Brown & Brown (BRO) 10-K risk factor changes: FY2018 vs FY2017

Also, if any of our key [removed: professionals] [added: personnel] were to join an existing competitor or form a competing company, some of our customers could choose to use the services of that competitor instead of our services.

While our key personnel are [added: generally] prohibited by contract from soliciting our employees and customers for a [added: two-year] period [removed: of years] following separation from employment with us, they are not prohibited from competing with us.

Although we operate with a decentralized [removed: management system,] [added: sales and service operating model,] the loss of our senior [removed: managers] [added: leaders] or other key personnel, or our inability to continue to identify, recruit and retain such personnel, could materially and adversely affect our business, results of operations and financial condition.

In addition, we compete for acquisition and expansion opportunities with firms and banks that [added: may] have substantially greater resources than we do.

Acquisitions also involve a number of special risks, such [removed: as:] [added: 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 [added: accounting issues, some or all of which could have a material adverse effect on our results of operations, financial condition and cash flows.]

Post-acquisition deterioration of [removed: targets] [added: operating performance] could also result in lower or negative earnings contribution and/or goodwill impairment charges.

While we have [removed: taken,] [added: invested] and continue to [removed: take, actions to protect the] [added: invest in technology] security [added: initiatives, policies] and [removed: privacy of our information,] [added: resources and employee training,] entirely eliminating all risk of improper access to private information is not possible.

For the year ended December 31, [removed: 2017,] [added: 2018,] no insurance company accounted for more than 5.0% of our total core commissions.

For the years ended December 31, [removed: 2016] [added: 2017] and [removed: 2015,] [added: 2016,] approximately [removed: 6.0%] [added: 5.0%] and [removed: 7.3%,] [added: 6.0%,] 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 us or to otherwise decrease the number of insurance policies underwritten [removed: it writes] for us, we believe that other insurance companies are available to underwrite the business, [removed: and we could likely move our business to one of these other insurance companies,] although some additional expense and loss of market share could [removed: possibly] result.

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

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

For the years ended December 31, [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015,] [added: 2016,] we derived [removed: $1,677.2] [added: $1,976.5] million or [removed: 89.1%, $1,568.0] [added: 88.6%, $1,692.6] million or [removed: 88.8%] [added: 90.0%,] and [removed: $1,458.5] [added: $1,574.0] million or [removed: 87.8%,] [added: 89.1%,] of our [added: annualized] revenue, respectively, from our operations located in these states.

We are susceptible to losses and interruptions caused by hurricanes (particularly in Florida, where we have [removed: 41] [added: 46] offices and our headquarters, as well as in Texas, where we have [removed: 10 offices and Hurricane Harvey made landfall in August 2017),] [added: 14 offices.),] earthquakes (including in California, where we have [removed: 23] [added: 24] 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.

OUR CORPORATE CULTURE HAS CONTRIBUTED TO OUR [removed: SUCCESSS,] [added: SUCCESS,] 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.

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 [removed: decentralization,] [added: our decentralized sales and service operating model,] which could negatively impact our future success.

At December 31, [removed: 2017,] [added: 2018,] we believe we were in compliance with the financial covenants and other limitations contained in each of these agreements.

ANY CHANGES IN ESTIMATES, JUDGMENTS AND ASSUMPTIONS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR [removed: BUSINESS,] FINANCIAL POSITION AND RESULTS OF [removed: OPERATIONS.][added: OPERATIONS AND THEREFORE OUR BUSINESS.]

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and internal controls and procedures will prevent all error and [removed: all] fraud.

Additionally, controls can be circumvented by [removed: the] individual acts of some persons, by collusion of two or more people, or by management override of a control.

Such claims, lawsuits and other proceedings could, for example, include claims for damages based upon allegations that our employees or sub-agents failed to procure coverage, report claims on behalf of customers, provide insurance companies [removed: with complete and accurate information relating to the risks being insured or appropriately apply funds that we hold for our customers on a fiduciary basis.]

Although we are not currently experiencing any limitation of access to our revolving credit facility (which matures in 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 [added: consummate significant acquisitions or make other significant capital expenditures.]

At December 31, [removed: 2017,] [added: 2018,] our executive officers, directors and certain of their family members collectively beneficially owned approximately [removed: 17.1%] [added: 16.7%] of our outstanding common stock, of which J.

Powell Brown, our President and Chief Executive Officer, beneficially owned approximately [removed: 16.3%.][added: 15.8%.]

- Governmental restrictions on the transfer of funds to [removed: us] [added: or] from [added: us, including to or from] our operations outside the United States; and

In addition, and to the extent that banks, securities [removed: firms] [added: firms, private equity funds,] and insurance companies affiliate, the financial services industry may experience further consolidation, and we therefore may experience increased competition from insurance companies and the financial services industry, as a growing number of larger financial institutions increasingly, and aggressively, offer a wider variety of financial services, including insurance intermediary services.

While we [added: collaborate and] compete in these segments on a fee-for-service basis, we cannot be certain that such alternative markets will provide the same level of insurance coverage or profitability as traditional insurance markets.

If economic conditions were to worsen, a number of negative effects on our business could result, including declines in values of insurable exposure units, declines in insurance premium rates, [removed: and] the financial insolvency of insurance companies, or [added: the] reduced ability [removed: to pay,] of [removed: certain of our customers.][added: customers to pay.]

If these customers are affected by poor economic [removed: conditions] [added: conditions,] but yet remain in existence, they may face liquidity problems or other financial difficulties [removed: which] [added: that] could result in delays or defaults in payments owed to us, which could have a significant adverse impact on our consolidated financial condition and results of operations.

Capacity could also be reduced by insurance companies failing or withdrawing from writing certain coverages that we offer [added: to] our customers.

To the extent that reinsurance becomes less widely [removed: available,] [added: available or significantly more expensive,] we may not be able to procure the amount or types of coverage that our customers desire and the coverage we are able to procure for our customers may be more expensive or limited.

In addition, [removed: as discussed,] we rely on insurance companies for the payment of certain commissions.

Quarterly and annual fluctuations in revenues based upon increases and decreases associated with the timing of [added: new business,] policy renewals [added: and payments from insurance companies] may adversely affect our financial condition, results of operations and cash flows.

Profit-sharing contingent commissions are special revenue-sharing commissions paid by insurance companies based upon the profitability, volume and/or growth of the business placed with such companies [added: generally] during the prior year.

[removed: These] [added: Over the last three years these] commissions generally have been in the range of 3.0% to [removed: 4.0%] [added: 3.5%] of our previous year’s total core commissions and [removed: fees over the last three years.][added: fees.]

Override commissions are paid by insurance companies based upon the volume of business that we place with them and are [removed: generally paid over the course of the year.]

We maintain cash and investment balances, including restricted cash held in premium trust accounts, at [removed: various] [added: numerous] depository institutions in amounts that are significantly in excess of the limits insured by the FDIC.

[added: 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.

As a result, such regulation and supervision could reduce our profitability or growth by increasing compliance costs, [added: technology compliance,] restricting the products or services we may sell, the markets we may enter, the methods by which we may sell our products and services, or the prices we may charge for our services and the form of compensation we may accept from our customers, carriers and third parties.

The laws of the various state jurisdictions establish supervisory agencies with broad administrative powers with respect to, among other things, licensing of entities to transact business, licensing of agents, admittance of assets, regulating premium rates, approving policy forms, regulating unfair trade and claims practices, [added: determining technology and data protection requirements,] establishing reserve requirements and solvency standards, requiring participation in guarantee funds and shared market mechanisms, and restricting payment of dividends.

A CYBERSECURITY ATTACK, OR ANY OTHER INTERRUPTION IN INFORMATION TECHNOLOGY AND/OR DATA SECURITY AND/OR OUTSOURCING RELATIONSHIPS, COULD ADVERSELY AFFECT OUR BUSINESS, FINANCIAL CONDITION AND REPUTATION.

We rely on information technology and third party vendors to provide effective and efficient service to our customers, process claims, and timely and accurately report information to carriers and which often involves secure processing of confidential sensitive, proprietary and other types of information.

Cybersecurity breaches of any of the systems we rely on may result from circumvention of security systems, denial-of-service attacks or other cyber-attacks, hacking, “phishing” attacks, computer viruses, ransomware, malware, employee or insider error, malfeasance, social engineering, physical breaches or other actions, any of which could expose us to data loss, monetary and reputational damages and significant increases in compliance costs.

We have from time to time experienced cybersecurity breaches, such as computer viruses, unauthorized parties gaining access to our information technology systems and similar incidents, which to date have not had a material impact on our business.

Additionally, we are an acquisitive organization and the process of integrating the information systems of the businesses we acquire is complex and exposes us to additional risk as we might not adequately identify weaknesses in the targets’ information systems, which could expose us to unexpected liabilities or make our own systems more vulnerable to attack.

In the future, any material breaches of cybersecurity, or media reports of the same, even if untrue, could cause us to experience reputational harm, loss of clients and revenue, loss of proprietary data, regulatory actions and scrutiny, sanctions or other statutory penalties, litigation, liability for failure to safeguard clients’ information or financial losses.

Such losses may not be insured against or not fully covered through insurance we maintain.

The cost and operational consequences of implementing, maintaining and enhancing further system protections measures could increase significantly as cybersecurity threats increase.

As these threats evolve, cybersecurity incidents will be more difficult to detect, defend against and remediate.

Any of the foregoing may have a material adverse effect on our business, financial condition and reputation.

CHANGES IN DATA PRIVACY AND PROTECTION LAWS AND REGULATIONS, OR ANY FAILURE TO COMPLY WITH SUCH LAWS AND REGULATIONS, COULD ADVERSELY AFFECT OUR BUSINESS AND FINANCIAL RESULTS.

We are subject to a variety of continuously evolving and developing laws and regulations globally regarding privacy, data protection, and data security, including those related to the collection, storage, handling, use, disclosure, transfer, and security of personal data.

Significant uncertainty exists as privacy and data protection laws may be interpreted and applied differently from country to country and may create inconsistent or conflicting requirements.

These laws apply to transfers of information among our affiliates, as well as to transactions we enter into with third party vendors.

For example, the European Union adopted a comprehensive General Data Privacy Regulation (“GDPR”) in May 2016 that replaced the former EU Data Protection Directive and related country-specific legislation.

The GDPR became fully effective in May 2018 and requires companies to satisfy new requirements regarding the handling of personal and sensitive data, including its use, protection and the ability of persons whose data is stored to correct or delete such data about themselves.

Failure to comply with GDPR requirements could result in penalties of up to 4% of worldwide revenue.

Complying with the enhanced obligations imposed by the GDPR may result in significant costs to our business and require us to revise certain of our business practices.

In addition, legislators and regulators in the U.S. have enacted and are proposing new and more robust privacy and cybersecurity laws and regulations in light of the recent broad-based cyber attacks at a number of companies, including but not limited to the New York State Department of Financial Services Cybersecurity Requirements for Financial Services Companies and the California Consumer Privacy Act of 2018.

These and similar initiatives around the world could increase the cost of developing, implementing or securing our servers and require us to allocate more resources to improved technologies, adding to our IT and compliance costs.

In addition, enforcement actions and investigations by regulatory authorities related to data security incidents and privacy violations continue to increase.

The enactment of more restrictive laws, rules, regulations or future enforcement actions or investigations could impact us through increased costs or restrictions on our business, and noncompliance could result in regulatory penalties and significant legal liability.

with complete and accurate information relating to the risks being insured or appropriately apply funds that we hold for our customers on a fiduciary basis.

generally paid over the course of the year.

accounting issues, some or all of which could have a material adverse effect on our results of operations, financial condition and cash flows.

OUR ABILITY TO CONDUCT BUSINESS WOULD BE NEGATIVELY IMPACTED IN THE EVENT OF AN INTERRUPTION IN INFORMATION TECHNOLOGY AND/OR DATA SECURITY AND/OR OUTSOURCING RELATIONSHIPS.

Our business relies on information systems to provide effective and efficient service to our customers, process claims, and timely and accurately report information to carriers.

