Good morning, and welcome to the Brown & Brown, Inc. 2013 First Quarter Earnings Call. Today's call is being recorded. Please note that certain information discussed during this call, including answers given in response to your questions, may relate to future results and events or otherwise be forward-looking in nature and reflect our current views with respect to future events, including those relating to the company's anticipated financial results for the first quarter of 2013. Such statements are intended to fall within the Safe Harbor provisions of the securities law. Actual results or events in the future are subject to a number of risk and uncertainties, and may differ materially in those currently anticipated or desired or referenced in any forward-looking statements made as a result of a number of factors, including the company's determination as it finalizes its financial results for the first quarter of 2013 that is financial results differ from these current preliminary unaudited numbers set forth in the press release issued yesterday, other factors that the company may not have currently identified or quantified, and those risks and uncertainties identified from time-to-time in the company's reports filed with the Securities and Exchange Commission. Additional discussion of these and other factors affecting the company's business and prospects are contained in the company's filings with the Securities and Exchange Commission. We disclaim any intention or obligation to the update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. With that said, I will now turn the call over to Powell Brown, President and Chief Executive Officer. You may begin.

Thank you, Celia. Good morning, everyone. We're very pleased with our 10.2% organic growth in Q1. This shows the contributions of all of our divisions and our consolidated margins expanded, and it shows we believe a positive trend for the future. Now I'd like to turn it over to Cory for our financial report.

Thanks, Powell. We did have a very, very good quarter, and our net income for the first quarter of 2013 was $60.1 million, and that's up 21.6% over last year. Correspondingly, our net income per share was $0.41, and that's 20.6% over the $0.34 we earned last year. Now if you draw a line through the change in estimated acquisition earn-out payables, which was an expense of $1.5 million versus 388 last year, we really made $0.42, and that's compared to $0.34, which is really a 23.5% increase. So very nice. From a revenue standpoint, commissions and fees for the quarter increased 12.6% to $333 million, and that's up from the $296.5 million we earned last year. And of course, as always, in our press release, we have a table that summarizes our total growth rates and the internal growth rates from our core commissions and fees, and that excludes our profit-sharing contingent commissions, as well as our guaranteed supplemental commission, the GSCs. For the quarter, we received $25 million of profit-sharing contingent commissions, and that's approximately $818,000 more than we earned last year in the first quarter. If you look at the breakdown of that $818,000, our Retail division increased their profit-sharing contingent commission by $3.7 million, and the wholesale brokerage division increased theirs by $500,000. Those are both as a result of basically better loss ratios from our insurance carriers. And on top of that, the impact from the Superstorm Sandy really was not as big of an impact as we had feared. Now those increases then were offset by $3.8 million in less profit-sharing contingent commissions in our National Programs division, and that's primarily due to our Proctor Financial operations. Looking at how much profit-sharing contingent commissions we're going to receive for the rest of the year,…

Thanks, Cory, great report. In our Retail division, we were up 80 basis points versus 5.6% in Q4. In South Florida, property carriers are looking for 10% rate increases, but they're not getting it typically. On good accounts, they're getting 2% to 5%, maybe 7% on accounts that have loss problems. It's more than that. GL rates and automobile rates in the South Florida are flat to up 5%, and exposure units, both payrolls and sales in South Florida, on average, are flat to up 5%. In Central to North Florida, property rates can be down 2% to up 4% or 5%. And in particular, RMS 11 continues to have impact on properties on the spine in turning down the spine in the state of Florida, meaning more rate pressure. GL rates are 0 to 5%. Auto is up 2% to 6%. We're not seeing a net new autos put on the schedules. We're seeing new exchanged for old vehicles. Payrolls for workers' compensation are flat to up 5%. Carriers are obviously pushing much harder for profitability today. Some are re-underwriting their books. There's lots of underwriting questions, and specifically, in the toughest work comp classes, we're seeing more consent to rate. In the Southeast United States, excluding Florida, we're seeing property rates up 3% to 8%. GL is flat. Auto and work comp are 0 to up 5%. Exposure units are flat to up 2% to 3% to 4% to 5%. We're seeing a lot more pressure on habitational accounts. That's both the property rate and GL, specifically thinking about 2-storey frame, garden-style apartments. Work comp carriers are removing discretionary credits. We're seeing pressure on wind deductibles in coastal areas, and the coastal Carolinas are seeing more pressure on property rates in the standard market. Texas and Oklahoma, the…

[Operator Instructions] And we'll go first to Michael Nannizzi with Goldman Sachs.

