Item 1. Financial Statements (Unaudited)

BROWN & BROWN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

		Three months ended September 30,								Nine months ended September 30,
(in thousands, except per share data)		2021				2020				2021				2020
REVENUES
Commissions and fees		$	769,654			$	671,396			$	2,309,610			$	1,966,056
Investment income			430				349				909				1,844
Other income, net			221				2,217				2,414				3,364
Total revenues			770,305				673,962				2,312,933				1,971,264
EXPENSES
Employee compensation and benefits			394,997				362,767				1,220,107				1,058,907
Other operating expenses			101,071				91,403				291,690				274,103
(Gain)/loss on disposal			(288	)			(994	)			(4,332	)			(1,285	)
Amortization			29,523				27,059				88,562				80,190
Depreciation			9,200				6,647				25,457				18,836
Interest			16,175				13,234				48,802				42,334
Change in estimated acquisition earn-out payables			23,138				15,318				20,643				4,996
Total expenses			573,816				515,434				1,690,929				1,478,081
Income before income taxes			196,489				158,528				622,004				493,183
Income taxes			50,135				24,549				136,617				110,020
Net income		$	146,354			$	133,979			$	485,387			$	383,163
Net income per share:
Basic		$	0.52			$	0.47			$	1.72			$	1.35
Diluted		$	0.52			$	0.47			$	1.71			$	1.35
Dividends declared per share		$	0.093			$	0.085			$	0.278			$	0.255

See accompanying Notes to Condensed Consolidated Financial Statements.

BROWN & BROWN, INC.

CONDENSED CONSOLIDATED STATE****MENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

		Three months ended September 30,								Nine months ended September 30,
(in thousands)		2021				2020				2021				2020
Net income		$	146,354			$	133,979			$	485,387			$	383,163
Foreign currency translation			(2,918	)			—				(6,700	)			—
Unrealized (loss) gain on available-for-sale debt securities, net of tax			(83	)			—				150				—
Comprehensive income		$	143,353			$	133,979			$	478,837			$	383,163

See accompanying Notes to Condensed Consolidated Financial Statements.

BROWN & BROWN, INC.

CONDENSED CONSOLIDATE****D BALANCE SHEETS

(UNAUDITED)

(in thousands, except per share data)		September 30, 2021				December 31, 2020
ASSETS
Current Assets:
Cash and cash equivalents		$	943,969			$	817,398
Restricted cash			481,922				454,517
Short-term investments			14,428				18,332
Premiums, commissions and fees receivable			1,205,655				1,099,248
Reinsurance recoverable			220,430				43,469
Prepaid reinsurance premiums			411,252				377,615
Other current assets			120,621				147,670
Total current assets			3,398,277				2,958,249
Fixed assets, net			208,343				201,115
Operating lease assets			187,828				186,998
Goodwill			4,565,156				4,395,918
Amortizable intangible assets, net			1,045,280				1,049,660
Investments			31,349				24,971
Other assets			192,933				149,581
Total assets		$	9,629,166			$	8,966,492
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Premiums payable to insurance companies		$	1,214,835			$	1,198,529
Losses and loss adjustment reserve			220,430				43,469
Unearned premiums			411,252				377,615
Premium deposits and credits due customers			140,109				102,505
Accounts payable			226,143				190,497
Accrued expenses and other liabilities			386,372				371,737
Current portion of long-term debt			290,000				70,000
Total current liabilities			2,889,141				2,354,352
Long-term debt less unamortized discount and debt issuance costs			1,755,487				2,025,906
Operating lease liabilities			171,571				172,935
Deferred income taxes, net			374,595				344,222
Other liabilities			330,753				314,854
Shareholders’ Equity:
Common stock, par value $0.10 per share; authorized 560,000 shares; issued 300,929 shares and outstanding 282,432 shares at 2021, issued 299,689shares and outstanding 283,004 shares at 2020			30,093				29,969
Additional paid-in capital			830,066				794,909
Treasury stock, at cost at 18,497 shares at 2021, 16,685 shares at 2020, respectively			(673,902	)			(591,338	)
Accumulated other comprehensive loss			(6,550	)			—
Retained earnings			3,927,912				3,520,683
Total shareholders’ equity			4,107,619				3,754,223
Total liabilities and shareholders’ equity		$	9,629,166			$	8,966,492

See accompanying Notes to Condensed Consolidated Financial Statements.

BROWN & BROWN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)

		Common Stock
(in thousands, except per share data)		Shares Outstanding				Par Value				Additional Paid-In Capital				Treasury Stock				Accumulated Other Comprehensive Loss				Retained Earnings				Total
Balance at December 31, 2020			283,004			$	29,969			$	794,909			$	(591,338	)		$	—			$	3,520,683			$	3,754,223
Net income																							199,744				199,744
Net unrealized holding (loss) gain on available-for- sale securities											(508	)						263									(245	)
Foreign currency translation																			(5,253	)			122				(5,131	)
Shares issued - employee stock compensation plans
Employee stock purchase plan											3,032																3,032
Stock incentive plans			1,400				140				15,506																15,646
Agency acquisition			107				11				4,881																4,892
Repurchase shares to fund tax withholdings for non-cash stock-based compensation			(973	)			(98	)			(44,954	)															(45,052	)
Purchase of treasury stock			(1,558	)											(70,020	)											(70,020	)
Cash dividends paid ($0.0925 per share)																							(26,092	)			(26,092	)
Balance at March 31, 2021			281,980			$	30,022			$	772,866			$	(661,358	)		$	(4,990	)		$	3,694,457			$	3,830,997
Net income																							139,290				139,290
Net unrealized holding (loss) gain on available-for- sale securities																			(30	)							(30	)
Foreign currency translation																			1,471								1,471
Shares issued - employee stock compensation plans
Employee stock purchase plan											1,988																1,988
Stock incentive plans			(83	)			(8	)			12,067																12,059
Directors			17				2				897																899
Repurchase shares to fund tax withholdings for non-cash stock-based compensation			(61	)			(6	)			(3,198	)															(3,204	)
Purchase of treasury stock			(232	)											(11,405	)											(11,405	)
Cash dividends paid ($0.0925 per share)																							(26,063	)			(26,063	)
Balance at June 30, 2021			281,621			$	30,010			$	784,620			$	(672,763	)		$	(3,549	)		$	3,807,684			$	3,946,002
Net income																							146,354				146,354
Net unrealized holding (loss) gain on available-for- sale securities																			(83	)							(83	)
Foreign currency translation																			(2,918	)							(2,918	)
Shares issued - employee stock compensation plans
Employee stock purchase plan			851				85				35,215																35,300
Stock incentive plans			7				—				11,567																11,567
Repurchase shares to fund tax withholdings for non-cash stock-based compensation			(25	)			(2	)			(1,336	)															(1,338	)
Purchase of treasury stock			(22	)											(1,139	)											(1,139	)
Cash dividends paid ($0.0925 per share)																							(26,126	)			(26,126	)
Balance at September 30, 2021			282,432			$	30,093			$	830,066			$	(673,902	)		$	(6,550	)		$	3,927,912			$	4,107,619
Balance at December 31, 2019			281,655			$	29,711			$	716,049			$	(536,243	)		$	—			$	3,140,762			$	3,350,279
Net income																							152,400				152,400
Net unrealized holding (loss) gain on available-for- sale securities											194												99				293
Shares issued - employee stock compensation plans
Employee stock purchase plan											2,191																2,191
Stock incentive plans			1,828				182				(173	)															9
Purchase of treasury stock			(42	)											(1,429	)											(1,429	)
Cash dividends paid ($0.085 per share)																							(23,902	)			(23,902	)
Balance at March 31, 2020			283,441			$	29,893			$	718,261			$	(537,672	)		$	—			$	3,269,359			$	3,479,841
Net income																							96,784				96,784
Net unrealized holding (loss) gain on available-for- sale securities											384												(69	)			315
Shares issued - employee stock compensation plans
Employee stock purchase plan											1,349																1,349
Stock incentive plans			(73	)			(7	)			18,733																18,726
Agency acquisition			274				27				9,973																10,000
Directors			16				2				585																587
Cash dividends paid ($0.085 per share)																							(24,084	)			(24,084	)
Balance at June 30, 2020			283,658			$	29,915			$	749,285			$	(537,672	)		$	—			$	3,341,990			$	3,583,518
Net income																							133,979				133,979