Computer viruses, hackers and other external hazards could expose our data systems to security breaches.

These increased risks, and expanding regulatory requirements regarding data security, could expose us to data loss, monetary and reputational damages and significant increases in compliance costs.

Further, privacy laws and regulations are continuously changing and often are inconsistent among the states in which we operate.

Our failure to adhere to or successfully implement procedures to respond to these requirements could result in legal liability or impairment to our reputation.

consummate significant acquisitions or make other significant capital expenditures.

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

We have increased revenues every year from 1993 to [removed: 2017,] [added: 2018,] with the exception of 2009, when our revenues dropped 1.0%.

Our revenues grew from $95.6 million in 1993 to [removed: $1.9] [added: $2.0] billion in [removed: 2017,] [added: 2018,] reflecting a compound annual growth rate of [removed: 13.2%.][added: 13.0%.]

In the same [removed: 24-year] [added: 25-year] period, we increased net income from $8.1 million to [removed: $399.6] [added: $344.3] million in [removed: 2017,] [added: 2018,] a compound annual growth rate of [removed: 17.6%.][added: 16.2%.]

The volume of business from new and existing customers, fluctuations in insurable exposure units, changes in premium rate levels, [removed: and] changes in general economic and competitive [removed: conditions] [added: conditions, and the occurrence of catastrophic weather events] all affect our revenues.

The term “Organic [removed: Revenue”,] [added: Revenue,”] a non-GAAP measure, is our core commissions and fees less (i) the core commissions and fees earned for the first twelve months by newly-acquired [removed: operations and] [added: operations,] (ii) divested business (core commissions and fees generated from offices, books of business or niches sold or terminated during the comparable [removed: period).][added: period), and (iii) the impact of the adoption of Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” and Accounting Standards Codification Topic 340 – Other Assets and Deferred Cost (the “New Revenue Standard”) effective January 1, 2018.]

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 partners, [removed: and] (iv) the net change in fees paid to us by our [removed: customers.][added: customers and (v) fees earned based upon claim processing volumes within our Services Segment.]

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

We also earn “profit-sharing contingent commissions,” which are [removed: profit-sharing] commissions based primarily on underwriting results, but which may also reflect considerations for volume, growth and/or retention.

These commissions [added: which] are [added: included in our commissions and fees in the Consolidated Statement of Income, are accrued throughout the year based on actual premiums written and are] primarily received in the first and second quarters of each year, based upon the aforementioned considerations for the prior year(s).

Over the last three years, profit-sharing contingent commissions have averaged approximately [removed: 3.2%] [added: 3.1%] of the previous year’s [removed: total] commissions and [removed: fees.][added: fees revenue.]

[removed: Since] GSCs are [removed: not subject to the uncertainty of loss ratios, they are] accrued throughout the year based upon actual premiums written.

For the year ended December 31, [removed: 2017,] [added: 2018,] we had earned [removed: $10.4] [added: $10.0] million of GSCs, of which [removed: $8.5] [added: $8.9] million remained accrued at December 31, [removed: 2017] [added: 2018] as most of this will be collected [removed: in] [added: over] the first [removed: quarter] [added: and second quarters] of [removed: 2018.][added: 2019.]

For the years ended December 31, [added: 2018,] 2017, [removed: 2016,] and [removed: 2015,] [added: 2016,] we earned [removed: $10.4] [added: $10.0] million, [removed: $11.5] [added: $10.4] million and [removed: $10.0] [added: $11.5] million, respectively, from GSCs.

Fee revenues [added: primarily] relate to [added: services other than securing coverage for our customers, as well as] fees negotiated in lieu of commissions, [removed: which] [added: and] are recognized as [removed: services] [added: performance obligations] are [removed: rendered.][added: satisfied.]

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 [removed: companies] [added: companies;] and to a lesser extent [removed: (3) our Retail Segment in our large-account customer base.]

Fee revenues as a percentage of our total commissions and fees, represented [removed: 31.5%] [added: 19.8%] in [removed: 2017, 31.3%] [added: 2018, 31.5%] in [removed: 2016] [added: 2017] and [removed: 30.6%] [added: 31.3%] in [removed: 2015.][added: 2016.]

[removed: Additionally,] [added: Combined,] our profit-sharing contingent commissions and GSCs for the year ended December 31, [removed: 2017 decreased] [added: 2018 increased] by [removed: $2.9] [added: $3.3] million over [removed: 2016] [added: 2017] primarily as a result of [removed: a decrease in profit-sharing contingent commissions and GSCs in the Retail and Wholesale Brokerage Segments as a result of increased loss ratios and lower premium rates, partially offset by] an increase in profit-sharing contingent commissions and GSCs in the National Programs [removed: Segment.][added: Segments.]

Other income [removed: increased] [added: decreased] by [removed: $20.1] [added: $20.8] million primarily as a result of a legal settlement recognized in the first quarter of 2017.

For the years ended December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] our commissions and fees growth rate was [removed: 5.4%] [added: 8.2%] and [removed: 6.4%,] [added: 5.4%,] respectively, and our consolidated [removed: organic revenue] [added: Organic Revenue] growth rate was [removed: 4.4%] [added: 2.4%] and [removed: 3.0%,] [added: 4.4%,] respectively.

In the event that the gradual increases in insurable exposure units that occurred in the past few years continues through [removed: 2018] [added: 2019] and premium rate changes are similar with [removed: 2017,] [added: 2018,] we believe we will continue to see positive quarterly [removed: organic revenue] [added: Organic Revenue] growth rates in [removed: 2018.][added: 2019.]

Historically, investment income has consisted primarily of interest earnings on [added: operating cash and where permitted, on] premiums and advance premiums collected and held in a fiduciary capacity before being remitted to insurance companies.

Income before income taxes for the year ended December 31, [removed: 2017] [added: 2018] increased over [removed: 2016] [added: 2017] by [removed: $26.2] [added: $12.7] million, primarily as a result of [removed: a legal settlement recorded in the first quarter of 2017 and] net new business and acquisitions completed in the past twelve [removed: months.][added: months offset by lower weather related claims processing revenues in 2018 and a legal settlement recorded in the first quarter of 2017.]

In the discussion and analysis of our results of operations, in addition to reporting financial results in accordance with [removed: GAAP,] [added: generally accepted accounting principles (“GAAP”),] we provide [removed: information regarding] [added: references to] the following non-GAAP [removed: measures:] [added: financial measures as defined in Regulation G of SEC rules:] Organic Revenue, [removed: organic revenue] [added: Organic Revenue] growth, [added: EBITDAC] and [removed: organic revenue growth rate.][added: EBITDAC Margin.]

We view [removed: each of] these non-GAAP [added: financial] measures as important indicators when assessing and evaluating our performance on a consolidated basis and for each of our segments because they allow us to determine a [added: more] comparable, but non-GAAP, measurement of revenue growth [added: and operating performance] that is associated with the revenue sources that were a part of our business in both the current and prior [removed: year and that are expected to continue in the future.][added: year.]

We [removed: believe that presenting these] [added: present such] non-GAAP [removed: measures allows readers of our] [added: supplemental] financial [removed: statements] [added: information because we believe such information is of interest] to [removed: measure, analyze and compare our consolidated growth,] the [removed: growth of each of our segments,] [added: investment community] and [added: because we believe they provide additional meaningful methods of evaluating] certain aspects of our operating performance from period to period [removed: in] [added: on] a [removed: meaningful and consistent manner] [added: basis] that may not be otherwise apparent on a GAAP basis.

From 1993 through the fourth quarter of [removed: 2017,] [added: 2018,] we acquired [removed: 490] [added: 513] insurance intermediary operations, excluding acquired books of business (customer accounts).

During the year ended December 31, [removed: 2017,] [added: 2018,] the Company acquired the assets and assumed certain liabilities of [removed: eleven] [added: twenty] insurance [added: intermediaries, all of the stock of three insurance] intermediaries and one book of business (customer accounts).

Collectively, these acquired [removed: business that] [added: businesses] had annualized revenues of approximately [removed: $17.5] [added: $323.2] million.

Management determines [removed: the] [added: a] policy cancellation reserve based upon historical cancellation experience adjusted in accordance with known circumstances.

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

The recorded purchase prices for all acquisitions [removed: consummated after January 1, 2009] include an estimation of the fair value of liabilities associated with any potential earn-out [removed: provisions.][added: provisions, where an earn-out is part of the negotiated transaction.]

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

We completed our most recent evaluation of impairment for goodwill as of November 30, [removed: 2017] [added: 2018] 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: 2017, 2016] [added: 2018, 2017] and [removed: 2015.][added: 2016.]

We grant non-vested stock [removed: awards, and to a lesser extent, stock options] [added: awards] to our employees, with the related compensation expense recognized in the financial statements over the associated service period based upon the grant-date fair value of those awards.

During the first quarter of [removed: 2016,] [added: 2019,] the performance conditions for approximately [removed: 1.4] [added: 2.0] million 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 [removed: 2011.][added: 2014 and 2016.]

These grants had a performance measurement period that concluded on December 31, [removed: 2015.][added: 2018.]

The vesting condition for these grants requires continuous employment for a period of up to [removed: ten] [added: seven] years from the [removed: January 2011] [added: July 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 [removed: became] [added: will be] eligible to receive payments of dividends and exercise voting privileges after the awarding [removed: date.][added: date, and the awarded shares will be included as issued and outstanding common stock shares and included in the calculation of basic and diluted net income per share.]

During the first quarter of 2017, the performance conditions for [removed: approximately 169,000] [added: 326,808] 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 2012.

Prior to the adoption of the New Revenue Standard, these commissions were recorded to income when received.

(3) our Retail Segment in our large-account customer base.

We believe that Organic Revenue provides a meaningful representation of our operating performance and view Organic Revenue growth as an important indicator when assessing and evaluating the performance of our four segments.

Organic Revenue can be expressed as a dollar amount or a percentage rate when describing Organic Revenue growth.

We also use Organic Revenue growth and EBITDAC Margin for incentive compensation determinations for executive officers and other key employees.

We view EBITDAC and EBITDAC Margin as important indicators of operating performance, because they allow us to determine more comparable, but non-GAAP, measurements of our operating margins in a meaningful and consistent manner by removing the significant non-cash items of depreciation, amortization and the change in estimated acquisition earn-out payables, and also interest expense and taxes, which are reflective of investment and financing activities, not operating performance.

We believe these non-GAAP financial measures improve the comparability of results between periods by eliminating the impact of certain items that have a high degree of variability.

On November 15, 2018, we completed the acquisition of certain assets and assumption of certain liabilities of The Hays Group, Inc. and certain of its affiliates (collectively, “Hays”).

At closing, we delivered a payment of $705 million, consisting of $605 million in cash and the issuance to certain key owners of Hays of 3,376,103 shares of our common stock for a total value of $100.0 million.

In addition, the Company may pay additional consideration to Hays in the form of earn-out payments in the aggregate amount of up to $25.0 million in cash over three years, which is subject to certain conditions and the successful achievement of average annual EBITDA compound annual growth rate targets for the acquired business during 2019, 2020 and 2021.

Hays was founded in 1994 providing employee benefits, property & casualty, and personal lines insurance and has grown to be the 22nd largest U.S. broker as measured by Business Insurance magazine.

With headquarters in Minneapolis, Hays operates across twenty-one states, increasing our presence in the mid-west.

This transaction was initially funded through utilization of the Company’s revolving line of credit within our credit facility, details of which can be found in “Management’s Discussion and Analysis of Financial Condition”,“Results of Operations” and Note 9 “Long-Term Debt” in the “Notes to Consolidated Financial Statements”.

The majority of our revenue is commissions derived from our performance as agents and brokers, acting on behalf of insurance carriers to sell products to customers that are seeking to transfer risk, and conversely, acting on behalf of those customers in negotiating with insurance carriers seeking to acquire risk in exchange for premiums.

In these arrangements our performance obligation is complete upon the effective date of the bound policy, as such that is when the associated revenue is recognized.

