: $1.8] [added: $1.9] billion in [removed: 2016,] [added: 2017,] reflecting a compound annual growth rate of [removed: 13.5%.][added: 13.2%.]

In the same [removed: 23-year] [added: 24-year] period, we increased net income from $8.1 million to [removed: $257.5] [added: $399.6] million in [removed: 2016,] [added: 2017,] a compound annual growth rate of [removed: 16.2%.][added: 17.6%.]

The resulting net change reflects the aggregate changes attributable to (i) net new and lost accounts, (ii) net changes in our customers’ exposure units, (iii) net changes in insurance premium rates or the commission rate paid to us by our carrier [removed: partners;] [added: partners,] and (iv) the net change in fees paid to us by our customers.

Organic Revenue is reported in the [removed: Results of Operations and in the Results] [added: “Results] of Operations - Segment [removed: sections] [added: Information”] of this [removed: form] [added: Form] 10-K.

Over the last three years, profit-sharing contingent commissions have averaged approximately [removed: 3.6%] [added: 3.2%] of the previous year’s total commissions and [removed: fees revenue.][added: fees.]

For the year ended December 31, [removed: 2016,] [added: 2017,] we had earned [removed: $11.5] [added: $10.4] million of GSCs, of which [removed: $9.2] [added: $8.5] million remained accrued at December 31, [removed: 2016] [added: 2017] as most of this will be collected in the first quarter of [removed: 2017.][added: 2018.]

For the years ended December 31, [added: 2017,] 2016, [removed: 2015,] and [removed: 2014,] [added: 2015,] we earned [removed: $11.5] [added: $10.4] million, [removed: $10.0] [added: $11.5] million and [removed: $9.9] [added: $10.0] million, respectively, from GSCs.

Fee revenues have historically been generated primarily by: (1) our Services Segment, which provides insurance-related services, including third-party claims administration and comprehensive medical utilization management services in both the workers’ compensation and all-lines liability arenas, as well as Medicare Set-aside services, Social Security disability and Medicare benefits advocacy services, and claims adjusting [removed: services;] [added: services,] (2) our National Programs and Wholesale Brokerage Segments, which earn fees primarily for the issuance of insurance policies on behalf of insurance companies and to a lesser extent (3) our Retail Segment in our large-account customer base.

Fee [removed: revenues, on a consolidated basis,] [added: revenues] as a percentage of our total commissions and fees, represented [removed: 31.3%] [added: 31.5%] in [removed: 2016, 30.6%] [added: 2017, 31.3%] in [removed: 2015] [added: 2016] and 30.6% in [removed: 2014.][added: 2015.]

Additionally, our profit-sharing contingent commissions and GSCs for the year ended December 31, [removed: 2016 increased] [added: 2017 decreased] by [removed: $3.7] [added: $2.9] million over [removed: 2015] [added: 2016] primarily as a result of [removed: an increase] [added: a decrease] in profit-sharing contingent commissions and GSCs in the Retail [removed: Segment,] [added: and Wholesale Brokerage Segments as a result of increased loss ratios and lower premium rates,] partially offset by [removed: a decrease] [added: an increase] in profit-sharing contingent commissions [added: and GSCs] in the [removed: Wholesale Brokerage Segment as a result of increased loss ratios.][added: National Programs Segment.]

For the years ended December 31, [removed: 2016] [added: 2017] and [removed: 2015,] [added: 2016,] our [added: commissions and fees growth rate was 5.4% and 6.4%, respectively, and our] consolidated organic revenue growth rate was [removed: 3.0%] [added: 4.4%] and [removed: 2.6%] [added: 3.0%,] respectively.

Additionally, each of our four segments recorded positive organic revenue growth for the year ended December 31, [removed: 2016.][added: 2017.]

In the event that the gradual increases in insurable exposure units that occurred in the past few years continues through [removed: 2017] [added: 2018] and premium rate changes are similar with [removed: 2016,] [added: 2017,] we believe we will continue to see positive quarterly organic revenue growth rates in [removed: 2017.][added: 2018.]

Income before income taxes for the [removed: years] [added: year] ended December 31, [removed: 2016] [added: 2017] increased over [removed: 2015] [added: 2016] by [removed: $20.9] [added: $26.2] million, primarily as a result of [added: a legal settlement recorded in the first quarter of 2017 and net new business and] acquisitions completed in the past twelve [removed: months and net new business.][added: months.]

[removed: Information] [added: Information] Regarding Non-GAAP [removed: Measures][added: Measures]

In the discussion and analysis of our results of operations, in addition to reporting financial results in accordance with GAAP, we provide information regarding the following non-GAAP measures: Organic Revenue, [removed: Organic Revenue] [added: organic revenue] growth, and [removed: Organic Revenue growth after adjusting for the significant] [added: organic] revenue [removed: recorded at our former Colonial Claims operation in the first half of 2013 attributable to Superstorm Sandy (“2014 Total core commissions and fees-adjusted”).][added: growth rate.]

We believe that presenting these non-GAAP measures allows readers of our financial statements to measure, analyze and compare our consolidated growth, [removed: and] the growth of each of our segments, [added: and certain aspects of our operating performance from period to period] in a meaningful and consistent [removed: manner.][added: manner that may not be otherwise apparent on a GAAP basis.]

[removed: Acquisitions][added: Acquisitions]

Part of our [removed: continuing] business strategy is to attract high-quality insurance intermediaries to join our operations.

From 1993 through the fourth quarter of [removed: 2016,] [added: 2017,] we acquired [removed: 479] [added: 490] insurance intermediary operations, excluding acquired books of business (customer accounts).

During the year ended December 31, [removed: 2016,] [added: 2017,] the Company acquired the assets and assumed certain liabilities of [removed: seven insurance intermediaries, all of the stock of one] [added: eleven] insurance [removed: intermediary] [added: intermediaries] and [removed: three books] [added: one book] of business (customer accounts).

Collectively, these acquired business that had annualized revenues of approximately [removed: $56] [added: $17.5] million.

[removed: Critical] [added: Critical] Accounting [removed: Policies][added: Policies]

[removed: Revenue Recognition][added: Revenue Recognition]

[added: Profit-sharing] contingent commissions are recognized when determinable, which is generally when such commissions are received from insurance [removed: companies, or periodically when we receive formal notification of the amount of such payments.]

[removed: Business] [added: Business] Combinations and Purchase Price [removed: Allocations][added: Allocations]

We have acquired significant intangible assets through [removed: business acquisitions.][added: acquisitions of businesses.]

These assets [added: generally] consist of purchased customer accounts, non-compete agreements, and the excess of purchase prices over the fair value of identifiable net assets acquired (goodwill).

Acquisition purchase prices are typically based upon a multiple of average annual operating profit [added: or core revenue] earned over a one to three-year period within a minimum and maximum price range.

Subsequent changes in the fair value of earn-out obligations are recorded in the Consolidated Statement of Income when [removed: incurred.][added: changes to the expected performance of the associated business are realized.]

In determining fair value, the acquired business’s future performance is estimated using financial projections developed by management for the acquired [removed: business] [added: business,] and this estimate reflects market participant assumptions regarding revenue growth and/or profitability.

[removed: Intangible] [added: Intangible] Assets [removed: Impairment][added: Impairment]

Any of the following factors, if present, may trigger an impairment review: (i) a significant underperformance relative to historical or projected future operating [removed: results;] [added: results,] (ii) a significant negative industry or economic [removed: trend;] [added: trend,] and (iii) a significant decline in our market capitalization.

We completed our most recent evaluation of impairment for goodwill as of November 30, [removed: 2016] [added: 2017] and determined that the fair value of goodwill exceeded the carrying value of such assets.

Additionally, there have been no impairments recorded for amortizable intangible assets for the years ended December 31, [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014.][added: 2015.]

[removed: Non-Cash] [added: Non-Cash] Stock-Based [removed: Compensation][added: Compensation]

[removed: Litigation] [added: Litigation] and [removed: Claims][added: Claims]

If it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss is estimable, an accrual for the costs to resolve these claims is recorded in accrued expenses in the accompanying Consolidated [removed: Balance Sheets.][added: Financial Statements.]

Other income increased by $20.1 million primarily as a result of a legal settlement recognized in the first quarter of 2017.

Refer to Note 1 “Summary of Significant Accounting Policies” in the “Notes to Consolidated Financial Statements” for a discussion of the impacts for adopting Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606).

companies, or periodically when we receive formal notification of the amount of such payments.

Please see Note 1 in the “Notes to Consolidated Financial Statements” for changes to our revenue recognition policies that are effective January 1, 2018 as prescribed by new accounting pronouncements.

During the first quarter of 2018, the performance conditions for 130,172 shares of the Company’s common stock granted under the Company’s Stock Incentive Plan were determined by the Compensation Committee to have been satisfied relative to performance-based grants issued in 2013.

These grants had a performance measurement period that concluded on December 31, 2017.