Net unrealized holding (loss) gain on available-for- sale securities											(51	)															(51	)
Shares issued - employee stock compensation plans
Employee stock purchase plan			962				96				31,518																31,614
Stock incentive plans			(856	)			(86	)			(22,111	)															(22,197	)
Agency acquisition			114				12				5,108																5,120
Purchase of treasury stock			(133	)											(5,884	)											(5,884	)
Cash dividends paid ($0.085 per share)																							(24,089	)			(24,089	)
Balance at September 30, 2020			283,745			$	29,937			$	763,749			$	(543,556	)		$	—			$	3,451,880			$	3,702,010

See accompanying Notes to Condensed Consolidated Financial Statements.

BROWN & BROWN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

		Nine months ended September 30,
(in thousands)		2021				2020
Cash flows from operating activities:
Net income		$	485,387			$	383,163
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization			88,562				80,190
Depreciation			25,457				18,836
Non-cash stock-based compensation			46,659				43,465
Change in estimated acquisition earn-out payables			20,643				4,996
Deferred income taxes			25,417				4,598
Amortization of debt discount and disposal of deferred financing costs			2,081				1,619
Amortization (accretion) of discounts and premiums, investment			119				26
Net (gain)/loss on sales of investments, fixed assets and customer accounts			(2,019	)			(720	)
Payments on acquisition earn-outs in excess of original estimated payables			(5,747	)			(1,199	)
Effect of changes in foreign exchange rate changes			475				—
Changes in operating assets and liabilities, net of effect from acquisitions and divestitures:
Premiums, commissions and fees receivable (increase) decrease			(66,431	)			(63,124	)
Reinsurance recoverables (increase) decrease			(176,961	)			(48,959	)
Prepaid reinsurance premiums (increase) decrease			(33,637	)			(31,594	)
Other assets (increase) decrease			(6,536	)			4,071
Premiums payable to insurance companies increase (decrease)			(37,999	)			58,986
Premium deposits and credits due customers increase (decrease)			37,486				1,823
Losses and loss adjustment reserve increase (decrease)			176,961				48,959
Unearned premiums increase (decrease)			33,637				31,594
Accounts payable increase (decrease)			45,847				53,041
Accrued expenses and other liabilities increase (decrease)			(796	)			(22,458	)
Other liabilities increase (decrease)			(30,762	)			(27,725	)
Net cash provided by operating activities			627,843				539,588
Cash flows from investing activities:
Additions to fixed assets			(34,617	)			(55,820	)
Payments for businesses acquired, net of cash acquired			(178,007	)			(402,358	)
Proceeds from sales of fixed assets and customer accounts			9,327				8,622
Purchases of investments			(12,363	)			(10,129	)
Proceeds from sales of investments			9,280				7,434
Net cash used in investing activities			(206,380	)			(452,251	)
Cash flows from financing activities:
Payments on acquisition earn-outs			(36,115	)			(9,859	)
Proceeds from long-term debt			—				700,000
Payments on long-term debt			(52,500	)			(41,250	)
Deferred debt issuance costs			—				(6,788	)
Borrowings on revolving credit facility			—				250,000
Payments on revolving credit facilities			—				(350,000	)
Issuances of common stock for employee stock benefit plans			33,834				29,940
Repurchase shares to fund tax withholdings for non-cash stock-based compensation			(49,594	)			(41,126	)
Purchase of treasury stock			(82,564	)			(7,313	)
Cash dividends paid			(78,281	)			(72,075	)
Net cash (used in) provided by financing activities			(265,220	)			451,529
Effect of foreign exchange rate cash changes			(2,267	)			—
Net increase in cash and cash equivalents inclusive of restricted cash			153,976				538,866
Cash and cash equivalents inclusive of restricted cash at beginning of period			1,271,915				962,975
Cash and cash equivalents inclusive of restricted cash at end of period		$	1,425,891			$	1,501,841

See accompanying Notes to Condensed Consolidated Financial Statements. Refer to Note 10 for the reconciliations of cash and cash equivalents inclusive of restricted cash and investments.

NOTES TO CONDEN****SED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 Nature of Operations

Brown & Brown, Inc., a Florida corporation, and its subsidiaries (collectively, “Brown & Brown” or the “Company”) is a diversified insurance agency, wholesale brokerage, insurance programs and service organization that markets and sells insurance products and services, primarily in the property, casualty and employee benefits areas. Brown & Brown’s business is divided into four reportable segments. The Retail Segment provides a broad range of insurance products and services to commercial, public and quasi-public entities, professional and individual insured customers, and non-insurance risk-mitigating products through our automobile dealer services (“F&I”) businesses. The National Programs Segment, which acts as a managing general agent (“MGA”), provides professional liability and related package products for certain professionals, a range of insurance products for individuals, flood coverage, and targeted products and services designated for specific industries, trade groups, governmental entities and market niches, all of which are delivered through a nationwide network of independent agents, including Brown & Brown retail agents. The Wholesale Brokerage Segment markets and sells excess and surplus commercial and personal lines insurance, primarily through independent agents and brokers, as well as Brown & Brown retail agents. The Services Segment 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 services.

NOTE 2 Basis of Financial Reporting

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of recurring accruals) necessary for a fair presentation have been included. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the Notes thereto set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

The preparation of these financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as disclosures of contingent assets and liabilities, at the date of the Condensed Consolidated Financial Statements, and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.

Recently Issued Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." The amendments provide optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. We have evaluated our contracts and the available expedients provided by the new standard and can assert there is no impact to any carrying value of assets or liabilities as our floating-rate debt instruments that are indexed to LIBOR are carried at amortized cost.

Recently Adopted Accounting Standards

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”. The standard removes specific exceptions in the current rules and eliminates the need for an organization to analyze whether the following apply in a given period: (a) exception to the incremental approach for intra-period tax allocation; (b) exceptions to accounting for basis differences when there are ownership changes in foreign investments and (c) exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses. The standard also is designed to improve financial statement preparers’ application of income tax-related guidance and simplify GAAP for (a) franchise taxes that are partially based on income; (b) transactions with a government that result in a step-up in the tax basis of goodwill; (c) separate financial statements of legal entities that are not subject to tax and (d) enacted changes in tax laws in interim periods. The Company adopted ASU 2019-12 effective January 1, 2021. The impact of adopting this standard was not material to the presentation of the Condensed Consolidated Financial Statements.