Where the Company’s performance obligations have been completed, but the final amount of compensation is unknown due to variable factors, we estimate the amount of such compensation.

We recognize subsequent commission adjustments upon our receipt of additional information or final settlement, whichever occurs first.

To a lesser extent, the Company earns revenues in the form of fees.

Like commissions, fees paid to us in lieu of commission, are recognized upon the effective date of the bound policy.

When we are paid a fee for service, however, the associated revenue is recognized over a period of time that coincides with when the customer simultaneously receives and consumes the benefit of our work, which characterizes most of our claims processing arrangements and various services performed in our employee benefits practices.

Other fees are typically recognized upon the completion of the delivery of the agreed-upon services to the customer.

Please see Note 2 “Revenues” in the “Notes to Consolidated Financial Statements” for additional information regarding the nature and timing of our revenues.

reflects market participant assumptions regarding revenue growth and/or profitability.

During the third quarter of 2018, the performance conditions for 2,229,561 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 July 2013.

These grants had a performance measurement period that concluded on June 30, 2018.

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 in diluted net income per share where the net income attributable to unvested awarded stock plans is excluded from the total net income attributable to common shares.

The vesting condition for these grants requires continuous employment for a period of up to seven years from the 2014 grant date and five years from the 2016 grant date in order for the awarded shares to become fully vested and nonforfeitable.

| Profit-sharing contingent commissions | 55,875 | | | | 7.1 | % | | 52,186 | | | | (3.4 | )% | | 54,000 | | |

| Guaranteed supplemental commissions | 9,961 | | | | (3.9 | )% | | 10,370 | | | | (9.7 | )% | | 11,479 | | |

| Income Before Income Taxes Margin | 23.0 | | % | | | | | 23.9 | | % | | | | | 24.0 | | % |

| EBITDAC (1) | 615,389 | | | | 1.7 | % | | 605,382 | | | | 4.4 | % | | 579,831 | | |

| EBITDAC Margin (1) | 30.6 | | % | | | | | 32.2 | | % | | | | | 32.8 | | % |

Core commissions and fees in 2018 increased $149.3 million, of which $91.2 million represented core commissions and fees from acquisitions that had no comparable revenues in 2017; approximately $43.5 million represented net new and renewal business; approximately $16.1 million related to the impact of the adoption of the New Revenue Standard; which was offset by $1.5 million related to commissions and fees revenue from businesses divested in 2017 and 2018, which reflected an Organic Revenue growth rate of 2.4%.

This underlying employee compensation and benefits expense increase was primarily related to (i) an increase in staff salaries attributable to salary inflation, higher volumes in portions of our business and the mix of business across the company; (ii) increased producer commissions due to higher revenue; partially offset by (iii) a decrease of approximately $8.8 million in commission expense as a result of the adoption of the New Revenue Standard which requires the deferral of incremental costs to obtain a customer contract, and (iv) the increase in the value of corporate-owned life insurance policies associated with our deferred compensation plan which is substantially offset in other operating expenses.

The other operating expenses for those offices that existed in the same periods in both 2018 and 2017 increased by $34.7 million or 6.6%, which was primarily attributable to (i) additional expenses associated with our investment in information technology and higher value-added consulting services; (ii) an increase of approximately $10.5 million for costs that had previously been reported on a net basis as contra-revenue prior to the adoption of the New Revenue Standard ; (iii) the increase in the value of corporate-owned life insurance policies associated with our deferred compensation plan which was substantially offset by employee compensation and benefits and partially offset by (iv) the benefits from our strategic purchasing program.

Other operating expenses as a percentage of total revenues was 16.5% in 2018 as compared to 15.1% for the year ended December 31, 2017.

The increase in 2018 was due primarily to the additional debt added in the fourth quarter with increased payments for newly acquired businesses, as well as increased interest rate exposure on the Company’s floating rate notes.

The Tax Cuts and Jobs Act of 2017 (the “Tax Reform Act”) makes changes to the U.S. tax code that affected our income tax rate in 2017 and 2018.

The Tax Reform Act reduces the U.S. federal corporate income tax rate from 35.0% to 21.0% and requires companies to pay a one-time transition tax on certain unrepatriated earnings from foreign subsidiaries that is payable over eight years.

The Tax Reform Act also establishes new tax laws that became effective January 1, 2018.

Profit-sharing contingent commissions are included in our total commissions and fees in the Consolidated Statement of Income in the year received.

Our services are provided over a period of time, which is typically one year.

Additionally, each of our four segments recorded positive organic revenue growth for the year ended December 31, 2017.

Commission revenues are recognized as of the effective date of the insurance policy or the date on which the policy premium is processed into our systems and invoiced to the customer, whichever is later.

Commission revenues related to installment billings are recognized on the later of the date effective or invoiced, with the exception of our Arrowhead business which follows a policy of recognizing on the later of the date effective or processed into our systems regardless of the billing arrangement.

Subsequent commission adjustments are recognized upon our receipt of notification from insurance companies concerning matters necessitating such adjustments.

Profit-sharing contingent commissions are recognized when determinable, which is generally when such commissions are received from insurance

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

Fee revenues, and commissions for employee benefits coverages and workers’ compensation programs, are recognized as services are rendered.

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.

Core commissions and fees in 2016 increased $102.1 million, of which approximately $61.7 million represented core commissions and fees from agencies acquired since 2015 that had no comparable revenues.

After accounting for divested business of $6.6 million, the remaining net increase of $47.0 million represented net new business, which reflects an organic revenue growth rate of 3.0% for

core commissions and fees.

This underlying employee compensation and benefits expense increase was primarily related to (i) higher producer commissions driven by new and renewed business, (ii) increased staff salaries that included some severance cost, (iii) increased bonuses due to higher revenue and operating profit, (iv) increased cost of health insurance, and (v) an increase in non-cash stock-based compensation expense due to forfeiture credits recognized in 2015.

As a percentage of total revenues, other operating expenses represented 14.9% in 2016 and 15.1% in 2015.

The other operating expenses for those offices that existed in the same periods in both 2016 and 2015, increased by $2.3 million or 0.9%, which was primarily attributable to higher data processing costs related to our multi-year technology investment program, partially offset by the receipt of certain premium tax refunds by our National Flood Program business.

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 2016 is driven by several permanent tax differences along with the apportionment of taxable income in the states where we operate.

| (in thousands) | 2015 | | | | 2014 | | |

| Commissions and fees | $ | 1,656,951 | | | $ | 1,567,460 | |

| Less profit-sharing contingent commissions | 51,707 | | | | 57,706 | | |

| Less guaranteed supplemental commissions | 10,026 | | | | 9,851 | | |

| Core commissions and fees | 1,595,218 | | | | 1,499,903 | | |

| Organic Revenue | $ | 1,518,586 | | | $ | 1,480,567 | |

Segment results for 2014 have been recast to reflect the current year segmental structure.

Certain reclassifications have been made to the prior year amounts reported in this Annual Report on Form 10-K in order to conform to the current year presentation.

| Commissions and fees | $ | 866,465 | | | $ | 822,140 | | | $ | 428,473 | | | $ | 397,326 | | | $ | 216,638 | | | $ | 211,512 | | | $ | 145,375 | | | $ | 136,482 | | | $ | 1,656,951 | | | $ | 1,567,460 | |

| Total change | $ | 44,325 | | | | | | | $ | 31,147 | | | | | | | $ | 5,126 | | | | | | | $ | 8,893 | | | | | | | $ | 89,491 | | | | | |

| Total growth % | 5.4 | | % | | | | | | 7.8 | | % | | | | | | 2.4 | | % | | | | | | 6.5 | | % | | | | | | 5.7 | | % | | | | |

| Contingent commissions | 22,051 | | | | 21,616 | | | | 15,558 | | | | 20,822 | | | | 14,098 | | | | 15,268 | | | | — | | | | — | | | | 51,707 | | | | 57,706 | | |

| GSCs | 8,291 | | | | 7,730 | | | | 30 | | | | 21 | | | | 1,705 | | | | 2,100 | | | | — | | | | — | | | | 10,026 | | | | 9,851 | | |

| Core commissions and fees | $ | 836,123 | | | $ | 792,794 | | | $ | 412,885 | | | $ | 376,483 | | | $ | 200,835 | | | $ | 194,144 | | | $ | 145,375 | | | $ | 136,482 | | | $ | 1,595,218 | | | $ | 1,499,903 | |

| Acquisition revenues | 35,644 | | | | — | | | | 38,519 | | | | — | | | | 2,469 | | | | — | | | | — | | | | — | | | | 76,632 | | | | — | | |

| Divested business | — | | | | 3,291 | | | | — | | | | 8,811 | | | | — | | | | 6,887 | | | | — | | | | 347 | | | | — | | | | 19,336 | | |

| Organic Revenue(2) | $ | 800,479 | | | $ | 789,503 | | | $ | 374,366 | | | $ | 367,672 | | | $ | 198,366 | | | $ | 187,257 | | | $ | 145,375 | | | $ | 136,135 | | | $ | 1,518,586 | | | $ | 1,480,567 | |

| Organic revenue growth(2) | $ | 10,976 | | | | | | | $ | 6,694 | | | | | | | $ | 11,109 | | | | | | | $ | 9,240 | | | | | | | $ | 38,019 | | | | | |

| Organic revenue growth %(2) | 1.4 | | % | | | | | | 1.8 | | % | | | | | | 5.9 | | % | | | | | | 6.8 | | % | | | | | | 2.6 | | % | | | | |

by (iv) a reduction in the change in estimated acquisition earn-out payables of $2.2 million, or 21.1%, to $8.1 million, and (v) a combined decrease in amortization, depreciation and intercompany interest expense of $9.3 million.

The Retail Segment’s growth rate for total commissions and fees was 5.6%, and the organic revenue growth rate was 1.9% for 2016, which were driven by revenue from net new business written during the preceding twelve months along with modest increases in commercial auto rates and underlying exposure unit values that drive insurance premiums, and partially offset by rate reductions in most lines of coverage, other than commercial auto, with the most pronounced declines realized for insurance premium rates for properties in catastrophe-prone areas.

This growth in income before income taxes was negatively impacted by $10.3 million in expense associated with the change in estimated acquisition earn-out payables, an increase of $8.2 million over the same period in 2015.

The fair values of our invested assets at December 31, [removed: 2017] [added: 2018] and December 31, [removed: 2016,] [added: 2017,] 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: 2017,] [added: 2018,] we had [removed: $385.0] [added: $1,015.0] million of borrowings outstanding under our [removed: Amended and Restated Credit Agreement,] [added: various credit agreements, all of] which [removed: bears] [added: bear] interest on a floating basis tied to [removed: the London Interbank Offered Rate (LIBOR)] [added: LIBOR] and is therefore subject to changes in the associated interest expense.

Based upon our foreign currency rate exposure as of December 31, [removed: 2017,] [added: 2018,] an immediate 10% hypothetical changes of foreign currency exchange rates would not have a material effect on our Consolidated Financial Statements.

WNFIC’s entire business consists of policies written pursuant to the National Flood Insurance Program (“NFIP”), the program administered by the Federal Emergency Management Agency (“FEMA”) and excess flood [removed: insurance] policies which are fully reinsured, thereby substantially eliminating WNFIC’s exposure to underwriting risk, as these policies are backed by either FEMA or a reinsurance carrier with an AM Best Company rating of “A” or better.

