Good morning and welcome to the Brown & Brown, Inc. 2016 Third Quarter Earnings Call. Today's call is being recorded. Please note that certain information discussed during the call, including information contained in the slide presentation posted in connection with this call, and including answers given in response to your questions may relate to future results and events, or otherwise be forward-looking in nature. Such statements reflect our current views with respect to future events, including those related to the company's anticipated financial results for the third quarter of 2016 and 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 statement made as a result of a number of factors. Such factors including the company's determination as it finalizes its financial results for the third quarter of 2016 that its financial results differ from the 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 the 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, as well as additional information regarding forward-looking statements is contained in the slide presentation posted in connection with this call and in the company's filings with the Securities and Exchange Commission. We disclaim any intention and obligation to update or revise any forward-looking statements whether as a result of new information, future events, or otherwise. And with this said, I will now turn the conference over to Mr. Powell Brown, President and Chief Executive Officer. Please go ahead.

Thank you, Ron, and good morning everyone and thanks for joining us for our third quarter 2016 earnings call. For the quarter, we delivered $462.3 million of revenue, growing 7% in total and 4.3% organically. Once again we realized organic growth in each of our four divisions with improvement seen in most of the divisions compared to the first half of the year. We'll discuss the drivers of this improvement in detail later in the presentation. For the quarter, we experienced a slight decrease in our EBITDAC margin compared to the prior year, which was primarily driven by lower contingents and GSCs, along with our continued investment in technology. Our earnings per share for the quarter increased 6.4% over the third quarter of 2015 to $0.50 a share. Excluding the change in estimated acquisition earn-out payables, earnings per share increased 10.6% to $0.52 on an adjusted basis. Andy will provide more detail about our financial performance in a few moments. Overall, we're very pleased with the top and bottom-line results for the quarter and the incremental improvement that was seen over the last few quarters. We like to thank all of our teammates for their contributions to these positive results. During the quarter, we saw modest growth I exposure units as a result of continued improvement in the economy and even though this trend was not seen across all geographies or industries. Catastrophic property rates for the quarter were down 5% to 20%. We think coastal property rates will not change in a material way as a result of Hurricane Matthew. Buyers of insurance will look very closely at hurricane deductibles, flood coverage and excess flood coverage in the future. We're also seeing non-admitted carriers offering admitted paper options in certain coastal areas. In the admitted market, rates are generally…

Great. Thank you, Powell. Good morning everybody. I'm over on slide six, which presents our GAAP reported results. For the third quarter, we delivered 7% revenue growth and an organic growth rate of 4.3%. Our pretax income grew by 3.5%. As a percentage of revenues, our pretax income decreased by 80 basis points, primarily due to a change in estimated acquisition earn-outs. I'll talk more about this in a few minutes. From an EBITDAC performance perspective, which we define as income before interest, income taxes, depreciation, and amortization, and the change in acquisition earn-outs, our EBITDAC margin decreased 90 basis points to 34% when compared to the prior year. Our EBITDAC margin was impacted by lower contingent commissions and GSCs recognized this quarter versus the prior year, which had about 40 basis point impact. Also during the quarter, we realized about 30 basis point impact associated with our technology investment programs. As a result, we're projecting the impact of our technology investments for the fourth quarter to be in the range of 30 to 40 basis points. We estimate the impact for 2017 to be in the range of 35 to 50 basis points. Our net income improved by 5.8% as compared to the prior year and is slightly higher than pretax growth due to a modest decrease in our effective tax rate to 38.8% this quarter versus 40.2% last year. The decrease to our effective the tax rate is primarily being driven by several permanent tax differences and the apportionment of taxable income to the state in which we operate. As of now, we see 39.2% to 39.4% as a good estimate for the full year effective tax rate Our earnings per share for the quarter increased over the prior year by 6.4%. This increase is slightly less than…

