Good day and welcome to the Brown & Brown Inc. 2013 Third Quarter Earnings Conference 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 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 laws. Actual results or events in the future are subject to a number of risks and uncertainties and may differ materially from 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 its financial results differ from the current preliminary unaudited numbers set forth in their 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 update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. With that said, I would now like to turn the conference over to Mr. Powell Brown, President and Chief Executive Officer. You may begin.

Thank you, Mary. Good morning, everybody. All 4 divisions grew organically in Q3 for Brown & Brown. Retail was up 2.5% from 2.3% in Q2; National Programs, up 14%, down slightly from 18.3% in Q2; Wholesale, up 15.8%, the big winner this quarter, up from 10.8%; and Services down, just at 4.6%, down slightly from 10%, which was significantly impacted by the Colonial Claims revenues in Q1 and Q2. The organic growth overall combined with 7.3% or $20,765,000 in revenue. In our results this quarter, we had a $1.3 million onetime expense associated with a possible acquisition that did not occur. Cory will discuss that in his comments. But most importantly, we're very pleased with our performance this quarter. And with that, I'll turn it over to Cory for our financial report.

Thanks, Powell, and you are right that we did have a very good quarter. We earned $0.39 of earnings per share, but that could have been a solid $0.41 but for 3 items that created some unusual noise in the quarter. I know that we don't really generally use that term, noise, but we did want to highlight 3 specific items. One, we did expense $1.3 million of nonrecurring expenses in the third quarter pursuing a very large acquisition, which we were not the winners. These costs were separate and above our normal quarterly acquisition related expenses. Approximately $300,000 of those expenses fell into the compensation and benefit line item expense with the remaining $1 million in the other operating expenses. Secondly, our July 1 acquisition of Beecher Carlson had a slow start due to some acquisition transition issues. They missed their third quarter revenue budget by about $3.9 million. Beecher is writing a lot of new business, and we still believe that much of that deficit will be made up next quarter and other quarters. We believe that the 12-month projections for Beecher Carlson's revenues and EBITDA that we gave last quarter are still valid and they will hit or exceed those targets. And Beecher's large account division, we believe that roughly 1/3 of their renewal revenues will fall into the fourth quarter. Now the combination of those first 2 items, the $1.3 million and the Beecher, when you extract that, that really does have about a 2% margin impact on a consolidated basis on EBITDA. And the last item just to highlight is one that we kind of highlight every quarter. It's that it's the change in the acquisition earnout liability. And we pretty much tell you every quarter to ignore whether it's a positive or a negative…

Great report, Cory. Thank you. On the Retail side, in Florida, coastal property is flat to potentially up slightly or down slightly within a couple points. Inland property is flat to down 5%. GL rates in Florida are all over the place, down 10 to maybe up 2 or 3 points. Auto rates are plus 1% to 2%, 3% up. Exposures are flat to 5%. We're seeing more consent to rate on workers' compensation in the state of Florida. We're seeing more construction, both in our insureds and on a project basis with builders' risk policies. Regional carriers continue to undercut national carriers. And remember, if you hear the target rate on a commercial book is x percent, let's say, 6%, 7%, then the good accounts are getting flat, maybe up slightly or down slightly in there, good defined as low loss history or positive loss history. In the Southeast, excluding Florida, coastal property rates are up 5% to 10%, and inland rates are up 0 to 5. GL is flat to 5% up. Auto is plus 1 to plus 6. Exposure units are generally flat to up slightly. Workers' compensation, depending on the state, is up 5% to 10%. We're seeing in the auto line, especially in heavy fleets, a tightening in Texas. In the oil and gas related businesses, those are up 10-plus%. And underwriters continue to look at price per square foot in terms of increasing the TIVs on property schedules. In the Northeast, property is up 2% to 8%. More coastal pressure on those rates. And GL, if it's a clean account, flat to 2% increase. Construction accounts are typically up 8% to 10% in rate. Auto is flat. Work comp is tightening. Exposure units are generally flat other than construction. As I alluded to, property…

[Operator Instructions] And we'll take our first question from Mark Hughes with SunTrust.

Powell, could you give us your take on the Beecher performance this quarter? Not quite as good as expected. What do you think caused that? What gives you confidence it will be back on track?