The vesting condition for these grants requires continuous employment for a period of up to ten years from the January 2013 grant date in order for the awarded shares to become fully vested and nonforfeitable.

As a result of the awarding of these shares, the grantees will be eligible to receive payments of dividends and exercise voting privileges after the awarding date, and the awarded shares will be included as issued and outstanding common stock shares and included in the calculation of basic and diluted EPS.

| Commissions and fees | 1,857,270 | | | | 5.4 | % | | 1,762,787 | | | | 6.4 | % | | 1,656,951 | | |

| Total assets at December 31 | $ | 5,747,550 | | | | | | $ | 5,262,734 | | | | | | $ | 4,979,844 | |

Profit-sharing contingent commissions and GSCs for 2017 decreased by $2.9 million, or 4.5%, compared to the same period in 2016.

core commissions and fees.

Investment income increased to $1.6 million in 2017, compared with $1.5 million in 2016 and increased to $1.5 million in 2016, compared with $1.0 million in 2015.

The increases in both years are due to additional interest income driven by higher average invested cash balances accompanied by higher effective earned rates of interest.

In 2017, $20.0 million of other income was recognized as a result of a legal settlement in the first quarter of 2017.

The other operating expenses for those offices that existed in the same periods in both 2017 and 2016 increased by $17.3 million or 6.6%, which was primarily attributable to (i) higher data processing costs related to our multi-year technology investment program, (ii) the receipt of certain premium tax refunds by our National Flood Program business in 2016, and (iii) professional fees at our National Programs Division.

The change in the gain on disposal was due to activity associated with book of business sales.

The decrease in 2017 was due primarily to having less total debt outstanding.

The increase in 2016 was primarily due to an increase in floating interest rates related to the outstanding debt balance on the Credit Facility term loan.

The decrease in the effective tax rate for 2017 was primarily driven by the revaluation of deferred tax liabilities as described in Part II, Note 9 “Income Taxes,” in addition to adoption of FASB Accounting Standards Update 2016-09, “Improvements to Employee Share Based Payment Accounting” (“ASU 2016-09”) in the first quarter of 2017.

ASU 2016-09, which requires upon vesting of stock-based compensation, any tax implications be treated as a discrete credit to the income tax expense in the quarter of vesting, amends guidance issued in Accounting Standards Codification (“ASC”) Topic 718, Compensation - Stock Compensation.

| (in thousands) | 2017 | | | | 2016 | | |

| Commissions and fees | $ | 1,857,270 | | | $ | 1,762,787 | |

| Core commissions and fees | 1,794,714 | | | | 1,697,308 | | |

| Less divested businesses | — | | | | 4,912 | | |

| Organic Revenue | $ | 1,766,975 | | | $ | 1,692,396 | |

The organic revenue growth rates for the year ended December 31, 2017, by Segment, are as follows:

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| 2017 | Retail(1) | | | | | | | | National Programs | | | | | | | | Wholesale Brokerage | | | | | | | | Services | | | | | | | | Total | | | | | | |

| Commissions and fees | $ | 942,039 | | | $ | 916,084 | | | $ | 479,017 | | | $ | 447,808 | | | $ | 271,141 | | | $ | 242,813 | | | $ | 165,073 | | | $ | 156,082 | | | $ | 1,857,270 | | | $ | 1,762,787 | |

| Total change | $ | 25,955 | | | | | | | $ | 31,209 | | | | | | | $ | 28,328 | | | | | | | $ | 8,991 | | | | | | | $ | 94,483 | | | | | |

| Total growth % | 2.8 | | % | | | | | | 7.0 | | % | | | | | | 11.7 | | % | | | | | | 5.8 | | % | | | | | | 5.4 | | % | | | | |

| Contingent commissions | 23,377 | | | | 25,207 | | | | 20,123 | | | | 17,306 | | | | 8,686 | | | | 11,487 | | | | — | | | | — | | | | 52,186 | | | | 54,000 | | |

| GSCs | 9,108 | | | | 9,787 | | | | 31 | | | | 23 | | | | 1,231 | | | | 1,669 | | | | — | | | | — | | | | 10,370 | | | | 11,479 | | |

| Core commissions and fees | $ | 909,554 | | | $ | 881,090 | | | $ | 458,863 | | | $ | 430,479 | | | $ | 261,224 | | | $ | 229,657 | | | $ | 165,073 | | | $ | 156,082 | | | $ | 1,794,714 | | | $ | 1,697,308 | |

| Acquisition revenues | 8,151 | | | | — | | | | 2,296 | | | | — | | | | 16,442 | | | | — | | | | 850 | | | | — | | | | 27,739 | | | | — | | |

| Divested business | — | | | | 4,838 | | | | — | | | | 277 | | | | — | | | | — | | | | — | | | | (203 | | ) | | — | | | | 4,912 | | |

| Organic Revenue(2) | $ | 901,403 | | | $ | 876,252 | | | $ | 456,567 | | | $ | 430,202 | | | $ | 244,782 | | | $ | 229,657 | | | $ | 164,223 | | | $ | 156,285 | | | $ | 1,766,975 | | | $ | 1,692,396 | |

Other income decreased by $0.2 million primarily as a result of a reduction in the gains on the sale of books of business when compared to 2015 and the change in where this activity is presented in the financial statements as described in the results of operations section below.

We present such non-GAAP supplemental financial information, as we believe such information provides additional meaningful methods of evaluating certain aspects of our operating performance from period to period on a basis that may not be otherwise apparent on a GAAP basis.

Refer to Note 1 in the “Notes to Consolidated Financial Statements”.

Profit-sharing

| Total assets at December 31 | $ | 5,287,343 | | | | | | $ | 5,004,479 | | | | | | $ | 4,946,560 | |

to the same period in 2014.

Investment income increased to $1.5 million in 2016, compared with $1.0 million in 2015 due to additional interest income driven by higher average invested cash balances.

Investment income increased to $1.0 million in 2015, compared with $0.7 million in 2014 due to additional interest income driven by cash management activities to earn a higher yield.

In 2014, other income included legal settlements and gains and loss on the sale and disposition of fixed assets as well as gains and losses from the sale on books of business (customer accounts).

Prior to the adoption of ASU No. 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity” (“ASU 2014-08”) in the fourth quarter of 2014, net gains and losses on the sale of businesses or customer accounts were reflected in other income.

Any such gains or losses are now reflected on a net basis in the expense section since the adoption of ASU 2014-08.

The other operating expenses for those offices that existed in the same periods in both 2015 and 2014, increased by $3.1 million or 1.3%, which was primarily attributable to increased sales meetings, legal and consulting expenses, partially offset by decreases in expenses associated with office rent, telecommunications and bank fees.

The Company recognized a gain on disposal of $1.3 million and $0.6 million in 2016 and 2015 respectively, and a loss of $47.4 million in 2014.

The pretax loss for 2014 is the result of the disposal of the Axiom Re business as part of the Company’s strategy to exit the reinsurance brokerage business.

Prior to the adoption of ASU 2014-08 in the fourth quarter of 2014, net gains and losses on the sale of businesses or customer accounts were reflected in Other Income.

In 2014 the Company recognized $5.3 million in gains from sales on books of business (customer accounts) reported as Other Income.

The increase for 2015 is a result of the amortization of newly acquired intangibles being greater than the decrease associated with intangibles that became fully amortized or otherwise written off as part of disposed businesses during 2015.

These changes were due primarily to the addition of fixed assets resulting from acquisitions completed in 2015 and 2016, net of assets which became fully depreciated.

The increase in 2015 was primarily due to the increased debt borrowings and an increase in our effective rate of interest for the years ended 2015 and 2014.

The increased debt borrowings from 2014 include: the Credit Facility term loan entered into in May 2014 in the initial amount of $550.0 million at LIBOR plus 137.5 basis points, and the $500.0 million Senior Notes due 2024 issued in September 2014 at a fixed rate of interest of 4.200%.

The Credit Facility term loan proceeds replaced pre-existing debt of $230.0 million with similar rates of interest.

The proceeds from the Senior Notes due 2024 were used to settle the Credit Facility revolver debt of $375.0 million, which had a lower, but variable rate of interest based upon an adjusted LIBOR.

This transitioned the debt to a favorable long-term fixed rate of interest and extended the date of maturity of those funds.

These changes were the result of an evolution and maturation of our previous debt structure and provide increased debt capacity and flexibility.