Thank you, Andy, and great report. I'd like to take a couple of minutes to discuss Hurricane Matthew and its effects on Florida and specifically our area here in Volusia County. First and foremost, none of our team mates at Brown & Brown or their family were injured. Those are in offices from West Palm Beach, Florida, all the way up into the Carolinas, number one. Two, there's lots of home owner's claims and some of those will not meet their deductibles, i.e. a hurricane deducible, might be higher than a flat deductible and it's usually percentage of the coverage A. Here in Volusia County, we had 90-an hour winds and the eye of the storm passed 30 miles east of us. And with that little wiggle of whatever you want to call it to the right, it made a big difference in potential damages here in the Daytona Beach area. What you would see if you were here, we have lots of dock damage, pooling closures, roofs, particularly roofs on condominiums and there has been lots of water damage, particularly north of us. That's Flagler Beach, St. Augustine, Jacksonville, up into Georgia, South Carolina and North Carolina. I drove last night up in the Flagler and there are two areas of A1A which are closed due to the erosion, the ocean washed under A1A and took out parts of the road and many of you may have seen on that television. 1947 was the last time something like this occurred here in Volusia County and I get that information from a source that was here that was my father. He was 10 year's old at the time. The bottom-line on the storm is it is the worst in the history of Volusia County, but not nearly bad as it could have been if the eye had come on onshore. In addition, in areas north of here, as I referenced the damage was much worse and our thoughts and prayers go out to those affected citizens in those affected areas. On a lighter note, and in closing, we're pleased with the quarter. And the outlook for the near to intermediate term is good. We believe Hurricane Matthew will have limited impact on rates, if any. There will be more discussions around flood and wind deductibles, rate for cat property continued downward affecting retail, wholesale, and national programs, and that will continue into Q4 and into 2017. We continue to look for acquisitions and the state of the market is similar to last quarter what we would call fully priced. With that, Ron, I'll turn it back over to you to open it up for question.

Good morning and thank you. Glad to hear everything is okay with you guys. So, I just follow-on on the Hurricane Matthew, you said will not impact pricing going forward, but we do see like your estimates of pricing impact has been sort like slowing down a bit, because a couple of quarters ago was down 15% to 25% like last quarter like down 10% to 25% now is 5% to 20%. I just wonder after multi years of significant decline, even without the storm like this, is that is the pricing reaching of a floor? And I just wonder how will that impact or less tailwinds -- lesser headwind for you guys going forward?

Yes, Kai, good morning and I think that's a good pick-up on your part. Number one, I would tell you that that moderate reduction in downward pricing was occurring obviously pre-storm, because it was Q3 and the storm was on 7th of October. That's number one. Number two, it's difficult to have four and five years of downward pressure going down 15% to 25% every quarter. So, I would tell you I don't think that it is something that I would -- I still -- I would not react overly to that pick-up on your part yet. And the reason I say that is because there is still a lot of interest in the coastal property marketplace and there's lots of capital out there wanting get in or be put into play. And so I still think there's going to be plenty of downward pressure on rates. Don't have to like it, but I'm just saying thing I think that it's going to continue. Will it moderate a little bit? Yes, it may, but it's still going to be downward pressure.

Just on that, can you quantify like the 15% to 25% pricing, how much that is a drag on your organic growth in the past?

Well, we haven't said what that relates to in aggregate, meaning this coastal property rate decreases relates to this amount. What we have said and were consistent by saying is rate overall impact our business and organic growth somewhere between one-quarter and one-third and the remainder of the impact is exposure unit driven.

Okay, that's good. And then switching to -- on the margin side, it looks like the margin is mainly dragged by low contingents and also the technology investment in the quarter, because in normal situation if you have like 4% organic growth, we would expect some margin expansion. I just wonder how those sort of lower contingent or technology investments in the near-term would sort of muted that potential margin expansion?

