Message From Our Chairman and Our Lead Independent Director
DearFellowShareholders:
OnbehalfofBrown&Brown,Inc.’sBoardofDirectors,wearepleasedtoinviteyouto attendourAnnualMeetingofShareholdersonWednesday,May3,2023.Againthisyear, wewillholdthemeetingvirtuallyviaaliveaudiowebcasttomakethemeetingmore accessibletoourshareholdersacrosstheworld,whileminimizingthecostsofaninpersonmeeting.TheattachedNoticeofAnnualMeetingofShareholdersandProxy Statementincludeimportantinformationaboutthematterstobevotedonatthemeeting. TheproxymaterialsfortheAnnualMeeting,whichincludetheProxyStatementand2022 AnnualReport,areavailableonlinetoexpeditereceiptofproxymaterialswhilelowering thecostsandreducingtheenvironmentalimpactofthemeeting.
Fiscal2022wasanothersuccessfulyearforourteam,aswedeliveredstrongfinancial results;executedonourdisciplinedcapitalallocationstrategy,includinggrowingour footprintbothdomesticallyandinternationallyviastrategicacquisitions;andenhanced ourgovernancepractices.
In2022wegrewourtotalannualrevenuestoover$3.5billion,fueledbystrongorganic revenuegrowthinourthreelargestoperatingsegments,andwemaintainedourindustryleadingoperatingmargins,despiteslightmoderationascomparedto2021.Onceagain, wedeliveredgrowthinourcashgeneration,netincomeandearningspershare.
Supportedbyourdisciplinedapproachtomanagingourcapital,wecompleted30highqualityacquisitionsduringtheyearwithcombinedannualrevenuesofapproximately $435million.Amongthesetransactionswasourmilestoneacquisitionoftheinsurance operationsofGlobalRiskPartners(GRP),whichbolsteredourinternationalfootprintby 110+officesand2,100+teammatesintheUnitedKingdomandIreland.Wealsoincreased ourdividendforthe29thconsecutiveyear,returningapproximately$120milliontoour shareholders,andwecompletedasuccessfulpublicdebtoffering,whichincludedour debut30-yearbondissuance,tohelpfinancetheacquisitionsofGRPandcertainother keybusinesses.
OurBoardofDirectorsremainsfocusedonmaintainingandenhancingourgovernance practices,andwetakeprideinlisteningregularlytofeedbackfromourinvestors.Asa resultofongoingconversationswithshareholdersthatbeganinpreviousyears,inearly 2023,weadoptedproxyaccessandalsoenhancedourCorporateGovernancePrinciples toformalizesomeoffactorsweconsiderwhenidentifyingandrecruitingthemosthighly qualifieddirectornominees.
Finally,withgreatsadness,wemourntherecentpassingofourdearfriend,SamBell,who servedusasadirectorfrom1993until2021andthereafterasaDirectorEmeritus.An accomplishedattorneyandformerlegislatorknownforhisdistinctive,thoughtful approach,SamhelpedsteerusthroughnumerousinflectionpointsinourCompany’s history,andwecredithisleadershiptoourgrowthandsuccessovertheyears.
Whetherornotyouattendthevirtualmeeting,weencourageyoutovoteonline,by phoneorbysigningandreturningyourproxycardpromptlyintheenclosedenvelopeto assureyourshareswillberepresentedatthemeeting.Ifyoudecidetoattendthevirtual meetingandvoteyourshareselectronically,youwill,ofcourse,havethatopportunity.
2022OrganicRevenueGrowth
+8.1% ProxyStatementHighlights
1 ProxySummary
4 BoardandCorporate GovernanceMatters
48 ExecutiveCompensationTables
OnbehalfofourBoardofDirectors, ourleadershipteamandour teammates,thankyouforyour investmentinandcommitmentto Brown&BrownInsurance.Welook forwardtoyourparticipationatthe AnnualMeeting.
Sincerely, H.PALMERPROCTOR,JR. LeadIndependentDirector
J.HYATTBROWN ChairmanoftheBoard“Supportedbyourdisciplinedapproachto managingourcapital,wecompleted30high-quality acquisitionsduringtheyearwithcombinedannual revenuesofapproximately$435million.”
Notice of Annual Meeting of Shareholders
TheAnnualMeetingofShareholdersofBrown&Brown,Inc.will beheldvirtuallyonWednesday,May3,2023,at9:00a.m. (EDT),forthefollowingpurposes:
1
Toelecttwelve(12)nomineestotheCompany’sBoard ofDirectors;
FOR eachdirectornominee
2
ToratifytheappointmentofDeloitte&ToucheLLPas Brown&Brown,Inc.’sindependentregisteredpublic accountantsforthefiscalyearendingDecember31,2023; FOR
YourVoteisImportant
3
Toapprove,onanadvisorybasis,thecompensationof namedexecutiveofficers; FOR 4
5
Toconductanadvisoryvoteonthedesiredfrequencyof holdinganadvisoryvoteonthecompensationofnamed executiveofficersand ONEYEAR
Totransactsuchotherbusinessasmayproperlycome beforethemeetingoranyadjournmentthereof.
TheBoardofDirectorshasfixedthecloseofbusinesson February27,2023,astherecorddateforthedeterminationof shareholdersentitledtonoticeofandtovoteatthemeeting andanypostponementsoradjournments.
ByOrderoftheBoardofDirectors ANTHONYM.ROBINSON AssistantSecretaryDaytonaBeach,Florida
March22,2023YouwillbeabletoattendtheAnnualMeetingonline,voteyour shareselectronicallyandsubmityourquestionsduringthe AnnualMeetingviaaliveaudiowebcastbyregisteringathttp:// www.viewproxy.com/bbinsurance/2023/htype.aspby11:59p.m. (EDT)onApril30,2023.Ifyouholdyoursharesbeneficially throughabankorbroker,youmustprovidealegalproxyfrom yourbankorbrokerduringregistration,andyouwillbeassigned aVirtualControlNumberinordertovoteyoursharesduringthe AnnualMeeting.Ifyouareunabletoobtainalegalproxytovote yourshares,youwillstillbeabletoattendtheAnnualMeeting (butwillnotbeabletovoteyourshares)solongasyou demonstrateproofofstockownership.Instructionsonhowto connectandparticipateviatheInternet,includinghowto demonstrateproofofstockownership,arepostedathttp:// www.viewproxy.com/bbinsurance/2023/htype.asp.Formore information,see“AttendingtheVirtualAnnualMeeting”below. Areplayofthewebcastwillbeavailableinthe“Investor Relations”sectionofourwebsite(www.bbinsurance.com) beginningtheafternoonofMay3,2023,andcontinuingfor 30daysthereafter.
HowtoVote
ByInternet
PriortotheAnnualMeeting,youcanvoteyourshares onlineviathewebsiteonyourproxycardorvoting instructionform.DuringtheAnnualMeeting,youcan voteyoursharesonlineatwww.AALvote.com/BRO.See “AttendingtheVirtualAnnualMeeting”formoredetails.
ByTelephone
IntheU.S.orCanada,youcanvoteyoursharestoll-free bycalling1-866-804-9616.
ByMail
Pleasevote,date,signandpromptlyreturntheenclosed proxyintheenvelopeprovidedforthatpurpose,whether ornotyouintendtobepresentatthemeeting.
IMPORTANTNOTICEREGARDINGTHEAVAILABILITYOF PROXYMATERIALSFORTHESHAREHOLDERMEETING TOBEHELDONMAY3,2023
TheProxyStatementandAnnualReporttoShareholdersare availableat:www.viewproxy.com/bbinsurance/2023.
Proxy Summary
Thissummaryhighlightsinformation containedelsewhereinthisProxy Statement.Thissummarydoesnot containalloftheinformationyoushould consider.Youshouldreadtheentire ProxyStatementcarefullybeforevoting.
MeetingInformation
TIMEANDDATE
9:00a.m.(EDT)on
Wednesday,May3,2023
LOCATION
TheAnnualMeetingwillbeheld virtually.Pleaseregisterat http://www.viewproxy.com/ bbinsurance/2023/htype.asp
RECORDDATE Monday,February27,2023
DirectorNominees
J.HYATT BROWN,85 DIrectorSince:1993
J.POWELL BROWN,55 DirectorSince:2007
JAMESS. HUNT,67 DirectorSince:2013
TONI JENNINGS,1 73 Directorsince:2007
TIMOTHYR.M. MAIN,57 Directorsince:2010
LAWRENCEL. GELLERSTEDTIII,66 DirectorSince:2018
JAMESC. HAYS,65 DirectorSince:2018
THEODOREJ. HOEPNER,81 DirectorSince:1994
JAYMINB. PATEL,55 DirectorSince:2023
H.PALMER PROCTOR,JR.,2 54 DirectorSince:2012
CommiteeChair AuditCommittee CompensationCommittee AcquisitionCommittee
1Ms.JenningspreviouslyservedonourBoardofDirectorsfrom1999untilApril2003.
2LeadIndependentDirector
WENDELLS. REILLY,65 DirectorSince:2007
CHILTOND. VARNER,80 DirectorSince:2004
Nominating/CorporateGovernanceCommittee
DirectorSkillsandDiversityHighlights
CorporateGovernanceHighlights
SHAREHOLDERRIGHTS
•Annualelectionofdirectors
•Majorityvotingfordirectors,withdirector resignationpolicy
BOARDINDEPENDENCE
•StrongroleforLeadIndependentDirector
•Periodicrotationofcommitteemembers, committeechairsandLeadIndependent Director
•Executivesessionsateveryin-person Boardmeetingandvirtually,when necessary
GOODGOVERNANCE
•Stronganti-hedgingandanti-pledging provisions
•AnnualBoardandcommitteeself evaluations
•Strongexecutiveanddirectorstock ownershipguidelines
•Robustclawbackpolicy
•Committeemeetingsgenerallyopento, andattendedby,alldirectors
75% ofOurDirectorsAre Independent
8% ofOurDirectors AreEthnically/ RaciallyDiverse
14 AverageTenure ofOurDirectors
17% ofOurDirectors AreFemale
OurStrategyandPerformance
TheCompany’sstrategyisfocusedonprofitablygrowingourtotalandorganicrevenueswhiledeliveringstrong,industry-leading operatingmarginsandcashconversion.Aspartofourgoaltomanagecapitalinthelong-terminterestsofourshareholders,we generallyinvestourearningsinthefollowingways:(1)internallybyhiringnewteammates,expandingourcapabilitiesandinvestingin innovation,(2)makinghigh-qualityacquisitionsand(3)returnstoshareholdersthroughthepaymentofdividendsandperiodicshare repurchases.Aspartofouroverallcapitalallocationstrategy,weremainfocusedonpreservingalevelofflexibilityanda conservativeleverageprofile,whichenablesustodeployourcapitalinwayswebelieveoptimizelong-termshareholdervalue.
HOWWEINVESTOUREARNINGS
1 Hiringnewteammatesand expandingourcapabilities
PerformanceHighlights
2 Makinghigh-quality acquisitions
3 Returnstoshareholders throughthepaymentof dividendsandperiodic sharerepurchases
Infiscal2022,wedeliveredstrongresults,asreflectedinthefollowingfinancialandoperationalhighlights:
Strongtotaland ORGANIC REVENUEGROWTH companywide
MAINTAINED our industry-leadingoperating margins
29TH consecutiveannual dividendincrease,returning approximately $120 MILLION toshareholders
(1) See AnnexA foradditionalinformationregardingOrganicRevenue,OrganicRevenuegrowthandAdjustedEBITDAC Margin,whicharenon-GAAPfinancialmeasures,includingareconciliationtothemostcloselycomparableGAAP financialmeasure.
(2) IncomebeforeincometaxesmarginiscalculatedastheCompany’sincomebeforeincometaxes,asreported,divided bytotalrevenues,asreported.
ROBUSTGROWTH innet cashprovidedbyoperating activities 30STRATEGIC ACQUISITIONS with aggregateannualrevenuesof approximately $435MILLION
Board and Corporate Governance Matters
Proposal1: ElectionofDirectors
AttheMeeting,12directorswillstandforreelectionforatermexpiringatthe2024AnnualMeetingofShareholders.Information abouteachnominee’sexperienceandqualificationsappearsbelow.
AllnomineeshaveconsentedtobeingnamedintheProxyStatementandhaveagreedtoserveifelected.Ifanydirectornominee becomesunableorunwillingtoserve,proxieswillbevotedforanysubstitutenominee(s)astheBoardofDirectors(the“Board”)may nominateontherecommendationoftheNominating/CorporateGovernanceCommittee.
VoteRequired;MajorityVoting;BoardRecommendation
OurBy-Lawsprovideforamajorityvotingstandardforthe electionofourdirectorsinuncontestedelections.Ifthedirector electionwerecontested,thepluralitystandardwouldapply, whichmeansthenomineesreceivingthegreatestnumbersof voteswouldbeelectedtoserveasdirectors.
Tobeelected,anomineemustreceivetheaffirmativevoteof morethan50%ofthevotescast,presenteitherinpersonorby proxy,attheMeeting.Ifanincumbentdirectordoesnotreceive morethan50%ofthevotescastwithrespecttohisorher election,heorshemustpromptlytenderaconditional resignationfollowingcertificationofthevote.TheNominating/ CorporateGovernanceCommitteewillthenconsiderthe resignationandrecommendtotheBoardwhethertoacceptit, andtheBoardwouldbeexpectedtoactonthe recommendationwithin90days.Thereafter,theBoardwill
promptlypubliclydiscloseitsdecisionconcerningwhetherto acceptthedirector’sresignationoffer(and,ifapplicable,the reasonsforrejectingtheoffer).IftheBoarddoesnotacceptthe resignation,thedirectorwillcontinuetoserveuntilthenextannual meetinganduntilasuccessorhasbeenelectedandqualified.If theBoardacceptstheresignation,thentheBoardmayfillany resultingvacancyormaydecreasethesizeoftheBoard.
TheBoardunanimously recommendsavote “FOR” eachofthe 12directornominees
DirectorNominees
DirectorNomineesandQualifications
Setforthbelowiscertaininformationconcerningourcurrentdirectors,allofwhomaredirectornominees.Alldirectorsholdofficefor one-yeartermsoruntiltheirsuccessorsareelectedandqualified.
J.HYATTBROWN
ChairmanoftheBoard
SkillsandExperience
Age: 85
DirectorSince: 1993
Mr.HyattBrownwasourChiefExecutiveOfficerfrom1993to2009andourPresidentfrom1993to December2002andservedasPresidentandChiefExecutiveOfficerofourpredecessorcorporationfrom 1961to1993.HewasamemberoftheFloridaHouseofRepresentativesfrom1972to1980andSpeakerof theHousefrom1978to1980.Mr.BrownservedontheBoardofDirectorsofInternationalSpeedway Corporation,apubliclyheldcompany,until2019,andhepreviouslyservedontheBoardofDirectorsof VeriskAnalytics,Inc.(formerlyInsuranceServicesOffice).Mr.BrownisamemberoftheBoardofTrustees ofStetsonUniversity,ofwhichheisapastChairman,andtheFloridaCouncilof100.Mr.HyattBrown’s sons,J.PowellBrownandP.BarrettBrown,areemployedbyusasPresidentandChiefExecutiveOfficer, andasExecutiveVicePresidentandPresident–RetailSegment,respectively.Hisson,J.PowellBrown, hasservedasadirectorsinceOctober2007.
NomineeAttributes
Mr.HyattBrown’sextensivebusinessandindustryexperience,knowledgeofourcompany,serviceon boardsofotherpubliclytradedcompaniesandprovenleadershipabilityarejustafewoftheattributes thatmakehimuniquelyqualifiedtoserveonandchairourBoard.
Age: 55
DirectorSince: 2007
J.POWELLBROWN DirectorandChiefExecutiveOfficer
SkillsandExperience
Mr.PowellBrownwasnamedChiefExecutiveOfficerinJuly2009.HehasbeenourPresidentsince January2007andwasappointedtobeadirectorinOctober2007.Priorto2007,heservedasoneofour RegionalExecutiveVicePresidentsstartingin2002.Mr.Brownwaspreviouslyresponsibleforoverseeing certainorallpartsofoursegmentsandworkedinvariouscapacitiesthroughouttheCompanysince joiningusin1995.Mr.BrownhasservedontheBoardofDirectorsofWestRockCompany(formerly RockTennCompany),apubliclyheldcompany,sinceJanuary2010.HeisthesonofourChairman,J.Hyatt Brown,andthebrotherofP.BarrettBrown,ourExecutiveVicePresidentandPresident–RetailSegment.
NomineeAttributes
Mr.PowellBrown’sworkinallsegmentsofourCompany,leadershipexperienceateverylevelofour Company,currentpositionasPresidentandChiefExecutiveOfficerandexperienceonotherboardsare amongthequalitiesconsideredinconnectionwithhisnominationforreelectiontotheBoard.
Age: 66
DirectorSince: 2018
CommitteesServed:
•Audit
•Acquisition
LAWRENCEL.GELLERSTEDTIII IndependentDirector SkillsandExperience
Mr.GellerstedthasbeenapartnerofSweetwaterHoldingsCompany,anAtlanta-basedrealestate investmentfirm,sinceMarch2019.HepreviouslyservedasChairmanoftheBoardandChiefExecutive OfficerofCousinsPropertiesIncorporated(Cousins)fromJuly2017untilJanuary2019andasCousins’ ExecutiveChairmanoftheBoardfromJanuary2019untilhisretirementinApril2020.Heservedas PresidentandChiefExecutiveOfficerofCousinsfromJuly2009toJuly2017.Priortothistime,heheld otherrolesatCousins,includingPresidentandChiefOperatingOfficer,ExecutiveVicePresidentandChief DevelopmentOfficer,andSeniorVicePresidentandPresidentoftheOffice/Multi-FamilyDivision.Mr. GellerstedtjoinedCousinsin2005followingtheacquisitionofhisfirm,TheGellerstedtGroup.He currentlyservesasadirectorofGeorgiaPowerCo.,apubliclyheldcompany,andpreviouslyservedasa directorofWestRockCompany(formerlyRockTennCompany)from2000to2017.
NomineeAttributes
Mr.Gellerstedt’sbreadthanddepthofexperiencerunningbusinessesandservingonboardsofboth privatelyheldandpubliclytradedcompanies,aswellashissignificantknowledgeinrealestate development,constructionandprojectmanagement,wereallconsideredinconnectionwithhis nominationforreelectiontotheBoard.
JAMESC.HAYS DirectorandViceChairman
SkillsandExperience
Mr.JamesHaysjoinedusasViceChairmaninNovember2018followingBrown&Brown’sacquisitionofThe HaysGroup,Inc.andcertainofitsaffiliates(collectively,HaysCompanies).Heco-foundedHaysCompaniesin 1994andservedasitsChiefExecutiveOfficerandPresidentandasaDirectorsinceitsinception.Mr.JamesC. HaysservesontheBoardofDirectorsofSkywardSpecialtyInsuranceGroup,Inc.,apubliclyheldcompany.
Age: 65
DirectorSince: 2018
CommitteesServed:
•Acquisition
NomineeAttributes
Mr.JamesHays’extensiveexperiencein,andknowledgeof,theinsuranceindustry,aswellashis impressivetrackrecordasanentrepreneurandinvestorinbusinesses,wereamongthefactors consideredinconnectionwithhisnominationforreelectiontotheBoard.
THEODOREJ.HOEPNER
IndependentDirector
SkillsandExperience
Mr.HoepnerservedasViceChairmanofSunTrustBank,Inc.fromJanuary2000toDecember2004and asViceChairmanofSunTrustBankHoldingCompanyfromJanuary2005untilJune2005,whenhe retired.From1995to2000,Mr.HoepnerwasExecutiveVicePresidentofSunTrustBank,Inc.and ChairmanoftheBoard,PresidentandChiefExecutiveOfficerofSunTrustBanksofFlorida,Inc.
Age: 81
DirectorSince: 1994
CommitteesServed:
•Audit
•Nominating/ Corporate Governance
NomineeAttributes
Mr.Hoepner’syearsofexperienceinthebankingindustry,includingextensiveexperiencein management,makehimavaluableadditiontotheBoard.HepreviouslychairedourAudit,Compensation andAcquisitionCommittees.Theseattributeswereamongthefactorsconsideredinconnectionwithhis nominationforreelectiontotheBoard.
Age: 67
DirectorSince: 2013
CommitteesServed:
•Acquisition
•Audit(Chair)
JAMESS.HUNT IndependentDirector
SkillsandExperience
Mr.Huntheldvariousseniorfinancepositions,includingExecutiveVicePresidentandChiefFinancial Officer,withWaltDisneyParksandResortsWorldwideuntilhisretirementin2012.Duringhisemployment withDisney,hewasamemberoftheBoardsofDirectorsofDisney’soperatingsubsidiariesinHongKong andShanghai,ChinaandDisney’stwoinsurancecompanysubsidiaries.Priortothat,hewasaPartnerwith Ernst&Young.Mr.HuntservesontheBoardofDirectorsofSubwayWorldwide,Inc.,aprivatecompany andtheworld’slargestsingle-brandrestaurantchain;theBoardofTrusteesofPennMutualLife,amutual lifeinsurancecompany,whereheisamemberoftheInvestmentCommitteeandChairoftheAudit Committee;andtheBoardofDirectorsoftheNemoursFoundation,whereheisamemberofthe NominatingandGovernanceCommitteeandChairmanoftheAudit,FinanceandComplianceCommittee. Mr.Huntpreviouslyservedasadirectoroftwootherpubliclytradedcompanies–CaesarsEntertainment Corporation,wherehewasChairmanoftheBoard,andTheSt.JoeCompany,wherehewasamemberof theCompensationCommitteeandChairoftheAuditCommittee.MrHuntisamemberoftheStandards andEmergingIssuesAdvisoryGroup,ofthePublicCompanyAccountingOversightBoard,towhichhe wasappointedin2022.HeisaCertifiedPublicAccountant(CPA)andaNationalAssociationofCorporate Directors-designatedBoardLeadershipFellow.