The increase in 2016 versus 2015 is due to the rise in the floating interest rate of our Credit Facility term loan, partially offset by the scheduled amortized principal payments on the Credit Facility term loan which has reduced the Company’s average debt balance.

| | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| 2016 | For the Year Ended December 31, | | | | | | | | Total Net Change | | | | Total Net Growth % | | | Less Acquisition Revenues | | | | Organic Growth $(2) | | | | Organic Growth %(2) | |

| Retail(1) | $ | 881,090 | | | $ | 834,197 | | | $ | 46,893 | | | 5.6 | % | | $ | 31,151 | | | $ | 15,742 | | | 1.9 | % |

| National Programs | 430,479 | | | | 411,589 | | | | 18,890 | | | | 4.6 | % | | 1,680 | | | | 17,210 | | | | 4.2 | % |

| Wholesale Brokerage | 229,657 | | | | 200,835 | | | | 28,822 | | | | 14.4 | % | | 20,164 | | | | 8,658 | | | | 4.3 | % |

| Services | 156,082 | | | | 141,928 | | | | 14,154 | | | | 10.0 | % | | 8,718 | | | | 5,436 | | | | 3.8 | % |

| Total core commissions and fees | $ | 1,697,308 | | | $ | 1,588,549 | | | $ | 108,759 | | | 6.8 | % | | $ | 61,713 | | | $ | 47,046 | | | 3.0 | % |

| Retail(1) | $ | 836,123 | | | $ | 789,503 | | | $ | 46,620 | | | 5.9 | % | | $ | 35,644 | | | $ | 10,976 | | | 1.4 | % |

| National Programs | 412,885 | | | | 367,672 | | | | 45,213 | | | | 12.3 | % | | 38,519 | | | | 6,694 | | | | 1.8 | % |

| Wholesale Brokerage | 200,835 | | | | 187,257 | | | | 13,578 | | | | 7.3 | % | | 2,469 | | | | 11,109 | | | | 5.9 | % |

| Services | 145,375 | | | | 136,135 | | | | 9,240 | | | | 6.8 | % | | — | | | | 9,240 | | | | 6.8 | % |

| Total core commissions and fees | $ | 1,595,218 | | | $ | 1,480,567 | | | $ | 114,651 | | | 7.7 | % | | $ | 76,632 | | | $ | 38,019 | | | 2.6 | % |

| (in thousands) | 2014 | | | | 2013 | | |

| Total commissions and fees | $ | 1,567,460 | | | $ | 1,355,503 | |

The fair values of our invested assets at December 31, [removed: 2016] [added: 2017] and December 31, [removed: 2015,] [added: 2016,] approximated their respective carrying values due to their short-term duration and therefore, such market risk is not considered to be material.

As of December 31, [removed: 2016] [added: 2017,] we had [removed: $481.3] [added: $385.0] million of borrowings outstanding under our [removed: term loan] [added: Amended and Restated Credit Agreement,] which bears interest on a floating basis tied to the London Interbank Offered Rate (LIBOR) and [added: is] therefore subject to changes in the associated interest expense.

We are subject to exchange rate risk primarily in our [removed: U.K-based] [added: U.K.-based] wholesale brokerage business that has a cost base principally denominated in British pounds and a revenue base in several other currencies, but principally in U.S. dollars.

Based upon our foreign currency rate exposure as of December 31, [removed: 2016,] [added: 2017,] an immediate 10% hypothetical changes of foreign currency exchange rates would not have a material effect on our Consolidated Financial Statements.

[removed: General][added: General]

The Company is compensated for [removed: our] [added: its] services primarily by commissions paid by insurance companies and to a lesser extent, by fees paid directly by customers for certain services.

We may also receive from an insurance [removed: company,] [added: company] a “profit-sharing contingent commission,” which is a profit-sharing commission based primarily on underwriting results, but may also contain considerations for volume, growth and/or retention.

As of December 31, [removed: 2016,] [added: 2017,] our activities were conducted in [removed: 237] [added: 238] locations in [removed: 41] [added: 40] states as follows, as well as in England, [added: Canada,] Bermuda, and the Cayman Islands:

| New York | [removed: 19] [added: 18] | | | Michigan | 4 | | [removed: Tennessee] [added: Montana] | 2 |

| Georgia | 10 | | | Arkansas | 3 | | [removed: Mississippi] [added: Wisconsin] | [removed: 1] [added: 2] |

| Louisiana | [removed: 8] [added: 9] | | | New Mexico | 3 | | [removed: Nevada] [added: Mississippi] | 1 |

| Massachusetts | 7 | | | [removed: Ohio] [added: South Carolina] | 3 | | North Carolina | 1 |

| Oregon | 7 | | | [removed: South Carolina] [added: Tennessee] | 3 | | Utah | 1 |

| [removed: Pennsylvania] [added: Colorado] | [removed: 7] [added: 6] | | | Hawaii | 2 | | Vermont | 1 |

[removed: Industry Overview][added: Industry Overview]

[removed: Segment Information][added: Segment Information]

Our business is divided into four reportable segments: (1) the Retail [removed: Segment;] [added: Segment,] (2) the National Programs [removed: Segment;] [added: Segment,] (3) the Wholesale Brokerage [removed: Segment;] [added: Segment] and (4) the Services Segment.

The National Programs Segment, which acts as a managing general agent (“MGA”), provides professional liability and related package products for certain professionals, a range of insurance products for individuals, flood coverage, and targeted products and services designated for specific industries, trade groups, governmental entities and market niches, all of which are delivered through [added: a] nationwide [removed: networks] [added: network] of independent agents, including Brown & Brown retail agents.

The following table summarizes (1) the commissions and fees [removed: revenue] generated by each of our reportable operating segments for [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014,] [added: 2015,] and (2) the percentage of our total commissions and fees [removed: revenue] represented by each segment for each such period:

| [removed: (in] [added: (in] thousands, except [removed: percentages)] [added: percentages)] | [removed: 2016] [added: 2017] | | | | [removed: %] [added: %] | | | [removed: 2015] [added: 2016] | | | | [removed: %] [added: %] | | | [removed: 2014] [added: 2015] | | | | [removed: %] [added: %] | |

| Retail Segment | $ | [removed: 916,723] [added: 942,247] | | | [removed: 52.0] [added: 50.7] | % | | $ | [removed: 867,762] [added: 916,723] | | | [removed: 52.4] [added: 52.0] | % | | $ | [removed: 823,211] [added: 867,762] | | | [removed: 52.5] [added: 52.4] | % |

| National Programs Segment | [removed: 447,808] [added: 479,017] | | | | [removed: 25.4] [added: 25.8] | % | | [removed: 428,473] [added: 447,808] | | | | [removed: 25.9] [added: 25.4] | % | | [removed: 397,326] [added: 428,473] | | | | [removed: 25.3] [added: 25.9] | % |

| Wholesale Brokerage Segment | [removed: 242,813] [added: 271,141] | | | | [removed: 13.8] [added: 14.6] | % | | [removed: 216,638] [added: 242,813] | | | | [removed: 13.1] [added: 13.8] | % | | [removed: 211,512] [added: 216,638] | | | | [removed: 13.5] [added: 13.1] | % |

| Services Segment | [removed: 156,082] [added: 165,073] | | | | [removed: 8.8] [added: 8.9] | % | | [removed: 145,375] [added: 156,082] | | | | 8.8 | % | | [removed: 136,482] [added: 145,375] | | | | [removed: 8.7] [added: 8.8] | % |

| Other | [removed: (639] [added: (208] | | ) | | — | % | | [removed: (1,297] [added: (639] | | ) | | [removed: (0.2] [added: —] | [removed: )%] [added: %] | | [removed: (1,071] [added: (1,297] | | ) | | [removed: —] [added: (0.2] | [removed: %] [added: )%] |

| Total | $ | [removed: 1,762,787] [added: 1,857,270] | | | [removed: 100] [added: 100.0] | % | | $ | [removed: 1,656,951] [added: 1,762,787] | | | [removed: 100] [added: 100.0] | % | | $ | [removed: 1,567,460] [added: 1,656,951] | | | [removed: 100] [added: 100.0] | % |

We conduct all of our operations within the United States of America, except for one [removed: wholesale brokerage] [added: Wholesale Brokerage] operation based in England, [added: one National Programs operation in Canada] and [removed: retail] [added: Retail] operations based in Bermuda and The Cayman Islands.

These operations generated [removed: $14.5] [added: $15.9] million, [removed: $13.4] [added: $14.5] million and [removed: $13.3] [added: $13.4] million of revenues for the years ended December 31, [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014,] [added: 2015,] respectively.

[removed: Retail Segment][added: Retail Segment]

As of December 31, [removed: 2016,] [added: 2017,] our Retail Segment employed [removed: 3,981] [added: 4,030] full-time equivalent employees.

During [removed: 2016,] [added: 2017,] commissions and fees from our largest single Retail Segment customer represented three tenths of one percent (0.3%) of the Retail Segment’s total commissions and [removed: fees revenue.][added: fees.]

In connection with the selling and marketing of insurance coverages, we provide a broad range of related services to our customers, such as risk management [removed: and] [added: strategies,] loss control surveys and analysis, consultation in connection with placing insurance coverages and claims processing.

[removed: National] [added: National] Programs [removed: Segment][added: Segment]

As of December 31, [removed: 2016,] [added: 2017,] our National Programs Segment employed [removed: 1,863] [added: 1,990] full-time equivalent employees.