In the contingents and specifically wholesale, we were down $3.6 million. So, that in and of itself is -- like I said, there's that profitable to our bottom-line. And then I'll let Andy talk about the technology investments, but I think that your assessment is correct. All things considered, but once again, contingents are variable based upon the performance of business and our business didn’t perform as well for the insurance company, so therefore, we paid slightly lower right.

Yes, Kai, we didn’t get into kind of all of the individual moving parts inside of there, but you also probably want to keep in mind while we called out the contingents and technology, but we've also got impact of flood, we got Morstan, we got a bunch of moving parts back and forth, but underlying business did really well on margins for the quarter. So, that's -- we're pleased with where we turned out.

Okay. How many more quarters like those could drag on in terms of you mentioned these new acquisitions as well as the recent hiring to deal with the higher volume in the wholesales?

Yes, so what we said in our comments is we think it's going to at least be for the next few quarters. Not sure on the transactions, that really that depends upon what happens with continued new business flow as well as pricing. That one we'll have to just monitor as we go forward. And then as we commented back at second quarter after we completed the acquisition of Morstan in Q1, -- excuse me, in the second quarter, we said that we would over time that margin up. That will probably take a number of quarters if not maybe a few years to get there, so that will be a drag. But the business itself is performing really well top and bottom-line, so we're pleased with it.

Thank you very much for all of the answers.

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

Yes. First on the tech spend, so it seems like this year most of the quarters the investment and the hit to margins has been coming lower than how you set out at the start of the year. Just any changes on the spending that you are seeing or it is just the impact that flowing through into your margins? And then could you -- is the 35 to 50 basis point impact for 2017 unchanged?

Correct. So, let me go back just to make sure we reset on everything. So, when we started the year, we said about 40 to 50 basis points was our estimate. Then we updated kind of midyear and said 30 to 40, and then for the -- so this quarter, we're about 30 basis points, fourth quarter, we think we'll be around 30 to 40 -- probably one of the lower end of the range. The underlying programs themselves are, in fact, picking up momentum. We went live with our new financial management reporting system in the third quarter and then full live with all of the offices in the fourth quarter. So, again, that's kind of kicking up the expenses on. And as it relates to 2017, the 35 to 50 would be off of 2016 and okay Elyse?

Okay.

So, our original estimate of 35 to 60 versus our starting point in 2015 does not change, we're still holding on that.

Okay, great. And then in terms of just some of the margin commentary putting it all together, so if we exclude the tech spend from the Q3, your margins would have contracted by about 60 basis points. So, if you assume in the fourth quarter that the tech spend comes in at that low-end, so another 30 basis points let's say, would you expect putting everything together that your margins would contract by most likely the same level that we saw in the third quarter, about 60 basis points ex the tech spend?

We don't know the answer to that because of the contingents, right. That will be the wildcard. We're expecting that contingents will be down in the fourth quarter based upon at least the indications that we're getting from some of the carriers. And as I think we've mentioned a couple times, there at least signaling that they think they can be down materially, we don't know exactly what material means, so that that will be ultimately kind of the driver of the margin in the fourth quarter depending on how much they move.

Okay. And then I guess another potential would be how much business you would get from the NFP following on Matthew that could benefit Q4?

Correct.

Okay. And then in terms of I know you, Powell, pointed to the market being fully priced in terms of acquisitions. We have seen you guys share repurchase activity pretty light for the past few quarters. I know you guys have historically used ASRs in terms of share repurchase. But any views in terms of getting back into the market to buyback more of your stock considering if there is kind of no change in pricing outlook on the deal front and we continue to see light acquisition activity?

Well, the answer is similar, at least, to how it's commented in the past. We talked to our Board pretty much every Board meeting about how we view stock price and should we consider buying stock or not. We look at that as an investment options. But I think the underlying question that you're asking is if, in fact, you don't do as many acquisitions in the near-term, are you going to go buy stock back at the option? And the answer is not necessarily. So, my answer to the group is we don't have a problem and if somebody is going to be critical, they can be critical of me, which is fine, for stockpiling cash on the balance sheet. That is not the intent, but I'm saying if we have to do that we will do that, so we can invest it at the right time, on the right businesses to grow our business going forward. So, I know you want to be able to figure out, yes, we're not going buyback X amount and we're not going to do that Elyse. I know that's frustrating for you, but it's -- we're going to evaluate it and when we think the stock price makes sense to buyback, we'll buy some of it back.