Sure. Well, Mark, I would tell you that it's a combination of a couple of things. We said, when we announced the acquisition, that their revenues were heavily weighted in the second half of the year. And what I don't think I realized at the time was generally -- or basically, what Cory said, about 1/3 of their revenue comes in, in Q4. That's number one. Number two, I would tell you that in that space, the revenue is lumpy, and so it can come in or move slightly into one quarter or another. Three, I would tell you that with all of the activity on pushing to close it and do all the things, they didn't write as much new business as they historically did in Q3. However, they're writing a ton of new business in Q4 and are already in Q1. And so we're very pleased with the opportunities, Mark, that, that presents us. And as you know, that $70 millions of revenue has 0 employee benefits or revenue associated with it, and so large accounts. And so we have an opportunity to sell some employee benefits there as well.

Okay. And then on that topic, the employee benefits, the 13 clients, the 1,300 lives. Can you give us some sense of how that impacted your revenue within that group of clients? And then have you lost any clients that might have gone elsewhere because of health care reform?

Yes. So the answer on individual exchanges is, no, we haven't lost any clients. Actually, the confusion around health care exchanges or just health care in general, ACA, has created great concern and anguish and yet great opportunity for us. So we're writing a lot of new business. So I'm not aware of us losing an account to an individual exchange or anything like that at this time. That's number one. Number -- back to the first question is on those accounts, my understanding that the revenue is generally similar at present time. But as we get into it deeper and we have more on it, we'll have better clarity on how that -- if that were to affect our income stream and how it will. But right now, our understanding is it's generally the same.

Yes. And Mark, as you know, that most of the employee benefit companies have already started to pay us per person, per month fee. And of course, the exchanges, that's exactly the way it will occur. The -- a lot of our producers and folks have already -- they focus mainly with renewing accounts well into 2014 just to avoid the confusion and the stuff happening on '14 to see -- beginning of '14 to see how things work out. So that -- those 2 respects is that we don't believe that there's going to be any significant change in the amount of revenues that we're going to see in our employee benefit operations over the next 12-month period.

And we'll take our next question from Josh Shanker with Deutsche Bank.

A couple of questions. The first one, I'm trying to understand the -- there was a little bit of margin contraction on EBITDA basis comparing 3Q '12 to 3Q '13. I'm wondering if you think that's temporary, if that's based on some of these slow starts [ph] with Beecher Carlson. How are you thinking about EBITDA margin going into the next few quarters?

Yes. Josh, as we have said, that 2 things really affected a normal margin was that 1.3 and then also the fact that in the Beecher Carlson large account, because of the $3.9 million hole that we had budgeted for in terms of the revenues that we think is only temporary because we think the whole year is, they're going to make it up. And if you take those 2 items, on a consolidated basis, that's actually over 2% in terms of margin. So we look at the margin improvement from 3Q of 2012 to this current quarter, roughly without those 2 items in there, going up by almost 1.74 percentage points. So as we have said that, and especially in Retail, as long as there is positive internal growth, our margins will expand. So again, our growth is pretty much tied to the middle market economy primarily as opposed to rates. We do think rates are moderating, but the driver, we believe, is going to be more the exposed units of our client, and so from your perspective, if you think the middle market economy is going to continue to grow like it has the first 9 months of this year, we believe that it will be a comparable amount of growth on a go forward basis.

And when we look at 3Q '13 on a trailing 12-month basis ending, let's say, 2Q '14, we won't feel the seasonality, I guess, that Beecher Carlson viewed into it this quarter, I suppose?

Yes, what -- the way I would look at it, Josh, is this. Remember, we announced it 7/1, so I think the best way to answer that is when we have the entire year, we will be able to say with exact certainty exactly how it works. But we think that about 1/3 of the revenue renews in Q4, and then the remaining pieces renew in Q1 and Q2 of next year.

Okay. And in your rate commentary, you mentioned that Florida coastal property was probably flat. I assume that's a reaction to the 6/1 renewal that is coming through very quickly. Can you talk about when you saw prices inflect there? And how quickly carriers are to pass reinsurance savings onto their end users?

Sure. I don't think it's got any direct relation to the reinsurance rates going down on 6/1. I think that, that's one way to peg it or you can say that. But the way I like to look at it is this. There -- hurricanes hit Florida in waves. And usually, if you think about it, it's every 10 to 12 years. And so it's a while since we had the last storm, 2004 and 2005. And so as the markets continue to do well, i.e., have good rate online and not incur losses, it becomes more and more competitive and more people kind of crowd into the space. And so I would tell you that it is more coincidence than direct correlation of rate going down with reinsurance rates going down. I think that people have been very cautiously toying with the idea of rate flattening already. And every once in a while, you hear about a large account that will renew down slightly in Florida. You hear about a couple markets that are trying to get rate, like on the primaries. And they may have priced those primaries a little below market before. And so we're seeing 1 or 2 carriers do that. But as I said, if we don't have a wind event this year, which we don't think we will, I think that you're going to see more pressure on rates starting at 12/1 and 1/1, it's open season. That's not a negative for us, but I just think that there's just too much capacity out there to do it.