Powell, just one question on growth. I think you mentioned kind of tough comps in the first quarter in terms of retail organic. Just trying to get an idea of what kind of led to that? And was there anything as opposed to 1Q '12 and 1Q '13, whether it's lumpiness or anything like that, that caused the comps to be different? And then we'll start there.

Perfect. All right, Michael, good morning. I would tell you, just by background, last year, '12, our organic good growth in retail was 1.6%. And so we believe, starting in Q3, the trend is moving up. So we operate in a band kind of -- in all of our businesses, but we're specifically talking about retail. In the first quarter of this year, there were several nonrecurring revenue items that we're -- I'm specifically talking about life insurance. We are not a huge life insurance writer, although we do write some chunky life insurance business on occasion around the horn. And we have several offices, 3 or 4, that specialize in it. But I'm saying as a general statement across the system, we don't write a ton of it, and so we identified at least $1.1 million worth of nonrecurring life revenue in Q1 this year versus last year. I'd also say that the EBITDA margin, as Cory talked about, is up 1.1%, which we're very pleased about. Michael, what you may have heard me say in the past is that we believe the Retail business is a low- to mid-single-digit organic growth engine with a normal operating economy. And so we've always said that we are a proxy for the middle market economy, which is the distinction over the overall economy. And so as we continue to see that improve, we think that will improve our prospects for internal growth in retail. I would also tell you that we believe that our -- well, our budget, plainly not we believe, our budget shows that our internal growth for retail should improve each quarter throughout the year.

And then, I guess, on the margin side, I'm just trying to understand. So with organic, you mentioned a point that margins were higher even though -- actually, margin improvement in basis point is better than top line organic growth. Just trying to understand, what are the levers that you're able to pull in order to accomplish that? And how much better can margins get from here with that sort of kind of low mid-single-digit organic increase? I'm just trying to get an understanding on the operating side, yes.

We understand. And as you know, we have always been a relatively efficient operation as compared to our other publicly held peers. And so there's never been an area where there's been high amounts of efficiencies or globs of fat that you can just cut out. Our efficiency comes from the fact that each one of our office is decentralized, and they look at what they can do better each year. And so in our case, with the retail specifically, the leverage -- we already got -- already have an efficient operation so when a dollar of new revenue comes in simply because that the exposure units goes up or the rates go up and creates that new dollar, you heard me -- heard us say that we don't have to buy another piece of paper or pencil. We do have to pay 20% to our producer if it's a renewal dollar that comes in. We may have to pay another 12% of bonuses to the profit center, and there may be $0.04 or $0.05 of extra frictional cost. So essentially, on that $1, there may be $0.40 on that first incremental dollar. And now over the last 3 or 4 years, where we've had negative internal growth, our offices all had to become more efficient. And so when somebody may have retired or left, they maybe didn't replace that person. Now at some point in the future, when things look better, each office will decide independently whether or not they need to hire that next person. So that incremental dollar improvement, what I showed you is 60%, is not going to continue on for every dollar in the future. But at some point, it will be a stepped-up approach, and so -- but right now, that incremental 60% is falling to the bottom line on our Retail division. And I think you can see it in the numbers this quarter when we only had an 80 basis points internal growth, and yet a 1.1% growth. So it happens naturally, and I don't want to be cute about it, but I'd tell you that does show the beauty and the efficiency of a decentralized organization and the fact that the people that we have on our Retail division specifically are just outstanding leaders and outstanding people. And I think that's the most important concept to view when you're looking at our company, and it is a company that's built to last and we continue to try to improve every quarter, and I think that margins are showing that this particular quarter. So I hope that answers your question.

Great. And then just one more, is retention improving, like, are you seeing this with the environment in kind of low-mid-single-digit rate increases? Are you seeing your ability to hang onto accounts longer, like, so retention, helping to support organic a bit more? Is that starting to come through or are you not seeing it?

Well, our retention rates are historical norms. I would tell you that I had several conversations over the last week with leaders of our businesses about those that we saw for a period of time, a number of businesses go out of business. And so what we're seeing now, we're not seeing as many go out of business, but in certain areas of the country, those that have been weakened by the economy, we're seeing those that are -- they may have more incentive to merge or be sold because they've been sort of, I hate to say this, but they've been wounded. It's been a tough go, and so we're seeing a little of that. But generally speaking, our retention levels are at the historical norms.

And we'll go next to Sarah DeWitt with Barclays.

When I look at the 10% organic growth in the quarter, how much of that was from the flood-related -- claims related to Sandy? I think, last quarter, you have predicted that would be about 2.5 points, and I want to see where that ultimately shook out. And what about the ARROWHEAD acquisition as well, how much does that contribute?