Okay. Thank you very much.

Thank you, Elyse.

Thank you.

And our next question comes from Quentin McMillan from KBW.

Good morning, Powell, Andy. Thanks very much. Just touching back on the margins one more time, the 35 to 50 basis points in 2017 seems obviously like its little bit better from the 35 to 60 that you had had previously. I know that you guys have said that longer term you are expecting to return to that 33% to 35% long-term margin and you don't want to give a timeframe. But my question is just the longer term in 2018, are you -- is the expectation that the IT spend will be done in 2017? And that we should see some sort of a margin inflection just from the IT spending rolling off in 2018? So, margins should get better even if they don't get to that 33% to 35% level? Is that the expectation now?

Good morning Quentin. Let me see if I can clarify the first piece on it. So, you said 35% to 50%, hey that's better than your original range. What I said earlier was 35% to 50% was off of the 2016 margins. We're holding with our original range 35% to 60% versus our starting point in 2015 -- off of 2015, okay. So, the range is still right in there. When we said this would be a two to three-year program, so no, it would be not be completed in 2017, it will definitely go into 2018. And as we talked about during our yearend results last year is we said when we get to the backend of the program that we'll be able to recover any diminution in our margins whatever that is inside of that 35% to 60% and then we'll get a slight uptick on the backend.

Okay, great. Thank you for the clarification there. And then secondly, on Wright Flood, we talked about Matthew, but could you talk about any impact that you might have seen in claims handling activity or just otherwise from the Louisiana floods in the third quarter? And then secondly, with Wright Flood, I think there's a little bit of confusion still within the market. Obviously, you guys sold Colonial Claims, but how much benefit that you guys get in particular from claims handling from Wright Flood as opposed to the uptake from the National Flood Insurance Program and kind of how that business flows through would be really helpful.

Okay. In our comments, mentioned that we picked up about $4 million of claims processing revenue year-over-year within Wright Flood. The majority of that was associated with the storms down in Louisiana, not exclusively, but majority was from there. What we can tell you is it was less than 6,000 claims that we got in Louisiana for reference point when we went through Hurricane Sandy back in 2012. That was over 20,000, so again, we just trying to give you guys an idea of the volume of what's out there. A lot of this is covered in the press, but that doesn't always mean one that how it's being covered represents who has policies. And I think that was indicative when we had the storms last year up in the Carolinas. So, we always try to manage our way through on the message in and that's what really Powell was saying earlier as relation to the fourth quarter. It really depends upon who has coverage and exactly what claims are going to be.

And Quentin I want to add one thing. Remember we haven’t seen or given any guidance and we won't relative to potential uptake if you want to call that. So, remember the thing that's challenged and I believe this is the case in some areas in the Carolinas; there is damage in areas that are not flood zones. And so those people may or may not own flood coverage. The vast majority probably don't. So, when you hear losses or projected loss on a national news station, those maybe losses, but they may not be insured losses.

Okay, great. Sorry, just to follow-up quickly on that, the 6,000 claims from Louisiana floods, Hurricane Sandy 20,000 claims. Just to put some perspective on it for the organic growth, in national programs you did a seven this quarter. What would that have been without that increase in claims activity or how much of that was attributable to the 4 million in Louisiana claims?

It's not. Yes, well, I mean you can do the quick estimate on the top-end the 4 million, you can do that calculation. It would represent probably about 40% of the gross -- so the actual underlying business did -- still did well.

Perfect. Thank you, guys.

[Operator Instructions] We'll take our next question from Josh Shanker from Deutsche Bank.