NomineeAttributes
Mr.Hunt’sextensiveexperienceinexecutiveandseniorexecutivefinance,strategyandrelated operationalroles,financialexpertiseandsignificantinternationalexperience,alongwithhispastserviceas amemberoftheCompensationCommittee,werefactorsconsideredinconnectionwithhisnominationfor reelectiontotheBoard.
TONIJENNINGS
IndependentDirector
SkillsandExperience
Age: 73
DirectorSince: 2007
CommitteesServed:
•Compensation
•Nominating/ Corporate Governance
Ms.JenningsservesasChairmanoftheBoardofJackJennings&Sons,Inc.,acommercialconstruction firmbasedinOrlando,Florida,andJennings&Jennings,Inc.,anarchitecturalmillworkfirmbasedin Orlando,Florida.SheservedasPresidentofJackJennings&Sons,Inc.from1982until2003.Ms. JenningspreviouslyservedonourBoardofDirectorsfrom1999untilApril2003.From2003through 2006,Ms.JenningsservedasLieutenantGovernoroftheStateofFlorida.Ms.Jenningswasamemberof theFloridaSenatefrom1980to2000andPresidentoftheFloridaSenatefrom1996to2000.Sheserved intheFloridaHouseofRepresentativesfrom1976to1980.SheisamemberoftheBoardofDirectorsof Mid-AmericaApartmentCommunities,Inc.,apubliclytradedrealestateinvestmenttrust(REIT),andthe FoundationforFlorida’sFuture.Ms.JenningspreviouslyservedontheBoardofDirectorsofNextEra Energy,Inc.,apubliclyheldcompany,until2021.In2019,Ms.JenningswasnamedoneoftheMost InfluentialCorporateDirectorsbyWomenInc.magazine.
NomineeAttributes
Ms.Jennings’experienceasownerandoperatorofasuccessfulbusiness,andheryearsofserviceinthe legislativeandexecutivebranchesoftheStateofFlorida,alongwithherpastserviceasamemberofthe AuditCommitteeandtheChairoftheCompensationCommittee,arefeaturesconsideredinconcluding thatsheshouldcontinuetoserveasadirectoroftheCompany.
Age: 57
DirectorSince: 2010
CommitteesServed: •Acquisition(Chair)
TIMOTHYR.M.MAIN
IndependentDirector
SkillsandExperience
Mr.MainhasservedasHeadofInvestmentBankingEMEA(UK,Europe,MiddleEast&Africa)atBarclays PlcsinceOctober2022andfromSeptember2016untilOctober2022asGlobalHeadoftheFinancial InstitutionsGroup.FromOctober2011untilSeptember2016,hewasaSeniorManagingDirectorof EvercorePartners.PriortojoiningEvercore,Mr.MainworkedatJPMorganChase,aglobalinvestment bank,for23years,mostrecentlyasaManagingDirectorandHeadoftheFinancialInstitutionsGroup.
NomineeAttributes
Mr.Main’sextensiveexperiencewithcomplexfinancialtransactionsandacquisitions,aswellashisbroad knowledgeoftheinsuranceindustryacquiredthroughouthiscareer,arekeycomponentsconsideredin nominatingMr.MainforreelectiontotheBoard.
JAYMINB.PATEL
IndependentDirector
SkillsandExperience
Age: 55
DirectorSince: 2023
Mr.PatelhasservedastheExecutiveChairmanofPerennialClimateInc.,aleadingplatformmeasuring, reportingandverifyingsoil-basedcarbonremovalandclimate-smartagriculture,sinceMarch2019.From March2015toAugust2018,hewasChiefExecutiveOfficerandadirectorofBrightstarCorporation,a globalwirelessdeviceservicescompanybackedbySoftbank(duringthattime).From1994toMarch2015, Mr.PatelservedinvariousexecutiveandfinancialleadershiprolesatGTECH(nowIGT),including PresidentandChiefExecutiveOfficerofGTECHCorporation,from2007to2015,andSeniorVice PresidentandChiefFinancialOfficerofthepubliclytradedGTECHHoldingsCorporationfrom2000to 2006.Mr.PatelhasservedasadirectorofBally’sCorporationsinceJanuary2021andSpartanNash CompanysinceFebruary2022.HepreviouslywasadirectorofWillisTowersWatsonandClarim AcquisitionCorp.,aspecial-purposeacquisitioncompany,wherehealsoserveditsPresidentandChief FinancialOfficerfromJanuary2021untilDecember2022.
NomineeAttributes
Mr.Patel’sextensivebackgroundoperatingbusinessesinregulatedindustries,combinedwithhisunique combinationofinternationalexperience,insuranceknowledgeandfinancialacumen,areamongthe attributesthatmakehimwellqualifiedtoserveonourBoard.
Age: 55
DirectorSince: 2012
CommitteesServed: •Nominating/ Corporate Governance(Chair)
H.PALMERPROCTOR,JR. LeadIndependentDirector SkillsandExperience
Mr.ProctorhasservedasChiefExecutiveOfficerofAmerisBancorp,apubliclyheldcompany(“Ameris”), andAmeris’swhollyownedbanksubsidiary,AmerisBank,sinceJuly2019.Healsoservesasadirectorof Ameris.HepreviouslyservedasPresidentandChiefExecutiveOfficerandaDirectorofFidelityBankand itsholdingcompany,FidelitySouthernCorporation,untiltheirmergerwithAmerisBankandAmeris, respectively,inJuly2019.HeisamemberoftheAdvisoryBoardofAlliedFinancial.Mr.Proctorpreviously servedasChairmanoftheGeorgiaBankersAssociation.
NomineeAttributes
Mr.Proctor’sbusinessexperience,leadershipabilitiesandmanagementexpertise,alongwithhispast serviceasamemberoftheAuditandCompensationCommitteesandChairoftheAcquisitionCommittee, werefactorsconsideredinconnectionwithhisnominationforreelectiontotheBoard.
Age: 65
DirectorSince: 2007
CommitteesServed:
•Compensation (Chair)
•Nominating/ Corporate Governance
WENDELLS.REILLY IndependentDirector SkillsandExperience
Mr.ReillyisManagingPartnerofGrapevinePartners,LLC,ofAtlanta,Georgia,aprivateinvestment company.HeisalsoaGeneralPartnerofPeachtreeEquityPartnersII.Previously,hewasChairmanof BermanCapitalAdvisors,aswellasChairmanandChiefExecutiveOfficerofGrapevineCommunications, LLC,agroupoflocaltelevisionstations.Earlier,hewastheChiefFinancialOfficerofTheLamar CorporationandHaasPublishingCompanies.Mr.ReillycurrentlyservesontheBoardofDirectorsof LamarAdvertisingCompany,apubliclytradedcompany.HeisTrustee Emeritus ofEmoryUniversityandis pastChairoftheGovernanceCommitteeofEmoryUniversity’sBoardofTrustees,andheservesonthe BoardofTrusteesofTheCarterCenterandtheBoardofDirectorsoftheInternationalCenterfor Journalists.Mr.ReillyisagraduateofEmoryUniversityandearnedhisMBAinFinancefromVanderbilt University.
NomineeAttributes
Mr.Reilly’sbusinessbackgroundandexperienceenhancehisabilitytoanalyzeandcontributevaluable anduniqueinsightsonmatters,includingthoserelatingtocapitalstructure,financingandacquisition structure.Mr.Reilly’scontributionsasapastChairmanofourAcquisitionCommitteeandNominating/ CorporateGovernanceCommittee,aswellashispastserviceasLeadIndependentDirector,werealso takenintoconsiderationinconnectionwithhisnominationforreelectiontotheBoard.
CHILTOND.VARNER IndependentDirector
SkillsandExperience
Age: 80
DirectorSince: 2004
CommitteesServed:
•Compensation
•Nominating/ Corporate Governance
Ms.VarnerhasbeenamemberofthelawfirmofKing&SpaldinginAtlanta,Georgia,since1976andwas partnerfrom1983to2017.SinceJanuary2018,shehasservedasSeniorCounselatKing&Spalding.A graduateofSmithCollege,whereshewasnamedtomembershipinPhiBetaKappa,andEmoryUniversity SchoolofLaw,Ms.VarnerwashonoredwithEmoryUniversitySchoolofLaw’sDistinguishedAlumni Awardin1998.In2001,theNationalLawJournalprofiledMs.Varnerasoneofthenation’stoptenwomen litigators.Withmorethan30yearsofcourtroomexperience,shespecializesindefendingcorporationsin productliability,commercialandothercivildisputes.ShewasaTrusteeofEmoryUniversityfrom1995until 2014andcurrentlycontinuesherservicesasaTrustee Emeritus. In2019,Ms.Varnerwasnamedoneof theMostInfluentialCorporateDirectorsbyWomenInc.magazine.
NomineeAttributes
Asapracticingattorneyatoneofthenation’spremierlawfirmsandacounselortobusinesses,their directorsandmanagementconcerningriskandriskcontrol,Ms.Varnerbringsadepthofexperienceanda wealthofuniqueandvaluableperspectivestoourBoard.Ms.VarnerpreviouslychairedtheCompensation CommitteeandservedasourLeadIndependentDirector.
DirectorsEmeritus
Fromtimetotime,ourBoardmaydesignateoneormoreofitsformerdirectorsas“DirectorEmeritus”basedontheirpast meritoriousservicetotheCompany.OurDirectorsEmeritusareentitledtoattendBoardmeetingsinanadvisorycapacity,butdonot voteonBoardmatters,andtheyreceivecompensationandfeesasmaybedeemedappropriatebytheCompanyinviewoftheir servicestotheCompany.
HUGHM.BROWN
DirectorEmeritus
SkillsandExperience
Age: 87
Directorfrom: 2004until2023
Mr.Brown,whoisunrelatedtoMr.HyattBrownandMr.PowellBrown,foundedBAMSI,Inc.,afull-service engineeringandtechnicalservicescompany,in1978andservedasitsPresidentandChiefExecutive Officeruntilhisretirementin1998.In2017and2021,Mr.BrownwasnamedoneoftheMostInfluential BlackCorporateDirectorsbySavoyMagazine.TheBoarddesignatedMr.HughBrownasaDirector EmeritusoftheCompany,effectiveimmediatelyfollowingthe2023AnnualMeetingofShareholders.
DirectorIndependence
TheNewYorkStockExchange(“NYSE”)listedcompanymanualrequiresdirectorstosatisfycertaincriteriatobedeemed “independent.”TheBoardappliesthesestandardsindeterminingwhetheranydirectorhasamaterialrelationshipwiththeCompany thatwouldimpairhisorherindependence,asdiscussedbelow.AsrequiredbytheNYSElistedcompanymanual,theBoard considersallmaterialrelevantfactsandcircumstancesknowntoitinmakinganindependencedeterminationfromthestandpointsof boththedirectorandpersonsororganizationswithwhichthedirectorhasanaffiliation.
TheBoardhasconsideredtheindependenceofournomineesinlightofthese NYSEstandardsandhasaffirmativelydeterminedthatthefollowing9ofthe12 directornomineeshavenomaterialrelationshipwithusotherthanserviceasa director,andarethereforeindependent:LawrenceL.GellerstedtIII;TheodoreJ. Hoepner;JamesS.Hunt;ToniJennings;TimothyR.M.Main;JayminB.Patel;H. PalmerProctor,Jr.;WendellS.ReillyandChiltonD.Varner.Thefollowingfactors wererelevanttotheBoard’sdeterminationofindependence:
•TheBoardconsideredtherelationshipsdescribedbelowin“RelationshipsandTransactionswithAffiliatedParties.”
•Ineachcase,theBoardconsideredthefactthatfromtimetotime,intheordinarycourseofbusinessandonusualcommercial terms,weandoursubsidiariesmayprovideservicesinourcapacitiesasinsuranceintermediariestovariousdirectorsofthe Company,andtoentitiesinwhichvariousdirectorsoftheCompanyhavedirectorindirectinterests.
•InthecaseofMr.Main,theBoardconsideredthefactthatMr.MainisHeadofInvestmentBankingEMEA(UK,Europe,MiddleEast &Africa)atBarclaysPlc.TheBoardconsideredthat(i)Mr.Main’sownershipinterestinBarclaysdoesnotexceedtenpercent,and heisnotanexecutiveofficerofBarclays;(ii)therearenoexistingprojectsortransactionsbetweenBarclays’investmentbanking division(i.e.,thedivisioninwhichMr.Mainholdshisposition)andtheCompany;(iii)inhisroleatBarclays,Mr.Main(a)isnot permittedtocovertheinsurancebrokeragesector,(b)isrequiredtorecusehimselffromanyconversationswithclientsorBarclays employeesregardingtheinsurancebusinesssector,(c)isprohibitedfromappearingasthecoveragepersonfortheCompanyon anyBarclaysbooks,recordsorsystems,andmaynotsuperviseanyactivityinrelationtotheCompanyortheinsurancebrokerage sectorgenerallyand(d)isprohibitedfromsellingtheCompany’scommonstockwhileitisonBarclays’“watch”or“restricted”list, exceptinaccordancewithBarclays’personalinvestmentpolicyand(iv)duringeachyearbetween2016and2022,theinterest amountstheCompanypaidtoBarclaysinconnectionwiththeCompany’sborrowingsfromBarclayswerelessthanonepercentof theCompany’sannualrevenue,andlessthanonepercentofBarclays’sannualrevenue.
•InthecaseofMr.Hoepner,theBoardconsideredthefactthatheisaninvestorinabankholdingcompanyinwhichMessrs.Hyatt BrownandPowellBrownalsoareinvestors,inwhichabankaccountwithabalanceofapproximately$1.6millionwasmaintained bytheCompanyin2022andforwhichasubsidiaryoftheCompanyprovidesinsuranceservicesandconcludedthatthe investment,whichintheaggregatecomprisedlessthanfivepercentoftheoutstandingstockofthebankholdingcompany,was notmaterial.
•InthecaseofMr.Proctor,theBoardconsideredthefactthattheCompanymaintainsamoneymarketaccountwithabalanceof approximately$10.2millionwithAmerisBank,ofwhichMr.ProctorisChiefExecutiveOfficer,aswellasChiefExecutiveOfficer andadirectorofitsparentcompany,andtobothofwhichasubsidiaryoftheCompanyprovidesinsuranceservices,and concludedthattherelationshipwasnotmaterial.
•InthecaseofMessrs.ProctorandGellerstedt,theBoardconsideredthefactthatMessrs.HyattBrown,PowellBrownandProctor areinvestorsinafundmanagedbyanentityinwhichMr.Gellerstedtisapartnerandconcludedthattheamountsinvestedwere notmaterialtoMessrs.HyattBrown,PowellBrownorProctor,ortotheentityinwhichMr.Gellerstedtisapartner.
DirectorNomineeSelectionProcess
TheNominating/CorporateGovernanceCommitteeisresponsibleforidentifyingandevaluatingdirectornomineesandfor recommendingtotheBoardaslateofnomineesforelectionateachAnnualMeetingofShareholders.TheCommitteehasnot established“minimumqualifications”fordirectornomineesbecauseitbelievesthatrigid“minimumqualifications”mightprecludethe considerationofotherwisedesirablecandidatesforelectiontotheBoard.
•theneedordesirabilityofmaintainingorexpandingthesizeoftheBoard;
•independence;
•credentials,including,withoutlimitation,businessexperience,technologyacumen, experiencewithintheinsuranceindustry,educationalbackground,professional training,designationsandcertifications;
•interestin,andwillingnesstoserveon,theBoard;
1
TheCommitteeevaluates directorcandidatesbased onanumberoffactors, including:
•abilitytocontributebywayofparticipationasamemberofBoardcommittees;
•financialexpertiseandsophistication;
•basicunderstandingoftheCompany’sprincipaloperationalandfinancialobjectives, plansandstrategies,resultsofoperationsandfinancialcondition,andrelative standinginrelationtotheCompany’scompetitorsand
•willingnesstocommitrequisitetimeandattentiontoBoardservice,including preparationforandattendanceatregularquarterlymeetings,specialmeetings, committeemeetingsandperiodicBoard“retreats”anddirectoreducationprograms.
2 Boarddiversity
TheCommitteeactivelyseeksdiverse,highlyqualifiedcandidatesformembershipon theBoard,includinggender-diversecandidatesandcandidatesthatareraciallyor ethnicallydiverse,aswellascandidateswithdiversebackgrounds,pointsofview, experienceandcredentials.
Sourcesforidentifying potentialBoardmembers
TheCommitteeandtheBoardconsideravarietyofsourceswhenidentifying individualsaspotentialBoardmembers,includingotherenterpriseswithwhichcurrent Boardmembersareorhavepreviouslybeeninvolvedandthroughwhichtheyhave becomeacquaintedwithqualifiedcandidates.TheCompanydoesnotpayanythird partyafeetoassistintheidentificationorevaluationofcandidates.
TheCommitteewillconsiderdirectornominationsthataresubmittedinwritingby shareholdersinaccordancewithourproceduresforshareholderproposals.See “ProposalsofShareholders”below.Suchproposalsmustcontainallinformationwith respecttoaproposedcandidateasrequiredbytheSEC’sproxyrules,mustaddressthe mannerinwhichtheproposedcandidatemeetsthecriteriadescribedabove,andmustbe accompaniedbytheconsentofsuchproposedcandidatetoserveasadirector,ifelected.
TheBoard’sRoleandResponsibilities Overview
TheroleoftheBoardofDirectorsistooverseetheaffairsoftheCompanyforthebenefitofourshareholdersandother constituencies,includingourteammates,customers,suppliers,carrierpartnersandthecommunitiesinwhichwedobusiness.The BoardstrivestopropelthesuccessandcontinuityoftheCompany’sbusinessthroughtheselectionofqualifiedmanagementand throughongoingmonitoringdesignedtoassuretheCompany’sactivitiesareconductedinalegal,responsibleandethicalmanner.
RiskOversight
TheBoardanditscommitteesactivelyoverseethemanagementoftheCompany’srisks.Theyreceiveregularreportsfromsenior managementonareasofmaterialrisktotheCompany,includingoperational,financial,strategic,acquisition-related,technological, competitive,reputational,legalandregulatoryrisks.
TheBoardbelievesriskoversightisaresponsibilityoftheentireBoard,anditdoesnotlooktoanyindividualdirectororcommittee toleaditindischargingthisresponsibility.However,ourBoardcommitteeshavespecificoversightresponsibilitiesrelatingtocertain aspectsofriskmanagement:
OurAuditCommittee
Regularlyreviewsourfinancial statements,certainfinancial disclosures,ourfinancialandother internalcontrols,andregularly receivesreportsfrommanagement, includingtheCompany’sChief InformationOfficerandthe Company’sChiefInformationSecurity Officer,ontheCompany’s cybersecurityrisks.Additionally,our InternalAuditTeamandindependent registeredpublicaccountants regularlyidentifyanddiscusswiththe Committeerisksandrelated mitigationmeasuresthatmayarise duringtheirregularreviewsofthe Company’sfinancialstatementsand auditwork,asapplicable.
OurCompensationCommittee
Regularlyreviewsourexecutive compensationpoliciesandpractices, andotherrelatedemployeebenefits, andtherisksassociatedwitheach.
Webelieveourcompensation policiesandprinciples,inconjunction withourinternaloversightofthose policiesandprinciples,reducethe possibilityofimprudentrisk-taking. Wedonotbelieveourcompensation policiesandprinciplesare reasonablylikelytohaveamaterial adverseeffectontheCompany.
OurNominating/Corporate GovernanceCommittee
Considersissuesassociatedwiththe independenceofourBoard, corporategovernanceandpotential conflictsofinterest.Additionally,the Committeeoverseesour environmental,socialand governance(ESG)policiesand initiatives.
Whileeachcommitteeisresponsibleforevaluatingcertainrisksandoverseeingthemanagementofsuchrisks,theentireBoardof Directorsisregularlyinformedthroughattendanceatcommitteemeetingsorthroughcommitteereportsaboutsuchrisks.
WebelievetheBoard’sapproachtoriskoversight,asdescribedabove,helpsassessvariousrisks,makeinformeddecisionsand proactivelyevaluateemergingrisksfortheCompany.