Our National Programs Segment works with over 40 well-capitalized carrier partners, offering more than [removed: 50] [added: 51] programs, which can be grouped into five broad [removed: categories;] [added: categories:] (1) Professional [removed: Programs;] [added: Programs,] (2) [removed: Arrowhead Insurance Programs;] [added: Personal Lines Programs,] (3) Commercial [removed: Programs;] [added: Programs,] (4) Public Entity-Related [removed: Programs;] [added: Programs,] and (5) the National Flood Program:

[added: Professional Programs.] Professional Programs provide professional liability and related package insurance products tailored to the needs of specific professional groups.

| | [removed: Healthcare Professionals:] [added: *Healthcare Professionals:*] Allied Protector Plan® (“APP®”) specializes in customized professional liability and business insurance programs for individual practitioners and businesses in the healthcare industry. The APP program offers liability insurance coverage for, among others, dental hygienists and dental assistants, home health agencies, physical therapy clinics, and medical directors. Also available through the APP program is cyber/data breach insurance offering a solution to privacy breaches and information security exposures tailored to the needs of healthcare organizations. |

[removed: Certified] [added: *Certified] Public [removed: Accountants:] [added: Accountants:*] The CPA Protector Plan® is a specialty insurance program offering comprehensive professional liability insurance solutions and risk management services to CPA practitioners and their firms nationwide.

[removed: Dentists:] [added: *Dentists:*] First initiated in 1969, the Professional Protector Plan® (“PPP®”) for Dentists provides dental professionals insurance products including professional and general liability, property, employment practices liability, workers’ compensation, claims and risk management.

[removed: Financial Professionals:] [added: *Financial Professionals:*] CalSurance® and CITA Insurance Services® have specialized in this niche since 1980 and offer professional liability programs designed for insurance agents, financial advisors, registered representatives, securities broker-dealers, benefit administrators, real estate brokers and real estate title agents.

[removed: Lawyers:] [added: *Lawyers*:] The Lawyer’s Protector Plan® (“LPP®”) has been providing professional liability insurance for over 30 years with a niche focus on law firms with fewer than 20 attorneys.

[removed: Optometrists,] [added: *Optometrists,] Opticians, and [removed: Ophthalmologists:] [added: Ophthalmologists*:] Since 1973 the Optometric Protector Plan® (“OPP®”), provides professional liability, general liability, property, workers’ compensation insurance and risk management programs for eye care professionals nationwide.

[removed: | | Real] [added: *Real] Estate Title [removed: Professionals:] [added: Professionals:*] TitlePac® provides professional liability products and services designed for real estate title agents and escrow [removed: agents in 47 states and the District of Columbia. |][added: agents.]

| | [removed: Wedding] [added: *Wedding] Protector [removed: Plan® and] [added: Plan®* *and] Protector [removed: Plan® for Events] [added: Plan®* *for Events*] provide an online [removed: wedding/private] [added: wedding and private] event cancellation and postponement insurance policy that offers financial protection if certain unfortunate or unforeseen events should occur during the period leading up to and including the [removed: wedding/event] [added: wedding or event] date. Liability and liquor liability is available as an option. [removed: Both the Wedding Protector Plan and Protector Plan for Events are offered in 47 states.] |

| Florida | 41 | | | Minnesota | 5 | | Maryland | 2 |

| California | 23 | | | Arizona | 4 | | Missouri | 2 |

| New Jersey | 13 | | | Oklahoma | 4 | | New Hampshire | 2 |

| Washington | 12 | | | Virginia | 4 | | Rhode Island | 2 |

| Texas | 10 | | | Indiana | 3 | | Delaware | 1 |

| Pennsylvania | 8 | | | Ohio | 3 | | Nevada | 1 |

| Illinois | 6 | | | Kansas | 2 | | | |

| Connecticut | 5 | | | Kentucky | 2 | | | |

| | *Physicians:* The Physicians Protector Plan program provides professional liability insurance solutions for physicians on an admitted basis in several key states. The program offers comprehensive insurance solutions and provides risk management benefits and claims services. |

*Professional Risk Specialty Group:* Professional Risk Specialty Group (“PRSG”) has been providing Errors & Omissions, Professional Liability and Malpractice Insurance for over 22 years both in a direct retail sales and brokering capacity.

PRSG has been an exclusive State Administrator for a Lawyers Professional Liability Program since 1994.

The admitted Lawyers Professional Liability Program focuses on law firms with fewer than 20 attorneys, and the non-admitted Lawyers Professional Liability Program is for firms with 20 or more attorneys and is available for primary or excess coverage.

PRSG is also involved in direct sales and brokering for other professionals, such as accountants, architects & engineers, medical malpractice, directors & officers, employment practices liability, title agency E&O and miscellaneous E&O.

Personal Lines Programs.

Commercial Programs.

*Bellingham Underwriters:* focuses on the commercial transportation industry and those that are in the business of supporting it.

The trucking program is specifically designed to handle all coverages a trucker on the road might need.

Other programs include specialty auto, repair services, forest products and commercial ambulance.

*Core Commercial:* formerly known as QBE Small Commercial (targets accounts under $100,000 in annual premium), this program offers business owner’s policies (BOPs) and commercial package coverages for a broad range of industries nationwide.

*Workers’ Compensation:* provides workers’ compensation insurance coverage primarily for California-based insureds.

National Flood Program. Operating as Wright Flood, Wright National Flood Insurance Company (“WNFIC”) is an insurance carrier.

*Protect Professionals Claims Management (“PPCM”)* provides third-party administration (“TPA”) services to professional liability insurance markets on a nationwide basis.

PPCM’s services include claims adjusting, administration, litigation and data management for professional programs for CPAs, dentists, lawyers, and physicians administered by our National Programs Segment.

to the SEC.

| Florida | 41 | | | Connecticut | 4 | | New Hampshire | 2 |

| California | 25 | | | Indiana | 4 | | Rhode Island | 2 |

| New Jersey | 14 | | | Minnesota | 4 | | Delaware | 1 |

| Washington | 12 | | | Oklahoma | 4 | | Kansas | 1 |

| Texas | 11 | | | Virginia | 4 | | Maryland | 1 |

| Colorado | 6 | | | Kentucky | 2 | | West Virginia | 1 |

| Illinois | 6 | | | Missouri | 2 | | Wisconsin | 1 |

| Arizona | 4 | | | Montana | 2 | | | |

Professional Programs.

| | |

| --- | --- |

The PPP is offered in all 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands.

The LPP is offered in 44 states and the District of Columbia.

The OPP is offered in all 50 states and the District of Columbia.

| | Professional Risk Specialty Group: Professional Risk Specialty Group (“PRSG”) has been providing Errors & Omissions/Professional Liability/Malpractice Insurance for over 22 years both in a direct retail sales and brokering capacity. PRSG has been an exclusive State Administrator for a Lawyers Professional Liability Program since 1994 in Florida, Louisiana, and Puerto Rico, and has state appointments in 34 other states. The admitted Lawyers Program focuses on law firms with fewer than 20 attorneys, and the non-admitted program is for firms with 20 or more attorneys and is available for primary or excess coverage. PRSG is also involved in direct sales and brokering for other professionals, such as accountants, architects & engineers, medical malpractice, directors & officers, employment practices liability, title agency E&O and miscellaneous E&O. |

Arrowhead Programs.

Architects and Engineering: operating as Arrowhead Design Insurance (“ADI”), is a leading writer of professional liability insurance for architects, engineers and environmental consultants.

ADI is a national program writing in all 50 states and the District of Columbia.

Commercial Programs.

AFC also has a separate program for independent pizza/deli restaurants.

| | Bellingham Underwriters Inc.: was established in 1997 and has primarily focused on the commercial transportation industry and those that are in the business of supporting it. The trucking program is specifically designed to handle all coverages a trucker on the road might need. Other programs include specialty auto, repair services, forest products and commercial ambulance. |

National Flood Program.

Wright operates a flood insurance carrier, WNFIC, which is a Wright subsidiary.

[removed: UNITED STATES][added: UNITED STATES]

[removed: SECURITIES] [added: SECURITIES] AND EXCHANGE [removed: COMMISSION][added: COMMISSION]

[removed: Washington,] [added: Washington,] D.C. [removed: 20549][added: 20549]

[removed: FORM 10-K][added: FORM 10-K]

| ý | [removed: ANNUAL] [added: ANNUAL] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934] [added: 1934] |

[removed: For] [added: For] the fiscal year [removed: ended December] [added: ended December] 31, [removed: 2016][added: 2017]

| ¨ | [removed: TRANSITION] [added: TRANSITION] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934] [added: 1934] |

[removed: For] [added: For] the transition period [removed: from to][added: from to]

[removed: Commission] [added: Commission] file number [removed: 001-13619][added: 001-13619]

[removed: BROWN] [added: BROWN] & BROWN, [removed: INC.][added: INC.]