As of December 31, [removed: 2017,] [added: 2018,] our activities were conducted in [removed: 238] [added: 286] locations in [removed: 40] [added: 42] states as follows, as well as in England, Canada, Bermuda, and the Cayman Islands:

| New Jersey | 13 | | | Oklahoma | 4 | | [removed: New Hampshire] [added: Mississippi] | [removed: 2] [added: 1] |

| [removed: Louisiana] [added: Illinois] | [removed: 9] [added: 7] | | | New Mexico | 3 | | [removed: Mississippi] | [removed: 1] |

| [removed: Pennsylvania] [added: Massachusetts] | [removed: 8] [added: 10] | | | Ohio | [removed: 3] [added: 4] | | Nevada | 1 |

The following table summarizes (1) the commissions and fees generated by each of our reportable operating segments for [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015,] [added: 2016,] and (2) the percentage of our total commissions and fees represented by each segment for each such period:

| (in thousands, except percentages) | [removed: 2017] [added: 2018] | | | | % | | | [removed: 2016] [added: 2017] | | | | % | | | [removed: 2015] [added: 2016] | | | | % | |

| Retail Segment | $ | [removed: 942,247] [added: 1,041,691] | | | [removed: 50.7] [added: 51.8] | % | | $ | [removed: 916,723] [added: 942,247] | | | [removed: 52.0] [added: 50.7] | % | | $ | [removed: 867,762] [added: 916,723] | | | [removed: 52.4] [added: 52.0] | % |

| National Programs Segment | [removed: 479,017] [added: 493,878] | | | | [removed: 25.8] [added: 24.6] | % | | [removed: 447,808] [added: 479,017] | | | | [removed: 25.4] [added: 25.8] | % | | [removed: 428,473] [added: 447,808] | | | | [removed: 25.9] [added: 25.4] | % |

| Wholesale Brokerage Segment | [removed: 271,141] [added: 286,364] | | | | [removed: 14.6] [added: 14.2] | % | | [removed: 242,813] [added: 271,141] | | | | [removed: 13.8] [added: 14.6] | % | | [removed: 216,638] [added: 242,813] | | | | [removed: 13.1] [added: 13.8] | % |

| Services Segment | [removed: 165,073] [added: 189,041] | | | | [removed: 8.9] [added: 9.4] | % | | [removed: 156,082] [added: 165,073] | | | | [removed: 8.8] [added: 8.9] | % | | [removed: 145,375] [added: 156,082] | | | | 8.8 | % |

| Other | [removed: (208] [added: (1,117] | | ) | | — | % | | [removed: (639] [added: (208] | | ) | | — | % | | [removed: (1,297] [added: (639] | | ) | | [removed: (0.2] [added: —] | [removed: )%] [added: %] |

| Total | $ | [removed: 1,857,270] [added: 2,009,857] | | | 100.0 | % | | $ | [removed: 1,762,787] [added: 1,857,270] | | | 100.0 | % | | $ | [removed: 1,656,951] [added: 1,762,787] | | | 100.0 | % |

These operations generated [removed: $15.9] [added: $15.2] million, [removed: $14.5] [added: $15.9] million and [removed: $13.4] [added: $14.5] million of revenues for the years ended December 31, [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015,] [added: 2016,] respectively.

See Note [removed: 15] [added: 16] to the Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional segment financial data relating to our business.

As of December 31, [removed: 2017,] [added: 2018,] our Retail Segment employed [removed: 4,030] [added: 5,028] full-time equivalent employees.

During [removed: 2017,] [added: 2018,] 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 fees.

As of December 31, [removed: 2017,] [added: 2018,] our National Programs Segment employed [removed: 1,990] [added: 1,962] full-time equivalent employees.

Professional Programs [removed: negotiates] [added: negotiate] policy forms and coverage options with their specific insurance carriers.

Professional Programs affiliate with professional groups, including but not limited to, dentists, oral surgeons, hygienists, lawyers, [removed: CPAs,] optometrists, opticians, ophthalmologists, insurance agents, financial advisors, registered representatives, securities broker-dealers, benefit administrators, real estate [removed: brokers, real estate] title agents and escrow agents.

In addition, Professional Programs encompasses supplementary insurance-related products to include weddings, events, medical facilities and [removed: cyber-liability.][added: cyber liability.]

The PPP recognized the importance of policyholder and customer service and developed a customized, proprietary, web-based rating and policy issuance [removed: system] [added: system,] which [removed: in turn] provides a seamless policy delivery resource and access to policy information on a real time basis.

*Financial Professionals:* CalSurance® and CITA Insurance Services® have specialized [removed: in this niche] since 1980 [removed: and] [added: to] 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: | |] *Physicians:* The Physicians Protector Plan program provides professional liability insurance solutions for physicians on an admitted basis in several key states. [removed: 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 [removed: Errors] [added: errors] & [removed: Omissions, Professional Liability] [added: omissions (“E&O”), professional liability] and [removed: Malpractice Insurance] [added: malpractice insurance] for over 22 years both in a direct retail sales and brokering capacity.

[removed: | |] *Wedding Protector Plan®* *and Protector Plan®* *for [removed: Events*] [added: Events:* These programs] provide an online 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 wedding or event date. [removed: Liability and liquor liability is available as an option. |]

The Professional Protector Plan® for Dentists and the Lawyer’s Protector Plan® are marketed and sold primarily through a national network of independent agencies and also through our Brown & Brown retail [removed: offices; however, certain professional liability programs, CalSurance® and TitlePac®, are principally marketed and sold directly to our insured customers.][added: offices.]

Arrowhead is [removed: a] [added: an] MGA, General Agent (“GA”), and Program Administrator (“PA”) to the property and casualty insurance industry.

As [removed: a] [added: an] MGA, Arrowhead has the authority to underwrite, bind insurance carriers, issue policies, collect premiums and provide administrative and claims services.

*Marine:* is a national program manager and wholesale producer of marine insurance products including yachts and [removed: high performance] [added: high-performance] boats, small boats, commercial marine and marine artisan contractors.

Commercial Programs [removed: markets] [added: market] products and services to specific industries, trade groups, and market niches.

*All [removed: Risk:*] [added: Risk*] is a program writing all risks meaning that any risk that the contract does not specifically omit is automatically covered.

[removed: *American Specialty Insurance & Risk Services, Inc*.*:*] provides insurance and risk management services for customers in professional sports, motor sports, amateur sports and the entertainment industry.

*Automotive [removed: Aftermarket:*] [added: Aftermarket* was] launched in 2012, [added: and] writes commercial package insurance for non-dealership automotive services such as mechanical repair shops, brake shops, transmissions shops, oil and lube shops, parts retailers and wholesalers, tire retailers and wholesalers, and auto recyclers.

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

The trucking program is specifically designed to handle all coverages [added: for] a [removed: trucker on the road might need.][added: trucker.]

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

*Earthquake and [removed: DIC:*] [added: DIC*] is a Differences-in-Conditions (“DIC”) Program, writing notably earthquake and flood insurance coverages to commercial property owners.

| | *Florida Intracoastal Underwriters, Limited [removed: Company:*] [added: Company*] (“FIU”) [removed: is a MGA that] specializes in providing insurance coverage for coastal and inland high-value condominiums and apartments. FIU has developed a specialty insurance facility to support the underwriting activities associated with these risks. |

[removed: *Forestry:*] [added: *Forestry* is a] logging equipment specialist for mobile equipment typically to the logging industry in Southeast U.S.

| Florida | 46 | | | Michigan | 5 | | Kentucky | 2 |

| California | 24 | | | Connecticut | 5 | | New Hampshire | 2 |

| New York | 19 | | | Colorado | 5 | | Rhode Island | 2 |

| Texas | 14 | | | Wisconsin | 4 | | Utah | 2 |

| Georgia | 14 | | | Virginia | 4 | | Kansas | 2 |

| Washington | 14 | | | Indiana | 4 | | North Carolina | 1 |

| Minnesota | 11 | | | Arkansas | 4 | | Vermont | 1 |

| Pennsylvania | 11 | | | Montana | 4 | | Delaware | 1 |

| Louisiana | 9 | | | South Carolina | 3 | | Maine | 1 |

| Oregon | 9 | | | Maryland | 3 | | Iowa | 1 |

| Arizona | 6 | | | Tennessee | 3 | | | |

| Hawaii | 5 | | | Missouri | 2 | | | |

The categories of insurance we principally sell include: commercial packages, group medical, workers’ compensation, property risk and general liability.

The program offers comprehensive insurance solutions and provides risk management benefits and claims services.

Liability and liquor liability is available as an option.

Certain professional liability programs, CalSurance® and TitlePac®, are principally marketed and sold directly to our insured customers.

*American Specialty Insurance & Risk Services, Inc*.

This program distributes product through a direct sales force, independent agencies and our Retail Segment.

*Proctor Financial, Inc*.

*Health Special Risk, Inc.* provides accident & health, special events insurance products, and administrative services to licensed agents, brokers, and insurance companies across the U.S.

*Daily Rental* provides loaner car coverage for auto dealerships.

Through Wright National Flood Insurance Services, the Company acts as an MGA, selling private primary flood insurance policies for a carrier partner.

These two businesses work closely with employer sponsored group life, disability and health plan participants to assist disabled individuals in receiving the education, advocacy and benefit coordination assistance necessary to achieve the fastest possible benefit approvals.

In addition, The Advocator Group also provides second injury fund recovery services to the workers’ compensation insurance market.

*ICA* provides comprehensive claims management solutions for both personal and commercial lines of insurance.

ICA is a national service provider for daily claims, catastrophic claims, vendor management, TPA operations and staff augmentation.

Additional claims services offered by ICA include first notice of loss, fast track, field appraisals and quality control.

Specialty services include medical projections, life care plans, Medicare Set-aside analysis, allocation and administration.

*Professional Disability Associates, LLC (“PDA”)* is a disability services firm that provides specialty risk resources, including medical, vocational and claim management services to the disability insurance market.

PDA has a nationwide physician referral network to address the needs of the industry for claim expertise across multiple specialties.

PDA services top disability insurance carriers in the U.S. and Canada, as well as several other insurers, reinsurers, self-insured employers and consulting firms.

PGCS’ services include claims administration and a dedicated subrogation recovery department.

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

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

| New York | 18 | | | Michigan | 4 | | Montana | 2 |

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

| Georgia | 10 | | | Arkansas | 3 | | Wisconsin | 2 |

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

| Massachusetts | 7 | | | South Carolina | 3 | | North Carolina | 1 |

| Oregon | 7 | | | Tennessee | 3 | | Utah | 1 |

| Colorado | 6 | | | Hawaii | 2 | | Vermont | 1 |

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

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

The categories of insurance we principally sell include: property insurance relating to physical damage to property and resultant interruption of business or extra expense caused by fire, windstorm or other perils; casualty insurance relating to legal liabilities, professional liability including directors and officers, cyber-liability, workers’ compensation, commercial and private passenger automobile coverages; and fidelity and surety bonds.

| | |

| --- | --- |

*Certified Public 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.

Optional coverage enhancements include: Employment Practices Liability, Employee Dishonesty, Non-Profit Directors and Officers, as well as Network Security and Privacy Protection Coverage.

*Real Estate Errors & Omissions:* writes errors and omissions insurance for small to medium-sized residential real estate agents and brokers in California.

Coverage includes real estate brokerage, property management, escrow, appraisal, leasing and consulting services.

*AFC Insurance, Inc.:* (“AFC”) (“Humanity Plus Program”) is a Program Administrator specializing in niche property & casualty products for a wide range of for-profit and nonprofit human & social service organizations.

Eligible risks include addiction treatment centers, adult day care centers, group homes, services for the developmentally disabled and more.

AFC’s nationwide comprehensive program offers all lines of coverage.

*Commercial Auto:* for vehicles owned by a business (no heavy vehicles or livery operations).

| | *Towing Operators Protector Plan®: (“TOPP*®”) providing insurance coverage including general liability, commercial auto, garage keeper’s legal liability, property and motor truck cargo coverage. |

| | *ICA* provides comprehensive claims management solutions for both personal and commercial lines of insurance. ICA is a national service provider for daily claims, vendor management, TPA operations and staff augmentation. ICA offers training and educational opportunities to independent adjusters nationwide in ICA’s regional training facilities. Additional claims services offered by ICA include first notice of loss, fast track, field appraisals, quality control and consulting. |

to the SEC.

Copies of these reports, proxy statements and other information can be read and copied at:

SEC Public Reference Room

100 F Street NE

Washington, D.C. 20549

Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-732-0330.

