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Brown & Brown (NYSE:BRO)

Q4 2013 Earnings Call

February 04, 2014 8:30 am ET

Executives

J. Powell Brown - Chief Executive Officer, President and Director

Cory T. Walker - Chief Financial Officer, Principal Accounting Officer, Senior Vice President and Treasurer

Analysts

Sarah DeWitt - Barclays Capital, Research Division

Michael Nannizzi - Goldman Sachs Group Inc., Research Division

Gregory Locraft - Morgan Stanley, Research Division

Adam Klauber - William Blair & Company L.L.C., Research Division

Joshua D. Shanker - Deutsche Bank AG, Research Division

Elyse Greenspan - Wells Fargo Securities, LLC, Research Division

Dan Farrell - Sterne Agee & Leach Inc., Research Division

Ryan J. Byrnes - Janney Montgomery Scott LLC, Research Division

Meyer Shields - Keefe, Bruyette, & Woods, Inc., Research Division

Kenneth G. Billingsley - Compass Point Research & Trading, LLC, Research Division

John Campbell - Stephens Inc., Research Division

Mark D. Hughes - SunTrust Robinson Humphrey, Inc., Research Division

Operator

Good day, and welcome to the Brown & Brown Fourth Quarter Earnings Conference Call. Today's conference is being recorded.

Certain statements contained in this conference call that are not descriptions of historical facts are forward-looking statements, as such term is defined in the Private Securities Litigation Reform Act of 1995. Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause results to differ materially from those expressed or implied by such forward-looking statements include but are not limited to, those discussed in filings made by the company with the Securities and Exchange Commission.

Many of the factors that will determine the company's future results are beyond the ability of management to control or predict. Listeners should not place undue reliance on forward-looking statements, which reflect management views only as of the date hereof. The company undertakes no obligation to revise or update any forward-looking statements or to make any other forward-looking statements whether as a result of new information, future events or otherwise.

At this time, I would like to turn the conference over to Mr. Powell Brown. Please go ahead, sir.

J. Powell Brown

Thank you, Linette. Good morning, everybody. We grew 2.2% in the quarter, and Cory will get into the information about the impact of Colonial Claims on Q4. As you know, Colonial was very busy in Q4 of '12 and Q1 of '13. Excluding their results, our internal growth would be 4.5%. National Programs and Wholesale, both grew at or above 10% organically and without our liabilities, we earned $0.33 for Q4 and $1.50 for the year.

So with that, I'd like to turn it over to Cory for our financial results.

Cory T. Walker

Thanks, Powell. Our net income for the fourth quarter of 2013 of $47.2 million was up 8.3% over last year's fourth quarter. Correspondingly, our net income per share for the quarter was $0.31 or up 6.9% over the $0.29 in the fourth quarter of 2012. However, more importantly, when you exclude the line item change in estimated acquisition earn-out payables, our net income per share for the fourth quarter of 2013 was $0.33 and versus last year's $0.30, and that's a 10% increase.

From a revenue standpoint, our commissions and fees for the quarter increased 13% to $339.4 million and that's up from the $300.3 million in last year's fourth quarter.

As we do -- the press release has a table that shows our total growth rates and our internal growth rates from our core commissions and fees, which excludes profit-sharing, continued commissions and the guaranteed supplemental commissions that we have. For the fourth quarter, we did receive $4.4 million of profit-sharing contingent commission, which was in line with what we thought we'd have in the third quarter conference call. That $4.4 million represented a net decrease though of $1.9 million from the $6.3 million of contingencies that we received in last year's fourth quarter. The majority of this net decrease came from our FIU operation.

Additionally, we accrued $1.9 million of guaranteed supplemental commissions in the fourth quarter 2013, and that was very similar to the same amount in the fourth quarter of 2012. If you refer to the internal growth schedule, we had a positive internal growth rate of 2.2%, however, it was 4.5% when you exclude the impact of Colonial Claims, and we'll get into that in a minute.

For the fourth quarter of 2013, our total core commissions and fees increased 14.9% or $43.2 million of net additional core commissions and fees. However, within that net number was $36.7 million of acquired revenues. That means we had $6.5 million more commissions and fees on a same-store sales basis. The biggest number in this internal growth schedule that jumps out is the negative growth rate of 17.8% in the Service division. That amounts to $6.1 million. And that was due exclusively to our flood claims operations, Colonial Claims.

As we pointed out in the third quarter conference call, we would have this big downdraft and it was due to the prior year revenues from Superstorm Sandy claims. Colonial Claims revenues in the fourth quarter of '12 was $7.4 million, as a result of those Superstorm Sandy claims.

In the fourth quarter this year, our revenues were at a normal run rate of $1.3 million, thus that's a $6.1 million decline. So if you exclude that $6.1 million, our total organic growth dollars would increase from $6.5 million to $12.6 million, and internal growth rate of 4.5% for the quarter on a consolidated basis.

Our Wholesale Brokerage division continued to have strong new growth with $5.9 million of new business and that translated into a 14.7% internal growth rate for the fourth quarter. Our National Programs division had a strong quarterly internal growth rate of 9.9%, and that represents $6.3 million of net new dollars. Out of that, only $339,000 of the $6.3 million related to Arrowhead's automobile aftermarket and the Everest non-standard auto. $5.9 million of that growth really came from our Proctor's ICG and our Arrowhead commercial lines earthquake operation.

When you add up the internal growth rates of all 4 quarters of 2013, you'll see that 3 out of 4 of our divisions, National Programs, Wholesale Brokerage and Services had annual internal growth rates of their core commissions and fees between 12% and 14% each. These 3 amounts added up to about $66.7 million of net growth dollars. Of the $66.7 million of growth dollars, 3 -- in these 3 divisions, $25.1 million came from the Arrowhead's automobile aftermarket and the Everest non-standard operations. $13 million of that increase came from our Colonial Claims operations.

I think it's important to note that when you exclude the impact of Colonial Claims, as well as the Arrowhead automobile aftermarket and the non-standard, our consolidated internal revenue growth rates improved sequentially each quarter during 2013. So when you exclude these 3 operations, the growth rate in the first quarter would have been 1.5%. In the second quarter, it improved to 3.5%. In the third quarter, our consolidated growth rate moved to 4.1% and then in the fourth quarter, without those 3 operations, we're at 4.4%. So you can see that it grew incrementally each quarter, I think it's important to note. So if you look at the whole year, without these 3 operations, the internal growth rate was a combined 3.4%.