[removed: (Exact] [added: (Exact] name of [removed: Registrant] [added: registrant] as specified in its [removed: charter)][added: charter)]

| [removed: Florida] [added: Florida] | | [removed: ] [added: ] | | [removed: 59-0864469] [added: 59-0864469] |

| [removed: (State] [added: (State] or other jurisdiction [removed: of incorporation] [added: of incorporation] or [removed: organization)] [added: organization)] | | | [removed: (I.R.S. Employer Identification Number)] [added: (I.R.S. Employer Identification Number)] | |

| [removed: 220] [added: 220] South Ridgewood [removed: Avenue, Daytona] [added: Avenue, Daytona] Beach, [removed: FL] [added: FL] | | | [removed: 32114] [added: 32114] | |

| [removed: (Address] [added: (Address] of principal executive [removed: offices)] [added: offices)] | | | [removed: (Zip Code)] [added: (Zip Code)] | |

[removed: Registrant’s] [added: Registrant’s] telephone number, including area code: (386) [removed: 252-9601][added: 252-9601]

[removed: Registrant’s] [added: Registrant’s] Website: [removed: www.bbinsurance.com][added: www.bbinsurance.com]

[removed: Securities] [added: Securities] registered pursuant to Section 12(b) of the [removed: Act:][added: Act:]

| [removed: Title] [added: Title] of each [removed: class] [added: class] | [removed: Name] [added: Name] of each exchange on which [removed: registered] [added: registered] |

| [removed: COMMON] [added: COMMON] STOCK, $0.10 PAR [removed: VALUE] [added: VALUE] | [removed: NEW] [added: NEW] YORK STOCK [removed: EXCHANGE] [added: EXCHANGE] |

[removed: Securities] [added: Securities] registered pursuant to Section 12(g) of the [removed: Act:][added: Act:]

[removed: None][added: None]

[removed: NOTE:] [added: Note -] Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such [removed: files)..][added: files).]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, [removed: or] a smaller reporting [added: company or emerging growth] company.

See the definitions of “large accelerated filer,” “accelerated filer,” [removed: and] “smaller reporting company” [added: and “emerging growth company”] in Rule 12b-2 of the Exchange Act:

The aggregate market value of the voting common stock held by non-affiliates of the registrant, computed by reference to the price at which the stock was last sold on June 30, [removed: 2016] [added: 2017] (the last business day of the registrant’s most recently completed second fiscal quarter) was [removed: $4,352,838,341.][added: $5,014,164,392.]

The number of shares of the Registrant’s common stock, $0.10 par value, outstanding as of February 23, [removed: 2017] [added: 2018] was [removed: 139,986,178.][added: 137,800,585.]

[removed: DOCUMENTS] [added: DOCUMENTS] INCORPORATED BY [removed: REFERENCE][added: REFERENCE]

Portions of Brown & Brown, Inc.’s Proxy Statement for the [removed: 2017] [added: 2018] Annual Meeting of Shareholders are incorporated by reference into Part III of this Report.

[removed: ANNUAL] [added: ANNUAL] REPORT ON FORM [removed: 10-K][added: 10-K]

[removed: INDEX][added: INDEX]

| | | [removed: PAGE NO.] [added: PAGE NO.] |

[removed: | [Part I](#s1411946DE8275BD69DE6E315CEF166F2) | | |][added: PART I]

| Item 1. | [removed: [Business](#s7CB89076037D53AD81989ACA1B4731FD)] [added: [Business](#s42D97492D87E5CC28901D49A4784F36B)] | [removed: [4](#s7CB89076037D53AD81989ACA1B4731FD)] [added: [4](#s42D97492D87E5CC28901D49A4784F36B)] |

| Item 1A. | [Risk [removed: Factors](#s4169FAE312405AEF96F86AEF80E75D90)] [added: Factors](#s1DAA9B8488745EF1BED08FC5CCE8364C)] | [removed: [11](#s4169FAE312405AEF96F86AEF80E75D90)] [added: [11](#s1DAA9B8488745EF1BED08FC5CCE8364C)] |

| Item 1B. | [Unresolved Staff [removed: Comments](#s9CE1D78F773D573FB993229547A64728)] [added: Comments](#s4FFD534936745C7B9BABE367314F40ED)] | [removed: [18](#s9CE1D78F773D573FB993229547A64728)] [added: [18](#s4FFD534936745C7B9BABE367314F40ED)] |

| Item 2. | [removed: [Properties](#sC64D68C775C15054BE614BFA6EBEA92D)] [added: [Properties](#s660114E34EAE508897D5B089FF05FA99)] | [removed: [18](#sC64D68C775C15054BE614BFA6EBEA92D)] [added: [18](#s660114E34EAE508897D5B089FF05FA99)] |

| Item 3. | [Legal [removed: Proceedings](#sA64A24F38DFF5F6E8F5B614C8C767C06)] [added: Proceedings](#sFC4AEFACEC8F5AD7AF3E31282C6D75A6)] | [removed: [18](#sA64A24F38DFF5F6E8F5B614C8C767C06)] [added: [18](#sFC4AEFACEC8F5AD7AF3E31282C6D75A6)] |

| Item 4. | [Mine Safety [removed: Disclosures](#s929FF5EDFAA95A6BB5EE0DFA0515A551)] [added: Disclosures](#s9DCE823216FC52F0B6A88F0B53C13154)] | [removed: [18](#s929FF5EDFAA95A6BB5EE0DFA0515A551)] [added: [18](#s9DCE823216FC52F0B6A88F0B53C13154)] |

or

| | | | | | | |

| | | | | Emerging growth company | | ¨ |

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

BROWN & BROWN, INC.

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2017

| [Part II](#sF9159479EE135D80B464033A28C93526) | | |

| [Part IV](#sB416390E574952A3B14173BD135C62FD) | | |

| [Signatures](#s08C9018DF73F5E17A907CCCEDED09794) | | [85](#s08C9018DF73F5E17A907CCCEDED09794) |

10-K 1 bro-20161231x10k.htm 10-K

Or

| | | |

| [Part II](#s7F6B35E91AA854259A092D5FD095665E) | | |

| [Part IV](#sDFF17A3165D05DC79E31B32FD5C38F54) | | |

| [Signatures](#sD3443D87E5B059EBA8B295763FEFC8D3) | | [83](#sD3443D87E5B059EBA8B295763FEFC8D3) |

| Exhibit Index | | [83](#sD3443D87E5B059EBA8B295763FEFC8D3) |

We lease offices at each of our [removed: 241] [added: 242] locations.

[removed: PART II][added: PART II]

| | [removed: High] [added: High] | | [removed: Low] [added: Low] | | [removed: Cash Dividends Per Common Share] [added: Cash Dividends Per Common Share] |

| [removed: 2016] [added: 2016] | | | | | |

On February 23, [removed: 2017,] [added: 2018,] there were [removed: 139,986,178] [added: 137,800,585] shares of our common stock outstanding, held by approximately [removed: 1,218] [added: 1,245] shareholders of record.

We intend to continue to pay quarterly dividends, subject to [removed: continued] capital availability and determination by our Board of Directors that cash dividends continue to be in the best interests of our shareholders.

[removed: Equity] [added: Equity] Compensation Plan [removed: Information][added: Information]

The following table sets forth information as of December 31, [removed: 2016,] [added: 2017,] with respect to compensation plans under which the Company’s equity securities are authorized for issuance:

| [removed: Plan Category] [added: Plan Category] | [removed: Number] [added: Number] of [removed: securities to] [added: securities to] be issued [removed: upon exercise of outstanding options, warrants and rights(a)(1)] [added: upon exercise of outstanding options, warrants and rights(1)] | | | [removed: Weighted-average exercise] [added: Weighted-average exercise] price [removed: of outstanding options, warrants and rights(b)(2) |] [added: of outstanding options, warrants and rights(2)] | | | [removed: Number] [added: Number] of [removed: securities remaining available for] [added: securities remaining available for] future [removed: issuance under equity compensation plans (excluding securities reflected in] [added: issuance under equity compensation plans (excluding securities reflected in] column [removed: (a))(c)(3)] [added: (A))(3)] | | |

| Equity compensation plans approved by shareholders: | | | | | | | | | | [removed: |]

| Brown & Brown, Inc. 2000 Incentive Stock Option Plan | [removed: 175,000 |] [added: N/A] | | [removed: $] | [removed: 18.48] [added: N/A] | | | — | | |

| Brown & Brown, Inc. 2010 Stock Incentive Plan | N/A | | | N/A | | | [removed: | 3,729,566] [added: 4,197,920] | | (4) |

| Brown & Brown, Inc. 1990 Employee Stock Purchase Plan | N/A | | | N/A | | | [removed: | 4,680,263] [added: 4,151,251] | | |

| Brown & Brown, Inc. Performance Stock Plan | N/A | | | N/A | | | [removed: |] — | | |

| Equity compensation plans not approved by shareholders | — | | | — | | | [removed: |] — | | |

| (1) | In addition to the number of securities listed in this column, [removed: 3,404,569] [added: 3,252,040] shares are issuable upon the vesting of restricted stock granted under the Brown & Brown, Inc. Performance Stock Plan and the Brown & Brown, Inc. 2010 Stock Incentive Plan, which represents the maximum number of shares that can vest based upon the achievement of certain performance criteria. |

| (4) | The payout for [removed: 321,955] [added: 634,091] shares of our outstanding performance-based restricted stock grants may be increased up to 200% of the target or decreased to zero, subject to the level of performance attained. The amount reflected in the table is calculated assuming the maximum payout for all restricted stock grants. |

[removed: Sales] [added: Sales] of Unregistered [removed: Securities][added: Securities]

We did not sell any unregistered securities during [removed: 2016.][added: 2017.]