For the fiscal year ended December 31, [removed: 2017][added: 2018]

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

Indicate by check mark whether the registrant has submitted electronically [removed: and posted on its corporate Website, if any,] every Interactive Data File required to be submitted [removed: 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 [removed: and post] such files).

| Non-accelerated filer | | ¨ [removed: (Do not check if a smaller reporting company)] | | Smaller reporting company | | ¨ |

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange [removed: Act.): Yes ¨ No ý][added: 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: 2017] [added: 2018] (the last business day of the registrant’s most recently completed second fiscal quarter) was [removed: $5,014,164,392.][added: $6,377,992,646.]

The number of shares of the Registrant’s common stock, $0.10 par value, outstanding as of February [removed: 23, 2018] [added: 21, 2019] was [removed: 137,800,585.][added: 279,701,832.]

Portions of Brown & Brown, Inc.’s Proxy Statement for the [removed: 2018] [added: 2019] Annual Meeting of Shareholders are incorporated by reference into Part III of this Report.

FOR THE FISCAL YEAR ENDED DECEMBER 31, [removed: 2017][added: 2018]

| Item 1. | [removed: [Business](#s42D97492D87E5CC28901D49A4784F36B)] [added: [Business](#sE02DB6019F835E18A34BA963B9F2FAFF)] | [removed: [4](#s42D97492D87E5CC28901D49A4784F36B)] [added: [5](#sE02DB6019F835E18A34BA963B9F2FAFF)] |

| Item 1A. | [Risk [removed: Factors](#s1DAA9B8488745EF1BED08FC5CCE8364C)] [added: Factors](#sC2AEA6BF2EDE5D91B0664092F9E9324D)] | [removed: [11](#s1DAA9B8488745EF1BED08FC5CCE8364C)] [added: [12](#sC2AEA6BF2EDE5D91B0664092F9E9324D)] |

| Item 1B. | [Unresolved Staff [removed: Comments](#s4FFD534936745C7B9BABE367314F40ED)] [added: Comments](#s6FC1828C50BB5B59931F30D59EBD92CA)] | [removed: [18](#s4FFD534936745C7B9BABE367314F40ED)] [added: [19](#s6FC1828C50BB5B59931F30D59EBD92CA)] |

| Item 2. | [removed: [Properties](#s660114E34EAE508897D5B089FF05FA99)] [added: [Properties](#s92D5F8F9160650278FD95BD25EE0BD30)] | [removed: [18](#s660114E34EAE508897D5B089FF05FA99)] [added: [20](#s92D5F8F9160650278FD95BD25EE0BD30)] |

| Item 3. | [Legal [removed: Proceedings](#sFC4AEFACEC8F5AD7AF3E31282C6D75A6)] [added: Proceedings](#sD2708AC1FE535A12B0A1AF804B041BAD)] | [removed: [18](#sFC4AEFACEC8F5AD7AF3E31282C6D75A6)] [added: [20](#sD2708AC1FE535A12B0A1AF804B041BAD)] |

| Item 4. | [Mine Safety [removed: Disclosures](#s9DCE823216FC52F0B6A88F0B53C13154)] [added: Disclosures](#s23A0A28A2D4456F483E4091F2B35BD29)] | [removed: [18](#s9DCE823216FC52F0B6A88F0B53C13154)] [added: [20](#s23A0A28A2D4456F483E4091F2B35BD29)] |

| Item 5. | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#sA4B119E045E65CA2945CF2A6EC15ED0A)] [added: Securities](#s8D32E5F821345B5788D83DD27D7195DA)] | [removed: [19](#sA4B119E045E65CA2945CF2A6EC15ED0A)] [added: [21](#s8D32E5F821345B5788D83DD27D7195DA)] |

| Item 6. | [Selected Financial [removed: Data](#s58371BF9ACD05375AD1C5D0BE1C04EF3)] [added: Data](#s28A0E67FAF5B51E3B0F851938187A9B9)] | [removed: [22](#s58371BF9ACD05375AD1C5D0BE1C04EF3)] [added: [23](#s28A0E67FAF5B51E3B0F851938187A9B9)] |

| Item 7. | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#s6F71C8AA4B4256F0A73AFF707A9EBC80)] [added: Operations](#s408AD11BC21D5209A62F1FDC362B1D23)] | [removed: [23](#s6F71C8AA4B4256F0A73AFF707A9EBC80)] [added: [24](#s408AD11BC21D5209A62F1FDC362B1D23)] |

| Item 7A. | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#s2C008111C1435CAB9BD235AA584DC51F)] [added: Risk](#sF84F42C9AE305948A09BF7CC82A370A3)] | [removed: [41](#s2C008111C1435CAB9BD235AA584DC51F)] [added: [46](#sF84F42C9AE305948A09BF7CC82A370A3)] |

| Item 8. | [Financial Statements and Supplementary [removed: Data](#s60D8FCE00C7151B680060ED51A911289)] [added: Data](#s72D1A901EB0759B99816AA922BFC16AE)] | [removed: [43](#s60D8FCE00C7151B680060ED51A911289)] [added: [47](#s72D1A901EB0759B99816AA922BFC16AE)] |

| Item 9. | [Changes in and Disagreements With Accountants on Accounting and Financial [removed: Disclosure](#s83BB2457EF2750EF8509A8359ADE9B68)] [added: Disclosure](#s81D47B72534653D2802B6CC9E25D0E9B)] | [removed: [77](#s83BB2457EF2750EF8509A8359ADE9B68)] [added: [84](#s81D47B72534653D2802B6CC9E25D0E9B)] |

| Item 9A. | [Controls and [removed: Procedures](#sD73FA00D4A6053C2BF37E8A12CECD732)] [added: Procedures](#sFADA13BE36385DB7BE3CF01C20A74888)] | [removed: [77](#sD73FA00D4A6053C2BF37E8A12CECD732)] [added: [84](#sFADA13BE36385DB7BE3CF01C20A74888)] |

| Item 9B. | [Other [removed: Information](#sB8935C80739B5322B9DF5F3369F884EE)] [added: Information](#s9E2F0689A35B57598142EF57AF8377E0)] | [removed: [80](#sB8935C80739B5322B9DF5F3369F884EE)] [added: [88](#s9E2F0689A35B57598142EF57AF8377E0)] |

| [Part [removed: III](#s9798A0372E885F909F874B6AFE896568)] [added: III](#sA75098BB3CE953348536EF2581933839)] | | |

| Item 10. | [Directors, Executive Officers and Corporate [removed: Governance](#s7FD23178DBB65C88A8ADA1728F378C88)] [added: Governance](#s5B5BCEAE1D3C5B679850F7C89A68856C)] | [removed: [80](#s7FD23178DBB65C88A8ADA1728F378C88)] [added: [88](#s5B5BCEAE1D3C5B679850F7C89A68856C)] |

| Item 11. | [Executive [removed: Compensation](#sA4F837C7BA705F72AEEA91064E53EEE7)] [added: Compensation](#sD0AB476C676553148C81852B7957E5AB)] | [removed: [81](#sA4F837C7BA705F72AEEA91064E53EEE7)] [added: [89](#sD0AB476C676553148C81852B7957E5AB)] |

| Item 12. | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#sC600DAE360C5544191FA949CF3F28477)] [added: Matters](#s8360977B1A505F94940BF6630F399D1D)] | [removed: [81](#sC600DAE360C5544191FA949CF3F28477)] [added: [90](#s8360977B1A505F94940BF6630F399D1D)] |

| Item 13. | [Certain Relationships and Related Transactions, and Director [removed: Independence](#sD93CA40A5204561CAF91DBD19396B3A9)] [added: Independence](#s9252D010EA845A169B154D50D6614EC4)] | [removed: [81](#sD93CA40A5204561CAF91DBD19396B3A9)] [added: [90](#s9252D010EA845A169B154D50D6614EC4)] |

| Item 14. | [Principal Accounting Fees and [removed: Services](#s21B9A933A20157A7868C996783109C6B)] [added: Services](#s60B57FEE283B5EB49BA9A96A98C19550)] | [removed: [81](#s21B9A933A20157A7868C996783109C6B)] [added: [90](#s60B57FEE283B5EB49BA9A96A98C19550)] |

| Item 15. | [Exhibits, Financial Statement [removed: Schedules](#s3A8706AD0E1D520098F894E4B4AA0D8D)] [added: Schedules](#sF292124C2BE35E5DBADF1030C65CFAC3)] | [removed: [82](#s3A8706AD0E1D520098F894E4B4AA0D8D)] [added: [91](#sF292124C2BE35E5DBADF1030C65CFAC3)] |

| Item 16. | [Form 10-K [removed: Summary](#s98B6C6EB34D7506FBF8D32124BA8B4EB)] [added: Summary](#s8F0CCC9C03B4536C8CB03BB52B18F570)] | [removed: [84](#s98B6C6EB34D7506FBF8D32124BA8B4EB)] [added: [92](#s8F0CCC9C03B4536C8CB03BB52B18F570)] |

| • | The occurrence of adverse economic conditions, an adverse regulatory climate, or a disaster [removed: (such as the recent hurricanes] in [removed: Florida and Texas and fires in California) in] Arizona, California, Florida, Georgia, Illinois, Indiana, Kentucky, Massachusetts, Michigan, [added: Minnesota,] New Jersey, New York, North Carolina, Oregon, Pennsylvania, Texas, [removed: Virginia] [added: Virginia, Washington] and [removed: Washington,] [added: Wisconsin,] because a significant portion of business written by us is for customers located in these states; |

| • | Our ability to attract, retain and enhance qualified [removed: personnel;] [added: personnel and to maintain our corporate culture;] |

| • | The integration of our operations with those of businesses or assets we have [removed: acquired] [added: acquired, including our November 2018 acquisition of The Hays Group, Inc. and certain of its affiliates,] or may acquire in the future and the failure to realize the expected benefits of such integration; |

| • | Our ability to forecast liquidity needs through at least the end of [removed: 2018;] [added: 2019;] |

| • | Potential changes to the tax rate that would affect the value of deferred tax assets and liabilities and the impact on income available for investment or [removed: distributable] [added: distribution] to shareholders; |

Yes ¨ No ý

| [Part I](#sB240D7F5F6BD59DDAF52EF37C6C3BFD8) | | |

| [Part II](#sFF5ABB08ACAC59C9B6DDE7CDC3261F6A) | | |

| [Part IV](#s8B6CEC9D0DF75760B31D4B532BACD3E5) | | |

| [Signatures](#s406F627C4F08541281F69A97549D7143) | | [93](#s406F627C4F08541281F69A97549D7143) |

| • | Disintermediation within the insurance industry, including increased competition from insurance companies, technology companies and the financial services industry, as well as the shift away from traditional insurance markets; |

| | |

| --- | --- |

| [Part I](#s1BAA38303B6457A98C4978EA1A7027AE) | | |

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

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

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

We lease offices at each of our [removed: 242] [added: 291] locations.

See Note [removed: 13] [added: 14] to the Consolidated Financial Statements for additional information on our lease commitments.

We have acquired several contiguous parcels of land totaling over thirteen acres in Daytona Beach, Florida, located approximately a mile from our current executive offices.

We have initiated a project to build a new office tower to hold our executive offices and certain other business operations with capacity for up to 1000 employees and room for additional expansion through construction of additional office space at this location.

Site preparation work began in 2018 and construction will commence in the first quarter of 2019, with completion anticipated in the fourth quarter of 2020.

Annual expenditures of approximately $30.0 million to $40.0 million in 2019 and 2020, respectively, are anticipated to complete this project.

On February [removed: 23, 2018,] [added: 21, 2019,] there were [removed: 137,800,585] [added: 279,701,832] shares of our common stock outstanding, held by approximately [removed: 1,245] [added: 1,311] shareholders of record.

We did not sell any unregistered securities during [removed: 2017.][added: 2018.]

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 [removed: Securities] Exchange [removed: Act of 1934.][added: Act.]

On [removed: August 14, 2017,] [added: December 12, 2018,] the Company entered into [added: an] accelerated share repurchase agreement [removed: ("ASR")] [added: (“ASR”)] with an investment bank to purchase an aggregate [removed: $50.0] [added: $100.0] million of the Company's common stock.