Sarah, out of the total internal growth dollars that we had, we ended up at $27.3 million for the quarter. $16.2 million of that came directly from Colonial Claims, okay? And from the national programs, we had total internal growth dollars of $6.6 million. Of that, as Powell had mentioned to you, the automobile aftermarket was about $7.4 million, but then ARROWHEAD, we don't break out -- ARROWHEAD is now just lumped in so we don't talk about ARROWHEAD in total. But the various components of ARROWHEAD, the vast majority of the programs had positive internal growth, but that was offset by that $2.1 million drop in the wheels program. Now in addition -- so the other -- all the other ARROWHEAD programs grew nicely in their own right. We had one ARROWHEAD program that was off about $187,000. Now the other programs within national programs that had a slight decline is that Proctor Financial was down about $636,000 over last year, and that was primarily due to the fact that the lender-placed ratios are going down because as foreclosed properties are kind of working through this system, there are less policies being put into the lender play's pot, and so that is the cause of most of that decline. The good thing at Proctor is, is that they've got a lot very good new business activity going, and of course, they've not lost any of their clients. And so over the next 12-month period, we believe that Proctor will continue to grow nicely. The other programs are all doing pretty well. So it was just the wheels program that had the negative in national programs.

Okay. I guess what I'm trying to get at is how should we think about what normalized organic growth was this quarter?

Well, if you look at the internal growth rate and you take out the automobile aftermarket, which to me is a brand-new account, it will continue, but it's -- if you take that out and if you take out Colonial Claims, which for the most part, unless there's another large claim, will be kind of back to flat normal, but if you exclude those 2, our consolidated internal growth rate was about 1.4%.

For the total company?

For the total company.

The automobile aftermarket is an ongoing business.

Yes. And so if you want -- if you leave in the automobile aftermarket, we basically had a 4.2% internal growth on a consolidated basis. I know you can figure those numbers out yourself by just deducting the 16.2 or the 7.4 whatever number you want to look at.

We'll go next to Greg Locraft with Morgan Stanley.

On the claims, the $16 million you got from that, which you guys had called out last quarter and it came through even better this quarter, how shall we think about the profitability of those? Did that all just fall right through?

That did have a very, very high profitability, and I'd say it's in excess of 65% margins on that business, on that internal growth, $16.2 million growth.

Okay, great. And then you just answered the question, there's nothing recurring from that so we should be just pulling out that extra $16 million with the margin to sort out on the model going forward? We're back to kind of a normal services business here?

That is true up until the next major claim, or catastrophe.

Got it. Okay, great, great. And then back to, I think, the first question, just on the retail segment, the organic there, I think you had mentioned that's going to sort of sequentially improve from this lower base. One thing I'm wrestling with is just you all pulled -- the 5% bonus plan, I think, ended in the fourth quarter is not going to recur. That obviously led to better organics in the fourth quarter and last year -- or I guess this is really a question, did it lead to better organics or did they pull forward? Did your guys pull forward their books into the fourth quarter that led to this lower organic in the first? And then I'm just trying to get confidence on that sequential from this lower level for the rest of the year. And any further clarity there would be helpful because that's really what surprised us.

Yes, there's nothing, Greg, that we're aware of that would indicate people were pulling or in near term, pulling things through from one quarter to another. So we're not aware of anything like that. I would just tell you that, as I said earlier, we had $1.1 million of nonrecurring life revenue at a minimum. This is the first quarter. As Cory said it, the comp is against the better comp from last year, and like I said, we believe that the trend is moving north overall. That's the most important thing that we're operating in a band or a range that is continuing to move up.

And we think the economy is, which is -- in the middle market, which is we're very tied to. And even though we believe the band is moving north, it's moving more to north at a slow but steady pace. And last year, as Powell had mentioned, we had internal growth in our Retail division of 1.6%. And for the whole year, we see no reason why we're not going to do better than that. It's just going to be a much slower and steady process. The middle market companies, we believe, are still somewhat in a bunker mentality, but they have cut back and they're operating much more efficiently. And until they see much greater signs of significant increase in revenues, we just don't believe they're adding a lot of people confidently. And so that's why the exposure units are flat to up a little bit, but it's a steady nice growth. And over the long term, maybe that's better for the overall economy because it will be more sustainable, as well as the rates. So we're positive about it. It's improving, and it will -- and we think it will continue.

And we'll go next to Mark Hughes with SunTrust.

The Colonial business, how should we think about that in terms of capabilities? If any disasters or catastrophes happen nationally, is Colonial positioned to provide service in those instances? Are there particular types of...

Yes, let me clarify, Mark. You think flood, okay? So FEMA claims, so flood claims, and so that could be around a wind event, it could be around a river going over the flood or the levees, it could be anything of the above. They do have certain other capabilities and specialized emergency claims, but focused on flood. It is a flood specialty adjusting business.