Good morning, everyone.

Good morning.

So, I just want to follow-up a little bit on Elyse's question about buybacks versus we're not afraid to hold cash on the balance sheet. Can you give us an idea of what is the value of holding cash on the balance sheet? And how uncomfortable are you trusting the market that if you really found a great deal out there and you didn't have the cash that the market would not let the financing be available for you to do it?

Okay. Well, let me take the second part first. We -- number one; have worked as you know really hard to build a balance sheet that we're very proud of. And we believe that that balance sheet allows the optimal flexibility and optionality in making investments in businesses. So, in our opinion, we think we could do whatever acquisition it is that we want to do with the balance sheet that we currently have. That's the first thing. The second thing is I don't want you to think, Josh that that is our desire to have cash build-up on the balance sheet and what I'm saying is we look at all of our investment options as we've talked about that hiring new teammates that's acquiring businesses or returning it to shareholders of which we do through share repurchases periodically or dividend increases. And we have just increased our dividend for the 23rd year in a row, Andy. And so I -- when I say that I'm not trying to make you nervous per se, but I do want everybody to understand that we don't have a feeling that we have to go -- the money that is our balance sheet is burning a hole in our pocket and we need to go out and do something that on a short-term basis that would not be best long-term. That's the way we look at it.

And I'd probably add to that Josh is when we put together our new series A and the credit or the accordion underneath of there that gave us access to a $100 million and our goal when we put that together was to give capital to our organization that we can access when and if we needed at the right time. So, combination the cash that we generate each year was on our balance sheet and that revolver that's out there, we've got a lot of flexibility at this the stage when and if it ever comes to us as an opportunity. Everything that we see in the market right now and all trends, don't give any indication that there's going to be any lockdown on availability of capital to a company with our balance sheet capabilities, but you never know. So, -- but we think we got plenty of flexibility.

I think that's right and so I know it's my job to determine whether your stock is cheap or not, but when you say that we don't think our stock is attractive for returning capital to shareholders right now, attractive versus the alternative of maintaining flexibility -- I mean I'm trying to figure out what the other side of the balance is that how deeply you are weighing that?

So, let me -- the way we look at it is we evaluate what we think the intrinsic value of the stock is. We then talk to the Board and we figure out if we think it’s the right investment at the time. That's -- I mean I'm not trying to oversimplify it, but that's how we do it. And so you're going make your own determinations based on statements you just made about us buying stock or not buying stock or wanting to buy it or not buy it in the future. We're not going to comment on that. What we're basically saying is that's how we analyze that as an option. And we talked to our Board on a quarterly basis about it.

Understood. And then on wholesale, obviously so there is a little drag maybe two quarters going out on less contingents, less GSCs that's going to hurt margins on the wholesale. Has something structural changed in your wholesale business that the commissions you're earning on that business are less capable of being supplemented by contingents and GSCs?

No. But here's the way I think it's important to -- I want to give you a visual which is a non-insurance visual. If you worked at a burger joint, and you're cooking burgers on a grill and you're flipping burgers envision in order to get back to flat, meaning the same revenue that you had last night, tonight, you got to put an extra 15 burgers on the grill and cook them. So, you're flipping more burgers for the same amount of revenue when the rates are going down, like they have in coastal property and that's seen both in brokerage and binding authority. So, fundamentally you could look at it several ways. You could say losses number one are random, but in a large subset of numbers, there are some predictability in numbers. The flipside of that is you could say as rates continue to go down, the traditional losses that occur in a large book will actually be a higher loss ratio because your premium volume comes down. And it could be a combination there of, but just think about it as you got to flip more burgers and when Andy talked about having more transactions, that's the burger concept. We're doing more transactions to stay flat and then to grow forward, you got to even more. So, that's not new. I don't want to give you the impression that like this is an epiphany and we're just coming to -- it happens in every market cycle like this. We understand that, but we just want you to know we're flipping a lot of burgers.