[removed: Issuer] [added: Issuer] Purchases of Equity [removed: Securities][added: Securities]

On [removed: March 5, 2015,] [added: November 14, 2017,] the Company entered into an ASR with an investment bank to purchase an aggregate [removed: $100.0] [added: $75.0] million of the [removed: Company’s] [added: Company's] common stock.

As part of the ASR, the [removed: Company] [added: company] received an initial delivery of [removed: 2,667,992] [added: 967,888] shares of the Company’s common stock with a fair market value of approximately [removed: $85.0] [added: $42.5] million.

On July [added: 18, 2014, the Company’s Board of Directors authorized the repurchase of up to $200.0 million of its shares of common stock, and on July] 20, 2015, the Company’s Board of Directors authorized the repurchase of up to an additional $400.0 million of the Company’s outstanding common [removed: stock, bringing the total available authorization to $450.0 million.][added: stock.]

On [removed: November 11, 2015,] [added: August 14, 2017,] the Company entered into [removed: another ASR] [added: accelerated share repurchase agreement ("ASR")] with an investment bank to purchase an aggregate [removed: $75] [added: $50.0] million of the [removed: Company’s] [added: Company's] common stock.

[removed: The Company] [added: As part of the ASR, the company] received an initial delivery of [removed: 1,985,981] [added: 1,290,486] shares of the [removed: Company’s] [added: Company's] common stock with a fair market value of approximately [removed: $63.75] [added: $63.8] million.

Between [removed: October 25, 2016] [added: May 18, 2017] and [removed: November 4, 2016,] [added: July 14, 2017,] the Company made share repurchases in the open market in total of [removed: 209,618] [added: 348,460] shares at a total cost of [removed: $7.7] [added: $14.9] million.

The following table presents information with respect to our purchases of our common stock during the three months ended December 31, [removed: 2016.][added: 2017.]

| [removed: Period] [added: Period] | | [removed: Total] [added: Total] Number [removed: of Shares Purchased (1)] [added: of Shares Purchased (1)] | | | [removed: Average Price Paid per Share] [added: Average Price Paid per Share] | | | | [removed: Total Number of Shares Purchased as] [added: Total Number of Shares Purchased as] Part [removed: of Publicly Announced Plans or Programs] [added: of Publicly Announced Plans or Programs] | | | [removed: Approximate Dollar] [added: Approximate Dollar] Value [removed: of Shares] [added: of Shares] that [removed: May Yet Be Purchased Under the] [added: May Yet Be Purchased Under the] Plans [removed: or Programs] [added: or Programs] | | |

(1) With the exception of [removed: 209,618] [added: 1,290,486] shares purchased in [removed: open market transactions,] [added: an ASR transaction,] all other shares reported above are attributable to shares withheld for employees’ payroll withholding taxes pertaining to the vesting of restricted shares awarded under our Performance Stock Plan and Incentive Stock Option Plan.

[removed: Performance Graph][added: Performance Graph]

The returns of each company have been weighted according to such companies’ respective stock market capitalizations as of December 31, [removed: 2011] [added: 2012] for the purposes of arriving at a peer group average.

The total return calculations are based upon an assumed $100 investment on December 31, [removed: 2011,] [added: 2012,] with all dividends reinvested.

[removed: ][added: ]

| 2017 | | | | | |

| First Quarter | $45.77 | | $41.68 | | $0.14 |

| Second Quarter | $44.57 | | $41.10 | | $0.14 |

| Third Quarter | $48.97 | | $42.30 | | $0.14 |

| Fourth Quarter | $52.42 | | $48.07 | | $0.15 |

| | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | |

| | A | | | B | | | C | | |

| Total | N/A | | | N/A | | | 8,349,171 | | |

Under the authorization from the Company’s Board of Directors, shares may be purchased from time to time, at the Company’s discretion and subject to the availability of stock, market conditions, the trading price of the stock, alternative uses for capital, the Company’s financial performance and other potential factors.

These purchases may be carried out through open market purchases, block trades, accelerated share repurchase plans of up to $100.0 million each (unless otherwise approved by the Board of Directors), negotiated private transactions or pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934.

Upon maturity of the program, the Company received 108,288 shares, relieving the remaining balance of $7.5 million at settlement on October 16, 2017 for a total delivery of 1,076,176 shares of the Company's common stock.

Upon maturity of the program, the Company received 168,227 shares, relieving the remaining balance of $11.2 million at settlement on February 9, 2018 for a total delivery of 1,458,713 shares of the Company's common stock.

During 2014, the Company repurchased 2,384,760 shares at an average price per share of $31.46 for a total cost of $75.0 million under the original share repurchase authorization from the Board of Directors on July 18, 2014.

During 2015, the Company repurchased 5,408,819 shares at an average price per share of $32.35 for a total cost of $175.0 million under the current share repurchase authorization, while exhausting the previous authorization of $200.0 million from the Board of Directors in 2014.

During 2016, the Company repurchased 209,618 shares at an average price per share of $36.53 for a total cost of $7.7 million under the current share repurchase authorization.

At December 31, 2017, the remaining amount authorized by our Board of Directors for share repurchases was $238.7 million.

Under the authorized repurchase programs, the Company has repurchased a total of approximately 10.7 million shares for an aggregate cost of approximately $386.3 million between 2014 and 2017.

| October 1, 2017 to October 31, 2017 | | 1,799 | | | $ | 49.38 | | | — | | | $ | 302,453,029 | |

| November 1, 2017 to November 30, 2017 | | 1,295,819 | | | 49.40 | | | | 1,290,486 | | | 238,703,029 | | |

| December 1, 2017 to December 31, 2017 | | 1,232 | | | 51.50 | | | | — | | | 238,703,029 | | |

| Total | | 1,298,850 | | | $ | 49.40 | | | 1,290,486 | | | $ | 238,703,029 | |

| | 12/12 | | | 12/13 | | | 12/14 | | | 12/15 | | | 12/16 | | | 12/17 | |

| Brown & Brown, Inc. | 100.00 | | | 124.74 | | | 132.41 | | | 130.98 | | | 185.09 | | | 214.61 | |

| NYSE Composite | 100.00 | | | 126.06 | | | 134.62 | | | 129.40 | | | 144.72 | | | 171.65 | |

| Peer Group | 100.00 | | | 142.91 | | | 157.73 | | | 156.96 | | | 185.44 | | | 228.52 | |

| 2015 | | | | | |

| First Quarter | $33.34 | | $30.47 | | $0.11 |

| Second Quarter | $33.81 | | $31.50 | | $0.11 |

| Third Quarter | $34.59 | | $29.67 | | $0.11 |

| Fourth Quarter | $33.09 | | $30.39 | | $0.12 |

| | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Total | 175,000 | | | $ | 18.48 | | | 8,409,829 | | |

On July 18, 2014, the Company’s Board of Directors approved a common stock repurchase plan to authorize the repurchase of up to $200.0 million worth of shares of the Company’s common stock during the period running from the July 18, 2014 approval date to December 31, 2015.

As of December 31, 2014, we had repurchased $50.0 million worth of shares of our common stock under the repurchase authorization.

On August 6, 2015, the Company was notified by its investment bank that the March 5, 2015 ASR agreement between the Company and the investment bank had been completed in accordance with the terms of the agreement.

The investment bank delivered to the Company an additional 391,637 shares of the Company’s common stock for a total of 3,059,629 shares repurchased under the agreement.

The delivery of the remaining 391,637 shares occurred on August 11, 2015.

On January 6, 2016 this agreement was completed by the investment bank with the delivery of 363,209 shares of the Company’s common stock.