And don't forget the fact that the first 9 months of last year was some of the driest periods in U.S. history. And so is last year the norm? I'm not sure it is. But right now, there are certain rivers that as the sun -- as the snow starts to melt, some rivers are starting to get up to the flood stage. So is last year a norm? I'm not sure. So you just have to watch for the catastrophes. And when that happens, Colonial Claims will increase their revenues.

Right. Powell, you had mentioned a brave new world in terms of the wholesale in, I think, New England. Is that fully reflected, would you say, in your wholesale organic growth numbers? They've been sustained at a pretty healthy rate here, high single digits. Should we see that hold steady, get a little better? What do you think?

I actually think, first and foremost, that I got to give kudos to the wholesale teams. So I think they're doing a great job, particularly in some difficult markets. As an example, I know several accounts that last year were written with one carrier in the Northeast and this year in order to get wind or flood, they got to write it with 5 or 7 carriers. And there might be only 5 or 7 carriers that are capable of doing it. And so I think that to answer your question succinctly, I think that it is indicative of what's going on in the Northeast. I would say that -- I think it's going to take a little while for it to really pan itself out because I think a lot of carriers, they were trying to figure it out in Q4. They started figuring it out and implementing whatever their strategy is in Q1. And then the question is, will they stick with that strategy? We like to say, sometimes the best laid plans of mice and men are not fully executed or continued. And so it might occur, and it might not continue to occur. We think it will continue to occur, though, in the Northeast. And I think they're going to operate in a similar level. I think it's indicated in those numbers, Mark.

We'll go next to Josh Shanker with Deutsche Bank.

I was wondering if I was a customer of Arrowhead Wheels this quarter, what happens to me and what's going to happen to me next year

Well, if you were a customer, let's say, of Arrowhead Wheels and you happen to be located in a state called Michigan, then there was a possibility, if you were renewing over the last 2 months or so, that we might not have been able to give you, not us, because we're distributing it through retail agents. So remember, we are the provider of the product; we are not the retail agent on the Wheels program. So there's a retailer that you're dealing with, let's say, in Michigan, and he or she would've had to provide you with another market to get coverage for you. Having said that, now we're able to write business again in Michigan. It might be slightly differently, but that's basically where the biggest change was in this period, where it went down in Q1.

Will you have any success in getting those customers back next year?

That depends. It's possible and in that space, obviously, people buy for price and they buy for coverage. And so it depends on if our new product is competitively priced and has the appropriate coverage, we believe it is. And we do believe that it's an opportunity to get it back, but it may not come all back at once.

Okay. And then given the [indiscernible] a little different, would you expect any issues with growth for the remainder of the year, anything negative growth associated with the program now being offered through Everest Re?

We're not aware of any.

No, we think with the new Everest program, that Wheels program will have a net growth for the rest of the year as opposed to the $2.0 million down.

Okay. And acquisition pipeline, how long do you expect the 2012 tax hike hanging over the last, and do you have any thoughts on that?

Sure. Josh, as you know, different people sell their businesses for different reasons and have different timetables. And so our ability to project when people want to sell their business is -- that's kind of a shot in the dark. I'll tell you that there were businesses that we talked to at the end of last year that decided not to sell that we are continuing to have conversations with. And so does that mean they might do something this year? It's possible, but I don't know. I would tell you there are new organizations that we weren't talking with last year that we started talking with this year that could we do something with? Sure. And so I really -- it's hard to speculate, Josh, on timing. I think the most important thing that you know is that our inventory is good and we continue to talk with lots of people. And that's the hardest -- one of the hardest things I think for you to model because it's not linear and particularly as it's a larger base, it looks lumpier. And so like I said, we are always talking with people. We are proactive in our approach, and we are looking to invest in high-quality people who run high-quality businesses. And so we will complete transactions in the future when they're ready. And fortunately for us, we have the balance sheet to invest in that.

And Josh, let me -- and you heard me say this before, from an investor standpoint, I think one of the most important things to understand is that I believe that Brown & Brown has the best infrastructure in place to where we have the most people talking to, other independent agents around the country, telling the Brown & Brown story and getting them interested and attracted to our model. With that said, as Powell kind of alluded to, it does come in lumpy. We probably -- if we wanted to, we could've done $100 million of additional revenues on acquisitions last year, if we wanted to. But we are very are disciplined in who we attract, and it has to be a cultural fit, as Powell said. And so again, we could add a lot more, but it's easy to make acquisitions. But for the shareholders, it's better to have the right acquisitions, and that's what we hold out for. So they are lumpy. But the fact that we didn't do much does not mean that the process is not working exactly the way it will. Each one of these acquisitions will ultimately sell, and it's just a -- it's a matter of time, and we're going to always get our fair share of them.