Further,ourFinancialInternalAuditTeamisresponsiblefortheperformanceoftheinternalauditfunctionandfortestingcompliance withpoliciesandproceduresrelatingtoourfinancialreportingandcontrolenvironment.OurInformationTechnologyAuditTeamis responsiblefortestingoursystemsanddatasecurity,aswellasinformationtechnologycontrols.OurInsuranceOperationsAudit Teamisresponsibleforthetestingofouroperationalinternalcontrols.OurTeamResourcesAuditTeamtestscompliancewith internalguidelinesandapplicableemploymentlawrequirementsrelatingtocompensationandhumanresourcesandregularly assessesrisksandpotentialrisksassociatedwithouroperations.Theseteamsevaluateandsupporttheduediligenceand integrationofouracquisitionsandreport,throughourDirectorofInternalAudit,toourAuditCommitteequarterly,unlessmore frequentreportsarenecessary.OurDirectorofInternalAuditregularlyreportsdirectlytotheAuditCommitteeandregularlyreviews theauditsofourbusinessesandrelatedcontrolenvironment.
OurGeneralCounselisprimarilyresponsibleforenterpriseriskmanagementfortheCompany.Onaquarterlybasis,ourGeneral CounselpresentsanenterpriseriskmanagementanalysistoourAuditCommittee,whichincludesanassessmentofoverallrisk,risk mitigationandeliminationpriorities,anonymousethicshotlinereportsandclaimsliabilities.Also,ourChiefExecutiveOfficerand
GeneralCounselannuallydeliveradetailedpresentationtoourBoardofDirectorsaboutrisksassociatedwithourbusiness.This presentationincludesextensivediscussion,analysisandcategorizationofriskswithrespecttothelikelihoodofoccurrence,severity andfrequency,aswellasconsiderationofmitigatingfactorsthatcontributetolesseningthepotentialadverseconsequences associatedwithsuchrisks(whichcannever,inanybusiness,befullyeliminated).Thispresentationispreparedwithinputfromthe Company’sseniorleaders,aswellasourChiefInformationSecurityOfficer.
TalentManagementandSuccessionPlanning
TheChairmanoftheBoard,aswellasourChiefExecutiveOfficer,routinelydiscusswiththeBoard,generallyinexecutivesessions, theCompany’smanagementdevelopmentandsuccessionactivities.
CommunicationwithDirectors
Interestedparties,includingshareholders,maycommunicatewithourBoardofDirectors,withspecifiedmembersorcommitteesof ourBoard,withnon-managementdirectorsasagrouporwiththeLeadIndependentDirector,H.PalmerProctor,Jr.,bysending correspondencetoourCorporateSecretaryat300NorthBeachSt.,DaytonaBeach,Florida32114,andspecifyinginsuch correspondencethatthemessageisforourBoardoroneormoreofitsmembersorcommittees.Communicationswillberelayedto directorsnolaterthanthenextregularlyscheduledquarterlymeetingoftheBoardandBoardCommittees.
CorporateGovernancePrinciples;CodeofBusinessConductandEthics;CodeofEthicsforChiefExecutive OfficerandSeniorFinancialOfficers
TheBoardofDirectorshasadoptedCorporateGovernancePrinciples,aCodeofBusinessConductandEthicsandaCodeofEthics forChiefExecutiveOfficerandSeniorFinancialOfficers,thefulltextofeachofwhichcanbefoundinthe“CorporateGovernance” sectionofthe“InvestorRelations”tab,under“KeyDocuments”onourwebsite(www.bbinsurance.com),andeachofwhichis availableinprinttoanyshareholderwhorequestsacopybywritingtoourCorporateSecretaryat300NorthBeachSt.,Daytona Beach,Florida32114.
RelatedPartyTransactionsPolicy
UnderourwrittenRelatedPartyTransactionsPolicy,ourGeneralCounsel(orourChiefExecutiveOfficeriftherelatedpartyisour GeneralCounseloranimmediatefamilymemberofourGeneralCounsel)willreviewanypotentialRelatedPartyTransactionto determineifitissubjecttothePolicy.Ifso,thetransactionwillbereferredtotheNominating/CorporateGovernanceCommitteefor approvalorratification.If,however,theGeneralCounseldeterminesthatitisnotpracticaltowaituntilthenextmeetingofthe Nominating/CorporateGovernanceCommittee,theChairoftheNominating/CorporateGovernanceCommitteeshallhavethe authoritytoactonbehalfoftheNominating/CorporateGovernanceCommitteeonwhethertoapproveorratifyaRelatedParty Transaction(unlesstheChairoftheNominating/CorporateGovernanceCommitteeisaRelatedPartyintheRelatedParty Transaction).IndeterminingwhethertoapproveorratifyaRelatedPartyTransaction,theNominating/CorporateGovernance Committee(or,asapplicable,theChairoftheNominating/CorporateGovernanceCommittee)willconsider,amongotherthings,the benefitsofthetransactiontotheCompany,thepotentialeffectofenteringintothetransactiononadirector’sindependence,the availabilityofothersourcesfortheproductsorservices,thetermsofthetransactionandthetermsavailabletounrelatedthird partiesgenerally.TheNominating/CorporateGovernanceCommitteehasauthoritytoadministerthePolicyandtoamenditas appropriatefromtimetotime.
ForpurposesofourPolicy,“RelatedPartyTransactions”aretransactionsinwhichtheCompanyisaparticipant,theamountinvolved exceeds$120,000whenallsuchtransactionsareaggregatedwithrespecttoanindividual,anda“relatedparty”had,hasorwill haveadirectorindirectmaterialinterest.“Relatedparties”areourdirectors(includinganynomineesforelectionasdirectors),our executiveofficers,anyshareholderwhobeneficiallyownsmorethanfivepercent(5%)ofouroutstandingcommonstock,andany firm,corporation,charitableorganizationorotherentityinwhichanyofthepersonslistedaboveisanofficer,generalpartneror principalorinasimilarpositionorinwhichthepersonhasabeneficialownershipinterestoftenpercent(10%)ormore.
RelationshipsandTransactionswithAffiliatedParties
Zambezi,LLC(“Zambezi”),aFloridalimitedliabilitycompanywhoseMembersandManagersareJ.HyattBrownandhiswife,Cici Brown,ownsaCessnaCitationSovereignaircraft(the“Aircraft”),whichtheCompanyleasespursuanttoanAircraftDryLease Agreement(the“Agreement”)withZambezi.In2022,theCompanypaidZambezi$157,865undertheAgreementtoleasethe Aircraft.PursuanttotheAgreement,subjecttoavailabilityoftheAircraftandotherspecifiedconditions,Mr.HyattBrownhastheright tousetheAircraftforpersonaluse,subjecttoreimbursementpaidtotheCompanyatthemaximumratepermittedbylaw.Mr.Hyatt Brownpaid$246,904totheCompanyforsuchpersonaluseoftheAircraftin2022.TheCompanyandZambezialsoarepartytoan
AirsideSub-LeaseAgreementandServicesAgreement,pursuanttowhichZambezileaseshangarspacefromtheCompanyand pursuanttowhichpilotsandmechanicsemployedbytheCompanyareavailabletopilotandservicetheAircraftasprovidedtherein. In2022,ZambezipaidtheCompany$19,937fortheleaseofhangarspacefortheAircraftand$291,087fortheservicesofpilotsand mechanicsemployedbytheCompanyandforparts,equipmentandsuppliesrelatedtotheAircraft’smaintenanceandoperation.
OnJuly27,2020,theCompany,HaysCompanies,Inc.,aFloridacorporationf/k/aBBHG,Inc.andwhollyownedsubsidiaryofthe Company(“Buyer”or“HCI”),TheHGGroup,Inc.,f/k/aTheHaysGroup,Inc.,aMinnesotacorporation(“THG”),TheHaysGroupOf WisconsinLLC,aMinnesotalimitedliabilitycompany(“THGW”),TheHaysBenefitsGroup,LLC,aMinnesotalimitedliabilitycompany (“THBG”),PlanIT,LLC,aMinnesotalimitedliabilitycompany(“PlanIT”),TheHaysBenefitsGroupofWisconsin,LLC,aMinnesota limitedliabilitycompany(“THBGW”),andTheHaysGroupofIllinois,LLC,aMinnesotalimitedliabilitycompany(“THGI”);andClaims ManagementofMissouri,LLC,aMissourilimitedliabilitycompany(dbaMMMAClaimsManagement)(“MMMA,”andtogetherwith THG,THGW,THBG,PlanIT,THBGWandTHGI,eacha“Seller”andcollectively,the“Sellers”),andTHG,astheSellers’Representative (the“Sellers’Representative”),enteredintoanamendment(the“Amendment”)totheassetpurchaseagreementdatedOctober22, 2018(the“PurchaseAgreement”),pursuanttowhichBuyerpurchasedcertainassetsandassumedcertainliabilitiesoftheSellers (the“Acquisition”).ThePurchaseAgreementprovidedthattheSellersmayreceiveadditionalconsiderationfromBuyer,ifearned,in theformofearn-outpayments(the“Earn-OutPayments”)intheaggregateamountofupto$25,000,000incashoverthreeyears, subjecttocertainconditionsandthesuccessfulachievementofaverageannualEBITDAcompoundannualgrowthratetargetsfor theacquiredbusinessduring2019,2020and2021(the“Earn-OutPeriod”).PursuanttotheAmendment,thepartiestothePurchase Agreementagreedthat(a)basedonthefinancialperformanceoftheacquiredbusinessfromtheperiodfromJanuary1,2019, throughJune30,2020,BuyerdeterminedthattheacquiredbusinessachievedsufficientaverageannualEBITDAthatthecalculated Earn-OutPaymentswillexceedthemaximumEarn-OutPaymentsamountof$25,000,000,(b)theSellersweredeemedtohave achievedthemaximumEarn-OutPaymentsof$25,000,000asofthedateoftheAmendment,(c)theoperationalcovenantsofBuyer withrespecttotheoperationoftheacquiredbusinessduringtheremainderoftheEarn-OutPeriodwereterminatedand(d)theEarnOutPaymentsof$25,000,000wouldbepaidinaccordancewiththePurchaseAgreementinthefirstquarterofcalendaryear2022. Mr.JamesHays,whoisoneofourdirectorsandalsoservesasViceChairmanoftheCompany,hadtherighttoreceivecash considerationintheamountofapproximately$5,200,000uponpaymentoftheEarn-OutPaymentspursuanttotheAmendment.In March2022,theCompanypaidtoSellerstheEarn-OutPaymentsof$25,000,000.
TheownersofTheHaysFinancialGroup,Inc.(“HFG”),aMinnesotacorporationandregisteredinvestmentadvisor,includeBrian Whinnery,whoistheson-in-lawofMr.JamesHays,andwhoindividuallyownsapproximately15%oftheoutstandingstockofHFG, andTHG,whichownsapproximately65%oftheoutstandingstockofHFGandofwhichMr.JamesHaysindividuallyowns approximately21%oftheoutstandingstock.During2022,HFGpaidHCI,asubsidiaryoftheCompany,approximately$360,137in connectionwithbusinessreferralsmadefromHCItoHFG.
During2022,TGHpaidtoHCI,asubsidiaryoftheCompany,approximately$108,000inrentpaymentsforofficespaceusedbyHCI.
JeffreyL.Hays,whoisthesonofMr.JamesHays,wasthemajorityownerofRLAInsuranceIntermediaries,LLC,awholesale insurancebrokeragefirmheadquarteredinBoston,Massachusetts(“RLA”).EffectiveMarch1,2020,PeachtreeSpecialRiskBrokers, LLC,awhollyownedsubsidiaryoftheCompany(“Peachtree”),acquiredsubstantiallyalloftheassets,andassumedcertainliabilities, ofRLA,pursuanttothatcertainassetpurchaseagreement(the“AssetPurchaseAgreement”),byandamongtheCompany, Peachtree,RLAandRLA’sindividualowners.PursuanttotheAssetPurchaseAgreement,PeachtreepaidtoRLAaninitialpurchase priceof$50,725,000attheclosingofthetransaction,andanadditionalamountofupto$22,500,000maybepaidbasedonthe performanceoftheacquiredassetsduringthethree-yearperiodfollowingtheeffectivedateofthetransaction.TheAssetPurchase Agreementincludescertainfive-yearnon-competitionandnon-solicitationcovenantsapplicabletoMr.JeffreyHays.
Inaddition,effectiveasofMarch1,2020,Mr.JeffreyHaysbecameemployedbyPeachtreeasanExecutiveVicePresidentandoffice leaderofournew“RLAInsuranceIntermediaries”office,andheenteredintoanEmploymentAgreementwithPeachtreethat providesforpaymentofthefollowingcompensationforathree-yeartermofemployment:(i)anannualbasesalaryof$400,000, (ii)anannualbonusbasedupontheperformanceoftheRLAInsuranceIntermediariesofficeand(iii)additionalcommissionsbased uponthegrowthofhisindividualbookofbusiness.Duringtheinitialthree-yearemploymentterm,Peachtreemayonlyterminatethe EmploymentAgreement“withcause.”Mr.JeffreyHays’EmploymentAgreementincludesaprohibitionondirectlyorindirectly solicitingorservicingourcustomersorsolicitingouremployeestoleavetheiremploymentwithus.For2022,Mr.JeffreyHays receivedcompensationof$502,053,consistingof$489,853forservicesrenderedin2021and$12,200inmatchingcontributions madebytheCompanytohis401(k)Planaccount.
AndrewM.Walker,whoisthesonofChrisL.Walker,isemployedbyasubsidiaryoftheCompanyasanunderwriterinthe Company’sSanDiego,Californiaofficeandreceivedcompensationof$252,094,consistingof$242,014forservicesrenderedin 2022,$576incashdividendspaidonrestrictedstockgrantedunderour2010StockIncentivePlan(“2010SIP”)andour2019Stock IncentivePlan(“2019SIP”)forwhichconditionsofvestingotherthantime-basedconditionshavebeensatisfied,and$9,504in matchingcontributionsmadebytheCompanytohis401(k)Planaccount.Inaddition,Mr.AndrewWalkerreceivedgrantsunderour 2019SIPinFebruary2022andFebruary2023withgrantdatefairvaluesof$14,948and$14,995,respectively.
AlexanderJ.Walker,whoisthesonofChrisL.Walker,isemployedbyasubsidiaryoftheCompanyasaseniorbusiness developmentmanagerintheCompany’sSanDiego,Californiaofficeandreceivedcompensationof$191,716,consistingof$184,421 forservicesrenderedin2022,$18incashdividendspaidonrestrictedstockgrantedunderour2019SIPforwhichconditionsof vestingotherthantime-basedconditionshavebeensatisfied,and$7,277inmatchingcontributionsmadebytheCompanytohis 401(k)Planaccount.Inaddition,Mr.AlexanderWalkerreceivedgrantsunderour2019SIPinFebruary2022andFebruary2023with grantdatefairvaluesof$14,948and$19,954,respectively.
BoardStructureandProcess BoardLeadership
OurBoardhastheflexibilitytodeterminewhethertherolesofChairmanoftheBoardandChiefExecutiveOfficershouldbe separatedorcombined.TheBoardmakesthisdecisionbasedonitsevaluationofthecircumstancesandthespecificneedsofthe Company.Mr.HyattBrown,whoretiredfromthepositionofChiefExecutiveOfficerin2009,continuestoserveasChairmanofthe Board,whileMr.PowellBrownservesasChiefExecutiveOfficer.
WebelieveourleadershipstructureisdesirablebecauseitallowsMr.PowellBrowntofocushiseffortsonrunningourbusinessand managingtheCompanyinthebestinterestsofourshareholderswhilewecontinuetorealizethebenefitsofMr.HyattBrown’s extensivebusinessandindustryexperience,knowledgeofourcompany,currentandpastserviceonboardsofotherpubliclytraded companiesandprovenleadershipability.
TheBoardconductsexecutivesessionsofnon-managementdirectorsinconnectionwitheachregularlyscheduledmeetingofthe Board.OurLeadIndependentDirector,H.PalmerProctor,Jr.,presidesovertheseexecutivesessions.
BoardandBoardCommitteeMatters
OurBoardofDirectorshasanAuditCommittee,CompensationCommitteeandNominating/CorporateGovernanceCommittee.The chartersofeachoftheseBoardcommitteesareavailableinthe“CorporateGovernance”sectionofthe“InvestorRelations”tab, under“KeyDocuments”onourwebsite(www.bbinsurance.com)andarealsoavailableinprinttoanyshareholderwhorequestsa copyfromtheCorporateSecretaryat300NorthBeachSt.,DaytonaBeach,Florida32114.Ourcommitteemeetingsaregenerally attendedbyallBoardmembers,subjecttotheavailabilityofeachdirector,whichwebelieveenablesourBoardtofunctioninamore collaborative,transparentandeffectivemanner,andwhichwebelievepromotescollegialityamongtheBoardandenhancesour directors’knowledgeabouteachareaofourbusiness.
AUDITCOMMITTEE
Members
JamesS.Hunt(Chair)
TheodoreJ.Hoepner
LawrenceL.GellerstedtIII
MeetingsHeldin2022: 6
TheAuditCommitteeiscomposedofindependentdirectorsasdefinedintheNYSElisted companymanualandincludestwoauditcommitteefinancialexperts,TheodoreJ.Hoepner andJamesS.Hunt,amongitsmembers.ThedutiesoftheAuditCommitteearetorecommend totheBoardofDirectorstheselectionofindependentregisteredpublicaccountants,tomeet withourindependentregisteredpublicaccountantstoreviewanddiscussthescopeand resultsoftheannualaudit,andtoconsidervariousaccounting,auditingandtechnology mattersrelatedtotheCompany,includingoursystemsofinternalcontrolsandfinancial managementpractices.
COMPENSATIONCOMMITTEE
Members
WendellS.Reilly(Chair)
HughM.Brown
ToniJennings
ChiltonD.Varner
MeetingsHeldin2022: 6
EachmemberoftheCompensationCommitteeisindependentasdefinedintheNYSElisted companymanual.TheCompensationCommitteesetsthecompensationforourChief ExecutiveOfficerandreviewsandapprovesthecompensationforourotherexecutiveofficers, includingtheNamedExecutiveOfficers.See“ExecutiveCompensation–Compensation CommitteeReport”and“CompensationDiscussionandAnalysis.”TheCompensation Committeealsoreviews,makesrecommendationswithrespectto,andapprovesourexisting andproposedcompensationplansandisresponsibleforadministeringour1990Employee StockPurchasePlan(“ESPP”),our2008SharesavePlan,ourPerformanceStockPlan(“PSP”), whichwassuspendedinApril2010,our2000IncentiveStockOptionPlan,whichexpired December31,2008,our2010SIP,whichwassuspendedinMay2019,andour2019SIP.The CompensationCommitteeisauthorizedbyitschartertoformanddelegateauthorityto subcommitteeswhenappropriate.
NOMINATING/CORPORATEGOVERNANCECOMMITTEE
Members
H.PalmerProctor,Jr.(Chair)
TheodoreJ.Hoepner
ToniJennings
WendellS.Reilly
ChiltonD.Varner
MeetingsHeldin2022: 5
EachmemberoftheNominating/CorporateGovernanceCommitteeisindependentasdefined intheNYSElistedcompanymanual.ThisCommittee’sdutiesincluderesponsibilities associatedwithcorporategovernance,aswellasthenominationofpersonstostandfor electiontotheBoardatourAnnualMeetingofShareholdersandrecommendationofnominees totheBoardofDirectorstofillvacancieson,orasadditionsto,theBoard.
DirectorTenureandBoardRefreshment
TheNominating/CorporateGovernanceCommitteeregularlyconsidersthecompositionoftheBoard.However,wehavenot establishedamandatoryretirementageorothertermlimitsbecausewebelievelonger-tenureddirectorscanbringimportant experienceandinstitutionalknowledgethatarecriticaltothesuccessofourBoardandthelong-terminterestsofourshareholders. Considerationisgiventorotatingcommitteemembers,committeechairsandtheLeadIndependentDirectorpositiongenerally everythreetofiveyearsbecausewebelievewebenefitfromhavingalevelofconsistencyinourcommitteecompositionsand committeechairs,butthatfreshperspectiveslikewisefacilitateenhancedBoardandcommitteeperformance.OurNominating/ CorporateGovernanceCommitteeevaluatestheperformanceofeachincumbentdirectoratleastannuallybeforerecommending suchdirector’snominationforanadditionalterm.Inaddition,anydirectorwhohasajobchangemustsubmitaletterofresignation resigningfromtheBoard.ThesubmissionofaletterofresignationprovidesanopportunityfortheBoardtoreviewthecontinued appropriatenessofthedirector’smembershipontheBoardunderthecircumstances.
BoardEvaluations
TheNominating/CorporateGovernanceCommitteeconductsanannualevaluationoftheBoardanditscommittees,aswellasthe individualperformanceofeachdirector.Aspartofthisprocess,alldirectorscompletedetailedconfidentialquestionnairestoprovide feedbackontheeffectivenessoftheBoard,thecommitteesandtheperformanceofindividualdirectors.Theresultsofthe questionnairesarecompiledanonymouslybytheChairoftheNominating/CorporateGovernanceCommitteeintheformof summaries,andthefeedbackisreviewedanddiscussedbytheNominating/CorporateGovernanceCommitteeandsubsequently reportedtothefullBoard.WebelievetheseassessmentsallowustocontinuallyimprovetheeffectivenessofourBoardand committeemeetingsthroughouttheyear.