As you attempt to project the growth rates for 2014, I think it's important also to realize that in 2013, Colonial Claims had $23.7 million of core commissions and fees, mainly due to the Superstorm Sandy revenues. However, the 2014 budgeted core commissions and fee is only $6.5 million, and that's a $17.3 million differential. Out of that $17.3 million differential, $16.5 -- $16.2 million of that will come in the first quarter. As you know, with that incremental growth dollars has very high margins for Colonial Claims, and so that by itself almost $16.2 million differential in the first quarter, that will amount to over $0.045 of earnings per share for our company. So obviously those -- that $0.045 will not be there in the first quarter of 2014.

So in summary, excluding the impact of Colonial Claims, we have budgeted a consolidated internal revenue growth for the entire company for 2014 in excess of 4%.

So moving onto the other line items on our income statement. Our investment income decreased by approximately $100,000, and that's just due to lower invested assets this year versus last year. Our other income increased by $1.4 million just due to some sales of books of business and some settlements that we received.

Looking at our pretax margins for the fourth quarter, it was 22.3% compared to our pretax margin of 22.9% in the fourth quarter of 2012. Looking at the employee compensation and benefit as a percentage of total revenue, it was 52.3% in the current fourth quarter, which was the same cost factor in the fourth quarter of 2012. The total dollar increase of our employee compensation and benefits was approximately $21 million. Of that $21 million, $16 million was attributable to just the standalone new acquisitions since last year.

Therefore, excluding the impact of these standalone acquisitions, we had effectively $5 million of additional compensation on a semi-same-store sales basis. Of this increase, $1.4 million was due to increase in salaries of new producers. $1.6 million was due to increased salaries of just normal staff teammates. Another $300,000 was due to increased commission expenses paid to our commission producers and $2 million was a result of increased costs for our self-funded health care coverage.

Our noncash stock-based compensation cost was up on a net basis, $3.2 million for the quarter, and that is due mainly to the new grants that we issued under our stock incentive plan, grants in July of 2013, which we discussed significantly in the third quarter conference call.

In the current quarter, our other operating expenses as a percentage of total revenues increased 20 basis points to 15.1% from a 14.9% ratio to total revenues in the fourth quarter of 2012. From a dollar perspective, the other operating expenses increased by $6.8 million or 15.2% in the fourth quarter of 2013 over '12.

However, our new standalone acquisitions added about $5.8 million of net new costs for the quarter, and therefore, our existing same-store offices had a net increase in expenses by a little over $1 million. This increase related primarily to about $900,000 of increased costs in our legal claims expense and our E&O reserve. $400,000 was an increase in some bad debt expense; $400,000 was also an increase in our data processing and software licensing fees; and there was about $200,000 increase in just employee meetings. Now partially offsetting these increases, there was about a $500,000 reduction in our consulting and inspection fees, and then we had also another $500,000 reduction in our telephone cost for the quarter.

Amortization and depreciation in aggregate was up about $2.3 million as expected from last year's fourth quarter, just due to new acquisitions. Our interest expense increased about $300,000 over the prior year's and that was the result of our increased borrowings that we took out on the additional $60 million from the Beecher Carlson acquisition.

Our line item referred to as change in estimated acquisition earn-out payables was a debit or an expense of $1,020,000 versus a similar debit or expense last year of $1,552,000, and therefore, our GAAP income decreased by about $0.5 million from that line item.

Our effective tax rate for the entire year of 2013 was at -- was 39.3%. But since the final true-up for our annual tax rate falls in the fourth quarter, our quarterly tax rate ended up being 38.2%. But looking into 2014, we still think that 39.6% is probably still a good number to use on a projected go-forward basis.

Now that we reviewed each of the line items in the quarterly income statement, I'd like to step back and just highlight some of the results of our pretax earnings when you exclude amortization, depreciation interest and our change in estimated acquisition earn-out payables. Some of you refer to that as EBITDAC.

Additionally, since our noncash stock-based compensation essentially doubled based on the grants that we issued in July of 2013, and the fact that we talked about the reasons for that grants and we've talked about it in our third quarter conference call, so most of you know that, that cost has increased. And most of our investors are aware of the nature of those increase. I'd also for this purpose like to exclude that from these costs and kind of doing an EBITDA-type comparison. So another way of looking at it, it's total revenues less our employee compensation cost and benefits and just the other operating expenses, which are really the more controllable, ongoing, true cost of our detailed divisional operations.

If you look at that basis, our consolidated operating profit margin for fourth quarter of 2013 was 32.6% and that's compared to last year's fourth quarter of 32.8%. So that's a reduction of 20 basis points. However, if you exclude Colonial Claims from this calculation, our fourth quarter 2013 margin would've been 32.65% versus last year's fourth quarter margin of 32.08%. That's a 57 basis point improvement.

On the same basis, looking at the Retail division, the straight comparison for the 2013 fourth quarter would've been 34.11% compared to 32.78% in this 2012 quarter. That was an increase of 133 basis point improvement, and this is an improvement with only 0.2% internal growth rate. On a side note, the Beecher Carlson large account division, which you know missed their budget in the third quarter and only had a 2.7% operating profit margin. Well, I'm happy to say that they exceeded their budget in the fourth quarter and their operating profit for the fourth quarter was at 34.7% margin.

So as we said -- we said before, we still believe that the entire Beecher Carlson operation will still be very close to their 12-month goal of delivering approximately $33 million of EBITDAC earnings before our stock incentive plan and corporate overhead charges.

Looking at the Wholesale Brokerage division on this EBITDAC-type comparison. For the fourth quarter of 2013, their margin was 30.38% and that's 82 basis points improvement over the 29.56% margin in the fourth quarter of 2012. Also for the National Programs division, their margins on this basis of 2013 was 37.43%, and they had a 271 basis point improvement over the 34.72% margin in the fourth quarter of 2012. And finally, looking at the Service division, their comparable margin for the fourth quarter of 2013 was 21.4% versus 30.35% in the fourth quarter of '12 when -- that's when Colonial Claims had their big quarter, however, excluding the Colonial Claims from the calculation, the 2013 fourth quarter margin was 21.51% versus 21.76% for the 2012 quarter. Therefore, it was a decrease of about 20 basis points.

The other operation that I want to mention on Services they had a difficult time in 2013 fourth quarter was our Social Security Disability claims operation, The Advocator Group, where they missed their budget for the quarter by over $2 million, little over $2 million, and that was mainly because the U.S. government slowed down the approvals of the disability claims as a result of the sequester. We believe that most of those claims will ultimately, eventually be approved but they just didn't happen in this quarter. So without this slowdown with The Advocator Group, the operating profit for the Services would also have improved over the prior years.

So thus, you can see that, we believe that all of our business divisions are operating more efficiently and effectively than they did last year, and they will continue to operate nicely as the middle market economy slowly improves.