We'll go next to Adam Klauber with William Blair. Adam Klauber - William Blair & Company L.L.C., Research Division: On the -- in the Retail division, I guess, what's the trend on audit premiums? And I know you don't forecast, but just any thoughts throughout the rest of the year on audit premiums.

Yes, Adam, what I would say is, audit premiums seem to be turning positive. So remember, you've heard me talk about and us talk about it in 2 ways. One, we're starting to see more audit premiums, that's a positive. And two, we've talked about the potential for a delay in clients who are renewing their business that have come down several years in a row, 3, 4 years in a row, might be less apt to anticipate a growth in their exposure units, even though they have a very high likelihood of achieving those numbers. And so what I mean by that is, if you were a manufacturer of widgets and you were $20 million in sales 3 years ago, and $20 million came to $15 million, which came to $13 million, and then you did $12 million last year, and you have an order that's confirmed that would get you to at least $15 million this coming year, I think many of our clients and prospects are continuing to talk with their insurance, cover their insurance at $12 million and then accrue for that additional expense in 14 months after the audit is done, rather than go ahead and pay for it sequentially over the next 12. So we would say, it's a positive, but it's a slight positive right now as opposed to in a normal operating environment. If you look at the risk-bearing community and you ask them, what is the impact in a normal operating environment of additional premiums? I've been led to believe it is 2% to 4% impact on total written premium in a quarter. So I don't know what it is on some of the larger carriers right now, but I think that it's turning positive, and that's reflected in what we're seeing. Adam Klauber - William Blair & Company L.L.C., Research Division: That's helpful. Also, on the benefit business, what was the organic for the quarter? And is there any more pressure on commissions for small accounts, or is that pretty much done?

Yes, first of all, we don't break out the organic on benefits only. I would tell you that it depends on the state. As you know, many of the states and small group have gone to a per head per month. So the only way we get additional commissions would be, you have to add bellybuttons, that's their terminology, not mine, so insured lives on the plan to get additional commissions. If you actually have -- there are certain states that are still on commission, and those that are on commissions seem to still be paying commission on the increased premiums. And so what I think -- what I'm trying to tell you is, I think right now, it's neutral. We're not aware of anything that is dramatically forcing down commissions on small group at the present time, obviously. We're watching and preparing and watching with great interest the introduction of exchanges and not only how we're prepared for it and what we can offer our customers and prospects, but what the states are going to provide and how viable are those options. Adam Klauber - William Blair & Company L.L.C., Research Division: Okay. And then 1 last question. You've done 2 pretty nice deals with Zürich and Everest Re in the last, say, 6 months or so, very interesting deals, where it seems like you're essentially taking over distribution from the carriers, which isn't their core business. Would you say those are more aberrations, or can you see more of those deals in the future?

Well, I would say, number one, I wasn't really aware of a deal like that before we did the transaction with our partners at the Zürich. I want you to also know that the partnership with both of those 2 carriers, the partnerships, are very good. So I don't know if it will lead to additional opportunities. My instinct would be that we understand and have a platform -- we understand how to operate distribution, and we have the platform and the technology to do it. So it's an interesting alternative. I'm not saying it's the only solution, but it's an interesting alternative for some of our risk-bearing partners to potentially operate their business more efficiently. So long-winded in saying, I don't know. We're very pleased with the opportunity with Zürich and Everest, and it's not as though we won't be asking, but I would continue to operate in a mode that those were sort of onetime opportunities. And then if we see more, that's great, as opposed to thinking you can put something into a model and pop it in. I don't think that would be fair.

We'll go next to Ray Iardella with Macquarie.

So I just want to maybe touch, Cory, on the number you threw out for the retail margins, 110 basis points, can you quantify what improvement was due to the ending of the bonus program versus sort of underlying margin expansion?

Well, the amount that we accrued last year in the first quarter for the 5% bonus program was $1.3 million, okay? But as I explained that if you take all the bonuses, the profit center bonuses as well as other bonus we accrued, it only went up by $900,000 over last year. So basically, it's a little bit of a trade-off is that, yes, we didn't accrue for the $1.3 million, but because many of our offices were more profitable, the profit center bonuses went up. So the net-net change was roughly $900,000.

Okay, that's helpful. And then maybe just sort of going back to the M&A question, and I know it's lumpy and maybe a hangover from year-end, but if you guys didn't close any more deals, how much sort of acquired revenues can we expect, I guess, for the rest of the year?