MeetingsandAttendance
During2022,ourBoardofDirectorsheldeightmeetings.Eachincumbentdirectorservingduring2022attendedatleast75%ofthe totalnumberofBoardmeetings,and75%ofthetotalnumberofmeetingsofcommitteesofwhichsuchdirectorisorwasamember. TheBoardexpects,butdoesnotrequire,directors,allofwhom,otherthanHughM.Brownaredirectornominees,toattendthe AnnualMeetingofShareholders.Allthen-currentmembersoftheBoardattendedthe2022AnnualMeetingofShareholders.
ShareholderEngagement
Weregularlymeetwithinvestors,prospectiveinvestorsandinvestmentanalystsonabroadrangeoftopics,includingourstrategy, financialperformanceandtechnologyinitiatives.Wealsoroutinelyengagewithshareholdersaftereachquarterlyearningscalland materialnewsannouncement,aswellasinconnectionwithconferencesandotherevents.Weviewtheseconversations,which typicallyincludeourChiefFinancialOfficer,andmayalsoincludeourChiefExecutiveOfficerand/ortheleadersofouroperating segments,asopportunitiesforustoreceiveanddiscussvaluableinsightsintoourshareholders’prioritiesandperspectives throughouttheyear.
Wealsoengagewithshareholdersoncorporategovernancematters.Asaresultofdiscussionswithshareholdersthatbeganin 2022,werecentlyadoptedproxyaccessandalsoformalizedourlong-standingpracticetoconsiderdiversityinseekingthemost highlyqualifieddirectorcandidates.
DirectorCompensation
2022DirectorCompensation
OurBoardofDirectorsreviewsthecompensationofournon-employeedirectorsatleasteverytwoyearsorassuchothertimeas circumstancesmaywarrant.Therewerenochangestothecompensationofournon-employeedirectorsfor2022.
During2022,non-employeedirectorswerepaidanannualretainerof$90,000,payableinquarterlyinstallments.Inaddition,the ChairsoftheAcquisition,AuditandCompensationCommitteesareeachpaida$20,000retainer,theChairoftheNominating/ CorporateGovernancereceivesa$15,000retainerandtheCompany’sLeadIndependentDirectorreceivesa$15,000retainer,in eachcaseforservicesassociatedwiththosepositions.Alldirectorsreceivereimbursementofreasonableout-of-pocketexpenses incurredinconnectionwithmeetingsoftheBoard.
Also,eachdirectorwhoisnotanemployeeoftheCompanyreceivedinMay2022agrantoffullyvestedsharesofourcommon stockunderour2019SIP,valuedat$100,000,valuedasofthecloseofbusinessonthelastbusinessdaybeforetheregularMay meetingoftheCompensationCommittee.
Nodirectorwhoisanemployeereceivesseparatecompensationforservicesrenderedasadirector.
Thefollowingtablesetsforthcashandothercompensationearnedduring2022bydirectorswhoarenotNamedExecutiveOfficers.
2022DIRECTORCOMPENSATION
(1) During2022,J.HyattBrown,whoisthefatherofJ.PowellBrown,adirectorandPresidentandChiefExecutiveOfficeroftheCompany,andP.BarrettBrown,an ExecutiveVicePresidentandPresident–RetailSegment,receivedcompensationof$218,744,consistingof$180,000forservicesrenderedtotheCompanyin2022, includingassistancewithacquisitionsandrecruitment,$6,480inmatchingcontributionsmadebytheCompanytohis401(k)Planaccount,$27,819forreimbursement ofamountsearnedbytheCompanyforpersonallinesinsurancehepurchasedthroughtheCompanyoritssubsidiariesand$4,445forthecostofcertainclub membershipdues.Mr.HyattBrownservesasChairmanoftheBoardoftheCompany.
(2) During2022,JamesC.Haysreceivedcompensationof$1,364,078,consistingof$1,358,000forservicesrenderedtotheCompanyin2022and$6,078inmatching contributionsmadebytheCompanytohis401(k)Planaccount.Mr.JamesHays,whoservesasViceChairmanoftheCompany,isapartytoanEmploymentAgreement withtheCompany,effectiveasofNovember16,2018,thatprovidesforpaymentofanannualbasesalaryof$517,000forathree-yeartermofemployment, afterwhich timethisamountwillbeasmutuallyagreeduponbetweenMr.JamesHaysandtheCompany,andwhichprovidesthattheCompanywillterminatetheagreementonly “withcause”duringtheinitialthree-yearterm.PursuanttohisEmploymentAgreement,Mr.JamesHaysisalsoeligibleduringtheinitialthree-year termtoparticipatein theCompany’sSeniorLeaderBonusProgramineffectfromtimetotime,andhisbonustargetundertheSeniorLeaderBonusProgramis$700,000.TheCompanyhas determinedthatMr.JamesHaysisnotanexecutiveofficer.
2023DirectorCompensation
InMarch2023,FredericW.Cook&Co.,Inc.(“FWCook”),anindependentoutsidecompensationconsultingfirmretainedbythe CompensationCommittee,conductedacomprehensiveanalysisoftheCompany’snon-employeedirectorcompensation,as describedbelow.
SURVEYCOMPARISON
AspartofFWCook’sanalysis,theCompensationCommitteereviewedandconsidereddatafromthe
2021–2022NACDDirector CompensationReport,whichconsistedofdatafromgeneralindustrycompanieswithablendofmediumandlargecompanydata withannualrevenuesbetween$2.5and$10billion.
PEERCOMPARISONGROUP
FWCookalsoreviewedthecompensationpracticesofsevenpubliclytradedinsurance carriersandseveralothercompaniesinthecapitalmarketsindustry(the“PeerComparison Group”).ThePeerComparisonGroup,whichFWCookalsousesforconductinganalysesof ourpaypracticesandexecutivecompensationlevels,wasasfollows:
Ourtotalrevenueisatthe 46thpercentile andour marketcapitalizationisatthe 56thpercentile ofthepeer comparisongroup.
PeerCompanyBusinessFocus
ArchCapitalGroupLtd.Property&CasualtyInsuranceCarrier
AXISCapitalHoldingsLimitedProperty&CasualtyInsuranceCarrier
AonplcInsuranceIntermediary
ArgoGroupInternationalHoldingsProperty&CasualtyInsuranceCarrier
ArthurJ.Gallagher&Co.InsuranceIntermediary
CBIZ,Inc.Research&ConsultingServices
Crawford&CompanyInsuranceIntermediary
ErieIndemnityCompanyProperty&CasualtyInsuranceCarrier
Marsh&McLennanCompaniesInc.InsuranceIntermediary
Primerica,Inc.Life&HealthInsuranceCompany
RaymondJamesFinancial,Inc.InvestmentBanking&Brokerage
RLICorp.Property&CasualtyInsuranceCarrier
SelectiveInsuranceGroupInc.Property&CasualtyInsuranceCarrier
WillisTowersWatsonPLCInsuranceIntermediary
ResultsofFWCook’sAnalysis
BasedupontheresultsofFWCook’sanalysis,theCompensationCommitteeconcludedthat:
•thetotalpayforournon-employeedirectors(excludingretainersforourcommitteechairsandourLeadIndependentDirector)was belowthemarketmedian,
•thepaymixforournon-employeedirectorcompensationwasmoreheavilyweightedtowardequitythancash,whichwas consistentwithmarketpractice,
•theretainerspaidtoourAuditCommitteechairandourLeadIndependentDirectorwerebelowthemarketmedian,
•theretainerspaidtoourNominating/CorporateGovernanceCommitteechairandCompensationCommitteechairweregenerally alignedwiththemarketmedianand
•theCompany’sstockownershipguidelines,whichrequirenon-employeedirectorsaccumulateBrown&Browncommonstock valuedatleastfivetimesthecurrentannualcashretainerwithinfiveyearsofjoiningtheBoard,werealignedwithmarketpractices.
BaseduponFW’sCook’sanalysisandtheCompensationCommittee’srecommendation,inMarch2023,theBoardapprovedthe followingchangestothecompensationforournon-employeedirectors,tobeeffectiveimmediatelyfollowingthe2023Annual MeetingofShareholders:
•anincreasetothesizeoftheannualcashretainerfrom$90,000to$100,000,and
•anincreasetothesizeoftheannualgrantoffullyvestedcommonstockfrom$100,000to$120,000,valuedasofthecloseof businessonthelastbusinessdaybeforetheregularMaymeetingoftheCompensationCommittee.
Audit Matters
PROPOSAL2: RATIFICATIONOFTHEAPPOINTMENT OFDELOITTE&TOUCHELLPASTHECOMPANY’S INDEPENDENTREGISTEREDPUBLICACCOUNTANTS
TheAuditCommitteeoftheBoardofDirectorshasselectedDeloitte&ToucheLLPastheCompany’sindependentregisteredpublic accountingfirmforthefiscalyearendingDecember31,2023.Deloitte&ToucheLLPhasservedasourindependentregistered publicaccountingfirmsincethefiscalyearendedDecember31,2002.
TheCommitteeandtheBoardarerequestingthatshareholdersratifythisappointmentasameansofsolicitingshareholders’ opinionsandasamatterofgoodcorporategovernance.Iftheshareholdersdonotratifytheselection,theappointmentofthe independentregisteredpublicaccountantswillbereconsideredbytheCommittee.Eveniftheselectionisratified,theCommittee,in itsdiscretion,maydirecttheappointmentofadifferentindependentregisteredpublicaccountingfirmatanytimeduringtheyearifit determinesthatsuchchangewouldbeinthebestinterestsoftheCompanyanditsshareholders.
OneormorerepresentativesofDeloitte&ToucheLLPareexpectedtobepresentattheMeeting,willhavetheopportunitytomake astatement,andwillbeavailabletorespondtoappropriatequestionsfromshareholders.
VoteRequired;BoardRecommendation
Inordertoberatified,thisProposal2mustreceivethe affirmativevoteofamajorityofthevotescastontheProposal. TheBoardofDirectorsbelievesthattheratificationofProposal 2isinthebestinterestsoftheCompanyanditsshareholders.
TheBoardunanimously recommendsavote “FOR” thisproposal.
ReportoftheAuditCommittee
TheAuditCommitteeoftheBoardofDirectorsoperatespursuanttoanAuditCommitteeCharter,whichwasmostrecentlyreviewed bytheCommitteeinOctober2022andlastamendedinJanuary2021.TheCharterispostedontheCompany’swebsite (www.bbinsurance.com)inthe“CorporateGovernance”sectionofthe“InvestorRelations”tab,under“KeyDocuments.”
EachmemberoftheAuditCommitteequalifiesas“independent”(asthattermisdefinedintheNYSElistedcompanymanual,aswell asotherstatutory,regulatoryandotherrequirementsapplicabletotheCompany’sAuditCommitteemembers).
WithrespecttothefiscalyearendedDecember31,2022,theAuditCommittee:
1.hasreviewedanddiscussedtheCompany’sauditedfinancialstatementswithmanagementandtheindependentregistered publicaccountants;
2.hasdiscussedwiththeindependentregisteredpublicaccountantsoftheCompanythemattersrequiredtobediscussedbythe standardsofthePublicCompanyAccountingOversightBoard,includingthosedescribedinAuditingStandardNo.16, CommunicationswithAuditCommittees,andtheSecuritiesandExchangeCommission;
3.hasreceivedandreviewedthewrittendisclosuresandtheletterfromtheindependentregisteredpublicaccountantsrequired bytheapplicablerequirementsofthePublicCompanyAccountingOversightBoardregardingtheindependentregisteredpublic accountants’communicationswiththeAuditCommitteeconcerningindependence,andhasdiscussedwiththeindependent registeredpublicaccountantstheindependentregisteredpublicaccountants’independenceand
4.basedonthereviewanddiscussionswithmanagementandtheindependentregisteredpublicaccountantsreferencedabove, recommendedtotheBoardofDirectorsthattheauditedfinancialstatementsbeincludedintheCompany’sAnnualReporton Form10-KforthefiscalyearendedDecember31,2022,forfilingwiththeSecuritiesandExchangeCommission.
ItisnotthedutyorresponsibilityoftheAuditCommitteetoconductauditingoraccountingreviewsorprocedures.Inperformingits oversightresponsibility,membersoftheAuditCommitteerelywithoutindependentverificationontheinformationprovidedtothem andontherepresentationsmadebymanagementandtheindependentregisteredpublicaccountants.Accordingly,theAudit Committee’sconsiderationsanddiscussionsdonotassurethattheauditoftheCompany’sfinancialstatementshasbeencarriedout inaccordancewiththestandardsofthePublicCompanyAccountingOversightBoardorthatthefinancialstatementsarepresented inaccordancewithgenerallyacceptedaccountingprinciplesintheUnitedStatesofAmerica(“GAAP”).
AUDITCOMMITTEE
JamesS.Hunt (Chair)
TheodoreJ.Hoepner
LawrenceL.GellerstedtIII
Information Concerning Independent Registered Public Accountants
FeesPaidtoDeloitte&ToucheLLP
WeincurredthefollowingfeesforservicesperformedbyDeloitte&ToucheLLPforfiscalyears2022and2021:
(1) AuditFeesweretheaggregatefeesbilledtousbyDeloitte&ToucheLLPforprofessionalauditservicesrenderedfortheauditofourannualfinancialstatements,the reviewoffinancialstatementsincludedinourForms10-QandtheauditofourinternalcontroloverfinancialreportingforthefiscalyearsendedDecember31,2022 and2021,includinganyout-of-pocketexpense.
(2) Audit-RelatedFeesarefeesforassuranceandrelatedservicesreasonablyrelatedtotheperformanceoftheauditorreviewofourfinancialstatementsthatarenot reportedaboveunderthecaption“AuditFees”forthefiscalyearendedDecember31,2022and2021.Deloitte&ToucheLLPdidnotprovideanysuchservicesduring thefiscalyearendedDecember31,2021.
(3) ThesefeeswerebilledinconnectionwithduediligenceservicesperformedinconnectionwiththeCompany’sacquisitionofGRPin2022.
(4) TaxFeesarefeesfortaxcompliance,taxadviceandtaxplanningforthefiscalyearsendedDecember31,2022or2021.Deloitte&ToucheLLPdidnotprovideany suchservicesduringtheperiods.
(5) Deloitte&ToucheLLPdidnotprovideany“otherservices”duringtheperiods.
AuditCommitteePolicyforPre-ApprovalofIndependentRegisteredPublic AccountantServices
OurpolicyrequiresthattheAuditCommitteeconsiderandapproveinadvanceanyproposedengagementoftheindependent registeredpublicaccountantstoperformservicesinadditiontothoseapprovedinconnectionwiththeirannualengagementletter, exceptforcertainlimitednon-auditservices.Duringfiscalyears2022and2021,allserviceswereapprovedbytheAuditCommittee inaccordancewiththispolicy.
NegotiationofFeesPayabletotheIndependentRegisteredPublicAccountant
Eachyear,theCompany’smanagementbeginsarobust,good-faithnegotiation,overseenbytheAuditCommittee,withthe independentregisteredpublicaccountantregardingtheindependentregisteredpublicaccountants’proposedfeesforthe engagement.Thisnegotiationincludesareviewforreasonablenessoffeesincurredduringthepreviousyear,aswellasareviewfor reasonablenessoffeesfortheproposedengagement,withconsiderationofanyenhancementstotheCompany’sfinancialandother internalcontrolsasaresultoftheCompany’syear-over-yeargrowthandexpansionintonewinternationaljurisdictions.
AuditCommitteeAuditPartnerSelection
Inconjunctionwiththerequiredrotation,theAuditCommitteeisinvolved,togetherwiththeCompany’smanagementteam,inthe evaluationandselectionofthenewleadauditpartner.
EvaluationofIndependentRegisteredPublicAccountant
Onatleastanannualbasis,theAuditCommittee,togetherwiththeCompany’smanagement,evaluatestheperformanceofthe independentregisteredpublicaccountantsinconnectionwithitsdecisiontore-engagetheindependentregisteredpublic accountants.Aspartofthisevaluation,whichisbased,inpart,upontheCenterforAuditQuality’sexternalauditorassessmenttool, theAuditCommitteeandtheCompany’smanagementconsider,amongotherthings,thequalityofservicesperformedbythe independentregisteredpublicaccountants;theskillandresponsivenessoftheengagementteam;theindependentregistered publicaccountants’understandingoftheCompany,includingtheCompany’soperationalandfinancialrisks;andtheindependent registeredpublicaccountants’tenure.
Compensation Matters
PROPOSAL3: ADVISORYVOTETOAPPROVE NAMEDEXECUTIVEOFFICERCOMPENSATION
AttheMeeting,wewillaskourshareholderstoapprove,onanonbinding,advisorybasis,underSection14AoftheExchangeAct,the compensationofourNamedExecutiveOfficersasdisclosedinthisProxyStatement.Thisproposal,commonlyknownasa“say-onpay”proposal,givesourshareholderstheopportunitytoexpresstheirviewsonourexecutivecompensation.Wehaveheldasimilar shareholdervoteeveryyearsince2011andexpecttoholdasimilarvoteatthe2024AnnualMeeting.
Asdescribedindetailbelowunder“CompensationDiscussionandAnalysis,”ourexecutivecompensationprogramisdesignedtoattract, motivateandretainourNamedExecutiveOfficers,whoarecriticaltooursuccess.Accordingly,ourNamedExecutiveOfficersarerewardedto theextentweachievespecificannualgoalsanddeliverfinancialperformanceintendedtoincreaselong-termshareholdervalue.
OurCompensationCommitteehasadoptedanapproachtoexecutivecompensationthatwebelieveenablestheCompanytoretain itsexecutivetalentwhileremainingcommittedtoourcorecompensationphilosophyofpayingforperformanceandaligning executivecompensationwithshareholderinterests.TheCommitteecontinuallyreviewsthecompensationprogramsforourNamed ExecutiveOfficerswiththegoalofmosteffectivelyaligningourexecutivecompensationstructurewithourshareholders’interests andcurrentmarketpractices.Forexample,(1)asignificantportionofpayisperformance-based,(2)compensationisincentive-driven withbothshort-andlong-termfocusand(3)webelievecomponentsofcompensationarelinkedtoincreasingshareholdervalue.
Weareagainaskingourshareholderstoindicatetheirsupportforourexecutiveofficercompensation.Thisvoteisnotintendedto addressanyspecificitemofcompensation,butrathertheoverallcompensationofourNamedExecutiveOfficersandthephilosophy, programandpracticesdescribedinthisProxyStatementinaccordancewiththeSEC’scompensationdisclosurerules.Accordingly, weaskourshareholderstovote“FOR”theapproval,onanadvisorybasis,ofexecutivecompensation.
Thesay-on-payvoteisadvisoryandthereforenotbindingontheCompany,theCompensationCommitteeorourBoard.However, ourBoardandCompensationCommitteevaluetheopinionsofourshareholders,andtotheextentthereisanysignificantvote againsttheexecutivecompensationasdisclosedinthisProxyStatement,wewillconsiderourshareholders’concerns,andthe CompensationCommitteewillevaluatewhetheranyactionsarenecessarytoaddressthoseconcerns.
Accordingly,weaskourshareholderstovoteonthefollowingresolutionattheMeeting:
“RESOLVED,thatthecompensationpaidtotheCompany’sNamedExecutiveOfficers,asdisclosedpursuanttoItem402of RegulationS-K,includingtheCompensationDiscussionandAnalysis,compensationtablesandnarrativediscussion,ishereby APPROVED.”
VoteRequired;BoardRecommendation
Inordertobeapproved,thisProposal3mustreceivethe affirmativevoteofamajorityofthevotescastontheProposal. TheBoardofDirectorsbelievesthattheadvisoryapprovalof Proposal3isinthebestinterestsoftheCompanyandits shareholders.
TheBoardunanimously recommendsavote “FOR” thisproposal.
CompensationCommitteeReport
NotwithstandinganythingtothecontrarysetforthinanyofourpreviousfilingsundertheSecuritiesActof1933,asamended,orthe SecuritiesExchangeActof1934,asamended,thatmightincorporatefuturefilings,includingthisProxyStatement,inwholeorinpart, thefollowingBoardCompensationCommitteeReportshallnotbeincorporatedbyreferenceintoanysuchfilings.
TheCompensationCommitteehasreviewedanddiscussedtheCompensationDiscussionandAnalysiswithmanagementand basedonthisreviewandthosediscussions,hasrecommendedtotheBoardofDirectorsthattheCompensationDiscussionand AnalysisbeincludedinthisProxyStatement.
COMPENSATIONCOMMITTEE
WendellS.Reilly (Chair)
HughM.Brown
ToniJennings
ChiltonD.Varner
Compensation Analysis and Discussion
EXECUTIVESUMMARY
OurCompensationCommitteehasresponsibilityforthedesign,implementation,reviewandapprovalofthecompensationofour executiveofficers.Weseektoprovideanexecutivecompensationpackagethatsupportsourbusinessstrategyandisdrivenbyour overallfinancialperformance,thesuccessoftheoperatingsegmentsandcorrespondingfinancialperformancethataredirectly impactedbytheexecutive’sleadershipandtheperformanceoftheindividualexecutive.TheCompensationCommitteeperiodically reviews,withthesupportofanindependentcompensationconsultant,thepaypracticesofothercompanieswiththegoalof confirmingthattheCompany’sexecutivecompensationprogramremainscompetitivebutdoesnottargetcompensationdecisionsor levelstoaspecificpercentileorotherabsolutemeasuresrelatedtocomparisongroupdata.