And we'll take our next question from Greg Locraft with Morgan Stanley.

Just one thing I'm wrestling with is this $1.3 million as a one-timer. Can you -- I mean, why is it a one-timer? I sort of think of you guys as an acquisition machine that is constantly looking for new deals, and that's sort of the way you deploy cash flow, and you've done so successfully for years. So why would we strip out a $1.3 million, call it onetime in the quarter, as an expense related to M&A?

Greg, have we ever talked about an expense related with an acquisition before?

To my knowledge, no, I guess. But you would know about it.

You're right. So the answer is no, we haven't ever done that. And we highlight it because it is unusual in the sense that it was a large amount. It's something that was onetime in nature. It's not something that we've accumulated all of our acquisition related expenses on all the other things that we did. There's no correlation. This is not related to Beecher Carlson. And it was something that we looked into and we're not successful. And so obviously, you'll have to make that determination, whether you think it's recurring or not. We can tell you that it's a nonrecurring expense and it's just -- will be how people view that. We know that it's nonrecurring unless we got involved in another very large acquisition that we looked into, and that would be that. But like I said, this is a onetime only event, and we've never, to my knowledge, ever broken out acquisition related expenses with an acquisition. Have we, Cory?

No. And the difference here is that this was a completely different acquisition. And we had expenses in terms of legal and other people who were involved in it that were not -- that we never have involved on a normal type of acquisition that we normally do day in and day out.

And let me make just one comment, Greg. We are not trying to be vague to mess with you on this. We are under an NDA, so we are not at liberty to talk about it.

That's actually very helpful. Just shifting gears entirely. The private -- the rise of the private exchange, you guys have, as you mentioned, 13 clients, 1,300 lives. How do you think this marketplace will evolve? And I know that nobody knows the answer. But you guys are in there. You're competing. You're seeing clients adopt. What is the rate of adoption here? And how do you think, economically, this is going to play out in terms of your business?

Yes, okay. So this is obviously speculative. I think there's going to be a component of employers that are going to think about health care in this way, which would be, they're going to identify the cost to provide a medium-level plan for their teammates. That doesn't mean a Cadillac. That doesn't mean a Yugo. That means kind of a mid -- a Chevy option for their health care plan. Then they're going to look at it as a defined contribution sum. Some adopters will look at it as a defined contribution amount. They take that amount and they will deposit it into -- for sake of this discussion, knowing that you're at Morgan Stanley or any other investment house, let say they invest -- put that in an investment account. And then you, the individual employee, have the option to buy coverages based on your own desire or so called perceived medical need. So they may, in turn, allocate 60% or 70% of that income that's contributed into that account to medical and the remaining to ancillary coverages. If you get your medical through your spouse, that money would not -- you would not have access to that money unless you actually buy the medical through their plan. And the same with the ancillary. Then think of it as an allocation, like an asset allocation model. It's a health care allocation model. Do you want to have disability coverage? How much? Do you want to have life insurance? How much? How much for health insurance? And think of it like a pie chart. And the biggest slice will be health care, and then a portion will be life and disability and vision and dental. I think that will only affect -- I think the adoption rates will be slow.…

And Greg, I would add to this that, our health care exchange is very similar to what others have out there, and that's just one tool in the arsenal. But when you talk about each individual client, the managements are helping their employees in determining which direction they are going to go to. And we're -- and our folks are in there, working with them to determine that. From a standpoint of some of these other exchanges that you've publicly read about, and how Walgreens have gone, they've got very large employer groups. When you talk about individual companies, somebody has to still go and sell that account to the management team and decide either are they going to go for the fully indemnified plan or they going to -- do they want you to enroll their employees into your own exchanges. That still has to happen. So from the competitive marketplace, really, very little has changed because it's still at the grassroots, talking to each management team, each company one-on-one. And so the competitive marketplace has not significantly changed in our view. And of course, that's part of the reason why we -- that I did say that our expectations for the next 12 months is that the overall commissions that we -- commissions and fees that we have for employee benefits is not expected to change materially.

Okay. And then, I mean -- apologies, this is sort of the back half of the question, what was the economics? You mentioned it's not that big a deal to you right now. It sounds like you're having a lot of discussions, you're going to help your clients however they need to be helped. But as we just stand alone and look at I guess regular way, how it's done now versus a client wanting to go to an exchange, is the exchange business model different in terms of how you charge the client or is it the same? I'm trying to decide is a net neutral positive or negative to you guys.