Well, remember, Ray, I appreciate your question, but we don't budget acquisitions nor do we give guidance on acquisitions. And so we would be -- it would be purely speculative, and we don't do that. So what I would say is this, we continue to look and talk with people all the time. We feel good about our ability to finance those transactions in the future, we feel good about our balance sheet and our existing operations, and we think that's good. Now, Ray, though, if you're talking about the acquisitions that we already have closed on and are part from last year, what will fall through without a new acquisition through the internal growth schedule, basically, we've got about $7.1 million of acquired revenues that will come through in the second quarter. We'll have about $5.7 million that will flow through in the third quarter and about $3.2 million that will flow through in the fourth quarter.

Got it, no, that's kind of the number I was looking for, so I appreciate that. The other question, I guess, in terms of the employee benefits business, and, Powell, I know you've talked about the state exchanges, I mean, maybe can you quantify, a, sort of the revenue you guys have to the small life medical side and then, b, sort of how Brown & Brown will sort of work together with the exchanges going forward, or any updates you can give there?

Okay. Last year, Ray, we did $225 million worth of employee benefits revenue. Of that, 1/3 of that revenue was ancillary products, that would be group disability, group life, group vision, group demo. So 2/3 of that revenue is health-related. Of that health-related, just under 1/2 is under 50 lives, okay? So just call it's less than 1/3 -- just slightly less than 1/3 of the total revenue, okay? And so in different states, as you know, exchanges are being -- there are several options that can occur. Number one, an exchange can be up and running in a state and backed by the state, that's option number one. Option number two is, if they decide not to or they're not in compliance by 2014, then allegedly the government, the U.S. Government, is supposed to provide an exchange until they can get theirs up and running. But it's ultimately going to be the potato they're going to give back to the state to operate. So that's number two. Number three, as it relates to us, we have a group-based customized private label exchange at Brown & Brown. And so in addition to any of those other state exchanges, any of the other stuff, we have our own that we can bring to our customer or our prospect. And so the key is, there's going to be lots of calculations on should I join an exchange, should I give health insurance? There's lots of group plan. There's lots of speculation about the cost, which is obviously something that we haven't heard a lot about in the news for these plans. I believe you're also going to see a lot of pressure on individual health rates, of which we don't write a lot of individual health ourselves, but I'm just saying, it's a broad statement which will create a fervor in Washington when it starts happening by the end of this year. So somewhere in the -- I'm sorry, somewhere in the August, September, October time period, individuals that are insured -- individual health plans are going to start receiving letters, which is going to show them what their projected cost is going forward. And it's going to be a lot more than it is right now. And so there's going to become -- I believe, there's going to be a lot of political uproar around that. I'm not saying it's changing the exchanges, not -- that's not the implication. I'm just saying you need to be aware of that out there. But we feel good about what we can provide for our customers and our prospects. And we operate simply, how do we give our customers not only the knowledge that they need to make the right decision but to give them choices or solutions in this complex situation?

Okay, that's helpful. One other quick one, if I can squeeze it in, for Cory. In terms of the contingents up year-over-year, I think you had mentioned sort of throughout last year that a couple other carriers had switched from guaranteed supplementals towards contingents. I mean, did that have a positive impact on contingents in the quarter?

There were a little -- there was a little bit of that, but it wasn't a significant amount that made a net increase.

We'll go next to Meyer Shields with KBW. Meyer Shields - Keefe, Bruyette, & Woods, Inc., Research Division: I need to clarify something because I can't read my notes. Powell, was the $1.1 million in life revenues, was that first quarter of '12 or first quarter of '13 issue?

'12.

'12. Meyer Shields - Keefe, Bruyette, & Woods, Inc., Research Division: Okay. So that impeded the kind of growth this year...

So we didn't have it recurring in '13. Meyer Shields - Keefe, Bruyette, & Woods, Inc., Research Division: Okay, good, that's what I thought. When -- I think you talked a little bit about how you who don't see any signs of employees kind of gaining last year's 5% bonus. But is there any concern that maybe the entire program should be reimplemented? Or is there any connection between the discontinuation of the program and the slowing retail growth?

Well, we don't believe so, Meyer. But what we've said is, we're all about driving growth and profitable growth. And so I've said that it's not our intent to continue that, and we're not continuing that plan. If we decide to do something in the future that would be over a number of years or period that would reward performance, that's something that's up for discussion. But no, we don't think that the perception or what you're saying is real that since there's not a -- this kicker that we haven't grown as much. No, we don't believe that would be the case.

We'll go next to Brett Huff with Stephens Inc.

Just a couple of quick questions. Did you guys tell us how much annualized revenue you bought this quarter, did you give us that number?