Yes, Josh, what we view is a really good thing. That tell us we got a lot of business coming into the organization. We can't control pricing, but we can control hopefully the amount of business that we get in and we retain.

So, would I think that contingents will be depressed until rates improve? Is that a takeaway?

I don't think I would certainly say that. You could come to that conclusion, but I would not actually encourage you to think that way. I think that there's a component, you got to remember when a building burns, a building burns. And then you have a storm, which is unpredictable and let's say you have lots of damage, million dollars roof claims, like we see in some of the places here and up the coast. That's unpredictable, but you're going to have a certain amount of property damage in a year where inevitably there's going to be a fire in somebody's apartment, complex. There's going to be a couple of things. And so, I don't know if I go that far but I think you could.

And with all comments we've been making Josh, about continued downed pressure on continents, we would expect that to happen. We don't know definitively because if you step back and say if rates have been down for a number of renewal cycles, then the overall returns for the risk-barrier have absolutely contracted. We continue to drive off of profitability and so as well as obviously loss experience inside of their. So, that's why we're seeing shrink down, cycle that we go through.

That makes sense and I realize I've asked a bunch of questions but we still have 20 minutes left. There might not be too many questioners. Can you just talk about deal pipeline versus prices in the markets and whether or not A, there's a lot of deals, but B, they are not attractive at these prices and what is the relationship between the two?

I think that when you talk about it, I think that there's a normal amount of deals that are occurring out there and in terms of pipeline because we're talking to people all the time. I do think that even the business broker themselves; the people trying to sell these agencies recognize that this pricing level is not in perpetuity. They acknowledge that is that at a high and is not sustainable over a long period of time. And so like I said we're looking for businesses that fit culturally, that make sense financially. And we haven't -- we've done $52 million of annualized acquisition revenue this year. Last year, as you know, we did about $56 million. And then the three years prior to that, it was north of 100. Each of those three years, we had one larger transaction in each of those years. And so we continue to look and talk with lots of people. And I have no doubt that there will be -- there will continue to be opportunities that come along. And as Andy said earlier, we have worked hard to put our balance sheet in a position where we want be able to have the option to look at those that come along, because we think that there will be a lot you know in the next several years and we're looking forward to it.

Well, thank you for giving me so much time on the phone and good luck.

Absolutely Josh. Thank you.

And our next question comes from Ken Billingsley from Compass Point. Please go ahead caller.

Yes, thanks for taking my question. Just want to follow-in on a couple of questions that have already been asked. One, just on the earn-out expectations and the impact this quarter and last quarter which were fairly similar, can you just kind of how that relates to your commentary regarding exposure to units, improvements, the pricing in the market outside of coastal being flat and the contingent pressures? Kind of how do those things relate to what you are seeing with changes regarding earn-out payables?

Yes, I think the way I would look at it is, think of it these are all different types of businesses and those businesses in their general market area are performing really well, that means they are renewing a lot of their existing clients, high retention factors and they are writing a lot of new business. So, although, you could have one of those things that you just described, i.e. rate pressure if they wrote coastal property, or you can have lower contingent, the core business, meaning the client first comment that we talk about, continues to expand. They are writing more clients and retaining their existing clients and as a result of that, they are doing better on their earn-outs. So, it's funny when you have a change in acquisition earn-out payable and it is -- we look at it as positive. It goes up that means the underlying business is doing better and as, from a GAAP standpoint, you cannot book -- and we wouldn’t, but you can't book the maximum because you don't know if they are going to hit the maximum. And so we have to book o to what we think is best estimate at the time and then if they do better, we adjust it up. We view that as a positive.

I agree and that gets to my next question when you talk about M&A and being competitive. I'm seeing that at least and I know two quarters doesn't make a trend, but does this allow for you guys a little bit more flexibility when you are looking at some M&A and trying to compete with others that are willing to open up the pocketbook a little bit more for these transactions because you are able to help them drive better margins, better revenues, better retentions?