After completing these open market share repurchases, the Company’s outstanding Board approved share repurchase authorization is $367.3 million.

| October 1, 2016 to October 31, 2016 | | 105 | | | $ | 37.34 | | | — | | | $ | 375,000,000 | |

| November 1, 2016 to November 30, 2016 | | 210,943 | | | 36.57 | | | | 209,618 | | | 367,342,175 | | |

| December 1, 2016 to December 31, 2016 | | 930 | | | 43.62 | | | | — | | | 367,342,175 | | |

| Total | | 211,978 | | | $ | 36.60 | | | 209,618 | | | $ | 367,342,175 | |

| | 12/11 | | | 12/12 | | | 12/13 | | | 12/14 | | | 12/15 | | | 12/16 | |

| Brown & Brown, Inc. | 100.00 | | | 114.03 | | | 142.25 | | | 150.99 | | | 149.35 | | | 211.06 | |

| NYSE Composite | 100.00 | | | 116.03 | | | 146.27 | | | 156.21 | | | 150.15 | | | 167.91 | |

| Peer Group | 100.00 | | | 132.13 | | | 177.92 | | | 193.88 | | | 191.20 | | | 223.36 | |

| [removed: (in] [added: (in] thousands, except per share data, number of employees and [removed: percentages] [added: percentages] | | [removed: Year] [added: Year] Ended December [removed: 31 |] [added: 31] | | | | | | | | | | | | | | | | | | |

| | [removed: 2016 |] [added: 2017] | | | [removed: 2015] | [added: 2016] | | | [removed: 2014] | [added: 2015] | | | [removed: 2013] | [added: 2014] | | | [removed: 2012] | [added: 2013] | | | |

| [removed: REVENUES |] [added: REVENUES] | | | | | | | | | | | | | | | | | | | | |

| Commissions and fees | | $ | [removed: 1,762,787] [added: 1,857,270] | | | $ | [removed: 1,656,951] [added: 1,762,787] | | | $ | [removed: 1,567,460] [added: 1,656,951] | | | $ | [removed: 1,355,503] [added: 1,567,460] | | | $ | [removed: 1,189,081 |] [added: 1,355,503] | |

| Investment income | | [removed: 1,456 |] [added: 1,626] | | | [removed: 1,004] | [added: 1,456] | | | [removed: 747] | [added: 1,004] | | | [removed: 638] | [added: 747] | | | [removed: 797] | [added: 638] | | |

| Other income, net | | [removed: 2,386 |] [added: 22,451] | | | [removed: 2,554] | [added: 2,386] | | | [removed: 7,589] | [added: 2,554] | | | [removed: 7,138] | [added: 7,589] | | | [removed: 10,154] | [added: 7,138] | | |

| Total revenues | | [removed: 1,766,629 |] [added: 1,881,347] | | | [removed: 1,660,509] | [added: 1,766,629] | | | [removed: 1,575,796] | [added: 1,660,509] | | | [removed: 1,363,279] | [added: 1,575,796] | | | [removed: 1,200,032] | [added: 1,363,279] | | |

| [removed: EXPENSES |] [added: EXPENSES] | | | | | | | | | | | | | | | | | | | | |

| Employee compensation and benefits | | [removed: 925,217 |] [added: 994,652] | | | [removed: 856,952] | [added: 925,217] | | | [removed: 811,112] | [added: 856,952] | | | [removed: 705,603] | [added: 811,112] | | | [removed: 624,371] | [added: 705,603] | | |

| Other operating expenses | | [removed: 262,872 |] [added: 283,470] | | | [removed: 251,055] | [added: 262,872] | | | [removed: 235,328] | [added: 251,055] | | | [removed: 195,677] | [added: 235,328] | | | [removed: 174,389] | [added: 195,677] | | |

| [removed: Loss/(gain)] [added: (Gain)/loss] on disposal | | [removed: (1,291] [added: (2,157] | | ) | | [removed: (619] [added: (1,291] | | ) | | [removed: 47,425] [added: (619] | | [added: )] | | [removed: —] [added: 47,425] | | | | — | | | [removed: |]

| Amortization | | [removed: 86,663 |] [added: 85,446] | | | [removed: 87,421] | [added: 86,663] | | | [removed: 82,941] | [added: 87,421] | | | [removed: 67,932] | [added: 82,941] | | | [removed: 63,573] | [added: 67,932] | | |

| Depreciation | | [removed: 21,003 |] [added: 22,698] | | | [removed: 20,890] | [added: 21,003] | | | [removed: 20,895] | [added: 20,890] | | | [removed: 17,485] | [added: 20,895] | | | [removed: 15,373] | [added: 17,485] | | |

| Interest | | [removed: 39,481 |] [added: 38,316] | | | [removed: 39,248] | [added: 39,481] | | | [removed: 28,408] | [added: 39,248] | | | [removed: 16,440] | [added: 28,408] | | | [removed: 16,097] | [added: 16,440] | | |

| Change in estimated acquisition earn-out payables | | [removed: 9,185 |] [added: 9,200] | | | [removed: 3,003] | [added: 9,185] | | | [removed: 9,938] | [added: 3,003] | | | [removed: 2,533] | [added: 9,938] | | | [removed: 1,418] | [added: 2,533] | | |

| Total expenses | | [removed: 1,343,130 |] [added: 1,431,625] | | | [removed: 1,257,950] | [added: 1,343,130] | | | [removed: 1,236,047] | [added: 1,257,950] | | | [removed: 1,005,670] | [added: 1,236,047] | | | [removed: 895,221] | [added: 1,005,670] | | |

| Income before income taxes | | [removed: 423,499 |] [added: 449,722] | | | [removed: 402,559] | [added: 423,499] | | | [removed: 339,749] | [added: 402,559] | | | [removed: 357,609] | [added: 339,749] | | | [removed: 304,811] | [added: 357,609] | | |

| Income taxes | | [removed: 166,008 |] [added: 50,092] | | | [removed: 159,241] | [added: 166,008] | | | [removed: 132,853] | [added: 159,241] | | | [removed: 140,497] | [added: 132,853] | | | [removed: 120,766] | [added: 140,497] | | |

| Net income | | $ | [removed: 257,491] [added: 399,630] | | | $ | [removed: 243,318] [added: 257,491] | | | $ | [removed: 206,896] [added: 243,318] | | | $ | [removed: 217,112] [added: 206,896] | | | $ | [removed: 184,045 |] [added: 217,112] | |

| [removed: EARNINGS] [added: EARNINGS] PER SHARE [removed: INFORMATION |] [added: INFORMATION] | | | | | | | | | | | | | | | | | | | | |

| Net income per share - diluted | | $ | [removed: 1.82] [added: 2.81] | | | $ | [removed: 1.70] [added: 1.82] | | | $ | [removed: 1.41] [added: 1.70] | | | $ | [removed: 1.48] [added: 1.41] | | | $ | [removed: 1.26 |] [added: 1.48] | |

| Weighted-average number of shares outstanding - diluted | | [removed: 137,804 |] [added: 138,793] | | | [removed: 140,112] | [added: 137,804] | | | [removed: 142,891] | [added: 140,112] | | | [removed: 142,624] | [added: 142,891] | | | [removed: 142,010] | [added: 142,624] | | |

| Dividends declared per share | | $ | [removed: 0.50] [added: 0.56] | | | $ | [removed: 0.45] [added: 0.50] | | | $ | [removed: 0.41] [added: 0.45] | | | $ | [removed: 0.37] [added: 0.41] | | | $ | [removed: 0.35 |] [added: 0.37] | |

| [removed: YEAR-END] [added: YEAR-END] FINANCIAL [removed: POSITION |] [added: POSITION] | | | | | | | | | | | | | | | | | | | | |

| Long-term [removed: debt(1)] [added: debt(2)] | | $ | [removed: 1,018,372] [added: 856,141] | | | $ | [removed: 1,071,618] [added: 1,018,372] | | | $ | [removed: 1,142,948] [added: 1,071,618] | | | $ | [removed: 379,171] [added: 1,142,948] | | | $ | [removed: 449,136 |] [added: 379,171] | |

| Total shareholders’ equity | | $ | [removed: 2,360,211] [added: 2,582,699] | | | $ | [removed: 2,149,776] [added: 2,360,211] | | | $ | [removed: 2,113,745] [added: 2,149,776] | | | $ | [removed: 2,007,141] [added: 2,113,745] | | | $ | [removed: 1,807,333 |] [added: 2,007,141] | |

| Total shares outstanding at year end | | [removed: 140,104 |] [added: 138,105] | | | [removed: 138,985] | [added: 140,104] | | | [removed: 143,486] | [added: 138,985] | | | [removed: 145,419] | [added: 143,486] | | | [removed: 143,878] | [added: 145,419] | | |

| [removed: OTHER INFORMATION |] [added: OTHER INFORMATION] | | | | | | | | | | | | | | | | | | | | |

| Number of full-time equivalent employees at year end | | [removed: 8,297 |] [added: 8,491] | | | [removed: 7,807] | [added: 8,297] | | | [removed: 7,591] | [added: 7,807] | | | [removed: 6,992] | [added: 7,591] | | | [removed: 6,438] | [added: 6,992] | | |