NOTE 3 Revenues

The following tables present the revenues disaggregated by revenue source:

		Three months ended September 30, 2021
(in thousands)		Retail				National Programs				Wholesale Brokerage				Services				Other (8)				Total
Base commissions (1)		$	284,536			$	133,649			$	90,862			$	—			$	25			$	509,072
Fees (2)			109,915				49,779				17,938				43,732				(428	)			220,936
Incentive commissions (3)			15,460				444				720				—				—				16,624
Profit-sharing contingent commissions (4)			8,705				6,499				2,414				—				—				17,618
Guaranteed supplemental commissions (5)			4,454				549				401				—				—				5,404
Investment income (6)			236				136				35				—				23				430
Other income, net (7)			115				9				98				—				(1	)			221
Total Revenues		$	423,421			$	191,065			$	112,468			$	43,732			$	(381	)		$	770,305

		Nine months ended September 30, 2021
(in thousands)		Retail				National Programs				Wholesale Brokerage				Services				Other (8)				Total
Base commissions (1)		$	905,470			$	369,703			$	246,233			$	—			$	32			$	1,521,438
Fees (2)			307,314				125,329				51,574				135,590				(1,352	)			618,455
Incentive commissions (3)			88,219				1,443				2,321				—				—				91,983
Profit-sharing contingent commissions (4)			32,848				23,833				6,482				—				—				63,163
Guaranteed supplemental commissions (5)			12,383				1,316				872				—				—				14,571
Investment income (6)			271				423				120				3				92				909
Other income, net (7)			930				185				332				—				967				2,414
Total Revenues		$	1,347,435			$	522,232			$	307,934			$	135,593			$	(261	)		$	2,312,933

Base commissions generally represent a percentage of the premium paid by an insured and are affected by fluctuations in both premium rate levels charged by insurance companies and the insureds’ underlying “insurable exposure units,” which are units that insurance companies use to measure or express insurance exposed to risk (such as property values, or sales and payroll levels) to determine what premium to charge the insured. Insurance companies establish these premium rates based upon many factors, including loss experience, risk profile and reinsurance rates paid by such insurance companies, none of which we control.

Fee revenues relate to fees for services other than securing coverage for our customers, fees negotiated in lieu of commissions, and F&I products and services.

Incentive commissions include additional commissions over base commissions received from insurance carriers based on predetermined production levels mutually agreed upon by both parties.

Profit-sharing contingent commissions are based primarily on underwriting results, but may also reflect considerations for volume, growth and/or retention.

Guaranteed supplemental commissions represent guaranteed fixed-base agreements in lieu of profit-sharing contingent commissions.

Investment income consists primarily of interest on cash and investments.

Other income consists primarily of legal settlements and other miscellaneous income.

Fees within other reflects the elimination of intercompany revenues.

Contract Assets and Liabilities

The balances of contract assets and contract liabilities arising from contracts with customers as of September 30, 2021 and December 31, 2020 were as follows:

(in thousands)		September 30, 2021				December 31, 2020
Contract assets		$	375,277			$	308,755
Contract liabilities		$	84,566			$	80,997

Unbilled receivables (contract assets) arise when the Company recognizes revenue for amounts which have not yet been billed in the Company's systems and are reflected in premiums, commissions and fee receivables in the Company's Condensed Consolidated Balance Sheet. The increase in contract assets over the balance as of December 31, 2020 is due to normal seasonality, growth in our business, and from businesses acquired in the current year.

Deferred revenue (contract liabilities) relates to payments received in advance of performance under the contract before the transfer of a good or service to the customer. Deferred revenue is reflected within accrued expenses and other liabilities for those to be recognized in less than 12 months and in other liabilities for those to be recognized more than 12 months from the date presented in the Company's Condensed Consolidated Balance Sheet.

As of September 30, 2021, deferred revenue consisted of $54.5 million as current portion to be recognized within one year and $30.1 million in long term to be recognized beyond one year. As of December 31, 2020, deferred revenue consisted of $54.0 million as current portion to be recognized within one year and $27.0 million in long-term deferred revenue to be recognized beyond one year.

During the nine months ended September 30, 2021, the net amount of revenue recognized related to performance obligations satisfied in a previous period was $22.0 million, consisting of additional variable consideration received on our incentive and profit-sharing contingent commissions. During the nine months ended September 30, 2020, the net amount of revenue recognized related to performance obligations satisfied in a previous period was $7.5 million, consisting of $16.7 million of additional variable consideration received on our incentive and profit-sharing contingent commissions, offset by $7.1 million of revised estimates related to variable consideration on policies where the exposure units are expected to be impacted by the COVID-19 pandemic (“COVID-19”) and $2.1 million of other adjustments.

Other Assets and Deferred Cost

Incremental cost to obtain - The Company defers certain costs to obtain customer contracts primarily as they relate to commission-based compensation plans in the Retail Segment, in which the Company pays an incremental amount of compensation on new business. These incremental costs are deferred and amortized over a 15-year period. The cost to obtain balance within the other assets caption in the Company's Condensed Consolidated Balance Sheet was $54.1 million and $42.2 million as of September 30, 2021 and December 31, 2020, respectively. For the nine months ended September 30, 2021, the Company deferred $14.6 million of incremental cost to obtain customer contracts. The Company recorded an expense of $2.7 million associated with the incremental cost to obtain customer contracts for the nine months ended September 30, 2021.

Cost to fulfill - The Company defers certain costs to fulfill contracts and recognizes these costs as the associated performance obligations are fulfilled. The cost to fulfill balance within the other current assets caption in the Company's Condensed Consolidated Balance Sheet as of September 30, 2021 was $73.8 million, which is inclusive of deferrals from businesses acquired in the current year. The cost to fulfill balance as of December 31, 2020 was $77.8 million. For the nine months ended September 30, 2021, the Company had net expense of $7.5 million related to the release of previously deferred contract fulfillment costs associated with performance obligations that were satisfied in the period, net of current year deferrals for costs incurred that related to performance obligations yet to be fulfilled.

NOTE 4 Net Income Per Share

Basic net income per share is computed based on the weighted average number of common shares (including participating securities) issued and outstanding during the period. Diluted net income per share is computed based on the weighted average number of common shares issued and outstanding plus equivalent shares, assuming the issuance of all potentially issuable common shares. The dilutive effect of potentially issuable common shares is computed by application of the treasury-stock method. The following is a reconciliation between basic and diluted weighted average shares outstanding:

		Three months ended September 30,								Nine months ended September 30,
(in thousands, except per share data)		2021				2020				2021				2020
Net income		$	146,354			$	133,979			$	485,387			$	383,163
Net income attributable to unvested awarded performance stock			(3,069	)			(3,740	)			(10,901	)			(12,634	)
Net income attributable to common shares		$	143,285			$	130,239			$	474,486			$	370,529
Weighted average number of common shares outstanding – basic			282,132				283,426				282,177				283,139
Less unvested awarded performance stock included in weighted average number of common shares outstanding – basic			(5,917	)			(7,911	)			(6,337	)			(9,336	)
Weighted average number of common shares outstanding for basic net income per common share			276,215				275,515				275,840				273,803
Dilutive effect of potentially issuable common shares			1,338				1,418				1,306				1,535
Weighted average number of shares outstanding – diluted			277,553				276,933				277,146				275,338
Net income per share:
Basic		$	0.52			$	0.47			$	1.72			$	1.35
Diluted		$	0.52			$	0.47			$	1.71			$	1.35

NOTE 5 Business Combinations

During the nine months ended September 30, 2021, Brown & Brown acquired all of the share capital of one insurance intermediary, assets and assumed certain liabilities of eight insurance intermediaries, and two books of business (customer accounts) for a total of eleven acquisitions. Additionally, adjustments were recorded to the purchase price allocation of certain prior acquisitions completed within the last 12 months as permitted by Accounting Standards Codification Topic 805 — Business Combinations (“ASC 805”). Such adjustments are presented in the “Other” category within the following two tables. The recorded purchase price for all acquisitions includes an estimation of the fair value of liabilities associated with any potential earn-out provisions. Subsequent changes in the fair value of earn-out obligations will be recorded in the Condensed Consolidated Statements of Income when incurred.

The fair value of earn-out obligations is based on the present value of the expected future payments to be made to the sellers of the acquired businesses in accordance with the provisions outlined in the respective purchase agreements. In determining fair value, the acquired business’s future performance is estimated using financial projections developed by management for the acquired business and reflects market participant assumptions regarding revenue growth and/or profitability. The expected future payments are estimated on the basis of the earn-out formula and performance targets specified in each purchase agreement compared to the associated financial projections. These payments are then discounted to present value using a risk-adjusted rate that takes into consideration the likelihood that the forecasted earn-out payments will be made.