And the answer to your question is, at present, it would be a net neutral. And I think we got to see because it's so new relative to -- meaning, you're asking a question that's going to play itself out as we put more clients on it and if that model evolves. So for example, right now, in those programs or on those exchanges it's a single market. The risk bearer is one primary health carrier. That may evolve to multiple carriers where clients have choice, that's currently not the case. So there are things that are still evolving. And as those evolve, that choice will not only be good for the client, but I think it will also be good for us relative to being compensated.

And from Powell's standpoint, obviously, the carriers are going to continue to pay us on primarily on a per person, per month basis. The exchange -- as we put people onto the exchange, our exchange is at least from liaison, and so we do have a per person, per month charge to put them on the exchange, which I look at as kind of a glorified enrollment front end. And so that additional cost is generally going to be passed through to the employer. And so that's why the exchange right now is more of a net neutral, as Powell said.

And we'll take our next question from Ryan Byrnes with Janney Capital Markets.

Just had a question on the, I guess, the Beecher shortfall. So just to make sure I'm thinking about it correctly, it was mainly new business that was acted as a kind of a headwind for the retail organic growth in the quarter? And I guess, as you talk about -- would that business be -- would the new business be more fourth quarter centric, as well, in the Beecher platform?

Well, remember, when they were short, there's 2 components which is, you have any lost business that they had and any new business that either occurred or didn't occur. New business is not quarter centric. It's quarter centric defined as what the prospect's effective dates are as opposed to when we want to write it or anything else like that. What I'm trying to say is this, when there is an acquisition, and in this particular case we were involved with their senior leadership team throughout the spring time in discussions, they were not able to be as focused on new business as they would be, otherwise, if they are just running the business on a standalone, non-sell mode. And so we already know of a large amount of new business that's been sold in Q4. And to that matter, a large amount that's been sold in Q1 already. So like I said, we are very pleased with the teammates that have joined us from Beecher Carlson. And we believe it will all work out in the end.

Yes. And Ryan, just to clarify, none of the commissions and fees of Beecher Carlson affect the internal growth rate at all, because 100% of all Beecher Carlson's revenues for the first 12 months that they're with us, whether it's renewed accounts or new business, we put into the acquisitions category. And I grant you that our methodology of internal growth is a conservative approach on that, so it's completely excluded. So I just want to make sure you realize that.

Sure. And then just quickly, I guess, you also mentioned that Beecher didn't have any kind of the benefits options or capabilities previously, I guess, do they have that now? And then secondly, would there be any additional cost in terms of bringing that platform to Beecher? And I guess, also separately, in terms of -- do you guys have, I guess, kind of the fully insured capabilities through your exchanges? And I guess, if not, would there be any -- would you look to do so and would there be any cost for that capabilities?

Okay. The first question first. Remember, when we acquired Beecher Carlson, there were 3 components: $10 million of programs, which went under our programs area; there were $27 million of middle market retail business, in that, there were some benefits; and then the $70 million of large account business, of which there was no revenue. So having -- no revenue with employee benefits. Having said that, remember Brown & Brown last year, 2012, we did $225 million of employee benefits revenue. And we write employee benefits all over the country of all sizes and shapes. And so we have offices that specialize in large benefits and they have teamed up, or are teaming up, with Beecher Carlson to try to cross-sell certain opportunities and vice versa, where we have large benefit accounts in some of those offices where we don't write the P&C for some reason. And so there is a cross-sell opportunity on both sides of the table. So it's not as though we have to build out a platform, I don't want to give you that component. We already have the capabilities to write large account benefits plans all across the country right now. Does that mean we wouldn't be interested, potentially, in acquiring additional businesses in the future? We would be interested. We might hire a bunch of more people and add them into our existing operations, all of that. But we have the capability right now, and we're doing it. That's number one. As it relates to your second part of the question, as it relates to the fully insured products, yes, there are fully insured options available on the exchanges. Remember, my comments on the ASO products are really brand new, that's a self funded. So think of exchanges as typically fully insured products and you kind of define what type of plan you want. And for sake of this discussion, as I said earlier, I use the Cadillac, the Chevy or the Hugo. That's how I would look at it, Ryan.

And we'll take our next question from Sarah DeWitt with Barclays.

The 7% organic growth in the quarter is very strong result, but it's a bit faster than your historical average about 4 to 6, even though the economy is still relatively weak. If you could just talk generally what's driving that and should we think about that as sustainable going forward?