Now as a final point, just a few mundane points about 2014. I know a lot of you will ask about the projections for what amortization expense will be and some other items. So for 2014, excluding the Wright acquisition, just as we stand today, our amortization expense is expected to be around the $71 million mark. Our depreciation for 2014 is expected to be somewhere around the $20 million mark. Our noncash stock-based compensation for 2014 should be between $29 million and $30 million. And our interest expenses, just at our current debt level, should be about $16.5 million.

So with that overview, I'll turn it back to Powell.

J. Powell Brown

Thanks, Cory. Great report. From a retail standpoint in Florida, the overall market hasn't changed much from Q3 to Q4. I'd characterize it as an underwriter's market. Accounts with losses or tough classes are feeling rate pressure; clean accounts, underwriters are looking for rate but probably won't get it; newer construction without losses, good classes, there's lots of competition. Lots of property capacity, both admitted and non-admitted, particularly on large TIV schedules and it's quite competitive. We're seeing an uptick in construction payrolls. Property generally is flat to down slightly and liability in auto is up 3% to 7%.

In the Southeast, all around the states, all around Florida, seem to be up 3% to 5% with slight exposure increases. Texas rate seem to be up more than that and work comp rates are up 2% to 10% depending on the state. In the Northeast, New York City construction continues to be a tough place, and that rates are up 5% to 7% and the umbrellas with those contractors are even tougher to place. Most overall risks are up single digits with slight exposure increases. The habitational risks in the Northeast are seeing higher rate increases on the -- than the rest of the classes at 5-plus percent or comp rates are up 5% to 10%.

In the Midwest, rates are generally up 3% to 6%, and incumbents want to get rate, but new business is very competitive. Work comp is a challenge to place with losses. On the West Coast, good accounts are getting 3% to 5% and those with losses were getting 10%. Work comp is hardening in all the southwestern states. If a renewal is offered, it's up 8% to 10%. If it's not renewed, it's up 15-plus percent. Not many P&C carriers are looking to do Monoline Workers Compensation. The California State fund is very aggressive, and earthquake coverage in the Northwest is still up 10-plus percent.

On the benefits front, in both small and large groups, we see rates, there's only a 5% to 10-plus percent.

On the Wholesale side, in property -- cat property, rates are generally flat to down 5%. However, there's an expectation of retailers that it should be down more than that, maybe up to 10% because of all the reinsurance news.

Habitational continues to be a challenge, seeing an uptick in builders risk and renovation submission. DIC in excess flood areas are areas for growth on the post-Sandy underwriting world. Liability rates are flat except for liquor liability and habitational accounts are flat to up 5%. In the professional area, public company D&O is typically up 5 to 10%, private company D&O/EPLI is up 5% to 7% driven primarily by the losses in the EPLI line. Standalone EPLI is up 7% to 10%. Carriers are watching this line very closely and retentions are generally going up.

Miscellaneous, professional rates are down 5% to down 10%. Real estate accounts are up 10% to up 15%. With retentions going up, lots of requests for the cyber liability but low binding rates. In the binding authority, rates are flat to up slightly. Companies are trying to get rate on all renewals. We seem to be seeing more habitational and hospitality and even Lessor's Risk Only accounts from admitted markets. Transportation rates continue to be hardening as well.

As Cory said, in the programs arena, the winners in Q4 were Proctor, ICG and Arrowhead commercial earthquake. From a Services standpoint, Cory also said, Sandy had a substantial impact on Q4 for Colonial. The impact was $6.1 million. Please remember to adjust your models for the Q1 impact that Cory described earlier. I know we'll have questions around acquisitions and as you know, we did 3 acquisitions in December for just over $17.2 million in annualized revenue. We're very pleased with the announcement of the Wright organization joining our team sometime in Q2. I've had a good fortune to meet approximately 400 of our 500 soon-to-be new teammates, and I'm very, very impressed as we all thought we would be. So we're excited for them to join the team.

In conclusion, we are very pleased with our progress in 2013. I'd like to thank all of our teammates for everything they do to provide solutions for our clients. In Q4, internal growth without Colonial Claims was 4.5% and for the entire year of 2013, it was 5.6% without Colonial Claims. As Cory said, without Colonial Claims, automobile aftermarket and the Everest program, our internal growth sequentially improved each quarter, 1.4%, 3.5%, 4.1% 4.4%. We are well on our way to our $2 billion intermediate goal.

With that, I'd like to turn it back over to you, Linette, and we'll open it up for questions.

Question-and-Answer Session

Operator

[Operator Instructions] And we'll take your first question that will come from Sarah DeWitt with Barclays.

Sarah DeWitt - Barclays Capital, Research Division

You had mentioned that you're budgeting in excess of 4.5% organic growth for 2014. Just to clarify, does that include or exclude the impact in the first quarter from Colonial?

J. Powell Brown

That includes the Colonial's 2014 budget. So it does exclude that impact.

Sarah DeWitt - Barclays Capital, Research Division

It excludes the impact.

J. Powell Brown

That's right.

Sarah DeWitt - Barclays Capital, Research Division

And then on the retail organic growth, what drove the slowdown in the quarter to 0%.

J. Powell Brown

Well, Sarah, as you know, we've always talked about retail operating, just like any of our businesses in a band. Some up and some down a little bit, but constantly, we believe moving in a direction. In this case, going up but this one was down this quarter. Last year in Q4, we had a very good quarter as you know, 5.6% internal growth. And I would say, without making any excuses, we didn't write as much new business in Q4 this year as we had hoped. And so we didn't grow as much as we like or liked.

Sarah DeWitt - Barclays Capital, Research Division

Okay and then finally, could you just update us on the CFO search?

J. Powell Brown

The answer is, we continue with the process, and as I said, we engaged an outside firm to help us with that process and we are continuing to move through that process now, and very pleased with the progress based on our intended or our expected outcome of those results. But when things are finalized, you all will be the first people to know because we'll send out a press release.

Operator

We'll move next to Michael Nannizzi from Goldman Sachs.

Michael Nannizzi - Goldman Sachs Group Inc., Research Division

Maybe I have just a follow-up on Sarah's question, what -- can you give us any more detail in terms of what within the Retail segment was more challenging or timing-related or any more granular color on that just because it was pretty -- start drop off. So I appreciate the bands [ph] comment, but just give us -- if you could give us a little bit more color, I'd appreciate it.