Based on the acquisition date and the complexity of the underlying valuation work, certain amounts included in the Company’s Condensed Consolidated Financial Statements may be provisional and thus subject to further adjustments within the permitted measurement period, as defined in ASC 805. For the nine months ended September 30, 2021, adjustments were made within the permitted measurement period that resulted in a decrease in the aggregate purchase price of the affected acquisitions of $1.5 million. These measurement period adjustments have been reflected as current period adjustments in the nine months ended September 30, 2021 in accordance with the guidance in ASU 2015-16 “Business Combinations.” The measurement period adjustments primarily impacted goodwill, with no effect on earnings or cash in the current period.

The following table summarizes the purchase price allocations made as of the date of each acquisition for current year acquisitions and adjustments made during the measurement period for prior year acquisitions. Cash paid for eleven acquisitions was $224.1 million during the nine months ended September 30, 2021. During the measurement periods, the Company will adjust assets or liabilities if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of those assets and liabilities as of that date. These adjustments are made in the period in which the amounts are determined, and the current period income effect of such adjustments will be calculated as if the adjustments had been completed as of the acquisition date.

(in thousands)
Name		Business segment		Effective date of acquisition		Cash paid				Common stock issued				Other payable				Recorded earn-out payable				Net assets acquired				Maximum potential earn-out payable
O'Leary Insurances (O'Leary)		Retail		January 1, 2021		$	117,408			$	4,892			$	—			$	15,348			$	137,648			$	30,575
Piper Jordan LLC (Piper)		Retail		May 1, 2021			43,428				—				1,397				9,854				54,679				15,000
Berkshire Insurance Group, Inc. (Berkshire)		Retail		September 1, 2021			41,500				—				—				—				41,500				—
AGIS Network Inc. (AGIS) (1)		Retail		September 1, 2021			11,203				—				24,114				739				36,056				12,289
Other		Various		Various			10,602				—				2,098				(778	)			11,922				3,388
Total						$	224,141			$	4,892			$	27,609			$	25,163			$	281,805			$	61,252

(1) Amount in the "other payable" column relates to additional contingent consideration expected to be paid within 12 months.

The following table summarizes the estimated fair values of the aggregate assets and liabilities acquired as of the date of each acquisition and adjustments made during the measurement period of the prior year acquisitions.

(in thousands)		O'Leary				Piper				Berkshire				AGIS				Other				Total
Cash		$	45,441			$	—			$	—			$	—			$	693			$	46,134
Other current assets			43,354				2,397				1,621				520				5,060				52,952
Fixed assets			544				9				9				20				4				586
Goodwill			84,649				40,019				27,563				21,888				2,539				176,658
Purchased customer accounts			40,459				12,233				12,313				13,577				7,271				85,853
Non-compete agreements			819				21				11				51				109				1,011
Other assets			135				—				—				—				259				394
Total assets acquired			215,401				54,679				41,517				36,056				15,935				363,588
Other current liabilities			(72,683	)			—				(17	)			—				(4,013	)			(76,713	)
Deferred income tax, net			(5,057	)			—				—				—				—				(5,057	)
Other liabilities			(13	)			—				—				—				—				(13	)
Total liabilities assumed			(77,753	)			—				(17	)			—				(4,013	)			(81,783	)
Net assets acquired		$	137,648			$	54,679			$	41,500			$	36,056			$	11,922			$	281,805

The other column represents current year acquisitions with total net assets acquired of less than $20.0 million and adjustments from prior year acquisitions that were made within the permitted measurement period.

The weighted average useful lives for the acquired amortizable intangible assets are as follows: purchased customer accounts, 15 years; and non-compete agreements, 5 years.

Goodwill of $176.7 million, which is net of any opening balance sheet adjustments within the allowable measurement period, was allocated to the Retail, National Programs, and Wholesale Brokerage Segments in the amounts of $174.5 million, ($1.3) million, and $3.5 million, respectively. Of the total goodwill of $176.7 million, the amount currently deductible for income tax purposes is $151.5 million and the remaining $25.2 million relates to the recorded earn-out payables and will not be deductible until it is earned and paid.

For the acquisitions completed during 2021, the results of operations since the acquisition dates have been combined with those of the Company. The total revenues from the acquisitions completed through September 30, 2021, included in the Condensed Consolidated Statement of Income for the nine months ended September 30, 2021, was $28.9 million. The income before income taxes, including the intercompany cost of capital charge, from the acquisitions completed through September 30, 2021, included in the Condensed Consolidated Statement of Income for the nine months ended September 30, 2021, was $0.5 million. If the acquisitions had occurred as of the beginning of the respective periods, the Company’s estimated results of operations would be as shown in the following table. These unaudited pro forma results are not necessarily indicative of the actual results of operations that would have occurred had the acquisitions actually been made at the beginning of the respective periods.

(UNAUDITED)		Three months ended September 30,								Nine months ended September 30,
(in thousands, except per share data)		2021				2020				2021				2020
Total revenues		$	773,593			$	690,002			$	2,329,567			$	2,019,218
Income before income taxes		$	197,444			$	162,392			$	627,088			$	504,731
Net income		$	147,065			$	137,245			$	489,355			$	392,135
Net income per share:
Basic		$	0.52			$	0.48			$	1.73			$	1.38
Diluted		$	0.52			$	0.48			$	1.73			$	1.38
Weighted average number of shares outstanding:
Basic			276,215				275,515				275,840				273,803
Diluted			277,553				276,933				277,146				275,338

As of September 30, 2021 and 2020, the fair values of the estimated acquisition earn-out payables were re-evaluated and measured at fair value on a recurring basis using unobservable inputs (Level 3) as defined in ASC 820- Fair Value Measurement. The resulting additions, payments, and net changes, as well as the interest expense accretion on the estimated acquisition earn-out payables, for the nine months ended September 30, 2021 and 2020, were as follows:

		Three months ended September 30,								Nine months ended September 30,
(in thousands)		2021				2020				2021				2020
Balance as of the beginning of the period		$	242,016			$	218,467			$	258,943			$	161,513
Additions to estimated acquisition earn-out payables			79				22,091				25,163				96,845
Payments for estimated acquisition earn-out payables			(1,913	)			(3,580	)			(41,862	)			(11,058	)
Subtotal			240,182				236,978				242,244				247,300
Net change in earnings from estimated acquisition earn-out payables:
Change in fair value on estimated acquisition earn-out payables			21,855				13,433				15,814				(516	)
Interest expense accretion			1,283				1,885				4,829				5,512
Net change in earnings from estimated acquisition earn-out payables			23,138				15,318				20,643				4,996
Foreign currency translation adjustments during the year			(406	)			—				27				—
Balance as of September 30,		$	262,914			$	252,296			$	262,914			$	252,296

Of the $262.9 million estimated acquisition earn-out payables as of September 30, 2021, $94.2 million was recorded as accounts payable and $168.7 million was recorded as other non-current liabilities. As of September 30, 2021, the maximum future acquisition contingency payments related to all acquisitions was $512.9 million, inclusive of the $262.9 million estimated acquisition earn-out payables as of September 30, 2021. Included within the additions to estimated acquisition earn-out payables are any adjustments to opening balance sheet items within the allowable measurement period, which may therefore differ from previously reported amounts.

NOTE 6 Goodwill

Goodwill is subject to at least an annual assessment for impairment by applying a fair value-based test. The Company completed its most recent annual assessment as of November 30, 2020 and identified no impairment as a result of the evaluation.