Well, I think the answer to question is -- simply put, I know we say that fit culturally and makes them financially and the comment that you made we said in the second bucket. And there are things that sometime when people join us that we can do to help them enable them to get on their way to achieving whatever their earn-out is and hopefully, they get to their maximum. So, we want that and they want that. But I don't want to give the impression that there's something that so-called is exchanging in the last quarter or the last two quarters that would make us think differently about our acquisitions. We think the same way today as we did six and nine months ago. The most important thing is we're looking for good leaders that run good businesses and when you get the head and the heart of the leader, they deliver their team. That's what we've always talked about. If you one or the other -- if you get the head and not the heart or the heart and not the heart, then it still is not going to necessarily be a bad acquisition, but if you get neither, its not be a good acquisition.

Great. And then I want to move on to a different question on coastal property and I know this is only one piece of everything you're doing but in the past, competition has tended to generate higher broker commissions and incentives as they attempt to get market share. Is there anything different this time around? And I'm just looking at your commentary through your PowerPoint that discuss coastal property specifically, your commentary about contingents being down. Are people trying to be more competitive to grab market share with commissions or is that unchanged?

Yes, I would say that the commission environment is pretty much unchanged. What is unlike -- I mean not unlike the last couple of years, but what is unlike cycles in the past is remember you had a more traditional finite marketplace. So, let's just call that the non-admitted carriers for a moment. Now, you have sidecars and more alternative capital that's either coming into the marketplace for actually waiting on the sidelines, which is another alternative. So, you have additional alternatives in the marketplace, which continues to put rate pressure down on those properties. So, I think that the commissions are generally the same. I don't think that that's -- I wouldn’t say that's changed.

Okay. And last question I have is just on the technology and I believe you mentioned this before and I just wanted to clarify. The standalone technology in the fourth quarter, is that expected to ramp up to get to your margin expectations for the year or has it naturally the pathway natural for it to hit the targets?

No, just a natural pathway on it Ken. We again 30 basis points or so in the third quarter, we think we'll be somewhere in that 30 to 40 in the fourth quarter. That we will continue to build as we go forward into 2017, but nothing unusual on a trend.

And maybe I'm just recalling incorrectly but I thought the first part of this year the margins were much lower and so I just want to clarify it is 30 or 40 for the quarter, not 30 or 40 for the year?

We -- I said, we'll probably on the lower end of that for a full year. So, again our commentary is we didn’t have impacting Q1, we had about 25 bps impact in Q2, 30 in Q3. So, it is building.

Okay, great. Thank you very much.

Thank you.

Thank you.

[Operator Instructions] We'll take our next question from Adam Klauber from William Blair.

Thanks. Good morning.

Good morning.

Good morning.

Did I hear in the remarks on retail organic, did you say that the quarter organic was helped by business that was pulled from the quarter before?

No, we didn’t say it was pulled from the quarter before, is that we had a number of items that we didn’t recognized in previous quarters either deals that weren’t finalized or incentives that we hadn’t received back at that stage. So, we just catch all those up in the third quarter.

Okay, okay. That's what I thought. Then could you talk about the benefit business, how is that doing compared to the overall retail business? And in general, how is commission pressure on that small -- I know you don't have a huge book but in the 100 [Indiscernible] under book?

So, I would tell you, Adam that we're very pleased with our benefits book of business and how it's growing. I would tell you and we said that before we experience more organic growth in the over a hundred than under a hundred, but they are both growing, which is good. And I would tell you that we have seen in our book, in under a hundred there was a lot of change over the last couple of years where you had carriers going from a commission level to a per head per month or how they are looking at exchanges/other alternative and all these other things. What we're seeing now is sort of a leveling of commission dollars as it relates to those accounts. That does not mean that it's not under pressure on one-off accounts, that's not what I'm saying, but I'm saying generally speaking, I think that its kind of leveling out, and the under a hundred, as I said, both of them are growing and we're very pleased with our business.