J. Powell Brown

Sure, Michael. I'll try to -- look, as you know, we're straight shooters on this stuff and our goal is to grow our business organically and profit -- grow it organically and profitably. And we were not successful in doing that in Q4 in Retail. Like I said, I can give you, what happened in this office or what happened -- I think that defeats the purpose. Ultimately, at the end of the day, we had some offices grow, we had some offices shrink, it could be for a whole host of reasons. We could have not written up new business. We could have lost some accounts. We could have had a change in some sort of accrual. You can have any of those type of things but at the end of the day, we were surprised. And it's something that we know that we have to grow each of our businesses organically. So it's something that yours truly, and the rest of the senior leadership team at Brown & Brown is very keenly aware of. I'm sorry, I have not given you a lot more to chew on, but I'm just trying to give you a sense of in the way we view that.

Michael Nannizzi - Goldman Sachs Group Inc., Research Division

How about this, from this perspective, renewal book versus new business. Could you help us understand in terms of -- did retention change, meaningfully from last year's or third quarter to current or whether new business was different. I mean, just -- even if we could break it down into renewal versus new, that might help.

J. Powell Brown

Yes, I would tell you that our renewal retention in '13 was inside the historical ranges. And so once again, that does not mean on an individual office, you could have -- one office have, for whatever reason, lower retention in a book in their book of business than another office, or conversely, somebody who has budgeted a lot of new business, who didn't budget a lot of new business. I mean, he budgeted but didn't write a lot of new business. There are also scenarios where this is something we don't really talk about typically, but you can have a program, which is a First Dollar program that all of a sudden goes to some sort of deductible or retro or something where the amount of retention by the insured goes up, which in turn, may reduce the amount of premium upon, which we are either paid a commission or a fee. And I'm talking specifically, Michael, about middle market accounts. Remember, these are accounts that are $25,000, $50,000 $150,000, $250,000 accounts. I'm not talking about mega accounts. And so if you take a deductible, it can reduce that premium paid, in some instances substantially. But I'm not going to tell you that's the reason, I'm saying that could be one of the reasons. And so I would tell you that it's a combination of a little bit of all of the above, but our renewal retention was in the historical range for 2013.

Michael Nannizzi - Goldman Sachs Group Inc., Research Division

And then just one last one, just on -- looking ahead, I mean, obviously, you have to write -- you guys have done some pretty large acquisitions here recently. How should we think about your capacity for more M&A from here and what level of leverage are you comfortable in getting to, obviously, you've historically preferred to remain in a pretty low level. So how should we think about capacity and what sort of pipeline are you looking at?

J. Powell Brown

Michael, let me answer the first -- the last question first relative to the pipeline. And I always enjoy saying this to you all on an earnings call day, as you know, the pipeline is good. And so when you ask me that 1 year from now, the pipeline will also be good. And 3 years ago, the pipeline was good. I am saying that, not trying to be facetious, I'm trying to say that, that we are always talking to people, and when and why people sell their businesses are different, that's number one. Number two, and I think part of the question you were asking is, should you budget a large acquisition every year because several people have asked me that before and the answer to that is no. Although someone might say, well, you did one in 2012, you did one in '13, and now you've got one in '14. I think that there have been some larger firms clearly that became available in terms of, we're deciding to sell and we believe that they fit culturally and they had the right type of people that would be consistent with what we're all about. So that said, as you know, we continue to look at acquisitions of all sizes and shapes, as evidenced by the 3 acquisitions we did in December for just over $17 million in revenue. We have worked really hard to develop strong relationships with our financial partners and in doing so, I have been asked on numerous occasions, the question of what would we be comfortable in doing, and the answer is, I believe that we would be in a steady state environment, comfortable with the 1.5x to 2.5x debt to EBITDA, subject to the acquisition or acquisitions being that -- which we thought were cultural fits. And so we're not going to buy it just to buy it. And some of you have either said specifically or intimated in the past that as you get bigger to move the dial, you have to do more transactions and all sort of stuff. And the answer is, we totally understand that, but we are long-term thinkers in the terms of how we invest in our business, and so we think of acquisitions as forever. And so when we look at these things, we are thinking about them, not only next year but 3 years and 5 years and 10 years down the road and what they bring to Brown & Brown and the quality of the people and how that will help the overall organization. So I would tell you that, we as a team are optimistic about the investment opportunities going forward. As I said earlier, the investment pipeline looks good, as it always does. The idea of larger acquisitions in the future, we -- there are 3 things that people tell us in the investment community that are pretty well known about Brown & Brown. Number one, we pay in cash, hard to argue with greenbacks. Number two, we do what we say and say what we do. And so when we give a term sheet, that is not a license to renegotiate during the due diligence process. And number three, when we make our mind up, we move with alacrity. And so having said that, that I think puts us in good speed and we, with our financial relationships, we have dry powder to invest in our business. So I feel good about those opportunities, and like I said, we have had an aversion. We haven't needed to take the debt up substantially and if we did, we would try to pay that down aggressively anyway.

Operator

We'll hear next from Greg Locraft from Morgan Stanley.

Gregory Locraft - Morgan Stanley, Research Division

I wanted to go back to the retail organic. Is there any way to measure the -- 2012, you had the sales incentive plan, kind of the one-timer, the one-time payout for the producers. That -- I'm suspecting that, that probably pulled forward some demand or caused a bigger fourth quarter. Is there any way to measure the impact of that now that we're kind of one full year out? Obviously, this isn't going to recur in '14, so the numbers get a little cleaner, any thoughts there?

J. Powell Brown

The short answer is no, I don't believe so. Several people have either written about that or said that as a possibility and I'm not -- we don't like to use the terms, never or always. You've heard me and us, Cory and I talked about why we did that and we were pleased with the outcome. And as I said, that was a one-time only event. We have reward systems internally that we think make a lot of sense with our -- corresponding with our shareholders and our teammates, which are performance-driven as you're aware of, but we haven't, to tell you the truth, Greg, spent a lot of time looking in the rearview mirror on that. What we've basically said is, we look at the year and we look at the quarter we just came out of, and as I said, we're pleased with the result in the year. We're not necessarily as pleased as you rate with the growth, we're not accepting that growth as something that we want to have going forward and we're looking into the future about growing our business organically in each of the divisions, specifically Retail.

Gregory Locraft - Morgan Stanley, Research Division

So you mentioned that people are talking about that. Are these people internal to Brown & Brown or do you mean people like us in the Wall Street community?

J. Powell Brown

No, that's you and all your friends up there in New York in the snowstorm. I mean, when I say that, there were 1 or 2 analysts that actually wrote about that last night. And so when I say that, no one was talking about that internally, we're all focused on selling and servicing insurance. And as you know, we're very focused on writing lots of new business and working very hard to facilitate our relationships and improve our relationships with our existing clients so that we can retain them as well.