Atlastyear’sAnnualMeetingofShareholders,96%ofthevotescastwereinfavoroftheadvisoryvotetoapproveexecutive compensation.Inviewofthisfavorablevote(aswellasasimilarfavorablevotein2021)andthesuccessofour2021executive compensationpoliciesinincentivizingresultsthatwerealignedwiththelong-terminterestsofourshareholders,aswellasother factors(includingregulatoryrequirements,marketconsiderationsandCompanyandindividualperformance),ourexecutive compensationpoliciesandpracticesremainedsubstantiallyunchangedfromtheprioryear.
NamedExecutiveOfficers
For2022,ourNamedExecutiveOfficerswereasfollows:
WebelieveourcompensationsystemcontinuestoeffectivelyincentivizeourexecutiveofficerstodeliverresultsfortheCompanythat arealignedwiththelong-terminterestsofourshareholders.Asreflectedinthetablebelow,wedeliveredanotheryearofstrong performancein2022,andasaresult,theannualcashincentivesforourNamedExecutiveOfficerswerecalculatedandpaidabove thetargetamounts:
J.POWELLBROWN ChiefExecutiveOfficer andPresident R.ANDREWWATTS ChiefFinancialOfficer, ExecutiveVicePresident andTreasurer P.BARRETTBROWN ExecutiveVicePresident andPresident–Retail Segment J.SCOTTPENNY ExecutiveVicePresident andChiefAcquisitions Officer CHRISL.WALKER ExecutiveVicePresident andPresident–National ProgramsSegment1
PerformanceHighlights
(1) See AnnexA foradditionalinformationregardingOrganicRevenue,OrganicRevenuegrowthandAdjustedEBITDAC Margin,whicharenon-GAAPfinancialmeasures,includingareconciliationtothemostcloselycomparableGAAP financialmeasure.
(2) IncomebeforeincometaxesmarginiscalculatedastheCompany’sincomebeforeincometaxes,asreported,divided bytotalrevenues,asreported.
Strongtotaland ORGANIC REVENUEGROWTH companywide
MAINTAINED our industry-leadingoperating margins
29TH consecutiveannual dividendincrease,returning approximately $120 MILLION toshareholders
ROBUSTGROWTH innet cashprovidedbyoperating activities
30STRATEGIC ACQUISITIONS with aggregateannualrevenuesof approximately $435MILLION
OurCompensationPhilosophy
Ourcompensationsystemisintendedto: 1
AttractandRetain High-qualitypeoplethatarecrucial toboththeshort-termandlong-
CreateaCommonInterest
Betweenourexecutiveofficersand shareholdersthroughcompensation structuresthatpromotethesharing oftherewardsandrisksofstrategic decision-making
Insupportofthesegoals,for2022,ourincentivecompensationprogramincludedbothlong-andshort-termcompensation componentsthatweretiedtoincreasesinouradjusteddilutedearningspershare,OrganicRevenuegrowth,AdjustedEBITDAC Marginandpredeterminedpersonalobjectivesforeachofourexecutiveofficers.Webelieveourcompensationprogramrewarded ourexecutivesfordeliveringstrongfinancialresultsthatalignedwiththelong-terminterestsofourshareholders.
CompensationComponents
Ourcompensationphilosophyisreflectedinthefollowingshort-termandlong-termcompensationcomponents:
Rationale
1 BaseSalary
2 AnnualCash Incentives andBonuses
•Providecompetitivelevelsofcompensationtoourexecutiveofficersbasedonscopeofresponsibilities andduties
•Recruitandretainexecutiveofficers
HowAmountsAreDetermined
•Basedonawiderangeoffactors,includingbusinessresults,individualperformanceandresponsibilities, andcomparativemarketassessments
Rationale
•Alignexecutiveofficers’performancewithannualgoalsandobjectives
•Createadirectlinkbetweenpayandcurrentyearfinancialandoperationalperformance
HowAmountsAreDetermined
•Targetpayoutsbaseduponcomparativemarketassessments,recommendationsbyChiefExecutive Officer,andinputfromtheCompensationCommittee’sindependentcompensationconsultant,subjectto theapprovalofCompensationCommitteeor,inthecaseoftheChiefExecutiveOfficer,recommendations fromtheCompensationCommittee’sindependentcompensationconsultant,subjecttotheapprovalof CompensationCommitteebaseduponitsannualChiefExecutiveOfficerperformancereview
•ActualpayoutbaseduponacombinationofCompanyand/orsegmentperformanceandachievementof personalperformanceobjectives
•AdditionaldiscretionarybonusavailableasdeterminedbyChiefExecutiveOfficer,subjecttotheapprovalof CompensationCommittee,or,inthecaseofChiefExecutiveOfficer,asdeterminedbyCompensationCommittee
Rationale
•Rewardeffectivelong-termcapitalmanagementanddecision-making
•Focusattentiononfuturereturnstoshareholders
•Retainexecutiveofficerswhohavethepotentialtoimpactbothourshort-termandlong-termprofitability throughacombinationoftime-andperformance-basedawards
•Recognizeandrewardspecificachievementsand/orthepreviousyear’sperformance
•Generallygrantedannuallyduringfirstquarter
IncentiveAwards
3 Long-TermEquity
HowAmountsAreDetermined
•Awardamountdeterminedbaseduponablendofquantitativemeasuresandconsiderationofpersonal performance,aswellascomparativemarketassessments
•Forawardswithaperformance-basedvestingcondition,numberofawardedsharesmaybehigheror lowerthantarget,subjecttospecifiedthresholdandmaximumamounts,basedupontheCompany’s performanceduringtheperformanceperiod
•ActualvaluerealizedbasedupontheCompany’sstockpriceovermeasurementandvestingperiods
Thechartbelowshowsthe2022mixofcompensationforourChiefExecutiveOfficerandfortheotherNamedExecutiveOfficersas agroup.
HowWeSetCompensation RoleofManagement
Base Salary Cash Incentive Equity
TheCompensationCommitteeconsidersinputfromourChiefExecutiveOfficerinmakingdeterminationsregardingthecompensation ofourexecutiveofficers,otherthanourChiefExecutiveOfficer.Aspartoftheannualplanningprocess,ourChiefExecutiveOfficer recommendsandpresentstotheCompensationCommitteeforconsideration,basesalaryadjustments,frameworkandtargetsforour annualcashincentiveprogram,andlong-termequityincentiveawardamounts,ineachcasebaseduponanindividual’sperformance andresponsibilities,aswellascomparativemarketdata,asdescribedbelow,forourexecutiveofficers,otherthanourChiefExecutive Officer.Inaddition,ourChiefExecutiveOfficerperiodicallypresentstotheCompensationCommitteeandtheBoardhisevaluationof eachexecutiveofficer’sperformanceandreviewssuccessionplansforeachofourexecutiveofficers.
RoleoftheCompensationConsultant
BeginninginAugust2015,theCompensationCommitteeengagedFWCooktoassistwithareviewofthecomponents,structureand designofthelong-termequityincentivearrangementswithourexecutiveofficersandotherkeyemployees.Theprimarygoalofthis engagementwastohelpdesignlong-termequityincentivearrangementsthatcontinuetobecompetitiveandalignedwith shareholderinterests.FWCookhasremainedengagedbytheCompensationCommitteetoadviseandassistwithothermatters relatedtoexecutiveandnon-employeedirectorcompensation.TheCompensationCommitteeconsidersFWCooktobe independentbecauseFWCookperformednoservicesfortheCompany’smanagementunrelatedtoservicesperformedforthe CompensationCommittee,andtherewasnoconflictofinterestraisedasaresultofanyworkperformedbyFWCook,directlyor indirectly,fortheCompensationCommitteeduringfiscalyears2015-2022.
ComparativeMarketAssessments
TheCompensationCommitteedoesnottargetcompensationdecisionsorlevelstoaspecificpercentileorotherabsolutemeasures relatedtocomparisongroupdatabutdoesperiodicallyreviewthepaypracticesofothercompanieswiththegoalofseeingthatthe Company’sexecutivecompensationprogramremainscompetitive.Historically,theseanalyseshavebeencompletedapproximately everytwoorthreeyears,unlesstherehasbeenamaterialchangeinourbusinessorinoneofoursegments,ascomparativemarket ratesdonottypicallymateriallychangeovertheshortterm.
2022Compensation
January2022ComparativeMarketAssessments
InJanuary2022,FWCookconductedanalysesofourcompensationlevelsforourChiefExecutiveOfficerandChiefFinancialOfficer (the“January2022CEO/CFOComparativeMarketAssessment”)andinFebruary2022forourexecutiveofficerswithresponsibility fortheCompany’soperatingsegments(the“January2022SegmentHeadComparativeMarketAssessment”),ineachcaseas comparedtoagroupofourpeers(the“January2022ComparativeMarketAssessments”),asdescribedbelow.
PeerComparisonGroup
FortheJanuary2022CEO/CFOComparativeMarketAssessment,FWCookfocusedonourPeerComparisonGroup.
FortheJanuary2022SegmentHeadComparativeMarketAssessment,FWCookfocusedononlythosepeerswithinthePeer ComparisonGroupthatareinsurancebrokersandforwhichcompensationinformationwasavailableforexecutiveofficerswith directresponsibilityforoperatingsegmentssimilartothoseoverseenbyourexecutiveofficers(the“SelectSegmentHeadPeers”). ForadiscussionofthePeerComparisonGroup,includingalistofpeerscomprisingthePeerComparisonGroup,see“2023Director Compensation.”
SurveyComparison
AspartoftheJanuary2022ComparativeMarketAssessments,theCompensationCommitteealsoreviewedandconsidereddata fromcertainthird-partysurveys.
ResultsoftheJanuary2022ComparativeMarketAssessments
BasedupontheresultsoftheJanuary2022CEO/CFOComparativeMarketAssessment,theCompensationCommitteedetermined that,amongotherthings,thetotal2021directcompensationforMessrs.PowellBrownandWatts,whichincludestheirbasesalary, targetcashincentiveamountandtargetlong-termequityincentives,wasgenerallyalignedwiththemarketmedian.Asaresult,the CompensationCommitteedidnotapplyanypayrateadjustmentsforMessrs.PowellBrownorWattsfor2022.
BasedupontheresultsoftheJanuary2022SegmentHeadComparativeMarketAssessment,theCompensationCommittee determinedthat,amongotherthings,thetotal2021directcompensationforMessrs.BarrettBrown,PennyandWalker,which includestheirbasesalary,targetcashincentiveamountandtargetlong-termequityincentives,wasbelowthe50thpercentileofthe SelectSegmentHeadPeers.
ConsiderationofLastYear’s“Say-On-Pay”Vote
InaccordancewiththerequirementsoftheDodd-FrankWallStreetReformandConsumer ProtectionActof2010(the“Dodd-FrankAct”),weprovideourshareholderswithanopportunityto approve,onanonbinding,advisorybasis,thecompensationofnamedexecutiveofficers.Atour annualmeetingsofshareholdersinboth2021and2022,ourshareholdersvotedtoapprove compensationbyasignificantmargin.
Inviewofthefavorablevotein2022(aswellasasimilarfavorablevotein2021),aswellasother factors(includingregulatoryrequirements,marketconsiderationsandCompanyandindividual performance),wedidnotsubstantiallychangeourexecutivecompensationpoliciesfor2022.
Atour2022Annual MeetingofShareholders ourexecutive compensationprogram wassupportedby
96% ofvotescast.
2022BaseSalaries
TheCompensationCommitteechangedthe2022basesalariesofcertainofourNamedExecutiveOfficers,asfollows:
(1) ThedecisiontoincreaseMr.BarrettBrown’s2022basesalaryfrom$700,000to$800,000wasbasedupon(a)theincreaseinhisresponsibilitiesresultingfromthe Retailsegment’stotalrevenuesincreasingin2021by20%toapproximately$1.8billionand(b)theJanuary2022SegmentHeadComparativeMarketAssessmentand theconclusionthathis2021targettotaldirectcompensationwasbelowthe50thpercentileoftheSelectSegmentHeadPeers.
(2) ThedecisiontoincreaseMr.Penny’s2022basesalaryfrom$600,000to$700,000wasbasedupon(a)hisincreasedoperationalresponsibilityduring2021,andhis expectedincreasedoperationalresponsibilityin2022,forcertainofficeswithintheCompany’sRetailsegment,inadditiontohisongoingroleasChiefAcquisitions Officerand(b)theJanuary2022SegmentHeadComparativeMarketAssessmentandtheconclusionthathis2021targettotaldirectcompensationwasbelowthe 50thpercentileoftheSelectSegmentHeadPeers.
(3) ThedecisiontoincreaseMr.Walker’s2022basesalaryfrom$700,000to$800,000wasbasedupon(a)theincreaseinhisresponsibilitiesresultingfromtheNational Programssegment’stotalrevenuesincreasingin2021by15%toapproximately$700millionand(b)theJanuary2022SegmentHeadComparativeMarketAssessment andtheconclusionthathis2021targettotaldirectcompensationwasbelowthe50thpercentileoftheSelectSegmentHeadPeers.
2022AnnualCashIncentives
Ourannualcashincentivesaredesignedtofurtheralignexecutiveofficercompensationwithourannualgoalsandobjectives,andto createadirectlinkbetweencompensationandfinancialandoperationalperformance.Duringthefirstquarterofeachyear,the CompensationCommitteeapprovestheannualcashincentivecomponents,consistingoffinancialperformancemeasures,individual targetcashincentiveamountsandpersonalobjectives,foreachexecutiveofficer,includingtherelativeweightingsandgoalsagainst whichperformanceismeasuredandpayoutsaredeterminedforsuchfiscalyear.
TargetAmounts. InFebruary2022,theCompensationCommitteedeterminednottochangethecomponentsofourannual executiveofficercashincentives,theweightingofeachcomponentorthetargetcashincentiveamountsforourNamedExecutive Officers,exceptforthetargetcashincentiveamountsforMr.BarrettBrown,asfollows:ForMr.BarrettBrown,theCompensation Committeeincreasedhis2022targetcashincentiveamountfrom$1,000,000to$1,400,000basedupon(a)theincreaseinhis responsibilitiesresultingfromtheRetailsegment’stotalrevenuesincreasingin2021by20%toapproximately$1.8billionand(b)the January2022SegmentHeadComparativeMarketAssessmentandtheconclusionthathis2021targettotaldirectcompensation wasbelowthe50thpercentileoftheSelectSegmentHeadPeers:
(1) ThedecisiontoincreaseMr.BarrettBrown’s2022targetcashincentiveamountfrom$1,000,000to$1,400,000wasbasedupon(a)theincreaseinhisresponsibilities resultingfromtheRetailsegment’stotalrevenuesincreasingin2021by20%toapproximately$1.8billion,and(b)theJanuary2022SegmentHeadComparative MarketAssessmentandtheconclusionthathis2021targettotaldirectcompensationwasbelowthe50thpercentileoftheSelectSegmentHeadPeers.
Payoutscanrangefrom0%to200%oftheaggregatetargetcashincentivedependingonthefinancialperformanceoftheCompany orthesegment,asapplicable,andtheNamedExecutiveOfficer’sperformanceagainstpersonalobjectives.
For2022,theCompensationCommitteeselectedthefollowingcomponentsandweightingsfortheannualcashincentivesforthe
(1) TheCompensationCommitteeselectedthesefinancialperformancemeasuresinfurtheranceofourstrategytoincreaseourOrganicRevenuegrowthwhile maintaining,amongotherthings,ourstrong,industry-leadingoperatingmargins.
(2) See AnnexA foradditionalinformationregardingOrganicRevenue,OrganicRevenuegrowthandAdjustedEBITDACMargin,whicharenon-GAAPfinancialmeasures, includingareconciliationtothemostcloselycomparableGAAPfinancialmeasure.
(3) NationalProgramssegmentOrganicRevenuegrowthwasadjusted(i)for2021,toexcludetheimpactofcertainofficeswithintheNationalProgramssegmentforwhich ChrisL.Walker,ExecutiveVicePresidentandPresident–NationalProgramssegment,didnothaveresponsibilityin2021andtoincludetheimpactofcertainoffices withintheServicesandWholesaleBrokeragesegmentsforwhichMr.Walkerhadresponsibilityin2021;and(ii)for2022,toincludetheimpactofcertainofficeswithin theServicessegmentforwhichMr.Walkerhadresponsibilityin2022.See AnnexA foradditionalinformationregardingNationalProgramssegmentOrganicRevenue growth–adjusted,whichisanon-GAAPfinancialmeasure,includingareconciliationtothemostcloselycomparableGAAPfinancialmeasure.
(4) ThepersonalobjectivesforeachofourNamedExecutiveOfficerswereapprovedbytheCompensationCommitteeinFebruary2022.
Thetargetamountsforeachfinancialperformancemeasurewerediscussedoverseveralmonthsandthenreviewedandapproved bytheCompensationCommitteeinFebruary2022.Toensureourperformancetargetsarerigorousandchallenging,yetrealisticfor ourexecutiveofficers,thetargetamountsfortheOrganicRevenuegrowthfortheCompany,theOrganicRevenuegrowthofour operatingsegments,andourAdjustedEBITDACMarginwerebasedonour2022budget.Our2022budgetwasapprovedbythe BoardinDecember2021andreflectsamulti-monthprocessthatincludesthoroughandthoughtfuldiscussionsamongmanagement andtheleadersofourbusinesses,andbetweenmanagementandourBoard.Indeterminingour2022budget,whichservedasthe basisforthetargetsforeach2022financialperformancemeasure,considerationwasgivento,amongotherthings:
•ourexpectationthattheeconomywouldcontinuetogrow,butataslowerpacethantheprioryear,astheeconomyreturnedto morenormalgrowthratesfollowingthevolatilityin2020and2021causedbytheCOVID-19pandemic;
•ourexpectationthatinsurancepremiumrateswouldeitherremainrelativelystableorincreasemoderatelyin2022;
•ourexpectationthat“insurableexposureunits,”whichareunitsthatinsurancecompaniesusetomeasureorexpressinsurance exposedtorisk(suchaspropertyvalues,salesandpayrolllevels)todeterminewhatpremiumtochargetheinsured,would increasemodestlybutatthesamerateasGDPduetoyear-on-yearcomparisons;
•ourexpectationthattravelandrelatedcostswouldincreaseascomparedto2021asaresultofbeingabletoseemorecustomers andprospectsinpersonversusremotely,aswellasourcontinuedinvestmentsintechnologyanddatatohelpimprovethe customerandteammateexperienceand
•ourexpectationthatcertainbusinessesweacquiredinthepreviousthreeyears,whichhadloweroperatingmarginsversusother comparablebusinessesweoperate,wouldfurthergrowprofitablyandhaveapositiveimpactonouroverall2022operating margins.
Foreachfinancialperformancemeasure,wemakenopayoutforperformancebelowacertainthreshold.Aspartofourpay-forperformanceframework,theCompensationCommitteeadoptedpayoutcurvesthatareintendedtoincentivizeperformancegenerally withina“targetpayoutcorridor”andthatprovideforincrementallyhigherandlowerpayoutsforperformanceoutsideofthetarget payoutcorridor.Payoutpercentagesforeachfinancialperformancemeasurewerecalculatedbasedonthefollowingtables:
Determinationof2022AnnualCashIncentivePayouts. Inthefirstquarterof2023,theCompensationCommitteereviewedactual 2022performanceofeachfinancialperformancemeasureagainstthetargetperformanceforeachsuchmeasureassetforthinthe followingtable:
—75% CompanyOrganicRevenuegrowth6.1%8.1%133%175% RetailsegmentOrganicRevenuegrowth6.0%6.5%108%105% NationalProgramssegmentOrganicRevenuegrowth–adjusted6.2%12.2%197%200% (1) IncalculatingtheCompany’sAdjustedEBITDACMargin:
1.TheCommitteeexcludedthenegativeimpactoftheCompany’snon-cashstock-basedcompensationexpenseinexcessofwhatwasreflectedintheCompany’s Board-approved2022budget.TheCommitteebaseditsdecisionuponthefactthatthehigher-than-budgetednon-cashstock-basedcompensationexpensefor 2022wastheresultofabove-targetperformancebytheCompanyforthosegrantsofrestrictedstockmadeinFebruary2019underour2010SIP,whichresultedin theissuanceofadditionalsharesofrestrictedstock.ForadditionalinformationaboutthosegrantsofrestrictedstockmadeinFebruary2019under our2010SIP, see“EquityIncentivePlanOutcomesin2022.”