The changes in the carrying value of goodwill by reportable segment for the nine months ended September 30, 2021 are as follows:

(in thousands)		Retail				National Programs				Wholesale Brokerage				Services				Total
Balance as of December 31, 2020		$	2,650,470			$	1,091,122			$	483,057			$	171,269			$	4,395,918
Goodwill of acquired businesses			174,536				(1,337	)			3,459				—				176,658
Goodwill disposed of relating to sales of businesses			(3,050	)			—				—				—				(3,050	)
Foreign currency translation adjustments during the year			(4,434	)			64				—				—				(4,370	)
Balance as of September 30, 2021		$	2,817,522			$	1,089,849			$	486,516			$	171,269			$	4,565,156

NOTE 7 Amortizable Intangible Assets

Amortizable intangible assets at September 30, 2021 and December 31, 2020 consisted of the following:

		September 30, 2021																December 31, 2020
(in thousands)		Gross carrying value				Accumulated amortization				Net carrying value				Weighted average life (years) (1)				Gross carrying value				Accumulated amortization				Net carrying value				Weighted average life (years) (1)
Purchased customer accounts		$	2,249,514			$	(1,207,247	)		$	1,042,267				15.0			$	2,164,968			$	(1,118,316	)		$	1,046,652				15.0
Non-compete agreements			36,080				(33,067	)			3,013				4.4				35,093				(32,085	)			3,008				4.6
Total		$	2,285,594			$	(1,240,314	)		$	1,045,280							$	2,200,061			$	(1,150,401	)		$	1,049,660

(1)

Weighted average life calculated as of the date of acquisition.

Amortization expense for amortizable intangible assets for the years ending December 31, 2021, 2022, 2023, 2024 and 2025 is estimated to be $118.3 million, $115.5 million, $108.8 million, $104.6 million, and $102.2 million, respectively.

NOTE 8 Long-Term Debt

Long-term debt at September 30, 2021 and December 31, 2020 consisted of the following:

(in thousands)		September 30, 2021				December 31, 2020
Current portion of long-term debt:
Current portion of 5-year term loan facility expires 2022		$	260,000			$	40,000
Current portion of 5-year term loan facility expires 2023			30,000				30,000
Total current portion of long-term debt			290,000				70,000
Long-term debt:
Note agreements:
4.200% senior notes, semi-annual interest payments, net of the unamortized discount, balloon due 2024		$	499,534			$	499,416
4.500% senior notes, semi-annual interest payments, net of the unamortized discount, balloon due 2029			349,582				349,540
2.375% senior notes, semi-annual interest payments, net of the unamortized discount, balloon due 2031			699,306				699,252
Total notes			1,548,422				1,548,208
Credit agreements:
5-year term-loan facility, periodic interest and principal payments, LIBOR plus up to1.750%, expires June 28, 2022			—				250,000
5-year revolving-loan facility, periodic interest payments, LIBOR plus up to 1.500%, plus commitment fees up to 0.250%, expires June 28, 2022			—				—
5-year term-loan facility, periodic interest and principal payments, LIBOR plus up to1.750%, expires December 21, 2023			217,500				240,000
Total credit agreements			217,500				490,000
Debt issuance costs (contra)			(10,435	)			(12,302	)
Total long-term debt less unamortized discount and debt issuance costs			1,755,487				2,025,906
Current portion of long-term debt			290,000				70,000
Total debt		$	2,045,487			$	2,095,906

On June 28, 2017, the Company entered into an amended and restated credit agreement (the “Amended and Restated Credit Agreement”) with the lenders named therein, JPMorgan Chase Bank, N.A. as administrative agent and certain other banks as co-syndication agents and co-documentation agents. The Amended and Restated Credit Agreement amended and restated the credit agreement dated April 17, 2014, among such parties (the “Original Credit Agreement”). The Amended and Restated Credit Agreement extends the applicable maturity date of the existing revolving credit facility (the “Revolving Credit Facility”) of $800.0 million to June 28, 2022 and re-evidences unsecured term loans at $400.0 million while also extending the applicable maturity date to June 28, 2022. The quarterly term loan principal amortization schedule was reset. At the time of the execution of the Amended and Restated Credit Agreement, $67.5 million of principal from the original unsecured term loans was repaid using operating cash balances, and the Company added an additional $2.8 million in debt issuance costs related to the Revolving Credit Facility to the Condensed Consolidated Balance Sheet. The Company also expensed to the Condensed Consolidated Statements of Income $0.2 million of debt issuance costs related to the Original Credit Agreement due to certain lenders exiting prior to execution of the Amended and Restated Credit Agreement. The Company also carried forward $1.6 million on the Condensed Consolidated Balance Sheet the remaining unamortized portion of the Original Credit Agreement debt issuance costs, which will be amortized over the term of the Amended and Restated Credit Agreement. As of September 30, 2021, there was an outstanding debt balance issued under the term loan of the Amended and Restated Credit Agreement of $260.0 million and no borrowings outstanding against the Revolving Credit Facility. As of December 31, 2020, there was an outstanding debt balance issued under the term loan of the Amended and Restated Credit Agreement of $290.0 million with no borrowings outstanding against the Revolving Credit Facility.

On September 18, 2014, the Company issued $500.0 million of 4.200% unsecured Senior Notes due in 2024. The Senior Notes were given investment grade ratings of BBB-/Baa3 with a stable outlook. The notes are subject to certain covenant restrictions and regulations which are customary for credit rated obligations. At the time of funding, the proceeds were offered at a discount of the original note amount which also excluded an underwriting fee discount. The net proceeds received from the issuance were used to repay the outstanding balance of $475.0 million on the Revolving Credit Facility and for other general corporate purposes. As of September 30, 2021 and December 31, 2020, there was an outstanding debt balance of $500.0 million exclusive of the associated discount balance.

On December 21, 2018, the Company entered into a term loan credit agreement (the “Term Loan Credit Agreement”) with the lenders named therein, Wells Fargo Bank, National Association, as administrative agent, and certain other banks as co-syndication agents and as joint lead arrangers and joint bookrunners. The Term Loan Credit Agreement provides for an unsecured term loan in the initial amount of $300.0 million, which may, subject to lenders’ discretion, potentially be increased up to an aggregate amount of $450.0 million (the “Term Loan”). The Term Loan is repayable over the five-year term from the effective date of the Term Loan Credit Agreement, which was December 21,

2018. Based on the Company’s net debt leverage ratio or a non-credit enhanced senior unsecured long-term debt rating as determined by Moody’s Investor Service and Standard & Poor’s Rating Service, the rates of interest charged on the term loan are 1.00% to 1.75%, above the adjusted 1-Month LIBOR rate. On December 21, 2018, the Company borrowed $300.0 million under the Term Loan Credit Agreement and used $250.0 million of the proceeds to reduce indebtedness under the Revolving Credit Facility. As of September 30, 2021, there was an outstanding debt balance issued under the Term Loan of $247.5 million. As of December 31, 2020, there was an outstanding debt balance issued under the Term Loan of $270.0 million.

On March 11, 2019, the Company completed the issuance of $350.0 million aggregate principal amount of the Company's 4.500% Senior Notes due 2029. The Senior Notes were given investment grade ratings of BBB-/Baa3 with a stable outlook. The notes are subject to certain covenant restrictions, which are customary for credit rated obligations. At the time of funding, the proceeds were offered at a discount of the original note amount, which also excluded an underwriting fee discount. The net proceeds received from the issuance were used to repay a portion of the outstanding balance of $350.0 million on the Revolving Credit Facility, utilized in connection with the financing related to the Hays Companies acquisition and for other general corporate purposes. As of September 30, 2021 and December 31, 2020, there was an outstanding debt balance of $350.0 million exclusive of the associated discount balance.