Cory T. Walker

Greg, some people on the line may not have kind of know much of the background on that, but when we put that in place at the end of 2011, '12 -- when we thought about doing -- put it in place in '11, the rates had not started to move and the exposure units really hadn't grown. So we were trying to make sure that we put that in place to really get everybody focused on January 1, 2012. To really hit the ground running hard. And it just was coincidental that, that first quarter of '12 was the first time that the rates really started to stick and the economy and exposure units start to move up, and so that was a big help. So we never really -- you can never really determine whether or not that had a direct impact to change the each individual producer's behavior, unless you crawled inside their mind and said did that really motivate them. The point being that we really reiterated very frequently in 2012 is that regardless of whether that gave them an extra incentive or not, it did help the motivation in terms of -- the producers really appreciated the fact that it's gone so many years with basically reduction of exposure units with their clients and therefore, less compensation. So in an inadvertent way, it had a very, very positive impact that they just appreciated that the company recognized how difficult it was as a producer, and that now that it was a nice transition to help them kind of get a one-time little bump, but now we expect that the rates, as well as the exposure units to continue to grow even though they're not growing as fast as we all would hope, it is a steady and consistent growth that we think is going into the future -- into the fourth quarter, and the producers now are getting the benefit of that by seeing their book rise, not a lot, but it's still rising. So overall, I mean, the retail force is very, very positive and Charlie Lydecker is doing some great stuff in terms of new competitions and there's just a lot of excitement and enthusiasm in retail, and I think you just have a quarter like fourth quarter here that just a bunch of offices that had between $20,000 and $30,000 lesser revenues in the previous quarter and it was just -- it's just a lower quarter than normal, but the trend of the band is still going north in retail. And we're positive about going into 2014.

Operator

[Operator Instructions] Adam Klauber from William Blair has your next question.

Adam Klauber - William Blair & Company L.L.C., Research Division

A couple of different questions. What's your outlook for contingent supplements next year? And if you could remind us, does Beecher and Wright, do those firms accrue contingents or supplements?

J. Powell Brown

As it relates to the contingents and GSCs, we anticipate, generally, the same.

Cory T. Walker

Well, we will not really have. We'll only wait to the first quarter to give you any real guidance because as it stands right now, we don't really get stuff from the carriers until the end of February, end of March. That really will give us a clarity in terms of 2014. However, as a general rule, if the loss ratios of the carriers have improved then generally, our contingencies will move up. That's about the best guidance that we can give you right now, otherwise your guess is as good as ours as of -- it stands right now.

J. Powell Brown

And Adam, to your point, inside of Beecher, there are some accounts, which are commission-based, but those in the large accounts area inside the retail, the traditional retail in Oregon, Mississippi and Arizona, the answer to that is yes. And then inside of Wright, the answer is no.

Adam Klauber - William Blair & Company L.L.C., Research Division

Powell, you also mentioned an interesting dichotomy on the wholesale property pricing or property pricing where there's some impression that because reinsurance is weak, prices should be going down, but that isn't being reflected in the market. Do you think that will eventually flow through or do you there's think a different dynamic in the wholesale market than we're seeing in the reinsurance market?

J. Powell Brown

Well, Adam, I do believe that it's different between the primary market and the reinsurance market. So the actual primary writer, whether it's admitted or non-admitted, I think there is a divergence or this dichotomy that you're referring to. As you know, when reinsurance rates go up substantially, the rate pressure that is applied by the primary carrier is not necessarily reflected in the entire increase in the rate given to them upward as well as downward and so remember, the national carriers and the non-admitted carriers, you all know by name either public or private, all of them have to work that and manage that to the best of their ability locally. But if you read something or throughout the country, if you read something that says insurance rates are down, let me just make this up, 10% in a said line of business. Well, that's for a broad portfolio of risks and then the question is if you take those risks and you zero into a place like Texas or Florida or California or New York and you say how does that impact that? Well, it may impact it more or less depending on how that's factored into that underwriting book, but overall, the carriers are going to say okay, the primary carrier is going to say maybe the rates come down 5%, but then they don't come down commensurate with the amount that it's come on that treaty because by the way, when it's gone up, they have been able to pass it all through, so no, long answer. I don't think it is going to be -- it'll come to settle at per se, what you're hearing in the reinsurance market.

Adam Klauber - William Blair & Company L.L.C., Research Division

Okay. Another question I realize this may be sensitive, but it's a big-name out there. Obviously, QBE hit the headlines a little while ago. Do you think that will cause I guess, 2 questions, will it cause changes in the overall program market? Number one. And number two, do we know that today or we'll have to wait 6 to 12 months to understand what those changes could be?

J. Powell Brown

Well first of all I would say that as you know, QBE is a very large partner of our organization and they are going through some changes and they'll work their way through it. They are a large program, they're big on programs. We write a lot of programs with them. Based on what we've heard, they want to keep doing what they're doing with us. So we don't have any news other than that. I believe that the leadership there are very thoughtful around their business, and they're looking at certain businesses that may or may not fit exactly or how they fit when they made a number of acquisitions. And I think that long term, it works itself out, whatever that means. We don't have any information to the contrary right now.

Adam Klauber - William Blair & Company L.L.C., Research Division

And then just one final. The Zurich aftermarket auto business, is that growing?

J. Powell Brown

The answer is, there is lots of opportunity there. And we have continued to work with Zurich about how we can grow it. And so we were very pleased with how it came in, in the first full year as you know it's October to October. And so we believe that it is absolutely a growth engine going forward.

Operator

We'll hear next from Josh Shanker from Deutsche Bank.

Joshua D. Shanker - Deutsche Bank AG, Research Division

The responses, you mentioned that Charlie Lydecker was putting together sales competitions. There was some criticism or I guess, skepticism about your numbers back in 4Q '12 that they were enhanced through sales incentive programs. I'm wondering if you can talk about the impact that, that have had then, that, that might have in the future and where that hits retail.

Cory T. Walker

I think you're referring there to that, that producer bonus program that we have. I think people are still trying to figure that out if that was -- had a big impact. We generally always have sales contests going on at one time or another, but different ones. This particular part of the year, Charlie has focused on growing the personal lines and the contests are focused on that. And so we're always doing something and he's always keeping things, changing and exciting for the producers.

J. Powell Brown

Yes. But I don't think you should draw a parallel between Cory's statement about a sales contest and the producer incentive plan at the end of '12.

Joshua D. Shanker - Deutsche Bank AG, Research Division

Do you think that producer incentive plans accelerate growth and would they be valuable today?

J. Powell Brown

Well, the answer to your question is, we believe that keeping it fresh and new relative to like a sales contest is really important. But you don't have sales contests in the same business area every quarter or every month or every year. And so you kind of -- and we do things at local offices. So in local offices, the leaders set the course for growth there. So I would tell you, Josh, that we believe and we, as an organization are focused on long-term wealth creation for our teammates, particularly those that help us grow the business. And so that said, we think that we have an appropriate mix between cash compensation and equity-based compensation on a performance lever that ties us all together. So as you know, we talk about there's being long-term, we talk about this being how do we grow organically and how do we grow profitably and we believe that those are all, put together, or in that concept of how we compensate our producers.