2.TheCommitteeexcludedthenegativeimpactofapproximately$11.2millionofacquisitionandintegrationcosts(e.g.,costsassociatedwithregulatoryfilings,legal/ accountingservices,duediligenceandthecostsofintegratinginformationtechnologysystems)arisingoutoftheCompany’sacquisitionsofGRP(Jersey)Holdco Limitedanditsbusiness,OrchidUnderwritersAgencyandCrossCoverInsuranceServices,andBdBLimitedcompanies,whicharenotexpectedtooccuronan ongoingbasisinthefuture(“Acquisition/IntegrationCosts”).TheCommitteebaseditsdecisionuponthefactthatthesecostswererelatedtotheCompany’s acquisitionofthesebusiness,andnottheunderlyingperformanceofthebusinessesthemselves,andthefactthattheywerenotexpectedtooccuronan ongoing basisinthefuture.
3.TheCommitteeexcludedthepositiveimpactofthenetgainondisposalresultingfromsalesofbooksofbusinessesin2022.
4.TheCommitteeexcludedtheperiod-over-periodimpactofforeigncurrencytranslation(“ForeignCurrencyTranslation”),whichiscalculatedby applyingcurrentyearforeignexchangeratestothevariousfunctionalcurrenciesinourbusinesstoourreportingcurrencyofUSdollarsforthesameperiodintheprioryear.The CommitteebaseditsdecisionuponthefactthatfluctuationsinForeignCurrencyTranslationarenotrelatedtotheperformanceoftheCompany.
WithrespecttotheachievementofpersonalobjectivesbyeachoftheNamedExecutiveOfficers,whichaccountsfor20%ofthe 2022cashincentiveamountforeachNamedExecutiveOfficer,theCompensationCommitteeevaluatedthelevelofachievementfor eachNamedExecutiveOfficer’spersonalobjectivesinthefirstquarterof2023.TheevaluationforMr.PowellBrown,ourChief ExecutiveOfficer,wasmadebytheCompensationCommittee.FortheotherNamedExecutiveOfficers,theCompensation Committee,afterdiscussion,considerationandreview,acceptedwithoutmodificationtherecommendationsasproposedbythe ChiefExecutiveOfficer.TheCompensationCommitteeevaluatedtheachievementofeachNamedExecutiveOfficer’spersonal objectivesintheirtotalityinsteadofassigningaweighttoeachparticularpersonalobjective.
NamePersonalObjectives
J.PowellBrown
•contributiontotheCompany’stalentagenda,includingrecruiting,development, diversityandculture
•contributiontoidentifyingandacquiringcompaniesthatfitculturallyandprovide appropriatefinancialreturns
•contributiontodrivingtheCompany’stechnologyanddatastrategytocreatenew capabilitiesandenhancethecustomerandteammateexperience,aswellas ensuringtheCompany’srobustcyberposture
•contributiontotheCompany’sprofitablegrowth
•contributiontobalancingtheCompany’scapitalallocationtodriveshareholder returns
125%
R.AndrewWatts
•contributiontotheCompany’stalentagenda,includingrecruiting,development, diversityandculture
•contributiontotheCompany’sprofitablegrowththroughenhancedanalyticsand implementationofoptimizationopportunities
•contributiontosupportingtheCompany’stechnologyanddatastrategytocreate newcapabilitiesandenhancethecustomerandteammateexperience
•contributiontomaintaining,streamliningandenhancingtheCompany’scontrol environment
•contributiontobalancingtheCompany’scapitalallocationtodriveshareholder returns
200%
P.BarrettBrown
•contributiontotheCompany’stalentagenda,includingrecruiting,development, diversityandculture
•contributiontodrivingincrementalnewbusinessandenhancingretentionof existingbusiness
•contributiontobalancinginvestmentswithintheRetailsegmenttodeliver incrementalprofitableOrganicRevenuegrowth
•contributiontoleveragingtechnologyanddatatocreatenewcapabilitiesand enhancethecustomerexperience
•contributiontoidentifyingandacquiringcompaniesthatfitculturally,provide appropriatefinancialreturnsandareproperlyintegratedinatimelymanner
•contributiontotheCompany’stalentagenda,includingrecruiting,development, diversityandculture
•contributiontoidentifyingandacquiringcompaniesthatfitculturallyandprovide appropriatefinancialreturns
•contributiontoensuringrobustintegrationplansarecreatedandexecutedforthe Company’sacquisitions
•contributiontoscalingandgrowingtheCompany’sautomobileandrecreational vehicledealerservices(“F&I”)businesses
•contributiontodrivinginitiativeswithintheCompany’sRetailandServices segments
•contributiontotheCompany’stalentagenda,includingrecruiting,development, diversityandculture
•contributiontodrivingincrementalnewbusinessandenhancingretentionof existingbusiness
•contributiontobalancinginvestmentswithintheNationalProgramsegmentto deliverincrementalprofitableOrganicRevenuegrowth
•contributiontoleveragingtechnologyanddatatocreatenewcapabilitiesand enhancethecustomerexperience
•contributiontoidentifyingandacquiringcompaniesthatfitculturally,provide appropriatefinancialreturnsandareproperlyintegratedinatimelymanner
171%
200%
200%
Asillustratedinthetablebelow,thefinal2022cashincentiveamountswerecalculatedbycombiningthepayoutamountsforeach ofthecomponentsdiscussedaboveandthenroundingtheresultingnumberuptothenearestthousanddollars:
(1) The2022cashincentivepayoutsarealsoshownintheSummaryCompensationTableunderthe“Non-EquityIncentivePlanCompensation”column.
Whilenotexercisedin2022,theCompensationCommitteeexpresslyreservestheright,initssolediscretion,toreducetheannual cashincentiveforanyNamedExecutiveOfficer,ortopaynoannualcashincentiveatall,iftheCompany’sperformanceis unexpectedlypoororiftheintendedrecipientcommitsactsofmalfeasance.
2022DiscretionaryBonuses
EachoftheNamedExecutiveOfficersiseligibletoreceiveanadditionaldiscretionarybonusuponsuchtermsandconditionsas mightbedeterminedbytheChiefExecutiveOfficer,subjecttotheapprovaloftheCompensationCommittee,or,inthecaseofthe ChiefExecutiveOfficer,asmightbedeterminedbytheCompensationCommittee.InJanuary2023,theCompensationCommittee approvedthediscretionarybonusesforcertainNamedExecutiveOfficersbasedupontheiroutstandingindividualperformance during2022,asfollows:
(1) The2022discretionarybonusamountsarealsoshownintheSummaryCompensationTableunderthe“Bonus”column.
(2) Thedecisiontoapproveadiscretionarybonusof$60,000toMr.WattswasbasedupontherecommendationbyMr.PowellBrownandMr.Watts’contributionstothe financingactivitiesassociatedwiththeCompany’sacquisitionofGRPduring2022,including(a)theissuanceinMarch2022of$600.0millionaggregateprincipal amountoftheCompany’s4.200%SeniorNotesdue2032and$600.0millionaggregateprincipalamountoftheCompany’s4.950%SeniorNotesdue2052and (b)theCompany’sentryinMarch2022intoaLoanAgreementevidencingunsecureddelayeddrawtermloansinanaggregateamountofupto$300.0millionand unsecureddelayeddrawtermloansinanamountofupto$500.0million.
(3) Thedecisiontoapproveadiscretionarybonusof$20,000toMr.PennywasbasedupontherecommendationbyMr.PowellBrownandMr.Penny’scontributionsto thenegotiationandconsummationoftheCompany’sacquisitionofGRPduring2022.
2022EquityIncentiveGrants
Weendeavortomakeourlong-termequityincentivearrangements,whicharegenerallygrantedonanannualbasis,competitiveand alignedwithshareholderinterests,asreflectedinthefollowingstructure:
TermsRationale
Ingeneral,75%ofsharesgrantedtoeachexecutiveofficerasa PerformanceStockAward(“PSA”)thatvestbasedon performance(overathree-yearperiod)andtime(overafive-year periodfromthedateofgrant);25%ofsharesgrantedtoeach executiveofficerasaRestrictedStockAward(“RSA”)thatvest ontimeonly(overafive-yearperiodfromthedateofgrant)
VestingofPSAsharestiedtoincreasesintheCompany’s OrganicRevenuegrowth(asfurtherdefinedintheapplicable awardagreement)andcompoundannualgrowthrateofthe Company’scumulativedilutedearningspershare,excludingany impactforchangesinacquisitionearn-outliabilities,ineachcase measuredoverathree-yearperiodbeginningJanuary1,2022
PSAsgrantedtoourexecutiveofficerscontemplateaminimum payoutof0%andamaximumpayoutof200%baseduponthe levelofperformanceofeachperformanceconditionduringthe three-yearmeasurementperiod
PSAsaresubjecttobothperformance-basedandtime-based vestingconditions.Inadditiontotheperformanceconditions describedabove,PSAsgrantedinFebruary2022aresubjectto anadditionaltime-based,cliffvestingconditionrequiringfive yearsofcontinuousemploymentfromthedateofgrant
RSAsaresubjecttoacliffvestingconditionrequiringfiveyears ofcontinuousemploymentfromthedateofgrant;RSArecipients acquiredvotinganddividendrightsatthetimeofgrantbut cannotdisposeoftheshares
Tyingamajorityofourequityawardstopre-established corporatefinancialobjectiveswhichdrivelong-term shareholderreturnsshouldmorecloselyalignthelong-term interestsofourexecutiveofficersandourshareholders
OrganicRevenuegrowthandcumulativedilutedearningsper shareareeasilyunderstandable,directlyinfluencedbyour executiveofficersandareintendedtodriveourlong-term shareholdervalue
Payoutsforabove-targetperformancemotivateourexecutive officerstooverperform;recognitionofperformancethatmay belessthantarget
Acombinationofperformance-andtime-basedvesting conditionsisintendedtoachieveastrongalignmentbetween payandperformanceandincentivizethelong-termretentionof ourexecutiveofficersandkeyemployees
Equityawardswithtime-basedvestingconditionscontinueto operateasacomplementtoourtraditionalequityawards characterizedbybothperformance-basedandtime-based vestingconditionstofurtherincentivizeandrewardkey personnel;continuedinclusionofalonger-termequityaward (e.g.,fiveyears)helpsattract,motivateandretainindividuals whoseperformancedrivesourresults
Forcertainexecutiveofficersaged60andolder,equityawards arestructuredasperformancestockunits(PSUs)andrestricted stockunits(RSUs),ratherthanasPSAsandRSAs,toallowforthe paymentofawardsfollowinganexecutiveofficer’squalified retirement
Allowingforthepaymentofawardsfollowinganexecutive officer’squalifiedretirementmoreeffectivelyrewardsand incentivizesexecutiveofficerswhoareapproachinganageat whichretirementismorelikely
February2022EquityIncentiveGrants
BasedupontherecommendationofourChiefExecutiveOfficerand,withrespecttoourChiefExecutiveOfficer,baseduponthe CompensationCommittee’sannualevaluationofourChiefExecutiveOfficer’sperformance,aswellasinputfromFWCook,the followinglong-termequityincentiveawardsforourNamedExecutiveOfficerswereapprovedbyourCompensationCommitteein February2022:
(1) Thelong-termequityincentiveawardsforMessrs.PowellBrown,Watts,BarrettBrownandPennyarestructuredasPSAsandRSAs,forwhichvestingisconditioned uponthegrantee’scontinuousemploymentforfiveyearsfollowingthedateofgrant.
(2) Mr.Watts’2021long-termequityincentiveawardreflectedaone-timeincrementalincreaseof$150,000inrecognitionofhisleadershipindevelopingtheCompany’s newDaytonaBeach,Florida,campus,whichwascompletedin2021.
(3) TheCompensationCommitteedeterminedthattomoreeffectivelyrewardandretainMr.Walker,whois64yearsold,itwasdesirabletogranthimPSUsand RSUs, whichallowforthepaymentfollowinghisqualifiedretirementofPSUsthatbecomeawardedPSUsandtheRSUs.IfMr.Walker’sretirementoccursbefore thethird anniversaryofthedateofgrant,thePSUsthatbecomeawardedPSUsandtheRSUswillbepaidtoMr.Walkeronthesecondanniversaryofhisretirement,subjectto Mr.WalkerbeingingoodstandingwiththeCompanyasofthedateofsuchpayment;andifMr.Walker’sretirementoccursafterthethirdanniversaryofthedateof grant,thePSUsthatbecomeawardedPSUsandtheRSUswillbepaidtoMr.Walkeronthefifthanniversaryofthedateofgrant,subjecttoMr.Walkerbeingingood standingwiththeCompanyasofthedateofsuchpayment.
January2022EquityIncentiveGrants
Inadditiontotheannuallong-termequityincentivearrangementsdescribedabove,wemayperiodicallygrantotherlong-termequity incentiveawardstoourexecutiveofficersandotherkeyemployeestorecognizeandrewardspecificachievementsand/orthe previousyear’sperformance.InDecember2021,basedupontherecommendationofourChiefExecutiveOfficer,aswellasinput fromFWCook,theCompensationCommitteeapprovedlong-termequityincentiveawards,effectiveasofJanuary1,2022,tothe followingNamedExecutiveOfficers:
J.ScottPenny
ChrisL.Walker(1)
$2,000,000$—
$—$2,000,000
(1) WhiletheCompanyhashistoricallystructuredthelong-termequityincentiveawardsforourexecutiveofficersasRSAs,forwhichvestingisconditioneduponthe grantee’scontinuousemploymentthroughaspecifieddate,theCompensationCommitteedeterminedthattobetterrewardandretainMr.Walker,whowas64years oldatthattime,itwasdesirabletogranthimRestrictedStockUnits(RSUs),whichallowforthepaymentofawardedRSUsfollowinghisqualifiedretirement.
TheCompensationCommittee’sdecisiontoapprovetheselong-termequityincentiveawardswasbasedupontheexceptional performanceduring2021ofeachNamedExecutiveOfficer,theCompanyand/ortheofficesoverwhichourNamedExecutive Officershadoversightresponsibilityduring2021,aswellastheCompany’sstrongtotalshareholderreturnsduringthepastseveral years.Unlikethelong-termequityincentiveawardstheCompensationCommitteegenerallygrantedinFebruaryofeachyear,which typicallyvestfiveyearsfollowingthedateofgrant,theselong-termequitygrantshavea7.5-yearincrementalvestingperiod,as follows,whichisintendedtofurtherincentivizethelong-termretentionofourNamedExecutiveOfficers:
RSAsforMessrs.Watts,BarrettBrownandPenny
TheseRSAswillvestinincrementsof25%,25%and50%onJuly1,2027,July1,2028andJuly1,2029,respectively,assuming continuousemploymentthroughsuchvestingdates,providedthatvestingwillaccelerateintheeventofdeath,disabilityor termination(includingconstructivetermination)withoutcausewithin12monthsfollowingachangeincontroloftheCompany.
RSUsforMr.Walker
TheseRSUswillbeawardedinfiveequalinstallmentsonthefirstfiveanniversariesofthedateofgrantand,onceawarded,willvest inincrementsof25%,25%and50%onJuly1,2027,July1,2028andJuly1,2029,respectively,assumingcontinuousemployment throughsuchvestingdates,providedthatvestingwillaccelerateintheeventofdeath,disabilityortermination(including constructivetermination)withoutcausewithin12monthsfollowingachangeincontroloftheCompany.IfMr.Walker’sretirement occursonorbeforeJuly1,2027,awardedRSUswillbepaidinincrementsof25%onthefirstyearanniversaryofretirementand75% onthesecondanniversaryofretirement,subjecttoMr.WalkerbeingingoodstandingwiththeCompanyasofthedatesofsuch payments;andifMr.Walker’sretirementoccursafterJuly1,2027,awardedRSUswillbepaidpost-retirementontheremaining originalscheduledvestingdates,subjecttoMr.WalkerbeingingoodstandingwiththeCompanyasofthedatesofsuchpayments.
EquityIncentivePlanOutcomesin2022
InFebruary2019,certainofourNamedExecutiveOfficersreceivedgrantsofrestrictedstockunderour2010SIP,whichincluded performanceconditionsofvestingbaseduponthefollowing,ineachcaseexcludingitems(forexample,extraordinary,nonrecurring items)theCompensationCommitteedeterminestobeappropriatelydisregardedforallgrantssubjecttothisvestingcondition:(i)the Company’saverageOrganicRevenuegrowth(“AverageOrganicRevenueGrowth”)and(ii)thecompoundedannualgrowthrate (“CAGR”)ofourearningspershare,excludingtheimpactofthechangeinestimatedacquisitionearn-outpayablesandanyother items(forexample,extraordinary,nonrecurringitems)thattheCompensationCommitteedeterminestobeappropriatelydisregarded forallgrantssubjecttothisvestingcondition(“AdjustedEPS”).Undertheapplicableawardagreements,theperformancecondition issatisfied(i)forone-halfofthesharesgrantedbasedourAverageOrganicRevenueGrowthduringthethree-yearperformance periodendingDecember31,2021,asfollows:
MaximumEqualtoorgreaterthan4.5%200% HighTarget3.5%120% Target 3.0%100% LowTarget2.5%80% Threshold1.5%50% NoPayoutLessthan1.5%0%
and(ii)forone-halfofthesharesgrantedbasedontheCAGRofourAdjustedEPSduringthethree-yearperformanceperiodending December31,2021,asfollows:
PerformanceLevelAdjustedEPSCAGR
AwardedPercentageof Tranche2PerformanceShares
MaximumEqualtoorgreaterthan$4.38Equaltoorgreaterthan11.0%200% HighTarget$4.229.0%120% Target$4.107.5%100% LowTarget$3.986.0%80% Threshold$3.915.0%50% NoPayoutLessthan$3.91Lessthan5.0%0%
Iftheactualperformancelevelforeachperformanceconditionfallsinbetweenanyoftheperformancelevels,thepercentageof sharesthatareawardedisdeterminedbasedonstraight-lineinterpolation.
InFebruary2022,theCompensationCommitteedeterminedthat:
•ourcumulativeAverageOrganicRevenueGrowth,whichin2019excludedaone-time,non-cashincreaseofapproximately$8millionin thecommissionsandfeesearnedbyoneofthebusinessesinourNationalProgramssegmentin2018resultingsolelyfromour implementationof“RevenuefromContractswithCustomers(Topic 606)”andAccountingStandardsCodificationTopic340–Other AssetsandDeferredCost,bothofwhichwereadoptedbytheCompanyeffectiveonJanuary1,2018(the“NewRevenueStandard”), andwhichin2021,excludedtheperiod-over-periodimpactofForeignCurrencyTranslation,duringtheperformanceperiodwas6.1% and,therefore,fellabovethemaximumperformancelevel,resultinginapayoutpercentageof200%ofthetargetand
•ourAdjustedEPS,whichin2019excludedthenegativeafter-taximpactofalegalsettlementpaidbytheCompanyof approximately$4.8millionin2019(the“2019LegalMatter”),andwhichin2020excludedalegaljudgmententeredintoagainst theCompanyin2020forapproximately$6.6millioninconnectionwiththe2019LegalMatter(the“2020LegalMatter”and togetherwiththe2019LegalMatter,the“LegalMatters”),duringtheperformanceperiodwas$5.28and,therefore,fellabovethe maximumperformancelevel,resultinginapayoutpercentageof200%ofthetarget.
TheCompensationCommitteeconcludedthatitwasdesirabletomakecertainadjustmentsinthecalculationsoftheCompany’s actualperformance,asfollows:
•AverageOrganicRevenueGrowthexcludedthepositiveimpactoftheNewRevenueStandardin2019becausetheadoptionof NewRevenueStandardwasnotrelatedtotheperformanceoftheCompanyanddidnotcreateanylong-termeconomicvaluefor theCompany’sshareholders,asitprimarilyimpactsonlythetimingofwhentheCompany’srecognizesrevenuesandexpenses duringtheyearand
•AverageOrganicRevenueGrowthexcludedthenegativeperiod-over-periodimpactofForeignCurrencyTranslationbecause fluctuationsinForeignCurrencyTranslationarenotrelatedtotheperformanceoftheCompanyand
•AdjustedEPSexcludedthenegativeafter-taximpactofthe2019LegalMatterin2019andthe2020LegalMatterin2020because theunderlyinglegalmatterwasrelatedtothepre-acquisitionactivitiesofabusinessweacquiredin2012andwasnotrelatedto theperformanceoftheCompany.
UpontheCompensationCommittee’scertificationoftheseperformanceconditions,thefollowingNamedExecutiveOfficersgained dividendrightsandvotingentitlementwithrespecttotheindicatednumberofshares:Mr.PowellBrown–101,660;Mr.Watts–30,498;Mr.BarrettBrown–15,248;Mr.Penny–22,872andMr.Walker–22,872.Exceptinlimitedcircumstances,theseshareswill becomefullyvestedonFebruary25,2024,provided,thegranteeremainscontinuouslyemployedbyusuntilsuchdate.
See AnnexA foradditionalinformationregardingAdjustedEPS,OrganicRevenuegrowthandOrganicRevenuegrowth–adjusted, whicharenon-GAAPfinancialmeasures,includingareconciliationtothemostcloselycomparableGAAPfinancialmeasure.
2023Compensation
October2022ComparativeMarketAssessment
InOctober2022,FWCookconductedacomprehensiveanalysisofourpaypracticesandexecutivecompensationlevelsas comparedtoagroupofourpeers(the“October2022ComparativeMarketAssessment”),whichtheCompensationCommittee considered,amongotherthings,inconnectionwithcertainpayadjustmentsforourexecutiveofficersin2023,asdescribedbelow.