On September 24, 2020, the Company completed the issuance of $700.0 million aggregate principal amount of the Company's 2.375% Senior Notes due 2031. The Senior Notes were given investment grade ratings of BBB- stable outlook and Baa3 positive outlook. The notes are subject to certain covenant restrictions, which are customary for credit rated obligations. At the time of funding, the proceeds were offered at a discount of the original note amount, which also excluded an underwriting fee discount. The net proceeds received from the issuance were used to repay a portion of the outstanding balance of $200.0 million on the Revolving Credit Facility, utilized in connection with the financing related to the acquisitions of LP Insurance Services, LLP and CKP Insurance, LLC and for other general corporate purposes. As of September 30, 2021 and December 31, 2020, there was an outstanding debt balance of $700.0 million exclusive of the associated discount balance.

The Amended and Restated Credit Agreement and the Term Loan Credit Agreement require the Company to maintain certain financial ratios and comply with certain other covenants. The Company was in compliance with all such covenants as of September 30, 2021 and December 31, 2020.

The 30-day Adjusted LIBOR Rate for the term loan of the Amended and Restated Credit Agreement and the Term Loan Credit Agreement as of September 30, 2021 were each 0.125%.

NOTE 9 Leases

Substantially all of the Company's operating lease right-of-use assets and operating lease liabilities represent real estate leases for office space used to conduct the Company's business that expire on various dates through 2041. Leases generally contain renewal options and escalation clauses based upon increases in the lessors’ operating expenses and other charges. The Company anticipates that most of these leases will be renewed or replaced upon expiration.

The Company assesses at inception of a contract if it contains a lease. This assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether the Company obtains the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether the Company has the right to direct the use of the asset.

The right-of-use asset is initially measured at cost, which is primarily composed of the initial lease liability, plus any initial direct costs incurred, less any lease incentives received. The lease liability is initially measured at the present value of the minimum lease payments through the term of the lease. Minimum lease payments are discounted to present value using the incremental borrowing rate at the lease commencement date, which approximates the rate of interest the Company expects to pay on a secured borrowing in an amount equal to the lease payments for the underlying asset under similar terms and economic conditions. The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a total term of 12 months or less. The effect of short-term leases on the Company's right-of-use asset and lease liability would not be significant.

The balances and classification of operating lease right-of-use assets and operating lease liabilities within the Condensed Consolidated Balance Sheet is as follows:

(in thousands)			September 30, 2021				December 31, 2020
Balance Sheet
Assets:
Operating lease right-of-use assets	Operating lease assets		$	187,828			$	186,998
Total assets				187,828				186,998
Liabilities:
Current operating lease liabilities	Accrued expenses and other liabilities			43,097				43,542
Non-current operating lease liabilities	Operating lease liabilities			171,571				172,935
Total liabilities			$	214,668			$	216,477

As of September 30, 2021, the Company has entered into future lease agreements expected to commence later in 2021 and 2022 consisting of undiscounted lease liabilities of $1.6 million and $10.6 million, respectively.

Lease expense for operating leases consists of the lease payments, inclusive of lease incentives, plus any initial direct costs, and is recognized on a straight-line basis over the lease term. Included in lease expense are any variable lease payments incurred in the period that were not included in the initial lease liability. Variable lease cost is lease payments that are based on an index or similar rate. They are initially measured using the index or rate in effect at lease commencement and are based on the minimum payments stated in the lease. Additional payments based on the change in an index or rate, or payments based on a change in the Company's portion of the operating expenses, including real estate taxes and insurance, are recorded as a period expense when incurred.

The components of lease cost for operating leases for the three and nine months ended September 30, 2021 and 2020 were:

	Three months ended September 30,								Nine months ended September 30,
(in thousands)	2021				2020				2021				2020
Operating leases:
Lease cost	$	12,992			$	13,560			$	39,600			$	39,911
Variable lease cost		1,046				892				3,143				2,583
Short-term lease cost		320				122				857				360
Operating lease cost	$	14,358			$	14,574			$	43,600			$	42,854
Sublease income		(578	)			(416	)			(1,321	)			(1,224	)
Total lease cost net	$	13,780			$	14,158			$	42,279			$	41,630

The weighted average remaining lease term and the weighted average discount rate for operating leases as of September 30, 2021 were:

Weighted-average remaining lease term			6.27
Weighted-average discount rate			2.86	%

Maturities of the operating lease liabilities by fiscal year at September 30, 2021 for the Company's operating leases are as follows:

(in thousands)		Operating leases
2021 (Remainder)		$	10,413
2022			49,792
2023			41,772
2024			34,963
2025			28,608
Thereafter			67,616
Total undiscounted lease payments			233,164
Less: Imputed interest			18,496
Present value of lease payments		$	214,668

Supplemental cash flow information for operating leases for the three and nine months ended September 30, 2021 and 2020:

	Three months ended September 30,								Nine months ended September 30,
(in thousands)	2021				2020				2021				2020
Cash paid for amounts included in measurement of liabilities
Operating cash flows from operating leases	$	13,899			$	13,949			$	41,743			$	40,723
Right-of-use assets obtained in exchange for new operating liabilities	$	14,117			$	10,329			$	34,095			$	32,510

NOTE 10 Supplemental Disclosures of Cash Flow Information and Non-Cash Financing and Investing Activities

Throughout 2020, the Company deferred $31.1 million in employer-only payroll tax payments as allowed under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES” Act), which was signed into law on March 27, 2020. During the first nine months of 2021, there were no additional deferrals under the CARES Act. The cumulative deferred employer payroll taxes as of December 31, 2020 will be paid in two equal installments by December 31, 2021 and 2022, respectively, as permitted under the CARES Act.

During the second quarter of 2021, the Company received an $8.1 million reimbursement for capitalizable costs of public infrastructure improvements related to the construction of the Company’s headquarters in accordance with an economic development grant agreement between the Company and the City of Daytona Beach and Volusia County. The reimbursement has been reflected as a reduction to the additions to fixed asset line item on the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021.

Cash paid during the period for interest and income taxes are summarized as follows:

		Nine months ended September 30,
(in thousands)		2021				2020
Cash paid during the period for:
Interest		$	59,688			$	49,802
Income taxes, net of refunds		$	103,875			$	91,661

Significant non-cash investing and financing activities are summarized as follows:

		Nine months ended September 30,
(in thousands)		2021				2020
Other payables issued for agency acquisitions and purchased customer accounts		$	3,495			$	4,350
Estimated acquisition earn-out payables and related charges		$	25,163			$	96,845
Contingent payable issued for agency acquisition		$	24,114			$	—
Common stock issued for agency acquisition		$	4,892			$	—
Notes payable assumed for agency acquisition		$	1,355			$	—

The Company's restricted cash balance is composed of funds held in separate premium trust accounts as required by state law or, in some cases, by agreement with carrier partners. The following is a reconciliation of cash and cash equivalents inclusive of restricted cash as of September 30, 2021 and 2020.

		Balance as of September 30,
(in thousands)		2021				2020
Table to reconcile cash and cash equivalents inclusive of restricted cash
Cash and cash equivalents		$	943,969			$	1,070,190
Restricted cash			481,922				431,651
Total cash and cash equivalents inclusive of restricted cash at the end of the period		$	1,425,891			$	1,501,841

NOTE 11 Legal and Regulatory Proceedings

The Company is involved in numerous pending or threatened proceedings by or against Brown & Brown, Inc. or one or more of its subsidiaries that arise in the ordinary course of business. The damages that may be claimed against the Company in these various proceedings are in some cases substantial, including in certain instances claims for punitive or extraordinary damages. Some of these claims and lawsuits have been resolved; others are in the process of being resolved and others are still in the investigation or discovery phase. The Company will continue to respond appropriately to these claims and lawsuits and to vigorously protect its interests.