As part of the ASR, the [removed: company] [added: Company] received an initial delivery of [removed: 967,888] [added: 2,910,150] shares of the [removed: Company’s] [added: Company's] common stock with a fair market value of approximately [removed: $42.5] [added: $80.0] million.

During [removed: 2014,] [added: 2017,] the Company repurchased [removed: 2,384,760] [added: 2,883,349] shares at an average price per share of [removed: $31.46] [added: $48.52] for a total cost of [removed: $75.0] [added: $140.0] million under the [removed: original] [added: current] share repurchase [removed: authorization from the Board of Directors on July 18, 2014.][added: authorization.]

At December 31, [removed: 2017,] [added: 2018,] the remaining amount authorized by our Board of Directors for share repurchases was [removed: $238.7] [added: $147.5] million.

Under the authorized repurchase programs, the Company has repurchased a total of approximately [removed: 10.7] [added: 13.8] million shares for an aggregate cost of approximately [removed: $386.3] [added: $477.5] million between 2014 and [removed: 2017.][added: 2018.]

The following table presents information with respect to our purchases of our common stock during the three months ended December 31, [removed: 2017.][added: 2018.]

| Period | | Total [removed: Number] [added: number] of [removed: Shares Purchased (1)] [added: shares purchased(1)] | | | Average [removed: Price Paid] [added: price paid] per [removed: Share] [added: share] | | | | Total [removed: Number] [added: number] of [removed: Shares Purchased] [added: shares purchased] as [removed: Part] [added: part] of [removed: Publicly Announced Plans] [added: publicly announced plans] or [removed: Programs] [added: programs] | | | Approximate [removed: Dollar Value] [added: dollar value] of [removed: Shares] [added: shares] that [removed: May Yet Be Purchased Under] [added: may yet be purchased under] the [removed: Plans] [added: plans] or [removed: Programs] [added: programs] | | |

[added: |] (1) [added: |] With the exception of [removed: 1,290,486] [added: 2,910,150] shares purchased in 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 [removed: Incentive] [added: 2010] Stock [removed: Option] [added: Incentive] Plan. [added: |]

The returns of each company have been weighted according to such companies’ respective stock market capitalizations as of December 31, [removed: 2012] [added: 2013] 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: 2012,] [added: 2013,] with all dividends reinvested.

[removed: ][added: ]

Our common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “BRO.”

The $20.0 million hold back will be settled within the five-month maturity as agreed to in the program with a clause for early settlement any time after two months of the effective date.

| October 1, 2018 to October 31, 2018 | | — | | | $ | — | | | — | | | $ | 227,453,029 | |

| November 1, 2018 to November 30, 2018 | | 3,332 | | | 28.82 | | | | | | | 227,453,029 | | |

| December 1, 2018 to December 31, 2018 | | 2,914,066 | | | 27.49 | | | | 2,910,150 | | | 147,453,029 | | |

| Total | | 2,917,398 | | | $ | 27.49 | | | 2,910,150 | | | $ | 147,453,029 | |

| | 12/13 | | | 12/14 | | | 12/15 | | | 12/16 | | | 12/17 | | | 12/18 | |

| Brown & Brown, Inc. | 100.00 | | | 106.25 | | | 105.10 | | | 149.02 | | | 173.08 | | | 187.43 | |

| NYSE Composite | 100.00 | | | 106.87 | | | 102.62 | | | 115.02 | | | 136.76 | | | 124.72 | |

| Peer Group | 100.00 | | | 110.37 | | | 109.91 | | | 129.81 | | | 160.21 | | | 172.33 | |

Our common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “BRO.” The table below sets forth, for the quarterly periods indicated, the intra-day high and low sales prices for our common stock as reported on the NYSE Composite Tape, and the cash dividends declared on our common stock.

| | | | | | |

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

| | High | | Low | | Cash Dividends Per Common Share |

| 2016 | | | | | |

| First Quarter | $35.91 | | $28.41 | | $0.12 |

| Second Quarter | $37.49 | | $34.23 | | $0.12 |

| Third Quarter | $38.11 | | $35.81 | | $0.12 |

| Fourth Quarter | $45.62 | | $36.05 | | $0.14 |

| 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 |

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

Our dividend policy may be affected by, among other items, our views on potential future capital requirements, including those relating to the creation and expansion of sales distribution channels and investments and acquisitions, legal risks, stock repurchase programs and challenges to our business model.

Equity Compensation Plan Information

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

| | | | | | | | | | |

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

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

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

| Equity compensation plans approved by shareholders: | | | | | | | | | |

| Brown & Brown, Inc. 2000 Incentive Stock Option Plan | N/A | | | N/A | | | — | | |

| Brown & Brown, Inc. 2010 Stock Incentive Plan | N/A | | | N/A | | | 4,197,920 | | (4) |

| Brown & Brown, Inc. 1990 Employee Stock Purchase Plan | N/A | | | N/A | | | 4,151,251 | | |

| Brown & Brown, Inc. Performance Stock Plan | N/A | | | N/A | | | — | | |

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

| Equity compensation plans not approved by shareholders | — | | | — | | | — | | |

| | |

| --- | --- |

| (1) | In addition to the number of securities listed in this column, 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. |

| (2) | The weighted-average exercise price excludes outstanding restricted stock as there is no exercise price associated with these equity awards. |

| (3) | All of the shares available for future issuance under the Brown & Brown, Inc. 2000 Incentive Stock Option Plan, the Brown & Brown, Inc. Performance Stock Plan, and the Brown & Brown, Inc. 2010 Stock Incentive Plan may be issued in connection with options, warrants, rights, restricted stock, or other stock-based awards. |

| (4) | The payout for 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. |

Between May 18, 2017 and July 14, 2017, the Company made share repurchases in the open market in total of 348,460 shares at a total cost of $14.9 million.

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.

On November 14, 2017, the Company entered into an ASR with an investment bank to purchase an aggregate $75.0 million of the Company's common stock.

As part of the ASR, the company received an initial delivery of 1,290,486 shares of the Company's common stock with a fair market value of approximately $63.8 million.

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.

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

| | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | | |

| Commissions and fees | | $ | [removed: 1,857,270] [added: 2,009,857] | | | $ | [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] | |

| Investment income | | [removed: 1,626] [added: 2,746] | | | | [removed: 1,456] [added: 1,626] | | | | [removed: 1,004] [added: 1,456] | | | | [removed: 747] [added: 1,004] | | | | [removed: 638] [added: 747] | | |

| Other income, net | | [removed: 22,451] [added: 1,643] | | | | [removed: 2,386] [added: 22,451] | | | | [removed: 2,554] [added: 2,386] | | | | [removed: 7,589] [added: 2,554] | | | | [removed: 7,138] [added: 7,589] | | |

| Total [removed: revenues] [added: revenues(1)] | | [removed: 1,881,347] [added: 2,014,246] | | | | [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] | | |

| Employee compensation and benefits | | [removed: 994,652] [added: 1,068,914] | | | | [removed: 925,217] [added: 994,652] | | | | [removed: 856,952] [added: 925,217] | | | | [removed: 811,112] [added: 856,952] | | | | [removed: 705,603] [added: 811,112] | | |

| Other operating expenses | | [removed: 283,470] [added: 332,118] | | | | [removed: 262,872] [added: 283,470] | | | | [removed: 251,055] [added: 262,872] | | | | [removed: 235,328] [added: 251,055] | | | | [removed: 195,677] [added: 235,328] | | |

| (Gain)/loss on disposal | | [removed: (2,157] [added: (2,175] | | ) | | [removed: (1,291] [added: (2,157] | | ) | | [removed: (619] [added: (1,291] | | ) | | [removed: 47,425] [added: (619] | | [added: )] | | [removed: —] [added: 47,425] | | |

| Amortization | | [removed: 85,446] [added: 86,544] | | | | [removed: 86,663] [added: 85,446] | | | | [removed: 87,421] [added: 86,663] | | | | [removed: 82,941] [added: 87,421] | | | | [removed: 67,932] [added: 82,941] | | |

| Depreciation | | [removed: 22,698] [added: 22,834] | | | | [removed: 21,003] [added: 22,698] | | | | [removed: 20,890] [added: 21,003] | | | | [removed: 20,895] [added: 20,890] | | | | [removed: 17,485] [added: 20,895] | | |

| Interest | | [removed: 38,316] [added: 40,580] | | | | [removed: 39,481] [added: 38,316] | | | | [removed: 39,248] [added: 39,481] | | | | [removed: 28,408] [added: 39,248] | | | | [removed: 16,440] [added: 28,408] | | |

| Change in estimated acquisition earn-out payables | | [removed: 9,200] [added: 2,969] | | | | [removed: 9,185] [added: 9,200] | | | | [removed: 3,003] [added: 9,185] | | | | [removed: 9,938] [added: 3,003] | | | | [removed: 2,533] [added: 9,938] | | |

| Total expenses | | [removed: 1,431,625] [added: 1,551,784] | | | | [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] | | |

| Income before income taxes | | [removed: 449,722] [added: 462,462] | | | | [removed: 423,499] [added: 449,722] | | | | [removed: 402,559] [added: 423,499] | | | | [removed: 339,749] [added: 402,559] | | | | [removed: 357,609] [added: 339,749] | | |

| Income [removed: taxes] [added: taxes(2)] | | [removed: 50,092] [added: 118,207] | | | | [removed: 166,008] [added: 50,092] | | | | [removed: 159,241] [added: 166,008] | | | | [removed: 132,853] [added: 159,241] | | | | [removed: 140,497] [added: 132,853] | | |

| Net income | | $ | [removed: 399,630] [added: 344,255] | | | $ | [removed: 257,491] [added: 399,630] | | | $ | [removed: 243,318] [added: 257,491] | | | $ | [removed: 206,896] [added: 243,318] | | | $ | [removed: 217,112] [added: 206,896] | |

| Total [removed: assets(1)] [added: assets(4)] | | $ | [removed: 5,747,550] [added: 6,688,668] | | | $ | [removed: 5,262,734] [added: 5,747,550] | | | $ | [removed: 4,979,844] [added: 5,262,734] | | | $ | [removed: 4,931,027] [added: 4,979,844] | | | $ | [removed: 3,620,232] [added: 4,931,027] | |

| Long-term [removed: debt(2)] [added: debt(5)] | | $ | [removed: 856,141] [added: 1,456,990] | | | $ | [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] | |

| Total shareholders’ equity | | $ | [removed: 2,582,699] [added: 3,000,568] | | | $ | [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] | |

| Number of full-time equivalent employees at year end | | [removed: 8,491] [added: 9,590] | | | | [removed: 8,297] [added: 8,491] | | | | [removed: 7,807] [added: 8,297] | | | | [removed: 7,591] [added: 7,807] | | | | [removed: 6,992] [added: 7,591] | | |

| Total revenues per average number of [removed: employees(3)] [added: employees(6)] | | $ | [removed: 224,130] [added: 222,809] | | | $ | [removed: 219,403] [added: 224,130] | | | $ | [removed: 215,679] [added: 219,403] | | | $ | [removed: 216,114] [added: 215,679] | | | $ | [removed: 203,020] [added: 216,114] | |

| Stock price earnings multiple at [removed: year-end(4)] [added: year-end(7)] | | [removed: 18.3] [added: 22.6] | | | | [removed: 24.6] [added: 18.3] | | | | [removed: 18.9] [added: 24.6] | | | | [removed: 23.3] [added: 18.9] | | | | [removed: 21.2] [added: 23.3] | | |

| Return on beginning shareholders’ [removed: equity(5)] [added: equity(8)] | | [removed: 17] [added: 13] | | % | | [removed: 12] [added: 17] | | % | | 12 | | % | | [removed: 10] [added: 12] | | % | | [removed: 12] [added: 10] | | % |

| [removed: (1)] [added: (4)] | Years 2016 to [removed: 2013 have been restated to] [added: 2014] reflect the adoption of ASU No. 2015-17, “Income Taxes (Topic 740) - Balance Sheet Classification of Deferred Taxes” (“ASU 2015-17”). |