And the answer is this, as you know, we had a really good quarter in programs and an exceptional quarter in wholesale, and so that's very positive. And that growth in programs is a function of organic. We're writing more accounts that you know. And we also picked up the program last year with the automobile aftermarket program, which was announced on 10/01. And then the wheels program that was on 05/01 of this year. And so both of those scenarios, and the programs and the wholesale, are going very well. As it relates to our retail business, we are up slightly 2.5% versus 2.3%. And obviously, we like to grow that a little more quickly and we're continuing to work on that. But what I would say is we don't give organic growth guidance, we haven't. And your observation, we're very pleased with the 7.3% growth. We're very pleased with the entire year's growth actually for that matter. Some people and you're -- in the investment community, did not or do not give us credit for the earnings associated with Colonial Claims because of it -- it's associated around events. So everybody views all of that differently. What we're trying to do is to grow each individual division as quickly as possible and continue to have a good margin or grow that margin going forward. We are excited about investing in all 4 of our divisions. We think we've made some great investment over the last 20 months, highlighted by the 2 largest being Arrowhead and Beecher Carlson, which continues to give us more capabilities. And fortunately, as Cory said, our balance sheet is in a position such that we can continue to borrow and invest in our business over a very long period of time and take advantage or participate in any, pretty much, any acquisition that is available out there. And so we're excited about it, but we don't give organic growth guidance. And as I said, we want to grow as quickly as we can and as profitably as we can.

And Sarah, just to add to that just -- one of the biggest changes that you'll see in the fourth quarter, which we put in the queue the last 2 quarters is that, remember, as Powell was talking about Colonial Claims, in the fourth quarter of 2012, they had $7.4 million of revenue, which was primarily because of Superstorm Sandy. And course, all the claims on that have already kind of run through. And so their budget right now for the fourth quarter is going to be back to kind of normal at the $1.5 million to $2 million range. So you'll have to discount next quarter by almost $5.7 million of negative "internal growth" because of Colonial Claims. So I just want to highlight that for everybody.

Right. Okay. Great. And then you had mentioned that you pursued this large acquisition that you didn't win. You've done a couple of big acquisitions recently, can you just talk about the strategy there? It seems like your targeting more larger deals and how much capacity do you have for future acquisitions?

Okay. Sarah, there is not a change in strategy. So the strategy is the same as it's always been. We focus on high quality people that run good businesses that have a cultural fit. So people say, "Well, what's the cultural fit, as an example?" And there are 3 or 4 things that jump right out, which is how do people treat their teammates? How do people treat their clients? How do people treat their carrier partners? And how do they think about growing their businesses and investing in their businesses? All of those are kind of basic 1-2-3-type things we think about. And so the fact that we have done 2 larger acquisitions is good, we believe. And obviously, we're very pleased with the results of Arrowhead, and we think we'll be equally as pleased with the Beecher Carlson results. I would tell you that our capacity to do deals is very good in terms of our balance sheet and the willingness of our financial partners to support us in doing acquisitions of all sizes. We have always done on average accounts or acquisitions that are $4 million to $6 million in revenue, and we will continue to do those. We have done some of those that are larger. Over the last 10 years, 6 of the last 10 years, we've done over $100 million of annualized acquisitions that's based upon what became available at the time. And as you know, there are not that many. If you look at the top 100 brokers out there, how many of those will sell? Well, many of them will sell over time, but some of them -- they are fine firms, but maybe they just don't fit culturally. And so there's a limited pot of larger firms and when they become available, we want to be at the table and believe that, with our financial partners, that we can do the ones that we want to do. So as Cory alluded to and we've talked about it and as I said, we are under an NDA, so we can't talk about it at length, but we look at acquisitions of all sizes. And fortunately, we think the idea of having a conservative balance sheet allows us a certain amount of latitude to consider opportunities that others might not be able to consider if they had a little different balance sheet.

Okay. Can you give us any color on how large of a deal you would do and would you ever use stock for a deal?

The answer is, we would consider every deal on its merits. So I don't think that there -- I wouldn't say an upper bound, we don't think about it that way. And we don't like the term, never or always, I think you've heard me say that. And so we haven't used stock in an acquisition since 2001, when purchase accounting changed, it was pooling of assets went away. But I don't want to say we would never do it again. We believe that it's hard to argue with greenbacks, fundamentally. And we think that debt is always cheaper than equity, but we would look at the right opportunity and we would have to make certain decisions. So I don't want to say it's x dollar amount. I know you want to say -- you want to get me in the corner and say, this is it. We're not really -- we're not there, Sarah. I mean, we look at acquisitions that we believe that are -- will help us grow our business and our capabilities over a long period of time. And as Cory and I have said over and over for a long period of time, we pride ourselves in having a very conservative balance sheet. And with that conservative balance sheet, it gives us the opportunity to invest. And when a large opportunity comes along, we have the ability to do that.