Okay, thanks. Staying with the retail, I think you mentioned that exposures are doing okay. Would you say compared to six, nine months ago, are they doing moderately better particularly is the West Coast doing better than it has been?

So, are you talking about the West Coast geographically?

Yes.

So, what I would tell you is I have been -- I was in 23 offices last quarter, and a number of them were on the West Coast and I would tell you that from an economic standpoint, they seem to be doing better. So, I can't say six or nine months ago that I wasn’t in those offices six to nine months ago, but I would tell you that, moderately better overall and certain areas, you go into place like Miami and Orlando and cites like that, there's a lot of construction. You go into Vegas, you go into Orange County, you go into Seattle, Portland, things are doing better. So, once again I would tell you that I usually -- I ask our teammates I want to know about construction, the new construction and/or renovation work. We ask them about general exposure units in terms of sales and payrolls on their insured -- other insurance, not just contractors, things like that that kind of give you a general sense of what the economy is doing in that local market.

Okay. Thanks. And then as far as Florida Workers' Comp you mentioned that will probably add a little to the revenue line next year. There has been a number of headlines. Is it more headline activity or on the ground are you seeing a lot of lawsuits with those issues in Florida Workers' Comp?

No, what I would say is that a go-forward from our standpoint is a potential from a go-forward standpoint. Remember there was -- we -- the way the plaintiff's bar was involved before was mitigated by the current statue that its currently written and now it's changing back to where they can be more active going forward. So, remember this is prospective thing, Adam, as opposed to a current thing. That's how I wanted you think about that.

Okay, that's helpful. And then in general across your book of business, you've seen a little bit more property losses this year compared to late last year. How about in really non-property losses, are you seeing any pressure even if its subtle pressure compared to the last two years because losses have just been very benign. So, are you seeing any more pickup across your book ex-property?

Yes, well, I will kind of say two things. One, automobile and I'm not specifically just talking only about our book of business, but commercial auto continues to be a challenge for carrier partners. So, even on a more -- on a broader level and I know you already know that. The second thing that I would tell you is I think that casualty pricing, in general, is problematic for some of our carrier partners, because what I mean by that is they feel like it got to a level in some instances where they can't make money. And there are certain carriers that I think -- look, I don't want to write anymore if it goes that much lower. And so that's not a lot of carriers, but I'm saying there are people out there that are really digging deep into their books and they are saying. So, casualty is always a challenge for carriers in my opinion. But I would think about those two areas, and -- but I don't I think that our book has had something abnormal relative to other than property losses in the last two years. I think it's kind of normal.

Okay. Thank you. And then finally on wholesale, obviously a good quarter and we've been hearing the wholesale business has been holding up. Would you say you're growing better than the market? And then in general, why are wholesale flows remaining strong despite a fair amount of pressure on the market?

Well, the answer to the question is I don't know about all the other wholesale businesses out there. I would tend to say that we're performing probably in the top half or top third with that, I believe. But I don't really know. The reason that we do well in my opinion is we have really good leaders and really good brokers and teammates. And what Andy referred to earlier is there's a lot activity and so it is a current inconsistent action. And so we're trying to get more swings at the plate, more opportunities. And so I think that in short of markets whether there's disruption or potential disruption that creates more opportunities. So, as an example, if you have a storm coming, there are going to be some markets that close and some markets that don't close for maybe another day. So, that might present an opportunity to a wholesale broker t our try to get something done. Having said that you have -- anytime, wholesale business makes money in my opinion on the downside and the upside. The things that is not good for wholesale is a flat market.

Okay. Thank you. Thank you very much.

Thank you. And we're going to take one last question, okay Ron.

And it appears, we have no further questions at this time.

Perfect. Actually works out well then. Perfect. Thank you all very much and have a wonderful day. And we look forward to talking to you next quarter. Thank you very much.

Thank you.