| [removed: (2)] [added: (5)] | Please refer to Part I, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note [removed: 8] [added: 9] “Long-Term Debt” for more details. |

| [removed: (3)] [added: (6)] | 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. |

| [removed: (4)] [added: (7)] | Stock price at year-end divided by net income per share diluted. |

| [removed: (5)] [added: (8)] | Represents net income divided by total shareholders’ equity as of the beginning of the year. |

| Net income per share - diluted(3) | | $ | 1.22 | | | $ | 1.40 | | | $ | 0.91 | | | $ | 0.85 | | | $ | 0.71 | |

| Weighted average number of shares outstanding - diluted(3) | | 275,521 | | | | 277,586 | | | | 275,608 | | | | 280,224 | | | | 285,782 | | |

| Dividends declared per share(3) | | $ | 0.31 | | | $ | 0.28 | | | $ | 0.25 | | | $ | 0.23 | | | $ | 0.21 | |

| Total shares outstanding at year end(3) | | 279,583 | | | | 276,210 | | | | 280,208 | | | | 277,970 | | | | 286,972 | | |

| Stock price at year end(3) | | $ | 27.56 | | | $ | 25.73 | | | $ | 22.43 | | | $ | 16.05 | | | $ | 16.45 | |

| (1) | Years 2017 to 2014 do not reflect the adoption of “Revenue from Contracts with Customers (Topic 606)” (“Topic 606”), ASC Topic 340 - Other Assets and Deferred Cost (“ASC 340”) and ASU 2016-08, “Principal Versus Agent Considerations (Reporting Revenue Gross Versus Net)”. |

| (2) | Years 2017 to 2014 do not reflect the adoption of ASU 2016-09, “Improvements to Employee Share Based Payment Accounting” (“ASU 2016-09”). |

| (3) | Years 2017 to 2014 reflect the 2-for-1 stock split that occurred on March 28, 2018. |

| | |

| --- | --- |

| | |

| --- | --- |

| | |

| --- | --- |

| Net income per share - diluted | | $ | 2.81 | | | $ | 1.82 | | | $ | 1.70 | | | $ | 1.41 | | | $ | 1.48 | |

| Weighted-average number of shares outstanding - diluted | | 138,793 | | | | 137,804 | | | | 140,112 | | | | 142,891 | | | | 142,624 | | |

| Dividends declared per share | | $ | 0.56 | | | $ | 0.50 | | | $ | 0.45 | | | $ | 0.41 | | | $ | 0.37 | |

| Total shares outstanding at year end | | 138,105 | | | | 140,104 | | | | 138,985 | | | | 143,486 | | | | 145,419 | | |

| Stock price at year end | | $ | 51.46 | | | $ | 44.86 | | | $ | 32.10 | | | $ | 32.91 | | | $ | 31.39 | |

| Consolidated Statements of Income for the years ended December 31, [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015] [added: 2016] | [removed: [44](#s51DE25B770D651C99CE6B057A77D308C)] [added: [48](#sA6C95CDE0BEF5D57A0CD3400F626B1DA)] |

| Consolidated Balance Sheets as of December 31, [removed: 2017] [added: 2018] and [removed: 2016] [added: 2017] | [removed: [45](#s91F852309CE0551F944E5E7B9EB6E464)] [added: [49](#s76691CC2949F54BA82CFF87EDB00CC9D)] |

| Consolidated Statements of Shareholders’ Equity for the years ended December 31, [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015] [added: 2016] | [removed: [46](#sE3AFC770F5FA5051AF27611420A3798F)] [added: [50](#sF5CB1A7BDC8553078BFE877314E08ABD)] |

| Consolidated Statements of Cash Flows for the years ended December 31, [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015] [added: 2016] | [removed: [47](#s4250780EDCEC52CD994023D150B95F77)] [added: [51](#sD269D98AC6465CA2BC24C3EB6CE9B31C)] |

| Notes to Consolidated Financial Statements for the years ended December 31, [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015] [added: 2016] | [removed: [48](#s5F4255A1FD1750978A877FC691D802A8)] [added: [52](#s5CE5ECC7ED40577881780D1C57C1F278)] |

| Note 1: Summary of Significant Accounting Policies | [removed: [48](#sA5D82B2D8BDC5FE9B00E06AFE393A01D)] [added: [52](#s53C21CD5CD0555E4B4B1A96585193A22)] |

[removed: | Note 2:] [added: NOTE 3·] Business [removed: Combinations | [53](#s2608B3CF89BF53F2B04DEECCF7620EBC) |][added: Combinations]

[removed: | Note 3: Goodwill | [59](#sB9A657220DE954C08578F0D35E8D458A) |][added: NOTE 4· Goodwill]

[removed: | Note 4:] [added: NOTE 5·] Amortizable Intangible [removed: Assets | [59](#sE50F8980A6BB5FB49D0422DB74A2C4BD) |][added: Assets]

[removed: | Note 5: Investments | [59](#s297DD1A9BC7D5D5182FB87CD95585721) |][added: NOTE 6· Investments]

[removed: | Note 6:] [added: NOTE 7·] Fixed [removed: Assets | [61](#sDEED2A3C3B0857B3B8217CB7174C2984) |][added: Assets]

| Note [removed: 7:] [added: 8:] Accrued Expenses and Other Liabilities | [removed: [62](#s9F402ECE4F8F5DB8BCECC0ED1550F10C)] [added: [70](#sA8744271EC0D58F9A490E9C6728F6A9C)] |

[removed: | Note 8:] [added: NOTE 9·] Long-Term [removed: Debt | [62](#s29EF6329E27A5B1F9F13AD262C2AD8DB) |][added: Debt]

[removed: | Note 9:] [added: NOTE 10·] Income [removed: Taxes | [63](#s0CD5540D30CA5AC2A801EBDF301689C8) |][added: Taxes]

[removed: | Note 10:] [added: NOTE 11·] Employee Savings [removed: Plan | [66](#s0989E323D48C5B229A6D12831A4D387A) |][added: Plan]

[removed: | Note 11:] [added: NOTE 12·] Stock-Based [removed: Compensation | [66](#s4471CAF248755E31BA10B0E978DD9393) |][added: Compensation]

| Note [removed: 12:] [added: 13:] Supplemental Disclosures of Cash Flow Information | [removed: [71](#sE209C61FA8DC544A9A1C6A37109A9635)] [added: [77](#sFC8AF1306D745D6AAB126776E2F20068)] |

[removed: | Note 13:] [added: NOTE 14·] Commitments and [removed: Contingencies | [71](#s4F5594627B9C5D2F95B1737B7DF00171) |][added: Contingencies]

[removed: | Note 14:] [added: NOTE 15·] Quarterly Operating Results [removed: (Unaudited) | [72](#sA6DB30B4D2A250D09F5132ECE18DBCE5) |][added: (Unaudited)]

[removed: | Note 15:] [added: NOTE 16·] Segment [removed: Information | [72](#s6593379922E955C9B28B017416D1B869) |][added: Information]

[removed: | Note 16: Reinsurance | [74](#s4C163BF6ADE259E996CE976AC5678F7B) |][added: NOTE 17· Reinsurance]

[removed: | Note 17:] [added: NOTE 18·] Statutory Financial [removed: Information | [74](#sB093B71DECE85C8D9BFFE7CD62418E0C) |][added: Information]

[removed: | Note 18:] [added: NOTE 19·] Subsidiary Dividend [removed: Restrictions | [75](#sF85EFF340D1259A59E8097AC7E2C91B4) |][added: Restrictions]

[removed: | Note 19:] [added: NOTE 20·] Shareholders’ [removed: Equity | [75](#s8E850FC74CBB5886A2C3D5FE191A48CF) |][added: Equity]

| Report of Independent Registered Public Accounting Firm | [removed: [76](#s76AAA78ECD635DB0B347F23162FC2A6C)] [added: [83](#s56AE0A608FFC5356BFE6E40B504E19DE)] |

| | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | |

| Commissions and fees | $ | [removed: 1,857,270] [added: 2,009,857] | | | $ | [removed: 1,762,787] [added: 1,857,270] | | | $ | [removed: 1,656,951] [added: 1,762,787] | |

| Investment income | [removed: 1,626] [added: 2,746] | | | | [removed: 1,456] [added: 1,626] | | | | [removed: 1,004] [added: 1,456] | | |

| Other income, net | [removed: 22,451] [added: 1,643] | | | | [removed: 2,386] [added: 22,451] | | | | [removed: 2,554] [added: 2,386] | | |

| Total revenues | [removed: 1,881,347] [added: 2,014,246] | | | | [removed: 1,766,629] [added: 1,881,347] | | | | [removed: 1,660,509] [added: 1,766,629] | | |

| Employee compensation and benefits | [removed: 994,652] [added: 1,068,914] | | | | [removed: 925,217] [added: 994,652] | | | | [removed: 856,952] [added: 925,217] | | |

| Other operating expenses | [removed: 283,470] [added: 332,118] | | | | [removed: 262,872] [added: 283,470] | | | | [removed: 251,055] [added: 262,872] | | |

| (Gain)/loss on disposal | [removed: (2,157] [added: (2,175] | | ) | | [removed: (1,291] [added: (2,157] | | ) | | [removed: (619] [added: (1,291] | | ) |

| Amortization | [removed: 85,446] [added: 86,544] | | | | [removed: 86,663] [added: 85,446] | | | | [removed: 87,421] [added: 86,663] | | |

| Depreciation | [removed: 22,698] [added: 22,834] | | | | [removed: 21,003] [added: 22,698] | | | | [removed: 20,890] [added: 21,003] | | |

| Interest | [removed: 38,316] [added: 40,580] | | | | [removed: 39,481] [added: 38,316] | | | | [removed: 39,248] [added: 39,481] | | |

| Change in estimated acquisition earn-out payables | [removed: 9,200] [added: 2,969] | | | | [removed: 9,185] [added: 9,200] | | | | [removed: 3,003] [added: 9,185] | | |

| Total expenses | [removed: 1,431,625] [added: 1,551,784] | | | | [removed: 1,343,130] [added: 1,431,625] | | | | [removed: 1,257,950] [added: 1,343,130] | | |

| Income before income taxes | [removed: 449,722] [added: 462,462] | | | | [removed: 423,499] [added: 449,722] | | | | [removed: 402,559] [added: 423,499] | | |

| Income taxes | [removed: 50,092] [added: 118,207] | | | | [removed: 166,008] [added: 50,092] | | | | [removed: 159,241] [added: 166,008] | | |

| Note 2: Revenues | [59](#se543d732d5854900bd977a8c1e699550) |

| Basic | $ | 1.24 | | | $ | 1.43 | | | $ | 0.92 | |

| Diluted | $ | 1.22 | | | $ | 1.40 | | | $ | 0.91 | |

| Common stock, par value $0.10 per share; authorized 560,000 shares; issued 293,380 shares and outstanding 279,583 shares at 2018, issued 286,929 shares and outstanding 276,210 shares at 2017 - in thousands. 2017 share amounts reflect the 2-for-1 stock split effective March 28, 2018 | 29,338 | | | | 28,689 | | |

| Additional paid-in capital | 615,180 | | | | 483,733 | | |

| Balance at January 1, 2016 | 282,077 | | $ | 28,209 | | | $ | 412,931 | | | $ | (238,775 | ) | | $ | 1,947,411 | | | $ | 2,149,776 | |

| Adoption of Topic 606 at January 1, 2018 | | | | | | | | | | | | | | | 117,515 | | | | 117,515 | | |

| Beginning balance after adoption of Topic 606 | 286,895 | | 28,689 | | | | 483,733 | | | | (386,322 | | ) | | 2,574,114 | | | | 2,700,214 | | |

| Net income | | | | | | | | | | | | | | | 344,255 | | | | 344,255 | | |

| Common stock issued for agency acquisitions | 3,376 | | 338 | | | | 99,662 | | | | | | | | | | | | 100,000 | | |

| Balance at December 31, 2018 | 293,380 | | $ | 29,338 | | | $ | 615,180 | | | $ | (477,572 | ) | | $ | 2,833,622 | | | $ | 3,000,568 | |

| Net income | $ | 344,255 | | | $ | 399,630 | | | $ | 257,491 | |

| Amortization | 86,544 | | | | 85,446 | | | | 86,663 | | |

| Depreciation | 22,834 | | | | 22,698 | | | | 21,003 | | |

| Change in estimated acquisition earn-out payables | 2,969 | | | | 9,200 | | | | 9,185 | | |

| Proceeds from long-term debt | 300,000 | | | | — | | | | — | | |

| Borrowings on revolving credit facilities | 600,000 | | | | — | | | | — | | |

| Payments on revolving credit facilities | (250,000 | | ) | | — | | | | — | | |

In July 2018, the FASB also issued ASU 2018-10 and ASU 2018-11 related to Topic 842.