No, I mean, there were no acquisitions this quarter.

Okay, I didn't -- I wasn't sure if there was even a small one, okay -- that we hadn't heard about. Okay, so that was one question. The second is, I just want to make sure that I get how the organic growth is going to flow kind of through the year, at least from right now. I think you said including the auto but x the flood, you're at 4.2% organic growth, is that the right number? And then you get -- for 1Q, right? And then going forward, we're going to get, I think you said, $7 million for the next 3 quarters from Everest, is that the right understanding?

[indiscernible] next year.

Next year?

12-month. Well, yes...

Over the next year, okay.

So the Everest doesn't kick in until -- start until next month.

Okay, that's helpful. And then, we know the flood more or less goes away because it seems like a lot -- basically, it all happened in 1Q. Then we have what we think is...

Again -- hey, Brett, on that one, again, it's a normal operation. It's not a onetime, it's a continuing operations, and we're comparing ourselves to last -- the first 9 months of last year, which was, like I said, was one of the driest. So to say that it's not reoccurring, granted it's tied to catastrophes, but unfortunately, in the world we live in, there's always that. So I don't want you to discount Colonial because they've got a great operation, and they're going to continue to contribute a lot to our organization.

Sure. Okay. I was just trying to think relative to the very large $16 million benefits this past quarter.

Right, okay.

Okay. And then the last question is, the $2 million in Wheels, it was a carrier transition switch problem. Do we expect that to sort of levelize to normal levels, i.e., should the $2 million run rate be now included in 2Q?

Well, now that Everest Re will be able to start writing some of that business in some of the states that the old carrier would not write in, it will, we believe, greatly diminish. And then on top of that, the new policies that we will renew that came with the Everest program, which is more of that $7 million, Powell, that's going to overshadow it. So overall, the Wheels program, we believe, will have a net positive for the rest of the year.

Okay. And then on the life issue that I think Meyer just asked about, Powell, I just want make sure I get this. So there was -- can you just explain that again, and should that $1 million or $1.1 million again come back sequentially in 2, 3 and 4Q? Or how should we think about the life...

Think that when we talk about that $1.1 million, think of it this way, there were large life cases that were placed in Q1 of '12. Those are onetime only in nature. They did not reoccur in '13, and they will not reoccur in the future. However, we will sell life in the future in particularly through those entities that have specialized life departments. But specifically, we have one office as an example that had $0.5 million of that, and they write big life cases like every other year, but not every year. And so they're up and they're down and they're up and they're down. And so -- but when you put it all together, it does have an impact. So it did in this particular quarter.

And yes, I mean, and that's why we highlighted it because when you're dealing with just $1.1 million of net organic growth, we don't really think of life cases having a big fluctuation quarter-over-quarter. But because you take another $1 million, all of a sudden, the internal growth is more like $1.6 million, 2%, had it not been just the way it fell. We're going to write more life cases, then it's going to come in at some unpredictable times. That's why we highlighted it.

We'll go next to Al Copersino with Columbia Management.

I had a general question. Powell, I'm not sure that you can look into a crystal ball and give us the answer, but I'm very curious what you're hearing from small business owners. There's that portion of the Affordable Care Act which makes your 50th employee a very expensive employee on a marginal basis as far as health care benefits or a penalty goes. And I'm just curious what you're hearing from small business owners, who -- people with 40 to 60 employees, what they're thinking about that in terms of their own business planning. And I'm not referring to employee benefits; I'm referring to the exposure units you expect to see from your clients on a P&C basis.

Yes, I think that right now, Al, my comment would be cautious to cautiously optimistic. And so I think what a lot of those people -- and this is not just that group that you're talking about of clients or prospects, but I think it's a large number of people. They are trying to grow their businesses without adding new people or making major capital expenditures. And the reason they are is there's just a -- there continues to be a bit of a hesitancy about how the economy is doing. And so it's one thing, as you know, to read in The Wall Street Journal the stock market is doing well and blah blah blah. But if you're in Little Rock, Arkansas or you're in Brooksville, Florida in a smaller community, smaller than Little Rock but someplace, and you talk to business owners, I can tell you, they're still cautious.

Now, Al, there is a perception that with the ObamaCare that a lot of small businesses are just going to say, "Look, I'm going to cut everybody loose, and tell them to go down to the Post Office and get into the public exchanges and fend for yourself." Our reaction is this, these employees and the employers, they're -- they know their employees very well, it's a close-knit family, and they're not going to have this wholesale cut them loose kind of theory. We believe that most of them are going to say, "Look, I know we had a plan, and Brown & Brown as our agent, they have a private exchange. We're going to have them come, and we're going -- have them talk to you and enroll you." So it's going to be much more a logical progression as opposed to just this wholesale just cut everybody loose, let them fend for themselves.