PeerComparisonGroup
FortheOctober2022ComparativeMarketAssessment,FWCookfocusedonourPeerComparisonGroup.Foradiscussionofthe PeerComparisonGroup,includingalistofpeerscomprisingthePeerComparisonGroup,see“2023DirectorCompensation.”
SurveyComparison
AspartoftheOctober2022ComparativeMarketAssessment,theCompensationCommitteealsoreviewedandconsidereddata fromcertainthird-partysurveys.
Resultsofthe2022ComparativeMarketAssessments
BasedupontheresultsoftheOctober2022ComparativeMarketAssessment,theCompensationCommitteedeterminedthat,inthe aggregate,the2022targettotaldirectcompensationfortheCompany’sexecutiveofficerswasonlyslightlybelowthemarket median,butthatthe2022targettotaldirectcompensationforeachofMessrs.PowellBrownandWattswasmoremeaningfully belowthemarketmedian.
Aspartofitsongoingevaluationofourexecutiveofficers’compensationandbased,inpart,ontherecommendationofFWCook,in early2023,theCompensationCommitteeapprovedtheframeworkforourexecutiveofficers’compensationfor2023,asdescribed below.
2023BaseSalaries
TheCompensationCommitteedidnotincreasethebasesalariesfortheNamedExecutiveOfficersin2023,exceptforMr.Watts. ThedecisiontoincreaseMr.Watts’2023basesalaryfrom$600,000to$650,000wasbasedupontheOctober2022Comparative MarketAssessmentandthefactthat2022targettotalpayforMr.Wattswasbelowthemarketmedian.
2023AnnualCashIncentives
InFebruary2023,theCompensationCommitteedeterminednottochangethecomponentsofourannualexecutiveofficercash incentives,theweightingofeachcomponentorthetargetcashincentiveamountsforourNamedExecutiveOfficers,exceptfor Messrs.PowellBrownandWatts.ForMr.PowellBrown,theCompensationCommitteeincreasedhis2023targetcashincentive amountfrom$2,000,000to$3,000,000basedupontheOctober2022ComparativeMarketAssessmentandthefactthat2022 targettotalpayforMr.PowellBrownwasbelowthemarketmedian.ForMr.Watts,theCompensationCommitteeincreasedhis2023 targetcashincentiveamountfrom$700,000to$850,000basedupontheOctober2022ComparativeMarketAssessmentandthe factthat2022targettotalpayforMr.Wattswasbelowthemarketmedian.
2023EquityIncentiveGrants
BasedupontherecommendationofourChiefExecutiveOfficerand,withrespecttoourChiefExecutiveOfficer,baseduponthe CompensationCommittee’sannualevaluationofourChiefExecutiveOfficer’sperformance,aswellasinputfromFWCook,the followinglong-termequityincentiveawardsforourNamedExecutiveOfficerswereapprovedbyourCompensationCommitteein February2023:
(1) Theamountsreportedinthiscolumndonotincludethelong-termequityincentiveawards,effectiveJanuary1,2022,valuedat$2,000,000andgranted toeachof Messrs.Watts,BarrettBrown,PennyandWalker.Formoreinformationaboutthelong-termequityincentiveawardsapprovedeffectiveJanuary1,2022,see“January 2022EquityIncentiveGrants.”
(2) Thelong-termequityincentiveawardsforMessrs.PowellBrown,Watts,BarrettBrownandPennyarestructuredasPSAsandRSAs,forwhichvestingisconditioned uponthegrantee’scontinuousemploymentforfiveyearsfollowingthedateofgrant.
(3) ThedecisiontoincreaseMr.Watts’2023long-termequityincentiveawardfrom$700,000to$1,000,000wasbasedupontheOctober2022ComparativeMarket Assessmentandthefactthat2022targettotalpayforMr.Wattswas17%belowthemarketmedian.
(4) TheCompensationCommitteedeterminedthattobetterrewardandretainMr.Walker,whois65yearsold,itwasdesirabletogranthimPSUsandRSUs,whichallow forthepaymentfollowinghisqualifiedretirementofPSUsthatbecomeawardedPSUsandtheRSUs.IfMr.Walker’sretirementoccursbeforethethirdanniversaryof thedateofgrant,thePSUsthatbecomeawardedPSUsandtheRSUswillbepaidtoMr.Walkeronthesecondanniversaryofhisretirement,subjecttoMr.Walker beingingoodstandingwiththeCompanyasofthedateofsuchpayment;andifMr.Walker’sretirementoccursafterthethirdanniversaryofthedateofgrant,the PSUsthatbecomeawardedPSUsandtheRSUswillbepaidtoMr.Walkeronthefifthanniversaryofthedateofgrant,subjecttoMr.Walkerbeingingoodstanding withtheCompanyasofthedateofsuchpayment.
OtherCompensation
Wealsoprovidethefollowingcompensationandbenefitstoattractandretainkeyemployees.
BenefitsGenerally
Alongwithallotherfull-timeemployees,eachoftheNamedExecutiveOfficersiseligible:(a)toreceivematchingcontributionstothe Company’s401(k)Plan;(b)toparticipateinourESPP;(c)toparticipateingroupmedical,dentalandotherbenefitplansand(d)tothe extentpermittedbyapplicablelaw,forreimbursementofamountsearnedbytheCompanyonpersonallinesinsurancesuchas homeownersandfloodinsurancepurchasedbysuchNamedExecutiveOfficer.Our401(k)Planprovidesformatchingcontributions ofuptofourpercent(4.0%)ofthecontributionsmadebyeachparticipant.The401(k)Planalsopermitsdiscretionaryprofit-sharing contributions,buttheCompanymadenosuchcontributionstotheaccountsofNamedExecutiveOfficersfor2022.
DividendPaymentsonUnvestedStockAwards
TheNamedExecutiveOfficersreceivedividendsonunvestedshares,ordividendequivalentsonunvestedunits,grantedpursuantto theCompany’sequityincentivecompensationplans(i)thathaveexclusivelytime-basedvestingrequirements(e.g.,time-basedRSAs orRSUs)or(ii)forwhichtheapplicableperformanceconditionshavebeensatisfiedinaccordancewiththeapplicableaward agreements,butthetime-basedvestingrequirementshavenotbeensatisfied(e.g.,performance-basedPSAsorPSUs).
DeferredCompensationPlan
TheNamedExecutiveOfficersareeligibletoparticipateintheCompany’snon-qualifieddeferredcompensationplan,whichprovides theopportunitytodeferreceiptofupto75%ofbasesalaryandupto100%ofcashincentiveandbonuscompensation.Participant deferralsarecreditedtotheparticipant’sdeferralcontributionaccount.Theparticipant’saccountiscreditedwithearningsbasedon theperformanceoftheparticipant’sinvestmentallocationamongamenuofinvestmentoptionsdesignatedbytheCompany.The Companyispermitted,butnotrequired,tomakematchingcontributionsandotherdiscretionarycontributionsunderthisplan.The CompanymadenomatchingorotherdiscretionarycontributionstotheaccountsofNamedExecutiveOfficersfor2022.
Aparticipant’saccountundertheCompany’snon-qualifieddeferredcompensationplangenerallyisdistributedinalumpsumor installmentsupontheparticipant’sretirement,otherterminationofemploymentordeath.However,insomecircumstances(including hardship),alloraportionoftheparticipant’sdeferralaccountmaybedistributedononeormorespecifieddatespriortotermination ofemployment.Participantselectatthetimeofdeferraltohavethedistributionsmadeinalumpsumorannualinstallments.
PersonalBenefits
CertaingolforsocialclubmembershipduespaidbytheNamedExecutiveOfficerswhohaveresponsibilityfortheentertainmentof clients,prospectiveclientsandprincipalsofacquisitionprospectsmaybereimbursedbytheCompanyorpaidonbehalfofthe NamedExecutiveOfficer.Additionally,theCompanyreimbursesthecostsofannualphysicalexaminationsthatarenototherwise coveredbyinsurance,certaincarserviceexpenses,andforcertainfinancialandtaxplanningservicesforeachoftheNamed ExecutiveOfficers.
PolicyonTaxDeductibility
Thedeductibilityofcompensationpaymentscandependuponnumerousfactors,includingthenatureofthepaymentandthetime thatincomeisrecognizedundervariousplans,agreementsandprograms.Interpretationsofandchangesinapplicabletaxlawsand regulationsandotherfactorsbeyondtheCompensationCommittee’scontrolalsocanaffectthedeductibilityofcompensation.The CompensationCommitteeconsiderstheanticipatedtaxtreatmentoftheCompany’scompensationprogramsandpayments, includingthepotentialimpactofSection162(m)oftheUnitedStatesInternalRevenueCodeof1986,asamended.Section162(m) disallowsataxdeductionforanypubliclyheldcorporationforindividualcompensationexceedingonemilliondollarsinanytaxable yearforcertainexecutiveofficers.BeforetheeffectivedateoftheTaxCutsandJobsActof2017(the“TaxReformAct”),whichwas signedintolawinDecember2017,amountsinexcessofonemilliondollarsweredeductibleiftheyqualifiedasperformance-based compensationunderaplanthatwasapprovedbytheshareholdersandthatmetcertainothertechnicalrequirements.Withrespect toawardsmadebeforetheTaxReformAct,ourgeneralpolicywastotrytodeliverequity-basedcompensationtoemployeesinas tax-efficientamanneraspossible,takingintoconsiderationtheoverallcosttotheCompany.However,becauseourinterestsand ourshareholders’interestsmaysometimesbebestservedbyprovidingcompensationthatisnotdeductibleinordertoattractand retainhigh-qualitypeoplethatarecrucialtoboththeshort-termandlong-termsuccessoftheCompany,theCompensation Committeehasdeterminedatthistimetoretaintheflexibilitytoprovideforcompensationthatisnotdeductible.
AsaresultoftheTaxReformAct,theexemptionfromtheSection162(m)deductionlimitforperformance-basedcompensationhas beenrepealed,effectivefortaxableyearsbeginningafterDecember31,2017.Therefore,compensationpaidtoourcovered executiveofficersinexcessofonemilliondollarsisnotdeductibleunlessitqualifiesfortransitionreliefapplicabletocertain arrangementsinplaceasofNovember2,2017.Also,theTaxReformActexpandsthenumberofindividualscoveredbythe Section162(m)deductionlimit.Wewillcontinuetomonitorthepre-2018equity-basedawardsandendeavortopreservethe deductibilityofsuchawardsifandwhentheyarepaid.DespitetheCompensationCommittee’seffortstostructuretheseawardsina mannerintendedtobeexemptfromtheSection162(m)deductionlimit,becauseofuncertaintiesastotheapplicationand interpretationofSection162(m)aftertheTaxReformActandtheInternalRevenueServiceregulationsthatgovernthescopeofthe transitionreliefprovidedbythelegislation,noassurancecanbegiventhatcompensationintendedtosatisfytherequirementsfor exemptionfromSection162(m)willdoso.Inaddition,theCompensationCommitteereservestherighttomodifycompensationthat wasinitiallyintendedtobeexemptfromSection162(m)ifitdeterminesthatsuchmodificationsareconsistentwiththeCompany’s businessneeds.
PaymentsUponTerminationorChangeinControl
WiththeexceptionofMr.WalkerandMr.Watts,alloftheNamedExecutiveOfficershaveemploymentagreementswiththe Companythatincludechange-in-controlprovisions.ThetermsofouremploymentagreementswithourNamedExecutiveOfficers aredescribedbelowin“EmploymentandDeferredCompensationAgreements.”
The2010SIPand2019SIPprovidefordouble-triggervestingunderwhichallparticipants,includingalloftheNamedExecutive Officers,wouldbecomevestedinthefollowingamountsiftheparticipant’sservicewithusisinvoluntarilyorconstructivelyterminated (otherthanforspecifiedcauses,assetforthinthe2010SIPand2019SIP)within12monthsafterachange-in-controltransaction,which isdefinedineachplananddesignatedasa“TransferofControl”inthe2010SIPanda“ChangeinControl”the2019SIP:
•forallgrants,exceptthoseperformance-basedrestrictedstockgrantsinorafterFebruary2021,100%ofallunvestedrestricted stockgrantsgrantedpursuanttosuch2010SIPor2019SIPgrantsagreementsand •forallperformance-basedrestrictedstockgrantsinorafterFebruary2021,thegreaterof:(a)100%ofsuchunvestedrestricted stockgrantsor(b)thepercentageofunvestedrestrictedstockgrantsdeterminedinaccordancewiththeapplicableperformance schedulebasedupontheactuallevelofachievement(uptotheapplicablemaximumlevelofachievement)fromthefirstdayofthe performanceperiodtothedateonwhichthechange-in-controltransactionoccurs.
ForinformationconcerningthevalueofthevestedsharesthateachoftheNamedExecutiveOfficerswouldhaveunderthe2010SIP andthe2019SIPintheeventthatterminationofemploymentafterachange-in-controltransactionhadoccurredonthelastbusiness dayof2022,seethetabletitled“PotentialPaymentsUponTerminationorChangeinControl–2022.”
ThePSP(whichwasterminatedin2010)providesthatalloutstandinggrantsofPSPstockshallbecomefullyvestedandnon-forfeitable intheeventof:(i)theCompany’sentryintoanyagreementtosellallorsubstantiallyallofitsassetsortoenterintoanymerger, consolidation,reorganization,divisionorothercorporatetransactioninwhichCompanystockisconvertedintoanothersecurityorinto therighttoreceivesecuritiesorproperty,wheresuchagreementdoesnotprovidefortheassumptionorsubstitutionofPSPstock; (ii)anytenderorexchangeofferfortheCompany’sstockacceptedbyamajorityoftheshareholdersoftheCompany;or(iii)thedeath ofJ.HyattBrownandthesubsequentsalebyhisestate,hiswife,hislinealdescendants,anytrustcreatedforhisbenefitduringhis lifetime,oranycombinationoftheforegoing,oftheCompanystockownedbyJ.HyattBrownpriortohisdeath.ThePSPfurther providesthatifanysharesofPSPstockbecomefullyvestedandnon-forfeitablebecauseoftheoccurrenceoftheseevents,the Companyshallpaytotheholdersofsuchshares,within60daysoftheoccurrenceofsuchevent,thefullamountofanyfederaland stateincometaxliabilityincurredbysuchholderasaresultofsuchvesting,including,withoutlimitation,anyexcisetaxwithrespectto suchvesting(e.g.,underInternalRevenueCodeSection4999andanysuccessorprovision)aswellastheamountofanytaxliability withrespecttosuch“gross-up”payment.Thisexcisetaxgross-upprovisionisalegacyprovisionthatappliesonlytoawardsthatwere grantedunderthePSPpriortoitssuspensionin2010,andnonewagreementsthatcontainexcisetaxgross-upprovisionshavebeen enteredinto,andnopreviousagreementscontainingsuchlegacyprovisionshavebeenmateriallyamended.Additionally,thePSP providesthatintheeventofany“ChangeinControl”(asdefinedinthePSP,andexcludingthetriggeringeventsdescribedabove),the BoardthereaftershallhavetherighttotakesuchactionwithrespecttoanysharesofPSPstockthatareforfeitable,orallsuchshares ofPSPstock,astheBoardinitsdiscretiondeemsappropriateunderthecircumstancestoprotecttheinterestsoftheCompanyin maintainingtheintegrityoftheawardsunderthePSP.ThePSPfurtherstatesthattheBoardshallhavetherighttotakedifferentaction withrespecttodifferent“KeyEmployees”(asdefinedinthePSP)ordifferentgroupsof“KeyEmployees,”astheBoardinitsdiscretion deemsappropriateunderthecircumstances.ForinformationconcerningthevalueofthevestedPSPstockthateachoftheNamed ExecutiveOfficerswouldhaveintheeventthatoneofthetriggeringeventsdescribedaboveoccurredonthelastbusinessdayof 2022,seethetabletitled“PotentialPaymentsUponTerminationorChangeinControl–2022.”
EmploymentandDeferredCompensationArrangements
MESSRS.POWELLBROWN,BARRETTBROWNANDPENNY
Messrs.PowellBrownandPennyenteredintonewemploymentagreementswiththeCompanyin2014,andMr.BarrettBrown enteredintoanewemploymentagreementwiththeCompanyin2015,ineachcasereplacingpreviousemploymentagreementsthat haddifferentterms.Compensationundertheseagreementsisnotspecified,butratheristobeagreeduponbetweenusandthe executivefromtimetotime.See“CompensationDiscussionandAnalysis”forinformationconcerningtheconsiderationsaffecting thecompensationoftheNamedExecutiveOfficers.Theagreementsincludeaprovisionthatstatesthatintheeventofa“Changein Control,”definedasacircumstanceinwhichtheholdersofmorethan50%ofthevotingstockoftheCompanybeforethe transactionclosesholdlessthan50%ofthevotingstockoftheCompanyafterthetransactioncloses,iftheresultingentityemploys executiveswithdutiessimilarincharacter,classificationorresponsibilitiestotheNamedExecutiveOfficer’s,theAgreementshallbe
deemedmodifiedtoprovidetheNamedExecutiveOfficerwith“equivalenttermsandbenefitstothoseofsimilarexecutives.”The newemploymentagreementsinclude,amongotherprovisions,restrictivecovenantsprohibitingthesolicitationordiversionof businessoremployeesforaperiodoftwoyearsfollowingvoluntaryorinvoluntaryseparationfromemploymentandalsoprohibit disclosureofconfidentialinformation.Theseagreementsmaybeterminatedbyeitherpartyatanytime,withorwithoutcauseor advancenotice.
MR.WALKER
Mr.WalkerenteredintoanemploymentagreementwiththeCompanyeffectiveJanuary9,2012,inconnectionwithouracquisitionof ArrowheadGeneralInsuranceAgency,Inc.Theagreementmaybeterminatedbyeitherpartyatanytime,withorwithoutcauseor advancenotice.CompensationundertheagreementisatanamountagreeduponbetweenusandMr.Walkerfromtimetotime,and foraperiodoftwoyearsfollowingtheterminationofemployment,theagreementprohibitsMr.Walkerfromdirectlyorindirectly solicitingorservicingourcustomers,orsolicitingouremployeestoleavetheiremploymentwithus.
MR.WATTS
Inconnectionwithhishiringin2014,Mr.WattsandtheCompanyenteredintoanemploymentagreementwithaninitialtermthat endedonFebruary17,2017(the“Term”),pursuanttowhich,amongotherthings,Mr.Watts:(1)receivedastockgrantwithagrant datefairvalueof$250,002thatfullyvestedonFebruary17,2019(i.e.,fiveyearsafterthedateofgrant);(2)receivedastockgrant withagrantdatefairvalueof$474,991thatfullyvestedonFebruary17,2017(i.e.,threeyearsafterthedateofgrant)and(3)received astockgrantwithgrantdatefairvalueof$800,020,whichincludedafive-year,performance-basedvestingconditionthatthe CompensationCommitteedeterminedinFebruary2019wasachievedandvestedinyearsfive,sixandseven.Followingthe conclusionoftheTermonFebruary17,2017,thetermsoftheemploymentagreementcontinuedineffect,exceptthattheagreement maynowbeterminatedbyeitherpartyatanytime,withorwithoutcauseoradvancenotice.Compensationundertheagreementis atanamountagreeduponbetweenusandMr.Wattsfromtimetotime,andforaperiodoftwoyearsfollowingtheterminationof employment,theagreementprohibitsMr.Wattsfromdirectlyorindirectlysolicitingorservicingourcustomers,orsolicitingour employeestoleavetheiremploymentwithus.
TheabovedescriptionsofouremploymentagreementswithourNamedExecutiveOfficersaresummariesandarequalifiedby referencetothecopiesofsuchagreementsthathavebeenfiledasexhibitstoourSECfilingsasfollows:
•WithrespecttoMessrs.PowellBrown,BarrettBrownandPenny,Exhibit10.2toForm10-QforthequarterendedSeptember30,2014;
•WithrespecttoMr.Watts,Exhibit10.2toForm10-QforthequarterendedMarch31,2014and
•WithrespecttoMr.Walker,Exhibit10.1toForm10-QforthequarterendedMarch31,2013.
HedgingandPledgingPolicies;StockOwnershipRequirements;ClawbackPolicy
TheBoardhasadoptedpoliciesprohibitingthehedging(asdefinedbelow)ofourstockbydirectors,executiveofficersandother membersofourSeniorLeadershipTeamandprohibitingthepledgingofourstockbydirectors,aswellprohibitingthepledgingofour stockheldpursuanttoourstockownershiprequirementsbyourexecutiveofficersandothermembersofourSeniorLeadershipTeam. Forthepurposesofthispolicy,“hedging”includesengaginginshortsalesofCompanystockandengaginginhedgingtransactionsin publiclytradedoptionsthatarebasedonthetradingpriceofCompanystock,suchasputs,callsandotherderivativesecurities.