And we'll take our next question from Brett Huff with Stephens, Inc.

This is John Campbell for Brett Huff. Just 2 quick questions. First, just on rate. I mean it does sound like that's continuing to kind of moderate a bit. But still I would say, I guess, in positive territory, in aggregate, but some of your peers have said in the recent past that rate was worth about 1% or so of kind of like mid-single-digit organic growth. Can you guys just give us any kind of color as far as how much you think rate might have impacted that 7% cliff this quarter?

John, sorry, we can't. And it's not because we don't want to, but the answer is we're not -- I know what you're alluding to and there are other firms that say, "This is how much rate equates to. And if you grow this much organically, you get this much expansion." We make it real simple in the sense that in our businesses, when we grew organically, we believe that we have the opportunity for margin expansion. And as it relates to rate, rate, it comes with the territory. Whether it's up, down or sideways, we grow our business when the rating environment is down slightly, but exposures are up. It happens to help that the rates are up. But in our business, we've always said, particularly even through the slowdown in the economy, that we believe that the impact when it was negative, that 2/3 to 3/4 of the impact was rate -- I mean, it was exposure based, not rate. That was in the depths of the 2009, 2010 period of time where we couldn't write enough new business to fill in the hole because we had clients going broke and we had clients shrinking by 20% and 30% and 40%. And so we can't give it to you because we don't know. And we don't track it. We're just interested in growing our business organically and profitably, as you know.

Got you. That's fair enough. And then just a second question here, I know it's probably too early to give any exacts, but any initial follow-ups on how contingents will fare next year? I mean with 3Q results coming in pretty strong and you guys having just increased your expectations for 4Q, relative to what you guys said last quarter, I mean is that more product of just no major events or just a faster shift from supplementals to contingents? Just trying to get a better sense about...

Think about it this way, John, think about it as event driven. And you, you the collective you on this call or the investment community, would only see large events. So when you have a hurricane or an earthquake and it's on the national or international news, you are more readily aware of it. If there was a very significant car accident on I-75 North going to Atlanta, Georgia and South Georgia, and there were 5 insurers of ours involved and there were significant injuries, you might read about it if you were in the local area or in the Southeast. But that in and of itself, that one event could impact 3 or 4 or 5 offices experienced with several carriers, depending on who was on those lines of coverage. So it is too early to tell. As it relates to event driven exposures or experience this year, it has obviously been better than it has been in years past. But there could still be something that occurs between now and the end of the year, meaning, I don't think the wind is going to blow, but the ground could shake significantly out west. We don't speculate much about that and you can't see that one coming, it just happens. So I'm not -- we're not too much help for you on that one, John, sorry.

No problem. And then, I mean, is it fair to say that you guys are continuing to see just a general shift from supplementals to contingents?

That's correct. But that's not our decision, it's the carriers' decision. But yes, there's kind of a slow morphing back to some type of profit sharing contingency payments and those that went to GSCs, yes.

And we'll take our next question from Al Copersino with Columbia Management.

I had one just numbers question and then a little bit bigger picture question. The investment income was done quite a bit, was that simply due to the cash payment made to purchase Beecher Carlson or was there something else going on there?

No, that's primarily it.

Got it.

Because the rate -- we don't take much rate and so it's just really the cash invested. And we did pay $300 million of our own cash for Beecher in July.

Great. The other question I had, and I know Powell mentioned just broadly speaking, if Brown & Brown grows retail organically or margins are going to expand full stop. I had a question which is that -- and some of the disclosures in the past, it seems like the margins for the other segments, programs, services, brokerage are those margins are as high, in some cases higher than the retail margin? And I wonder if we continue with this slow, steady improvement in the growth acceleration in the retail segment, but we continue with these, particularly nice growth rates in the other segments, if that might have upward bias on the margin going forward?