Joshua D. Shanker - Deutsche Bank AG, Research Division

In terms of characterization that a surprisingly number of producers came up, maybe $20,000, $30,000 short during the quarter, do you think that -- although you're rightfully so, do you think that we may discover a one quarter from today that, that was a one-off situation? Will you be as surprised for 1 quarter from today, if it doesn't remedy itself?

J. Powell Brown

Well, like I said Josh, we talk about retail and just like our other divisions, operating in a band and so as you know, retail this last year grew 80 basis points in Q1, 2.3 or 230 basis points in Q2, 250 basis points in Q3 and now 20 basis points in Q4. And so that operated in a band. It was upward for 3 quarters. Now it's downward. And so once again, we're very focused on growing our business organically and profitably. So we're optimistic about 2014.

Operator

Moving on to Elyse Greenspan with Wells Fargo.

Elyse Greenspan - Wells Fargo Securities, LLC, Research Division

I just wanted to follow up just a little bit more on the retail segment, just specifically in terms of, I know you provided the over 4.5% organic growth for -- excluding Colonial for 2014. What does that kind of imply just numerically, that you're thinking about that the retail segment will show in terms of organic growth?

J. Powell Brown

Well as you know, we don't give traditional -- traditionally give organic growth guidance. Cory said that in our budget and I think Sarah may have -- she said, I think 4.5%, but Cory said that we are budgeting as an organization north of 4% organic growth for '14 without Colonial Claims. And so I would tell you that when I asked in the past, what does retail look like? I would tell you in a steady-state environment that it's usually a low to mid single-digit organic growth business, but we aren't saying what our particular organic growth projections are for retail.

Elyse Greenspan - Wells Fargo Securities, LLC, Research Division

Okay, and then just I know in the past you have said that kind of exposure changes had about 2/3 to 3/4 impact on your revenue growth and I know we've seen a little bit of a switch in business mix due to some of the recent larger acquisitions. Would you still say that impact still falls within the same range?

J. Powell Brown

I think it does, Elyse, and here's the thing that I would just want to reiterate. As you know, we believe that we're probably the purest middle-market play of these so-called publicly traded brokers and so what I'm not as clear on is how, in the bank owned agencies, how cleared information is to you and the rest of the people out there in the investment community. I just don't know. I'm talking about the 2 big bank owners. But having said that, we believe in our case of the larger publicly traded brokers that are just insurance operations, we're probably the purest play from a, as I said, a middle-market standpoint. And what we're seeing in that middle market is kind of fits and starts. There's still caution among our clientele of making large capital investments and hiring people. And so you've heard us say that our clients are trying to do more with same number of people, or do more with the same equipment until they see or feel better about their business and the economy. Are people feeling better? We believe the answer to that is yes, but what you read in the Wall Street Journal and other national publications about the success of some very large organizations, or lack thereof in the United States, that GDP, mirror or monitor is not indicative necessarily of middle-market businesses across the country, whether they're in Tulsa, Oklahoma or they're in Northern California or they're in Buffalo, New York. So I say that because it is a little different, that's not an excuse, that's an observation.

Elyse Greenspan - Wells Fargo Securities, LLC, Research Division

Okay. And then you guys do, just on your private healthcare exchange, you do offshoot that to a liaison [ph]. Have you seen any kind of change or impact that you might expect from the recent -- the Towers Watson deal?

J. Powell Brown

No, actually we haven't. And as you know, we believe that exchanges are a solution, not the solution. And so, we are in the solutions business. It's our goal to bring our clients, viable solutions and in doing so, help them make the best decision that fit their risk appetite and how they want to pay for it. You are going to read and hear a lot about the national, which we all have, the national exchanges and the state exchanges. Some state exchanges have been a little more successful than others. Connecticut, New York and Rhode Island might be 3 that you might say have seem to have done well and the 3 that were kind of having a hard time in Maryland, Minnesota and Oregon. We believe that a private exchange, like the one that we have, is one of the solutions. We have seen and continue to see carriers across the country move on some of their smaller business, and we've talked about this in the past from a commission-driven platform to a per head, per month charge. But the flip side of that is because of ACA, certain employers are being forced to offer coverage to more employees, which may in turn could present an additional opportunity for us there.

Elyse Greenspan - Wells Fargo Securities, LLC, Research Division

Okay. Perfect. And just one last quick question. Cory mentioned the advocator business missing targets in the fourth quarter. Has anything changed in terms of what we should expect in the first quarter, or should we adjust that down our revenue expectations for Q1 as well?

Cory T. Walker

Well right now, I think they're still trying to figure out if the government's going to start to open it up. And so I think it's a little early to tell.

Operator

Moving on to Dan Farrell with Sterne Agee.

Dan Farrell - Sterne Agee & Leach Inc., Research Division

Within retail, can you comment on how you're seeing the trends in your employee benefits business. Is it similar to your overall segment, better or worse?

J. Powell Brown

Yes, I would tell you that, Dan, what we're seeing is one, we're seeing a lot of discussion from prospective clients and existing clients around how does ACA affect them. And there are many clients that their plans that were offered in '13 may have been renewed in '13 and so some of the full effects of ACA and how it impacts their individual programs won't be fully played out until this year, sometime between now and the end of the year, number one. Number two, that is created a great opportunity for us to grow in offices that have big or maybe not so big, smaller benefits operations so we viewed it as a growth opportunity. And depending on the office, it may be growing substantially faster. It might be growing the same, or it might be growing slower depending the way the leadership and the focus on benefits in that particular office. All of our retail offices, not every single retail office writes employee benefits, but most do have benefits operations. Conversely, we do have a group of benefits-only offices that have done quite well as well. So it's kind of -- that's a pretty broad statement I know, but depends on the office, but it could be up, it could be the same or it could be slightly less depending on the office.

Dan Farrell - Sterne Agee & Leach Inc., Research Division

Okay. And then just on the question on the auto aftermarket. Margin headwind overall as it came on, you're now past sort of the first year. Can you talk about that business, update us on how you're thinking about margin trend in that business going forward? And then, as we head into next year, is it more of a neutral to overall? And when do you think it can actually start to be positive comparisons.

J. Powell Brown

Yes, Dan. As you remember, we said that we believe that the margin pressure on that would be 18 to 24 months. And so remember, it's an October transaction when it came online. So I believe that for the vast majority of this year, it will be a neutral. And then there will be an opportunity as we go forward for that to improve. So like I said, I can't recite the auto aftermarket budget in Q4 of '14 off the top of my head, but I know that until the fourth quarter, it is very similar to how it has been trending, so let's call it a neutral.