And one thing also, Al, to add on that is, we've always said there are 3 things you can say with certainty in an uncertain health environment: number one, health insurance is expensive; number two, it's utilized; and number three, it's complex. So if you add those 3 things together, we believe that there will be a place for a distributor or a partner like us. So whether you call is an insurance agent, broker, health care consultant or something other, this is a complex issue that we're going to have to work and help walk our clients and prospects through. So there -- where there is great uncertainty, for the prepared organizations, there's great opportunity.

We'll go next to Elyse Greenspan with Wells Fargo.

Most of my questions have been answered, but just quickly on the auto aftermarket program. I know you guys had pointed out in the past that, that was just a lower margin than some of the other businesses. So I just wanted to find out how that's tracking versus expectations, and just in terms of trying to getting a feel for the margin improvement overall going forward.

Sure. Elyse, if you remember, we said that in the automobile aftermarket, that program would run approximately 10% margin for the first 24 months. And then we believe that it would not only improve because of the growth in the program, which Zürich has expressed wanting to double it in 5 years, but just lots of other things, which would -- we think are positive for that organization and that operation. I would tell you that the margin is tracking in line with expectations, so we're pleased with that. And we think there's some good opportunities for growth, as we've said. So I would say it is performing as expected.

And you would say that to us in -- both in terms of revenue and on the margin front in terms of risk?

Yes.

Okay. And then also, just is there anything, I know we saw the life business, in terms of impacting the organic number in the first quarter year-over-year? Is there any nonrecurring revenue that we should maybe look for in the Q2 or any of the out-quarters of this year to kind of impact the organic growth trends maybe in the retail segment?

The short answer, Elyse, is I'm not aware of it, but I don't want you to say that I'm categorically -- that's obviously on my list after we get through Q1 and the earnings call. But I don't know the answer to that, but I don't believe so.

We'll go next to Ron Bobman with Capital Returns.

I had a quick question. Powell, in Florida, Florida homeowners in particular, what's the trend with respect to -- there's been a fair number of takeout the last, I don't know, 12 or 24 months. And I'm wondering what's the trend with these policies making their way back into citizens or not making their way back into citizens, sort of has the normal historical flowback changed at all of late?

Right. Rob, I think what I would tell you…

We're going with Ron today, Powell.

Sorry, Ron. I apologize. Ron, I'm -- number one, this number might be a little dated, but I believe there's somewhere around 62 or 63 takeout companies in the State of Florida. As you know, in order to form a takeout company in years past, all you had to do is have $5 million of surplus, and it didn't actually have to be in cash; it could be pledges from people. Then that was moved to $15 million. So all of the takeout companies have different philosophies in purchasing reinsurance. There are certain minimum requirements in purchasing that reinsurance from the state, but different companies have different views on it. I could make the argument that in the early going in some of those companies, if they take policies out, it is on a temporary basis. And in the event there would be a storm early in their evolution, there'll be probably a high likelihood that those policies would end up or some of those policies would end up going back to citizens. So that's one side of the argument. The second side of the argument is that here in the state, there is a feel, driven quite honestly by our governor, to try to depopulate citizens. And so stem the tide of business rolling into it, meaning specifically homeowners, but as well as commercial, residential properties, and get it into the private marketplace. We're starting to see more of that in the commercial side, which I talked about the rational behavior. On the personal line side, it's an issue of cost. And the answer is, they are still very competitive relative to the options that individuals have. It's not the only option, but it is an option. So what I think you're going to see, Ron, I apologize on that, is I think you're going to see over the next year or two, barring a major wind event in Florida, continued rate pressure upward on citizens, which is going to move it closer to what you and I and others would call a market of last resort, which would push it in -- push that coverage back and put and encourage it to stay in the private market. Long-winded answer of saying, I think it's kind of a neutral right now.

And, Ron, just to add to what Powell just said, there clearly is a focus on continuing the depopulation of citizens. And one of the bills that is currently in the legislature that people have told us that we think has a very good chance of passing this time is setting up an independent clearinghouse on a go-forward basis to where before a policy can be accepted by citizens, it will have to go through this clearinghouse. And if there is any carriers that is willing to write that risk, which includes the takeout, it has to go to those takeouts. So that will again create a barrier for things just to be dropped in to citizens. So I think if it does get passed, it will further the depopulation of it.

And we have no further questions at this time.

Okay, Celia. Thank you very much, and we wish everybody a great day and look forward to talking to you next quarter. Thank you very much.

And that concludes today's conference. We thank you for your participation.