Well, it's interesting you say that, Al. If you remember, you have certain businesses that have joined specifically the program 10/01 of last year that we said came on at a lower margin than our desired margin and programs, initially. And that, over time, that capacity with the teammates to write more business will drive that business up to margins more consistent with our current levels and beyond. And so I think that there are opportunities on both sides. Remember, the magnitude of retail now on a all-in basis is a $750 million business. And so when we did the Beecher, when we announced the Beecher acquisition, if we looked on the trailing 12-months basis, that would have put 57% of the trailing '12 revenue in retail, up from 53% of retail. And we've always said that we thought our business would be somewhere between 60% and 70% retail, because if there was a large acquisition, we think it'd be retail-driven. Having said that, all of a sudden, along comes Arrowhead, and that's not retail and has performed really well. And we've said, and I continue to say, if there were 2 more Arrowheads out there, which there are not, we'd buy both of them. And then all of a sudden, if we bought both of them, we'd be down at, actually, under 50% of retail for the time being. So we look at the leadership teams, the depth and the quality of the people, the relationships that they have with their carrier partners, how they treat their client base. And we think all 4 of our divisions are good opportunities to invest in and grow organically and good margins.

And we'll take our next question from Adam Klauber with William Blair. Adam Klauber - William Blair & Company L.L.C., Research Division: How would you gauge the mood of the carrier executives at this year's Broadmoor compared to last year?

Well, what Adam is talking about, as many of you know, was the first week in October is the Council of Insurance Agents & Brokers at the Broadmoor. I would tell you that the feeling at the Broadmoor from the carrier executives was good. And part of that is they are pleased with our performance and growth with them. And I think that they're enjoying certain levels or similar successes with other distribution partners. I think that carefully, that many of them will acknowledge that -- or privately, I should say, they would acknowledge that they do believe that rates will continue to be under pressure, some think more so than others. But there's lots of opportunity and the people, the senior leaders view that, and that's very good opportunity for them. And being involved with an organization like ours, as an example, creates additional opportunity for them. So I'd say it's overall positive. I didn't hear any real negatives. The only negative, really, would be around comp. Comp continues to be, workers' compensation, and the news with some of these carriers that were experiencing financial difficulties that came out, and depending on your perspective which market you are, you may see that as an opportunity or it may be a nonstarter and no effect. It's either a neutral or an opportunity for them. Adam Klauber - William Blair & Company L.L.C., Research Division: One follow-up question. Clearly, there's more capacity coming into the property cat markets. And that's both an opportunity and also, I imagine a risk for you, it gives you more capability to grow, but prices could be lower. Could you give us an idea in each of the major segments, retail, program and wholesale, how much of that business roughly is property cat oriented?

Yes, sure and this is I guess, Adam, because I don't have -- we don't have that broken right out here at our fingertips. In retail, I would tell you that cat property is probably -- Cory, I was going to say just under 5%?

Probably.

Let's say just under 5%. In wholesale, cat property -- now, remember, in our wholesale business last year we did $183 million of revenue. Half of that is binding authority business, over half of that, and just under half of that is transactional brokerage. So of the transactional brokerage, I would say cat property relates to probably 65% of that business. So -- but it's -- so let's call it, 32% of the whole, maybe. Maybe something like that. And then on programs, cat property is probably -- I'm just adding it up here. I'm with you, I'm just thinking. I would say it's probably, let's call that 15% to 20%? And then in services, obviously, it's a different deal. Adam Klauber - William Blair & Company L.L.C., Research Division: Right, right. And then I mean within those areas, I'm guessing a little -- if you have more capacity, particularly in the program area, was that the area that would give you more leverage to grow?

Well, it depends, yes. But when you say that, sometimes, if you have more capacity, there may not be a way to deploy that capacity at the rates online that the carriers want. So it is a balance from that standpoint. Because, remember, we are, in those instances, underwriting many times on behalf of a carrier. We're not assuming the risk, they're assuming the risk, but we're underwriting it for them. So they give us guidelines to which, these are the accounts that they want and this is kind of the range in prices that they want us to charge for them. So it -- I view it typically as pretty much all positive, but I just put an asterisk by it, Adam, so you know that, yes, periodically, you can have capacity like, I make this up, an earthquake. And if the rates in the area in California are not appropriate for the carrier, they may allocate the capacity to you, but you can't write the new capacity because you're not getting the rates they want for it.

And we'll take our next question from Meyer Shields with KBW. Meyer Shields - Keefe, Bruyette, & Woods, Inc., Research Division: Two quick questions on the acquisition front. One, according to a lot of the insurance press, there are a few decent sized deals that are available in London. Is that an area that you're looking at, at all?

Meyer, what I would say is this, we have a small business in London, as you know, it's USD 9 million revenue. And we would look at any opportunities that fit culturally, that we believe are good people and good businesses. So we're careful. We don't try to limit ourselves geographically, although we've been careful beyond the United States at present. Meyer Shields - Keefe, Bruyette, & Woods, Inc., Research Division: Okay. And I guess the second question is just, does the absence of small ticket acquisitions in the third quarter, is there anything significant there or is that just part of the hit or miss nature of acquisition activity?