Dan Farrell - Sterne Agee & Leach Inc., Research Division

And then just one last numbers of question, I apologize if I missed it, the $16 million of revenue for Colonial in the year-ago -- in the first quarter last year, can you just remind us what the margin was on that?

J. Powell Brown

Well, what Cory said is we had incrementally $16 million more in revenue and it was over $0.045 impact.

Operator

Up next is Ryan Byrnes from Janney Capital.

Ryan J. Byrnes - Janney Montgomery Scott LLC, Research Division

The first one, can you just give us an update as to what kind of range or the band I guess, would be for retail going forward, especially in I guess a 2% to 3% GDP world?

J. Powell Brown

So remember Ryan, we said that we don't know of any leading economic indicator that directly correlates with our middle market business, so let's start with that. And two, as I said or mentioned earlier, we believe that it is a low- to mid-single digit growth engine in the -- that state economy.

Ryan J. Byrnes - Janney Montgomery Scott LLC, Research Division

Okay, great. And then the second one is with Beecher Carlson. I think you guys mentioned that there may have been some seasonality with the fourth quarter. I just wanted to think about how do we think about that into first and second quarter this year.

J. Powell Brown

Sure, I would tell you that the cyclicality of their business is really -- Q2 and Q4 are their bigger quarters and Q1 and Q3 are their smaller quarters. So this is for large accounts. So in our large accounts division, the first half of the year we did just over $39 million of revenue, and then I would tell you that the budget for Q1 is just over -- as small as $12 million and $21 million plus in Q2. So like I said, the core budget is about $33.5 million in the first half of the year.

Operator

We'll hear next from Meyer Shields with KBW.

Meyer Shields - Keefe, Bruyette, & Woods, Inc., Research Division

2 maybe bigger-picture of questions. One, do you have any sense as to how much of your employee benefit revenues are attached to plans that are not compliant with the ACA? In other words, whether there's a risk of cancellation next year?

J. Powell Brown

The short answer, Meyer, is I can't give you the exact number but the number that we have talked about in the breakdown of our book is we have just under 1/3 of our business is small group, defined as under 50 lives.

Meyer Shields - Keefe, Bruyette, & Woods, Inc., Research Division

Second question. I understand that when you're looking at an acquisition, it's a long-term approach for a permanent acquisition, but if you start to see rate trends get a little bit less positive on the primary side, does that tend to influence willingness to sell in a way that -- in the aggregate?

J. Powell Brown

I think it can in some instances, but in many instances, no. I think if you put yourself in the position of an owner of a business, Meyer, and you say you have a mindset of what you think the asset is worth, depending on -- it may be rate environment, it's going to be a function of the growth of the business organically, a function of the operating profit, or EBITDA that it drives. I think that basically it's more of a valuation issue and the cycle can play a part of that, but not all of it. So as you remember in the 2008, 2009, 2010 period, businesses, particularly middle-market insurance agents, the gap between the expected value and what the willing acquirers were willing to pay could be substantial. And so as the economy got better and businesses grew and that was enhanced by the rate environment, those valuations started to come back into, they weren't so stratospheric, they were more reachable in certain instances. So that's a long answer on saying, can it have an impact, yes, but I don't think -- there are always reasons why people sell, when, why and the opportunity to grow or to join a growing organization like ours, and share information, which might present a better opportunity for that group of teammates as a whole to grow individually and collectively.

Operator

Moving on to Ken Billingsley with Compass Point.

Kenneth G. Billingsley - Compass Point Research & Trading, LLC, Research Division

I had a couple of fill-in questions throughout the call, so I'm going to jump around just a little bit. When you talked about mix of business and compensation margins, can you talk about how and what kind of impact it had on producer retention? And in the past, you've given the comparison of how your major producers have stayed with the company as they're very high percentage. Can you say how that has trended over, say, the last 2 years?

J. Powell Brown

Sure. I would tell you that we are very pleased with the retention of our producers at all stages, both as they come on to the team, they join the team, and then they're developing and advancing in their careers and then at a senior, not from an age standpoint, but a senior level from the standpoint of the size of their books, we've been very pleased with that and we've not seen any noticeable change, meaning downward, if that's what you're implying about our teammates. As you know, we have a very strong culture and we have been very pleased with the teammates. We have over 7,100 teammates and the producer group is a very large percentage of that, and we are very pleased with the people who have not only come, but continue to be a large part of our business. And so we have not seen a dramatic change i.e. downward that you're implying, in the last 2 years.

Kenneth G. Billingsley - Compass Point Research & Trading, LLC, Research Division

And have you adjusted -- I know in 2012, you had the incentive program, but excluding that calculations for the last 5 years, the comp and benefit margin has remained relatively stable with the mix of business changing with some of the large acquisitions, would we expect to see that go up or could we even expect that to see that tick down?

J. Powell Brown

Well, remember, as I alluded to earlier, we have a performance-driven equity reward plan, which is currently known as SIP and we used to have a plan called the PSP and so it's a performance-driven mechanism, which part of it for a producer, 50% is based on his or her individual production and growing their book over a 5-year measurement period. The other 50% is based on earnings per share growth and so we think that, that has worked very well. We obviously had some large program that was given out this summer, July and we were very pleased with the response that, that got with our teammates internally. So I think, what I would say in the near term, we don't like to say never or always, but I think it's going to be more of the same.

Kenneth G. Billingsley - Compass Point Research & Trading, LLC, Research Division

Okay. Just shifting to contingencies and supplemental, where's the percentage going towards? I know there's some talk in the past, there's going to be shift or has been a shift, do you continue to see that shift and where do you see that going to from an underwriter standpoint, with their desire to pay supplementals versus contingents?

J. Powell Brown

I think that as a broad statement there, if you ask all of the leaders quietly in a private place, what they would like? I think the response would be contingency payments versus guaranteed supplementals. There are continuing discussions and/or movements towards that. Last year, Cory didn't you receive about $8 million of GSCs?

Cory T. Walker

That's correct.

J. Powell Brown

And so $8 million of the total received in contingencies and that's all-in was $59 million. And so that said, I think, Ken, that, that number, the GSC would stay flat or only go down in the future, barring something that we haven't -- we can't see right now, but that's how we would view it.

Kenneth G. Billingsley - Compass Point Research & Trading, LLC, Research Division

The last question is regarding the Wright acquisition and Senate's voting to delay the Biggert-Waters change. Just kind of 2 parts. One, does this impact may be the initial plan for making the acquisition? And two, do you see any change from maybe the private company participation and maybe how that may affect your revenue expectation in the future once the deal was completed?