| Total revenues per average number of [removed: employees(2)] [added: employees(3)] | | $ | [removed: 219,403] [added: 224,130] | | | $ | [removed: 215,679] [added: 219,403] | | | $ | [removed: 216,114] [added: 215,679] | | | $ | [removed: 203,020] [added: 216,114] | | | $ | [removed: 191,729 |] [added: 203,020] | [removed: (3)] |

| Stock price at year end | | $ | [removed: 44.86] [added: 51.46] | | | $ | [removed: 32.10] [added: 44.86] | | | $ | [removed: 32.91] [added: 32.10] | | | $ | [removed: 31.39] [added: 32.91] | | | $ | [removed: 25.46 |] [added: 31.39] | |

| Stock price earnings multiple at year-end(4) | | [removed: 24.6 |] [added: 18.3] | | | [removed: 18.9] | [added: 24.6] | | | [removed: 23.3] | [added: 18.9] | | | [removed: 21.2] | [added: 23.3] | | | [removed: 20.2] | [added: 21.2] | | |

| Return on beginning shareholders’ equity(5) | | [removed: 12] [added: 17] | | % | | 12 | | % | | [removed: 10] [added: 12] | | % | | [removed: 12] [added: 10] | | % | | [removed: 11] [added: 12] | | % | [removed: |]

| [removed: (1)] [added: (2)] | Please refer to Part I, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 8 “Long-Term Debt” for more details. |

| [removed: (2)] [added: (3)] | Represents total revenues divided by the average of the number of full-time equivalent employees at the beginning of the year and the number of full-time equivalent employees at the end of the year. |

| | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | | | | |

| Total assets(1) | | $ | 5,747,550 | | | $ | 5,262,734 | | | $ | 4,979,844 | | | $ | 4,931,027 | | | $ | 3,620,232 | |

| (1) | Years 2016 to 2013 have been restated to reflect the adoption of ASU No. 2015-17, “Income Taxes (Topic 740) - Balance Sheet Classification of Deferred Taxes” (“ASU 2015-17”). |

| | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Total assets | | $ | 5,287,343 | | | $ | 5,004,479 | | | $ | 4,946,560 | | | $ | 3,648,679 | | | $ | 3,127,194 | | |

| (3) | Of the 881 increase in the number of full-time equivalent employees from 2011 to 2012, 523 employees related to the January 9, 2012 acquisition of Arrowhead, and therefore, are considered to be full-time equivalent as of January 1, 2012. Thus, the average number of full-time equivalent employees for 2012 is considered to be 6,259. |

[removed: Index] [added: Index] to Consolidated Financial [removed: Statements][added: Statements]

| | [removed: Page No.] [added: Page No.] |

| Consolidated Statements of Income for the years ended December 31, [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014] [added: 2015] | [removed: [42](#sFB8D62EE73CC5DABBCFA7FF1F4E2D7C0)] [added: [44](#s51DE25B770D651C99CE6B057A77D308C)] |

| Consolidated Balance Sheets as of December 31, [removed: 2016] [added: 2017] and [removed: 2015] [added: 2016] | [removed: [43](#s22C00237A74F53749DB9E47CDD8FD66D)] [added: [45](#s91F852309CE0551F944E5E7B9EB6E464)] |

| Consolidated Statements of Shareholders’ Equity for the years ended December 31, [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014] [added: 2015] | [removed: [44](#s5BC45955230450E38D20F40587856C46)] [added: [46](#sE3AFC770F5FA5051AF27611420A3798F)] |

| Consolidated Statements of Cash Flows for the years ended December 31, [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014] [added: 2015] | [removed: [45](#sE753870871EE5DF791E73B0C6FFC4CCA)] [added: [47](#s4250780EDCEC52CD994023D150B95F77)] |

| Notes to Consolidated Financial Statements for the years ended December 31, [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014] [added: 2015] | [removed: [46](#s10D6B76A29EC55ACB6875EF5A09E6CD1)] [added: [48](#s5F4255A1FD1750978A877FC691D802A8)] |

[removed: | Note 1:] [added: NOTE 1·] Summary of Significant Accounting [removed: Policies | [46](#sB88F81A9CBC65CA08D5ED4E12EFDB440) |][added: Policies]

[removed: | Note 2:] [added: NOTE 2·] Business [removed: Combinations | [50](#s1019EA25351550D6AC106D5B9AA8F309) |][added: Combinations]

[removed: | Note 3: Goodwill | [56](#sF950CA717F2F5526887A78DDC90D3B91) |][added: NOTE 3· Goodwill]

[removed: | Note 4:] [added: NOTE 4·] Amortizable Intangible [removed: Assets | [57](#s832E8FB776215B4386B148246B1BC6F3) |][added: Assets]

[removed: | Note 5: Investments | [57](#s2E4A91E62890599AA9660F42F909D82F) |][added: NOTE 5· Investments]

[removed: | Note 6:] [added: NOTE 6·] Fixed [removed: Assets | [59](#s0FA08A009C8D505487D41796A95B6146) |][added: Assets]

[removed: | Note 7:] [added: NOTE 7·] Accrued Expenses and Other [removed: Liabilities | [59](#s080F9F7B32A95DBEAB37EB22316864FF) |][added: Liabilities]

[removed: | Note 8:] [added: NOTE 8·] Long-Term [removed: Debt | [60](#s14904F92B22559EDA136FBA2F87646A4) |][added: Debt]

[removed: | Note 9:] [added: NOTE 9·] Income [removed: Taxes | [61](#sACE02673BE8C5F69A7899AC703A8F2F4) |][added: Taxes]

[removed: | Note 10:] [added: NOTE 10·] Employee Savings [removed: Plan | [63](#s646F13DDEAE853D298E5B8AB24AE4518) |][added: Plan]

[removed: | Note 11:] [added: NOTE 11·] Stock-Based [removed: Compensation | [63](#sC3C17C96E4FB586E820DACA80B072AF4) |][added: Compensation]

| Note 12: Supplemental Disclosures of Cash Flow Information | [removed: [68](#sD4C2A54FF0445F14964ADF6C7A6D5246)] [added: [71](#sE209C61FA8DC544A9A1C6A37109A9635)] |

[removed: | Note 13:] [added: NOTE 13·] Commitments and [removed: Contingencies | [69](#s0B807F26170E57CE9DF95076B2349D95) |][added: Contingencies]

[removed: | Note 14:] [added: NOTE 14·] Quarterly Operating Results [removed: (Unaudited) | [70](#s1C1A8199D2315B52B7AC4D945B2ADFE9) |][added: (Unaudited)]

[removed: | Note 15:] [added: NOTE 15·] Segment [removed: Information | [70](#s0D86783912B5574EA2794ED558C58089) |][added: Information]

[removed: | Note 16: Reinsurance | [72](#sB4C6C49B307151AABAF57A176A77C572) |][added: NOTE 16· Reinsurance]

[removed: | Note 17:] [added: NOTE 17·] Statutory Financial [removed: Information | [72](#sB33C250B8B4B5C20A09ED31C06F53ACE) |][added: Information]

[removed: | Note 18:] [added: NOTE 18·] Subsidiary Dividend [removed: Restrictions | [72](#sB6DF74F2221E571CB8E189F94C18AC27) |][added: Restrictions]

[removed: | Note 19:] [added: NOTE 19·] Shareholders’ [removed: Equity | [72](#s10869F199AB15706B08F670B1DD897B6) |][added: Equity]

[removed: | Report of Independent Registered Public Accounting Firm | [74](#s6829875346A157178141F4FA71ADAB3B) |][added: REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM]

[removed: BROWN] [added: BROWN] & BROWN, [removed: INC.][added: INC.]

[removed: CONSOLIDATED] [added: CONSOLIDATED] STATEMENTS OF [removed: INCOME][added: INCOME]

| [removed: (in] [added: (in] thousands, except per share [removed: data)] [added: data)] | [removed: For] [added: For] the Year Ended December [removed: 31,] [added: 31,] | | | | | | | | | | |

| | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | |

| [removed: REVENUES] [added: REVENUES] | | | | | | | | | | | |

| Commissions and fees | $ | [removed: 1,762,787] [added: 1,857,270] | | | $ | [removed: 1,656,951] [added: 1,762,787] | | | $ | [removed: 1,567,460] [added: 1,656,951] | |

| Investment income | [removed: 1,456] [added: 1,626] | | | | [removed: 1,004] [added: 1,456] | | | | [removed: 747] [added: 1,004] | | |

| Other income, net | [removed: 2,386] [added: 22,451] | | | | [removed: 2,554] [added: 2,386] | | | | [removed: 7,589] [added: 2,554] | | |

| Total revenues | [removed: 1,766,629] [added: 1,881,347] | | | | [removed: 1,660,509] [added: 1,766,629] | | | | [removed: 1,575,796] [added: 1,660,509] | | |

| [removed: EXPENSES] [added: EXPENSES] | | | | | | | | | | | |