I'm sorry, could you repeat the first part of the question? I just want to make sure I got it. Meyer Shields - Keefe, Bruyette, & Woods, Inc., Research Division: Yes. Okay. I'm just sort of -- it struck me as usual that there were no small acquisitions in the quarter.

Yes. I would want you to think of it as just a function of when people sell and why people sell varies by individual transaction. And so we always have irons in the fire and we're always talking to people about potential acquisitions. But we didn't have anything, and like I said, I don't want to give you the impression that that's shocking or unusual because there could be quarters where we don't do acquisitions. Conversely, there are quarters where we do lots of acquisitions or a big one, or this, that and the other thing. So I think of it more as a function of acquisitions are lumpy and we didn't have any in Q3 as opposed to, "Oh, oh, there's a problem." There's not, it's good.

And we'll take our next question from Elyse Greenspan with Wells Fargo.

Just a couple of quick questions. I was wondering if we could spend a little time just on the retail organic growth. I know your expectation has been to see an improvement for every quarter this year, which we have seen. I guess, going forward, do you kind of still expect that to be the case, I guess, looking out to the Q4? And then if you can kind of just give initial expectations based on kind of where the economy is now heading out into maybe 2014?

And I would say, number one, yes, you're right on retail, we've been pleased it's gone from 80 bps in Q1 to 2.3% organic growth to 2.5% organic growth. I think there are a couple of things that sit out there that present question marks. Number one, any business that we do that has a government contract, it can be impacted because of the shutdown. Now are they going to get that resolved? I think, yes. And hopefully, sooner than later. But the proposals are going to be to kick the can down the street a little bit. And so there's potentially a couple blips along the way. Nobody knows what that really means, that's me speculating, number one. Number two, I would tell you that, as I said in my prepared comments, that the economy is okay, it's kind of bumping along. And what we read about in The Wall Street Journal or in The Times or in any other national or international paper is we hear about big companies doing well. And I think there is a break between big companies and their view on the economy and their view on investing in large capital investments and the middle market. And so as I've said before, the middle market, if you're going to have to buy a $3 million system, whatever that is for your business, and you're a smaller business, you're not as keen to go and borrow $3 million to buy that new piece of equipment as opposed to just try to maintain the equipment and buy the new one as the economy gets better. So I'm sorry I'm being a little vague, not my intent, but we don't have good clarity into what the economy is going to do and thus, how our business will perform in the near to intermediate term, other than the fact that we think the economy is flattish. We think that it's ticking upward. We hope that Washington gets this all cleaned up sooner than later. Because the known is always better than the unknown. And if something happens that people don't like from an economic standpoint, they can operate and figure out a way to deal with it the best way they can. So we are endeavoring to continue to grow our business and grow it profitably in all lines and specifically, in retail, but -- and that's the goal.

Okay. And then also there were just no one-time items that you would highlight within the organic growth this quarter, right, to take out for future comparison purposes in any of the segments?

No. No.

Okay. And then one last number question, just going back to the acquisitions quickly. So I guess since we're about halfway into the fourth quarter, just assuming that you guys do not announce future deals from here, just to kind of get an idea of how much acquired revenue you could see come through that line for maybe the next few quarters, is there any way you could provide us those numbers?

No. We don't know the answer to the question. What I would tell you is, over the last 10 years, we have -- 6 of the last 10 years, we've done $100 million or more in acquisitions. It ranges up over $150 million, and then the lowest was in 2009, we did $27 million. So Elyse, it's really based upon availability and the quality and the cultural fit of the acquisition opportunities. But the last, last -- this year, we've acquired roughly $115 million of revenue so -- and then we had some other acquisition in the last year or so. You're talking $35 million to $38 million flowing through as acquired revenues this quarter. And probably fourth quarter, too. If that's what you were asking.

Yes. That's what I was asking, more of what we would see from deals that you already have.

Yes. This quarter, we had $34.8 million. So from a relative standpoint, since Beecher is a more recent acquisition, probably be a little bit more than that since there'll be getting much more in playing. So it'll be a little bit more than that fourth quarter estimate.

[Operator Instructions] And it looks like we have no further questions at this time.

Okay. Mary, thank you very much, everyone, and we look forward to talking to you next time. And have a wonderful day. Bye-bye.

And that does conclude today's conference. Thank you for your participation.