J. Powell Brown

Sure. Alright, and as you know, in relative to the Biggert-Waters, there was a bill that was passed in the Senate, which has a rate moratorium for 4 years on a rate freeze. And that said, FEMA is pushing to get the rates to an actuarially sound level over the next 5 years. So there is a bill that had been introduced that would -- it's a proposed cap to only increase 25% a year and obviously none of that has really gotten going in the house. So the way we look at it is, and this would give you a little insight probably into the private market as well. Of the total flood policies written out there, this is not Wright statement, of the total flood policies out there, 70% of those have mortgages on them. 20% of all of those are deemed to be subsidized, 20% of the 100%, and 2% of the overall are really, really subsidized, meaning, substantially. And so some people have said well, if FEMA drives the rates up, which there's a sensitivity there, I believe, that they could drive people out of the program. And so, there is a possibility of that. However, if 70% of the policies have mortgages, I believe that the banks will have some input on that, that's number one. Number two, the discussions that I've had personally with leaders of insurance operations who have inquired about this, the interest up to this point has all been around excess flood. And in many cases, when you look at, can the rate charge in the primary versus the rate charge on the excess, that rate maybe 2x to 3x higher in the excess than it is in the primary. The rate, not the premium, but the rate. And so, the way we look at it is this first of all, Wright is the largest servicing -- flood servicing company in the country. They've got a lot of great teammates, which I had the good fortune of meeting a number of them. And so there's a lot of history, there's a lot of data, there's a lot of information that would enable and we would be able to talk to carriers on behalf of our clients to try to put together the best solutions for them. So I've always thought all along that if there was someone that wanted to do an excess flood program, we would be a very interesting candidate because of the platform that we have within programs and our knowledge of programs and obviously, the interface with the National Flood Program and the Write Your Own Program. So we're very pleased with that. And as you know, that's a big part of the acquisition, but that's not all of it. We also have a public entity, several public entity businesses that are in there and the insurance reciprocals in the state of New York, very well-run insurance reciprocals and some national public entity offerings and then another piece, which is just traditional programs like in Arrowhead. So we're very pleased with the opportunity there and equally, if not more pleased, with the teammates. There are all 500 or so teammates at Wright.

Operator

We'll hear next from John Campbell from Stephens Inc.

John Campbell - Stephens Inc., Research Division

Powell, you mentioned renewals in '13 and aggregate were within that normal range. Can you just remind us what the range is for renewals? And then just secondly, does that normal renewal range change much as you look out from your more traditional smaller accounts to some of those new or larger accounts?

J. Powell Brown

Great. Well, the short answer is, in a traditional retail office, and once again, that can be broadly defined, but in a traditional retail office, I would tell you that the renewal retention is usually 92% to 95%. That's a good range. And so what we saw, John, and this you may remember, when we were in the economy and the depths of the slowdown, we said that our renewal retention was very similar, however, excluding insolvencies and acquisitions, but really the implication was insolvencies. And so we did see a lot of businesses go out of business then. We are not seeing that as much today. And so an office that writes a lot of new business typically has quite a good retention ratio. And so think of it this way, whatever business you're in, but in this case, we're selling an intangible, promise to pay for our future covered cause of loss. If you think about it, when you're in the market all the time, you have a sense of what's going on which we are, and so we bring that knowledge to bear, to the benefit of our existing clients and to our new customers. So I think that to your comment in terms of looking forward, I think that, that would be a reasonable expectation relative to the renewal retention, borrowing some unforeseen economic slowdown where there was a repeat of what we just came through.

John Campbell - Stephens Inc., Research Division

Great. And then that renewal range is pretty similar on the larger accounts side as well?

J. Powell Brown

Yes, you remember, larger accounts is going to be -- it can be lumpy. And when I say lumpy, if you have an account that generates several hundred thousand dollars in revenue, if you lose one, it puts up dent in you for that month or that quarter. Conversely, if you lose a $10,000 account in one account, in one office, 1 month, it doesn't ruin the month or affect that month depending on the size of the office as much. So I would tell you that I would be less comfortable in saying that with absolute certainty on large accounts because it's usually very high retention, but when you lose one, that's when it clicks it off that very high retention level. And so, I'm sorry I can't give you the historical for the last 15 years, but as we continue to grow with Beecher and Steve and Dan and their team, I fully anticipate a very good retention ratio and writing a lot of new business.

John Campbell - Stephens Inc., Research Division

Okay, great. And then last question here. Just as best as you guys can, can you just give us a very high-level update on organic growth trends for Arrowhead and Beecher?

J. Powell Brown

Well, the short answer is remember, Beecher is not in our organic growth for another 2 quarters, but it was a nice a growing business and when we announced it and it continues to be relative to an organic growth number. What we said because we did not break it out for large accounts and the other accounts. Cory, didn't we say it was mid-single digit growth?

Cory T. Walker

Yes.

J. Powell Brown

Yes. That's what I thought. We said mid-single digit growth and we continue to feel comfortable about that or more, which we're pleased about. Arrowhead as you know, has enjoyed a lot of success in terms of these 2 large programs that we've gotten from our carrier partners. Don't know if that would ever present an opportunity again, but what we have seen is, there are growth engines inside of those existing programs right now. And so we're very pleased with what Chris Walker and Steve Boyd and Steve Bouker are doing at Arrowhead.

Operator

Mark Hughes from SunTrust has your next question.

Mark D. Hughes - SunTrust Robinson Humphrey, Inc., Research Division

My questions have been answered.

Operator

And at this time, there are no further questions in the queue. Mr. Brown, I'd like to turn the conference back over to you for any closing remarks.

J. Powell Brown

Yes, thank you very much, Lynette. I would like to thank everybody and I wanted to -- you all have sort of sometimes chuckled at me when I've made this comment before, but I'd like to give this comment to our friends in New York City. Yesterday, I understand it was snowing really hard in New York City and as you know, the state of Florida, the economy we believe, is coming back and the state of -- and Florida just became the third largest state by population in the United States. Yesterday afternoon here in our office, it was 84 degrees and sunny. And so the point is, that as people decide to retire and consider and living in a place either on retirement or in a more tax-advantaged state, that might be Florida. So we think it bodes well, so as the growth occurs, and we're starting to see condos being built in Miami and homes and things like that, that's good. I'd just say that because some of you have gigged me a little bit on that before, but I wanted to use that as an actual example yesterday, heavy snow in the city versus beautiful sunny here at 84 degrees. So look forward to talking to everybody again soon. Thank you for your listening and have a great day.

Operator

Again, that does conclude today's teleconference. We thank you all for your participation.

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