The Company continues to assess certain litigation and claims to determine the amounts, if any, that management believes will be paid as a result of such claims and litigation and, therefore, additional losses may be accrued and paid in the future, which could adversely impact the

Company’s operating results, cash flows and overall liquidity. The Company maintains third-party insurance policies to provide coverage for certain legal claims, in an effort to mitigate its overall exposure to unanticipated claims or adverse decisions. However, as (i) one or more of the Company’s insurance carriers could take the position that portions of these claims are not covered by the Company’s insurance, (ii) to the extent that payments are made to resolve claims and lawsuits, applicable insurance policy limits are eroded and (iii) the claims and lawsuits relating to these matters are continuing to develop, it is possible that future results of operations or cash flows for any particular quarterly or annual period could be materially affected by unfavorable resolutions of these matters. Based upon the AM Best Company ratings of these third-party insurers and other factors, management does not believe there is a substantial risk of an insurer’s material non-performance related to any current insured claims.

On the basis of current information, the availability of insurance and legal advice, in management’s opinion, the Company is not currently involved in any legal proceedings which, individually or in the aggregate, would have a material adverse effect on its financial condition, operations and/or cash flows.

NOTE 12 Segment Information

Brown & Brown’s business is divided into four reportable segments: (1) the Retail Segment, which provides a broad range of insurance products and services to commercial, public and quasi-public entities, and to professional and individual customers, and non-insurance risk-mitigating products through our F&I businesses, (2) the National Programs Segment, which acts as an MGA, provides professional liability and related package products for certain professionals, a range of insurance products for individuals, flood coverage, and targeted products and services designated for specific industries, trade groups, governmental entities and market niches, all of which are delivered through nationwide networks of independent agents, and Brown & Brown retail agents, (3) the Wholesale Brokerage Segment, which markets and sells excess and surplus commercial and personal lines insurance, primarily through independent agents and brokers, as well as Brown & Brown retail agents, and (4) the 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 services.

Brown & Brown conducts most of its operations within the United States of America. International operations include, Retail operations in Bermuda, the Cayman Islands and Ireland, a National Programs operation in Canada, and a Wholesale Brokerage operation based in England. These operations earned $17.4 million and $9.1 million of total revenues for the three months ended September 30, 2021 and 2020, respectively. These operations earned $54.0 million and $25.4 million of total revenues for the nine months ended September 30, 2021 and 2020, respectively. Tangible long-lived assets held outside of the United States as of September 30, 2021 and 2020 were not material.

The accounting policies of the reportable segments are the same as those described in Note 1 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. Intersegment revenues are eliminated.

Summarized financial information concerning the Company’s reportable segments is shown in the following tables. The “Other” column includes any income and expenses not allocated to reportable segments, corporate-related items, including the intercompany interest expense charge to the reporting segment.

		Three months ended September 30, 2021
(in thousands)		Retail				National Programs				Wholesale Brokerage				Services				Other				Total
Total revenues		$	423,421			$	191,065			$	112,468			$	43,732			$	(381	)		$	770,305
Investment income		$	236			$	136			$	35			$	—			$	23			$	430
Amortization		$	19,057			$	6,821			$	2,360			$	1,285			$	—			$	29,523
Depreciation		$	2,775			$	2,987			$	649			$	374			$	2,415			$	9,200
Interest expense		$	22,417			$	2,190			$	3,916			$	680			$	(13,028	)		$	16,175
Income before income taxes		$	71,639			$	72,358			$	29,365			$	7,080			$	16,047			$	196,489
Total assets		$	7,385,770			$	3,789,376			$	1,918,263			$	449,494			$	(3,913,737	)		$	9,629,166
Capital expenditures		$	2,092			$	4,660			$	210			$	887			$	1,626			$	9,475

		Three months ended September 30, 2020
(in thousands)		Retail				National Programs				Wholesale Brokerage				Services				Other				Total
Total revenues		$	359,473			$	168,018			$	101,239			$	43,497			$	1,735			$	673,962
Investment income		$	19			$	205			$	45			$	—			$	80			$	349
Amortization		$	16,624			$	7,100			$	1,945			$	1,390			$	—			$	27,059
Depreciation		$	2,347			$	2,300			$	548			$	355			$	1,097			$	6,647
Interest expense		$	20,519			$	5,335			$	2,488			$	1,004			$	(16,112	)		$	13,234
Income before income taxes		$	56,057			$	47,171			$	35,038			$	6,041			$	14,221			$	158,528
Total assets		$	6,583,606			$	3,530,345			$	1,646,287			$	467,889			$	(3,432,748	)		$	8,795,379
Capital expenditures		$	5,232			$	2,203			$	1,170			$	584			$	10,693			$	19,882

		Nine months ended September 30, 2021
(in thousands)		Retail				National Programs				Wholesale Brokerage				Services				Other				Total
Total revenues		$	1,347,435			$	522,232			$	307,934			$	135,593			$	(261	)		$	2,312,933
Investment income		$	271			$	423			$	120			$	3			$	92			$	909
Amortization		$	56,892			$	20,558			$	7,121			$	3,991			$	—			$	88,562
Depreciation		$	8,337			$	7,498			$	1,973			$	1,120			$	6,529			$	25,457
Interest expense		$	67,641			$	9,188			$	12,220			$	2,219			$	(42,466	)		$	48,802
Income before income taxes		$	293,342			$	180,222			$	74,539			$	24,002			$	49,899			$	622,004
Total assets		$	7,385,770			$	3,789,376			$	1,918,263			$	449,494			$	(3,913,737	)		$	9,629,166
Capital expenditures		$	5,779			$	11,313			$	1,311			$	1,396			$	14,818			$	34,617

		Nine months ended September 30, 2020
(in thousands)		Retail				National Programs				Wholesale Brokerage				Services				Other				Total
Total revenues		$	1,119,524			$	451,098			$	267,790			$	130,879			$	1,973			$	1,971,264
Investment income		$	143			$	597			$	141			$	—			$	963			$	1,844
Amortization		$	49,363			$	20,331			$	6,326			$	4,170			$	—			$	80,190
Depreciation		$	6,530			$	6,298			$	1,446			$	1,059			$	3,503			$	18,836
Interest expense		$	63,620			$	15,212			$	6,793			$	3,137			$	(46,428	)		$	42,334
Income before income taxes		$	221,549			$	125,160			$	77,432			$	22,557			$	46,485			$	493,183
Total assets		$	6,583,606			$	3,530,345			$	1,646,287			$	467,889			$	(3,432,748	)		$	8,795,379
Capital expenditures		$	10,959			$	5,248			$	2,952			$	1,057			$	35,604			$	55,820

NOTE 13 Investments

At September 30, 2021, the Company’s amortized cost and fair values of fixed maturity securities are summarized as follows:

(in thousands)		Cost				Gross unrealized gains				Gross unrealized losses				Fair value
U.S. Treasury securities, obligations of U.S. Government agencies and municipalities		$	31,756			$	239			$	(172	)		$	31,823
Corporate debt			8,288				160				(23	)			8,425
Total		$	40,044			$	399			$	(195	)		$	40,248

At September 30, 2021, the Company held $31.8 million in fixed income securities composed of U.S. Treasury securities, securities issued by U.S. Government agencies and municipalities, and $8.4 million issued by corporations with investment grade ratings. Of that total, $8.9 million is classified as short-term investments on the Condensed Consolidated Balance Sheet as maturities are less than one year. Additionally, the Company holds $5.5 million in short-term investments, which are related to time deposits held with various financial institutions.

For securities in a loss position, the following table shows the investments’ gross unrealized loss and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of September 30, 2021:

		Less than 12 Months								12 Months or More								Total
(in thousands)		Fair value				Unrealized losses				Fair value				Unrealized losses				Fair value				Unrealized losses
U.S. Treasury securities, obligations of U.S. Government agencies and municipalities		$	15,987			$	(141	)		$	969			$	(31	)		$	16,956			$	(172	)
Corporate debt			2,929				(23	)			—				—				2,929				(23	)
Total		$	18,916			$	(164	)		$	969			$	(31	)		$	19,885			$	(195	)

At September 30, 2021, the Company had 21 securities in an unrealized loss position. The unrealized losses for the period ended September 30, 2021 were caused by interest rate increases. The corporate securities are highly rated securities with no indicators of potential impairment. Based on the ability and intent of the Company to hold these investments until recovery of fair value, which may be maturity, the bonds were not considered to be other-than-temporarily impaired at September 30, 2021.