ASU 2018-10 narrows certain aspects of the guidance issued in the amendments within ASU 2016-02.

ASU 2018-11 provides entities with an additional transition method to adopt ASU 2016-02.

Under this new transition method, at the adoption date, a company shall recognize a cumulative-effect adjustment to the opening balance of retained earnings.

The Company plans to adopt Topic 842 under the transition method provided by ASU 2018-11.

In August 2018, the FASB issued ASU 2018-15, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract,” which provides guidance for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license).

ASU 2018-15 will take effect for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

The Company is currently evaluating the impact of this pronouncement.

Recently Adopted Accounting Standards

on the Company’s Statement of Cash Flows.

The impact of ASU 2016-08 was limited to the claims administering activities of one of our businesses within our Services Segment and therefore was not material to the net income of the Company.

The Company adopted the guidance on January 1, 2017, as required and prior period have been adjusted to reflect this adoption.

Effective as of January 1, 2018, the Company adopted ASU 2014–09, and all related amendments, which established ASC Topic 606.

The Company adopted these standards by recognizing the cumulative effect as an adjustment to opening retained earnings at January 1, 2018, under the modified retrospective method for contracts not completed as of the day of adoption.

Under the modified retrospective method, the Company was not required to restate comparative financial information prior to the adoption of these standards and, therefore, such information presented prior to January 1, 2018 continue to be reported under the Company’s previous accounting policies.

The Company earns commissions and fees paid by insurance carriers for the binding of insurance coverage.

These commissions and fees are earned at a point in time upon the effective date of bound insurance coverage, as no performance obligation exists after coverage is bound.

If there are other services within the contract, the Company estimates the stand-alone selling price for each separate performance obligation, and the corresponding apportioned revenue is recognized over the period of time in which the customer receives the service, and as the performance obligations are fulfilled and the Company is entitled to that portion of revenue using the output method for the services.

As a result of the adoption of Topic 606, commission revenues associated with the issuance of policies are now recognized upon the effective date of the associated policy.

The overall impact of these changes are not significant on a full-year basis, but the timing of recognizing revenue has impacted our fiscal quarters when compared to prior years.

These commission revenues, including those billed on an installment basis, are now recognized earlier than they had been previously.

For the year ended December 31, 2018, the adoption of Topic 606 increased base and incentive commissions

| Note 20: Subsequent Event | [75](#s6bed48d18c9d4261b69e7b8c063a9797) |

BROWN & BROWN, INC.

| Basic | $ | 2.86 | | | $ | 1.84 | | | $ | 1.72 | |

| Diluted | $ | 2.81 | | | $ | 1.82 | | | $ | 1.70 | |

| Common stock, par value $0.10 per share; authorized 280,000 shares; issued 148,824 shares and outstanding 138,105 shares at 2017, issued 148,107 shares and outstanding 140,104 shares at 2016 | 14,882 | | | | 14,811 | | |

| Additional paid-in capital | 497,540 | | | | 468,443 | | |

| Balance at January 1, 2015 | 145,871 | | $ | 14,587 | | | $ | 405,982 | | | $ | (75,025 | ) | | $ | 1,768,201 | | | $ | 2,113,745 | |

| Net income | | | | | | | | | | | | | | | 243,318 | | | | 243,318 | | |

| Balance at December 31, 2015 | 146,415 | | 14,642 | | | | 426,498 | | | | (238,775 | | ) | | 1,947,411 | | | | 2,149,776 | | |

| Amortization of debt discount | 158 | | | | 165 | | | | 157 | | |

| Income tax benefit from exercise of shares from the stock benefit plans | — | | | | 7,346 | | | | 3,276 | | |

The Company adopted the guidance on January 1, 2017, as required.

The impact of adopting ASU 2016-08 is not material to the Company.

As a result, the Company retrospectively applied the guidance to the 2016 balance sheet by reclassifying $24.6 million from deferred income taxes (asset) to deferred income taxes, net (liability) on the Condensed Consolidated Balance Sheet.

In doing so, companies will need to use more judgment and make more estimates than under the current guidance.

Historically, approximately 70% of the Company’s commissions and fees are in the form of commissions paid by insurance carriers.

Contingent commissions have averaged approximately 3.6% of the previous year’s total commissions and fees over the last three years and have primarily been received in the first and second quarters of the year.

as compared to our current accounting treatment.

Topic 606 is effective for the Company beginning January 1, 2018.

Entities are permitted to adopt the guidance under one of the following methods: the “full retrospective” method, which applies the guidance to each period presented (prior years restated), or the “modified retrospective” method, in which the guidance is only applied to the year of adoption, with the cumulative effect of initially applying the guidance recognized as an adjustment to retained earnings.

The Company has elected to follow the modified retrospective method applied to contracts that are not completed as of the date of adoption.

Commission revenues are recognized as of the effective date of the insurance policy or the date on which the policy premium is processed into our systems and invoiced to the customer, whichever is later.

Commission revenues related to installment billings are recognized on the latter of effective or invoiced date, with the exception of our Arrowhead business which follows a policy of recognizing on the latter of effective or processed date into our systems, regardless of the billing arrangement.

Subsequent commission adjustments were recognized upon our receipt of notification from insurance companies concerning matters necessitating such adjustments.

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

Fee revenues and commissions for workers’ compensation programs are recognized as services are rendered.

Of the $598.9 million, $100.0 million is related to short-term notes which approximates the carrying value due to the proximity to maturity.

employees prior to January 1, 2006 that remained unvested on that date.

All of these businesses were acquired primarily to expand Brown & Brown’s core business and to attract and hire high-quality individuals.

These payments are

| | | | |

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

| Basic | $ | 2.88 | | | $ | 1.87 | |

| Diluted | $ | 2.83 | | | $ | 1.85 | |

| Basic | 136,290 | | | | 136,139 | | |

| Diluted | 138,793 | | | | 137,804 | | |

| Basic | $ | 1.86 | | | $ | 1.78 | |

| Diluted | $ | 1.84 | | | $ | 1.75 | |

| Basic | 136,139 | | | | 137,810 | | |

| Diluted | 137,804 | | | | 140,112 | | |

There were no changes in or disagreements with accountants on accounting and financial disclosure in [removed: 2017.][added: 2018.]

We carried out an evaluation (the “Evaluation”) required by Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15 and 15d-15 under the Exchange Act (“Disclosure Controls”) as of December 31, [removed: 2017.][added: 2018.]

There has not been any change in our internal control over financial reporting identified in connection with the Evaluation that occurred during the quarter ended December 31, [removed: 2017,] [added: 2018,] that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

We have audited the internal control over financial reporting of Brown & Brown, Inc. and subsidiaries (the “Company”) as of December 31, [removed: 2017,] [added: 2018,] based on criteria established in *Internal Control - Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2017,] [added: 2018,] based on criteria established in *Internal Control - Integrated Framework (2013)* issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, [removed: 2017,] [added: 2018,] of the Company and our report dated February [removed: 28, 2018,] [added: 25, 2019,] expressed an unqualified opinion on those financial [removed: statements.][added: statements and included an explanatory paragraph regarding the Company’s adoption of Financial Accounting Standards Board Accounting Standards Codification 606, *Revenue from Contracts with Customers,* and related amendments.]

| [removed: */s/] [added: /s/] DELOITTE & TOUCHE [removed: LLP*] [added: LLP] |

Based upon Brown & Brown’s evaluation under the framework in *Internal Control-Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission*,* management concluded that internal control over financial reporting was effective as of December 31, [removed: 2017.][added: 2018.]

Management’s internal control over financial reporting as of December 31, [removed: 2017] [added: 2018] has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which is included herein.

As described in *Management’s Annual Report on Internal Control Over Financial Reporting*, management excluded from its assessment the internal control over financial reporting at the Automotive Development Group, LLC, Servco Pacific Inc., Health Special Risk, Inc., Professional Disability Associates, LLC, Finance & Insurance Resources Inc., Rodman Insurance Agency, Inc., The Hays Group, Inc. et al, and Dealer Associates, Inc. which were acquired in 2018 and whose financial statements constitute approximately 0.01 percent and 17.55 percent of net and total assets, respectively, 3.18 percent of revenues, and 0.36 percent of net income of the consolidated financial statement amounts as of and for the year ended December 31, 2018.

Accordingly, our audit did not include the internal control over financial reporting of these acquired entities.

| February 25, 2019 |

In conducting Brown & Brown’s evaluation of the effectiveness of its internal control over financial reporting, Brown & Brown has excluded the following acquisitions completed by Brown & Brown during 2018: the Automotive Development Group, LLC, Servco Pacific Inc., Health Special Risk, Inc., Professional Disability Associates, LLC, Finance & Insurance Resources Inc., Rodman Insurance Agency, Inc., The Hays Group, Inc. et al, and Dealer Associates, Inc. (collectively the “2018 Excluded Acquisitions”), which were acquired during 2018 and whose financial statements constitute approximately 0.01% and 17.55% of net and total assets, respectively, 3.18% of revenues, and 0.36% of net income of the consolidated financial statement amounts as of and for the year ended December 31, 2018.

Refer to Note 3 to the Consolidated Financial Statements for further discussion of these acquisitions and their impact on Brown & Brown’s Consolidated Financial Statements.

February 25, 2019

| February 28, 2018 |

February 28, 2018

Set forth below is certain information concerning our executive officers as of February [removed: 28, 2018.][added: 25, 2019.]

| Robert W. Lloyd | Executive Vice President; Secretary and General Counsel | [removed: 53] [added: 54] |

| J. Scott Penny | Executive Vice President; Chief Acquisitions Officer | [removed: 51] [added: 52] |

| Julie K. Ryan | Executive Vice President; Chief People Officer | [removed: 46] [added: 47] |

| Anthony T. Strianese | Executive Vice President; President - Wholesale Brokerage Division | [removed: 56] [added: 57] |

| Chris L. Walker | Executive Vice President; President - [added: National] Programs Division | [removed: 60] [added: 61] |

| R. Andrew Watts | Executive Vice President; Chief Financial Officer and Treasurer | [removed: 49] [added: 50] |

Mr. Lloyd is a [removed: Rotarian,] [added: Rotarian;] a [removed: director] [added: director, legal counsel, and chairman-elect] of the Greater Daytona Beach Area Chamber of [removed: Commerce] [added: Commerce; a director of the Council on Aging of Volusia County; a member of the executive committee of the Halifax Area Civic League;] and a member of the Advisory Board of the Central Florida Council - Boy Scouts of America.

Since [removed: 2015,] [added: 2017,] Mr. Lloyd has served as an independent director of Raydon Corporation, a private company based in Port Orange, Florida.

Mr. Strianese joined [removed: Brown & Brown] [added: the Company] in January 2000 and helped form Peachtree Special Risk Brokers.

Mr. Walker is responsible for our [added: National] Programs Division.

The additional information required by this item regarding directors and executive officers is incorporated herein by reference to our definitive Proxy Statement to be filed with the SEC in connection with the Annual Meeting of Shareholders to be held in [removed: 2018] [added: 2019] (the [removed: “2018] [added: “2019] Proxy Statement”) under the headings “Board and Corporate Governance Matters” and “Other Important Information.” We have adopted a code of ethics that applies to our principal executive officer, principal financial officer, and controller.