At December 31, 2020, the Company’s amortized cost and fair values of fixed maturity securities are summarized as follows:

(in thousands)		Cost				Gross unrealized gains				Gross unrealized losses				Fair value
U.S. Treasury securities, obligations of U.S. Government agencies and municipalities		$	28,372			$	464			$	(5	)		$	28,831
Corporate debt			7,190				239				(6	)			7,423
Total		$	35,562			$	703			$	(11	)		$	36,254

At December 31, 2020, the Company held $28.8 million in fixed income securities composed of U.S. Treasury securities, securities issued by U.S. Government agencies and municipalities, and $7.4 million issued by corporations with investment grade ratings. Of that total, $11.3 million is classified as short-term investments on the Condensed Consolidated Balance Sheet as maturities are less than one year, which also includes $7.0 million that is related to time deposits held with various financial institutions.

For securities in a loss position, the following table shows the investments’ gross unrealized loss and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of December 31, 2020:

		Less than 12 Months								12 Months or More								Total
(in thousands)		Fair value				Unrealized losses				Fair value				Unrealized losses				Fair value				Unrealized losses
U.S. Treasury securities, obligations of U.S. Government agencies and municipalities		$	1,995			$	(5	)		$	—			$	—			$	1,995			$	(5	)
Corporate debt			808				(6	)			—				—				808				(6	)
Total		$	2,803			$	(11	)		$	—			$	—			$	2,803			$	(11	)

The unrealized losses from corporate issuers were caused by interest rate increases. At December 31, 2020, the Company had 3 securities in an unrealized loss position. The corporate securities are highly rated securities with no indicators of potential impairment. Based on the ability and intent of the Company to hold these investments until recovery of fair value, which may be maturity, the bonds were not considered to be other-than-temporarily impaired at December 31, 2020.

The amortized cost and estimated fair value of the fixed maturity securities at September 30, 2021 by contractual maturity are set forth below:

(in thousands)		Amortized cost				Fair value
Years to maturity:
Due in one year or less		$	8,801			$	8,899
Due after one year through five years			30,243				30,379
Due after five years			1,000				970
Total		$	40,044			$	40,248

The amortized cost and estimated fair value of the fixed maturity securities at December 31, 2020 by contractual maturity are set forth below:

(in thousands)		Amortized cost				Fair value
Years to maturity:
Due in one year or less		$	11,214			$	11,283
Due after one year through five years			23,348				23,976
Due after five years			1,000				995
Total		$	35,562			$	36,254

The expected maturities in the foregoing table may differ from the contractual maturities because certain borrowers have the right to call or prepay obligations with or without penalty.

Proceeds from the sales and maturity of the Company’s investment in fixed maturity securities were $7.70 million. This along with maturing time deposits yielded total cash proceeds from the sale of investments of $9.3 million in the period of January 1, 2021 to September 30, 2021. These proceeds were principally used to purchase additional fixed maturity securities and time deposits. The gains and losses realized on the sale of securities for the period from January 1, 2021 to September 30, 2021 were insignificant.

Realized gains and losses are reported on the Condensed Consolidated Statements of Income, with the cost of securities sold determined on a specific identification basis.

At September 30, 2021, investments with a fair value of approximately $4.2 million were on deposit with state insurance departments to satisfy regulatory requirements.

NOTE 14 Insurance Company WNFIC

Although the reinsurers are liable to the Company for amounts reinsured, our subsidiary, Wright National Flood Insurance Company (“WNFIC”) remains primarily liable to its policyholders for the full amount of the policies written whether or not the reinsurers meet their obligations to the Company when they become due. The effects of reinsurance on premiums written and earned are as follows:

		Nine months ended September 30,
(in thousands)		Written				Earned
Direct premiums		$	577,348			$	543,712
Ceded premiums			(577,332	)			(543,696	)
Net premiums		$	16			$	16

All premiums written by WNFIC under the National Flood Insurance Program (“NFIP”) are 100% ceded to the Federal Emergency Management Agency, or FEMA, for which WNFIC received a 30.0% expense allowance from January 1, 2021 through September 30, 2021. For the period from January 1, 2021 through September 30, 2021, the Company ceded $575.5 million of written premiums to FEMA, with $1.8 million ceded to highly rated carriers for excess flood policies which are not within the NFIP.

As of September 30, 2021 the Condensed Consolidated Balance Sheet contained reinsurance recoverable of $220.4 million and prepaid reinsurance premiums of $411.3 million. There was no change in the net balance in the reserve for losses and loss adjustment expense during the period January 1, 2021 through September 30, 2021, as WNFIC’s direct premiums written were 100% to two reinsurers. The balance of the reserve for losses and loss adjustment expense, excluding related reinsurance recoverable, as of September 30, 2021 was $220.4 million.

WNFIC maintains capital in excess of the minimum statutory amount of $7.5 million as required by regulatory authorities. The unaudited statutory capital and surplus of WNFIC was $35.1 million at September 30, 2021 and $32.6 million as of December 31, 2020. For the period from January 1, 2021 through September 30, 2021, WNFIC generated statutory net income of $1.0 million. For the period from January 1, 2020 through December 31, 2020, WNFIC generated statutory net income of $0.8 million. The maximum amount of ordinary dividends that WNFIC can pay to shareholders in a rolling 12-month period is limited to the greater of 10% of statutory adjusted capital and surplus or 100% of adjusted net income. There was no dividend payout in 2020 and the maximum dividend payout that may be made in 2021 without prior approval is $3.3 million.

NOTE 15 Shareholders’ Equity

Under the authorization from the Company’s Board of Directors, shares may be purchased from time to time, at the Company’s discretion and subject to the availability of stock, market conditions, the trading price of the stock, alternative uses for capital, the Company’s financial performance and other potential factors. These purchases may be carried out through open market purchases, block trades, accelerated share repurchase plans of up to $100.0 million each (unless otherwise approved by the Board of Directors), negotiated private transactions or pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934.

From July 1, 2021 to September 30, 2021, the Company completed share repurchases in the open market of 21,795 shares at a total cost of $1.1 million, at an average price of $52.26 per share.

From April 1, 2021 to June 30, 2021, the Company completed share repurchases in the open market of 232,243 shares at a total cost of $11.4 million, at an average price of $49.11 per share.

From January 1, 2021 to March 31, 2021, the Company completed share repurchases in the open market of 1,557,815 shares at a total cost of $70.0 million, at an average price of $44.95 per share.

After completing these open market share repurchases, the Company has outstanding approval to purchase up to approximately $323.6 million, in the aggregate, of the Company's outstanding common stock.

During the first quarter, the Company issued 106,586 shares at a total value of $4.9 million associated with business combinations.

During the first quarter, the Company paid a dividend of $.0925 per share, which was approved by the Board of Directors on January 22, 2021 and paid on February 17, 2021 for a total of $26.1 million. During the second quarter, the Company paid a dividend of $.0925 per share, which was approved by the Board of Directors on April 26, 2021 and paid on May 19, 2021 for a total of $26.1 million. During the third quarter, the Company paid a dividend of $.0925 per share, which was approved by the Board of Directors on July 21, 2021 and paid on August 18, 2021 for a total of $26.1 million.

On October 19, 2021 the Board of Directors approved a dividend of $.1025 per share payable on November 17, 2021 to shareholders of record on November 3, 2021.