OurstockownershiprequirementsprovidethatmembersoftheCompany’sSeniorLeadershipTeammustaccumulateCompany stockvaluedatthefollowingmultiplesoftheirbasesalarieswithinthreeyearsofhireorpromotion,andretainsuchstockuntil retirement,separationfromemploymentorremovalfromoneofthecategoriessetforthbelow:
STOCKOWNERSHIPGUIDELINES–NAMEDEXECUTIVEOFFICERCOMPLIANCE ASOFDECEMBER31,2022
(1) Ownershiplevelsinclude:(i)sharesowneddirectlyorindirectly,excludingsharesownedbyimmediatefamilymembersastowhichbeneficialownershipisdisclaimed; (ii)unvestedPSPsharesthathavemettheapplicableperformanceconditionsundertheapplicableawardagreements;and(iii)unvested2010SIPand2019SIPshares orunitsthat(a)aresubjecttoatime-based-onlyvestingconditionor(b)havemettheapplicableperformanceconditionsundertheapplicableaward agreements.For Messrs.PowellBrownandBarrettBrown,ownershiplevelsexclude2,201,877sharesheldbytheJamesHyattBrownNongrantorCharitableLeadAnnuityTrust,of whicheachofthemisatrusteeandaremainderbeneficiary.
(2) Theownershiprequirementsareasfollows:ChiefExecutiveOfficer–sixtimesbasesalary;SeniorLeadershipTeammemberswhoare“officers”pursuanttoSection16 ofSecuritiesExchangeAct1934–threetimesbasesalaryandSeniorLeadershipTeammemberswhoarenot“officers”pursuanttoSection16oftheSecurities ExchangeActof1934–onetimesbasesalary.
Inaddition,eachnon-employeedirectorisrequiredtoaccumulateBrown&Browncommonstockvaluedatleastfivetimesthe currentannualcashretainerwithinfiveyearsofjoiningtheBoard.
Onaverage,eachofour non-employeedirectors ownsBrown&Browncommon stockvaluedat
44x thecurrentannualcashretainer asofDecember31,2022.
TheBoardhasadoptedapolicythatprovidesfortheclawbackofcertainperformance-basedcompensationintheeventofa restatementoftheCompany’sfinancialresults,otherthanarestatementcausedbyachangeinapplicableaccountingrulesor interpretations.Underthepolicy,ifanyperformance-basedequityornon-equitycompensationpaidtoacurrentorformerofficerof theCompanyinthethreeyearspriortothedateofrestatementwouldhavebeenaloweramounthaditbeencalculatedbasedon therestatedresults,theBoard’sCompensationCommitteewillevaluaterecoveryofsuchperformance-basedequityornon-equity compensation.Ifarecoveryisdeterminedtobeappropriate,thentheCompensationCommitteewillseektorecover,forthebenefit oftheCompanyandtotheextentpermittedbyapplicablelaw,theafter-taxportionofthedifferencebetweenthepreviously awardedcompensationandtherecalculatedcompensation.
IndeterminingwhethertoseekrecoveryundertheCompany’sclawbackpolicy,theCompensationCommitteewilltakeintoaccountsuch considerationsasitdeemsappropriate,including,withoutlimitation,whethertheassertionofaclaimmayviolateapplicablelawor prejudicetheinterestsoftheCompanyinanyrelatedproceedingorinvestigation,andthelikelihoodofsuccessunderapplicablelaw.
APPROVAL,ONANADVISORYBASIS,OF
ONEYEARASTHEINTERVALATWHICHANADVISORY VOTEONTHECOMPENSATIONOFTHENAMED EXECUTIVEOFFICERSWILLBECONDUCTED
WearerequiredunderSection14AoftheExchangeActtoprovideourshareholderswiththeopportunitytovote,onanonbinding, advisorybasis,fortheirpreferenceonhowfrequentlyanadvisoryvoteonthecompensationofournamedexecutiveofficers,such asthe“sayonpay”proposal,above,shouldbeconducted.ByvotingonthisProposal4,shareholdersmayindicatewhetherthey wouldpreferanadvisoryvoteonnamedexecutiveofficercompensationonceeveryone,twoorthreeyears.Weexpecttoholda similarvoteatthe2029AnnualMeeting.
Aftercarefulconsideration,ourBoardhasdeterminedthatanadvisoryvoteonexecutivecompensationthatoccurseveryyearisthe mostappropriatealternativefortheCompany,andthereforeourBoardrecommendsthatyouvoteforaone-yearintervalforthe advisoryvoteonexecutivecompensation.Indeterminingitsrecommendation,ourBoardconsideredthatanannualadvisoryvoteon executivecompensationwillallowourshareholderstoprovideuswiththeirdirectinputonourcompensationphilosophy,policies andpracticesasdisclosedintheProxyStatementeveryyear.
ThisvoteisadvisoryandthereforenotbindingontheCompany,theCompensationCommitteeorourBoard.OurBoardandour CompensationCommitteevaluetheopinionsofourshareholdersandwilltakeintoaccounttheoutcomeofthevote,however,when consideringthefrequencyoffutureadvisoryvotesonexecutivecompensation.TheBoardmaydecidethatitisinthebestinterests ofourshareholdersandtheCompanytoholdanadvisoryvoteonexecutivecompensationmoreorlessfrequentlythantheoption approvedbyourshareholders.
Youmaycastyourvoteonyourpreferredvotingfrequencyofanadvisoryvoteonexecutivecompensationbychoosinganyoneof thefollowingoptions:anadvisoryvoteeveryoneyear;anadvisoryvoteeverytwoyears;anadvisoryvoteeverythreeyears;or abstainingfromvoting.Pleasenotethatwhencastingavoteonthisproposal,youwillnotbevotingtoapproveordisapprovethe Board’srecommendation.
VoteRequired;BoardRecommendation
Theoptionthatreceivesthehighestnumberofvotescastby shareholderswillindicatethefrequencyfortheadvisoryvoteon executivecompensationselectedbyshareholderscastingvotes onthisProposal.Abstentionsandbrokernon-voteswillhaveno effectonthevote.
TheBoardofunanimously recommendsavotefor “ONEYEAR” onthis proposal
Executive Compensation Tables
ThefollowingtablesetsforththecompensationreceivedbyourNamedExecutiveOfficersforservicesrenderedtousinsuch capacityfortheyearsendedDecember31,2022,2021and2020.
SummaryCompensationTable2020-2022
(1) Amountsshownfor2020reflecttheinclusionof27regularpayperiods,ascomparedto26regularpayperiodsin2022and2021.
(2) Amountsshownunderthe“StockAwards”columnreflecttheaggregategrantdatefairvalueofawardscomputedinaccordancewithStatementofFinancial AccountingStandardsASCTopic718(formerly“SFAS123(R)”)withrespecttostockgrantedunderthe2019SIPtoourNamedExecutiveOfficersratherthanthedollar amountrecognizedduringthefiscalyearforfinancialstatementpurposes.TheassumptionsusedforthevaluationsaresetforthinNote12toourauditedconsolidated financialstatementsinourAnnualReportonForm10-KforthefiscalyearendedDecember31,2022.See“CompensationDiscussionandAnalysis”andthe “OutstandingEquityAwardsatFiscalYear-End–2022”tableforinformationwithrespecttostockgrantedunderthePSP,the2010SIPandthe2019SIPpriorto2022. Forawardsthatareperformancebased,theindicatedgrantdatefairvalueamountsassumethatthetargetlevelofperformancewillbeachieved.
Amountsshownunderthe“StockAwards”columnincludetheaggregategrantdatefairvalueofallawards.For2020,2021and2022,aportionoftheshares granted toeachNamedExecutiveOfficerwereeitherPSAsorPSUs,andportionofthesharesgrantedtoeachNamedExecutiveOfficerwereeitherRSAsorRSUs.Assuming thehighestlevelofperformanceconditionswillbeachievedforthePSAsandPSUSsinthiscolumn(200%for2020,2021and2022),thegrantdatefairvalueforeach NamedExecutiveOfficer,includingbothPSAsorPSUs,asapplicable,andRSAsorRSUs,asapplicable,wouldbeasfollows:
*Thelong-termequityincentiveawardsreportedfor2022includethetime-based-onlylong-termequityincentiveawards,effectiveJanuary1,2022,eachwithagrantdatefairvalueof $1,999,958andgrantedtoeachofMessrs.Watts,BarrettBrown,PennyandWalker.Formoreinformationaboutthelong-termequityincentiveawardsapprovedeffectiveJanuary1,2022,see “January2022EquityIncentiveGrants.”
(3) Thesedollaramountsincludetheitemsidentifiedinthetabletitled“AllOtherCompensationTable–2022.”
AllOtherCompensationTable2020-2022
(1) Theseamountsincludereimbursementofthecostofannualphysicalexaminationstotheextentnototherwisecoveredbyinsurance,thereimbursement ofthecostof certainfinancialandtaxplanningservicesandreimbursementofcertainclubmembershipduesandcarserviceexpenses.Foradditionalinformation,see “CompensationDiscussionandAnalysis–OtherCompensation.”
(2) TheseamountsincludeamountsearnedbytheCompanyandreimbursedtotheseemployeesforpersonallinesinsurancepurchasedbytheseemployeesthroughthe Companyoritssubsidiaries.
(3) TheseamountsrepresentcashdividendspaidongrantedPSP,2010SIPand2019SIPsharesforwhichconditionsofvestingotherthantime-basedconditionshave beensatisfied.
(4) AmountreflectscostsassociatedwiththetemporaryrelocationofMr.BarrettBrownandhisfamilytoLondon,EnglandfromJune2022toAugust2022,including approximately$238,487forhousingcosts;$10,825fortransportationcosts,includingcarserviceandrentalcars;$27,844forairlinefarescosts and$8,893fortax grossups.
GrantsofPlan-BasedAwardsinFiscal2022
Thefollowingtableprovidesinformationabouttherangeofpossibleannualincentivecashpayoutsinrespectof2022performance, therangeofsharesthatmaybeearnedpursuanttothestockgrantsmadetoourNamedExecutiveOfficersunderour2019SIPin 2022andthegrantdatefairvalueofthesestockgrantscomputedunderStatementofFinancialAccountingStandardsASCTopic 718(formerly“SFAS123(R)”).
(1) Foradditionalinformationrelatedtotheannualcashincentiveawardsincludingperformancetargetsandmeasures,see“CompensationDiscussionandAnalysis.”
(2) The“EstimatedFuturePayoutsUnderEquityIncentivePlanAwards”columnshowstherangeofsharesthatmaybeearnedpursuanttothestockawardsgranted underour2019SIPin2022.Foradditionalinformationrelatedtothesegrants,see“CompensationDiscussionandAnalysis.”
(3) Foradditionalinformationrelatedtotheannualcashincentiveawardsincludingperformancetargetsandmeasures,see“CompensationDiscussionandAnalysis.”
(4) Foradditionalinformationrelatedtotheannualcashincentiveawardsincludingperformancetargetsandmeasures,see“CompensationDiscussionandAnalysis.”
(5) The“GrantDateFairValueofStockAwards”columnshowsthefullgrantdatefairvalueofthesharesgrantedtoourNamedExecutiveOfficersunderour2019SIPin 2022.ThegrantdatefairvalueoftheawardsisdeterminedunderStatementofFinancialAccountingStandardsASCTopic718(formerly“SFAS123(R)”)andrepresents theamountwewouldexpenseinourfinancialstatementsoverthevestingscheduleforthegrants.InaccordancewithSECrules,theamountsinthiscolumnreflectthe actualASC718accountingcostwithoutreductionforestimatesofforfeituresrelatedtoservice-basedvestingconditions.Theamountsreflectour accountingforthese grantsanddonotcorrespondtotheactualvaluesthatmayberealizedbythegrantees.
OutstandingEquityAwardsatFiscalYear-End–2022
(1) Themarketvalueshownwasdeterminedbymultiplyingthenumberofsharesofstockthathavenotvestedby$56.97,theclosingmarketpriceofourcommon stock onDecember31,2022.
(2) Themarketvalueshownwasdeterminedbymultiplyingthenumberofunearnedstockshares(attarget)by$56.97,theclosingmarketpriceofourcommonstockon December31,2022.
OptionExercisesandStockVested–2022
(1) Thevaluerealizeduponthevestingofstockawardsisthenumberofsharesmultipliedbythemarketvalue(beingtheclosingmarketpriceasoftheprevioustrading day)oftheunderlyingsharesonthevestingdate.Thevaluerealizedwasdeterminedwithoutconsideringanytaxesthatwereoweduponvesting.
NonqualifiedDeferredCompensationatFiscalYear-End–2022
(1) Ineachinstance,theindicatedexecutivecontributionisincludedinthe amountsreportedforthatNamedExecutiveOfficerintheSummaryCompensationTablefor2022.
PotentialPaymentsUponTerminationorChangeinControl–2022
(1) AllfiguresshownforthevalueofstockgrantedunderthePSP,2010SIPand2019SIPthatwouldvestupondeath,disabilityorfollowingachangeincontrolare calculatedbasedontheassumptionthatthetriggeringevent(s)forsuchvestingtookplaceonDecember31,2022,thelastbusinessdayoftheCompany’slast completedfiscalyear,andthatthepricepershareofourcommonstockis$56.97theclosingmarketpriceasofthatdate.Otherthantheamountsshownin the columncaptioned“ChangeinControl”payableunderthePSP,thefiguresshowninthistabledonotreflecttheimpactoftheexcisetaxunderSections280Gand4999 oftheInternalRevenueCode,whichmayeffectivelyreducetheamountsofchange-in-controlpaymentsthataNamedExecutiveOfficermayreceive,and donotreflect theassignmentofanyvaluetonon-competitionandotherrestrictivecovenantsordeterminationsofreasonablecompensationthatmayreducetheamountsof change-in-controlpaymentssubjecttotheexcisetax.Formoredetailedinformationconcerningthechange-in-controlprovisionsofthePSP,the2010SIPandthe2019 SIP,see“CompensationDiscussionandAnalysis–PaymentsUponTerminationorChangeinControl.”Allfiguresshowninthistablewouldbepaidinlump-sum paymentsbyusinaccordancewiththeapplicablegrantagreements.
(2) Thefiguresshowninthiscolumnweredeterminedasfollows:(a)forallgrants,exceptthoseperformance-basedrestrictedstockgrantsinorafterFebruary2020,the amountcontemplates100%ofallunvestedrestrictedstockgrantsgrantedpursuanttosuch2010SIPand2019SIPgrantagreements,and(b)forthoseperformancebasedrestrictedstockgrantsinorafterFebruary2020,theamountcontemplatesthegreaterof:(i)100%ofsuchunvestedrestrictedstockgrantsor(ii)theestimated percentageofunvestedrestrictedstockgrantsdeterminedinaccordancewiththeapplicableperformanceschedulebasedupontheactuallevelofachievement(upto theapplicablemaximumlevelofachievementandassumingtheapplicableperformancelevelisadjusted,pursuanttotheCompensationCommittee’sexerciseofits discretion,fromthefirstdayoftheperformanceperiodtoDecember31,2022,thedateonwhichtheTransferofControloccurs,asfollows:(w)in2020, toexcludethe negativeimpactofthe2020LegalMatter;(x)in2021and2022,toexcludetheperiod-over-periodimpactofForeignCurrencyTranslation;(y)in2022, toexcludethe positiveimpactofthedecreaseinexpensewerecognizedrelatedtotheLegalMattersandthenegativeimpactofAcquisition/IntegrationCostsand(z)in2022,to includeguaranteedsupplementalcommissionsaspartofcorecommissionsandfeesand,therefore,asacomponentoftheCompany’sOrganicRevenue.
(3) ThesefiguresrepresentamountsthatwouldbepaidpursuanttothetermsofthePSPintheeventofachangeincontrolasdefinedinthePSPandincludethe followingexcisetaxgross-upamounttobepaidbytheCompanyonPSPsharesonbehalfoftheparticipantintheeventofchangeincontrol:Mr.PowellBrown–$1,988,975;Mr.BarrettBrown–$60,656andMr.Penny–$970,718.Theexcisetaxgross-upamounthasbeencalculatedassumingtheexcisetaxrateof20% multipliedbytheexcessofthevalueofthechange-in-controlpaymentsovertheexecutive’saverageW-2earningsforthelastfivecalendaryears,andassuminga blendedeffectivetaxrateofapproximately40%foreachexecutive.However,theexcisetaxgross-upisonlyapplicableifthesumofallpaymentsequalsorexceeds threetimestheexecutive’saverageW-2earningsforthepastfivecalendaryears.Further,theexcisetaxgross-upassumesnovalueisassignedtonon-competition andotherrestrictivecovenantsordeterminationofreasonablecompensationthatmayapplytotheparticipant.Suchexcisetaxgross-upamountsalsoassumea changeincontroldateofDecember31,2022,atourclosingmarketpriceof$56.97asofthatdate.Theexcisetaxgross-upprovisionisalegacyprovisionthatapplies onlytoawardsthatweregrantedunderthePSPpriortoitssuspensionin2010anddoesnotapplytoawardsunderthe2010SIPorthe2019SIP.Nonewagreements thatcontainexcisetaxgross-upprovisionshavebeenenteredinto,andnopreviousagreementscontainingsuchlegacyprovisionshavebeenmateriallyamended.
(4) Thisamountwouldbepaidpursuanttothatcertaingrantunderour2010SIPmadeonApril29,2010for374,080shares.Thisgrantreplaced374,080shares granted underourPSPonJuly21,2009,whichhadinadvertentlyexceededthemaximumnumberofsharespermittedtobeawardedinaparticularcalendaryear.Inorderto assureachievementofthefullintentoftheoriginalPSPgrant,thereplacementgrantunderthe2010SIPhasidenticalperformance-basedandothervestingconditions, includingthoseassociatedwithachangeincontrol,totheoriginalPSPgrant.
Pay Ratio
AsrequiredbySection953(b)oftheDodd-FrankAct,andItem402(u)ofRegulationS-K,weareprovidingthefollowinginformation abouttherelationshipoftheannualtotalcompensationofouremployeesandtheannualtotalcompensationofMr.PowellBrown, ourPresidentandChiefExecutiveOfficer:
ChiefExecutiveOfficerPayRatio
For2022,ourlastcompletedfiscalyear:
•themedianoftheannualtotalcompensationofallemployeesofourcompany,otherthanMr.PowellBrown,was$96,278;and •theannualtotalcompensationofMr.PowellBrown,asreportedintheSummaryCompensationTable,was$6,741,633.
•Basedonthisinformation,for2022,theratiooftheannualtotalcompensationofMr.PowellBrowntothemedianoftheannual totalcompensationofallemployees,otherthanMr.PowellBrown,was70to1.
Methodology
Toidentifythemedianoftheannualtotalcompensationofallouremployees,otherthanMr.PowellBrown,aswellastodetermine theannualtotalcompensationofourmedianemployeeandMr.PowellBrown,wetookthefollowingsteps:
1.Wedeterminedtherewasnochangeinouremployeepopulationoremployeecompensationarrangementsduringthelasttwo completedfiscalyearsthatwebelievewouldsignificantlyimpactthepayratiodisclosurefor2022.Accordingly,weusedthesame medianemployeeweidentifiedin2020forpurposesofcalculatingourpayratiodisclosureforfiscalyears2021and2020.As permittedunderSECrules,wedidnotconsideraspartofourdeterminationemployeesfromour2022acquisitionofGRP(estimated headcountof2,100).
2.Wedeterminedthat,asofDecember26,2020,thelastdayofourlastregularpayperiodin2020,ouremployeepopulation consistedofapproximately11,123full-time,part-time,seasonalandtemporaryemployees,with10,933oftheseindividuals locatedintheUnitedStates,45oftheseindividualslocatedintheUnitedKingdom,132oftheseindividualslocatedinCanada,11 oftheseindividualslocatedinBermuda,andtwooftheseindividualslocatedintheCaymanIslands.
3.AspermittedbySECrules,wechosetoexclude(a)allofthenon-U.S.employeesdescribedfromthedeterminationofthe “medianemployee”becausetheyaccountforlessthan5%ofourtotalemployeesand(b)60employeeshiredinDecember 2020inconnectionwithouracquisitionofsubstantiallyalloftheassetsofSouth&WesternGeneralAgency,Inc.andallissued andoutstandingsharesofitsaffiliate,S&WPremiumFinanceCompany,Inc.Ouremployeepopulation,aftertakinginto considerationtheseadjustments,consistedofapproximately10,873individuals.
4.Toidentifythe“medianemployee”fromouremployeepopulation,wecomparedtheamountofcompensationofouremployeesas reflectedinourpayrollrecordsasreportedtotheInternalRevenueServiceonFormW-2for2020.Inmakingthisdetermination,we annualizedthecompensationofapproximately2,025permanentemployees(full-timeandpart-time)whowerehiredin2020,butdid notworkforusfortheentirefiscalyear.Sincewedonotwidelydistributeannualequityawardstoouremployees,thegrantdatefair valuesofsuchawardswereexcludedfromourcompensationmeasure.Fewerthan10%ofouremployeesreceiveannualequityawards.
5.WeidentifiedourmedianemployeeasofDecember26,2020usingthiscompensationmeasure,whichwasconsistentlyappliedto allouremployeesincludedinthecalculation.Wedidnotmakeanycost-of-livingadjustmentsinidentifyingthe“medianemployee.”
6.Onceweidentifiedourmedianemployee,wecombinedalloftheelementsofsuchemployee’scompensationfor2022in accordancewiththerequirementsofItem402(c)(2)(x)ofRegulationS-K,resultinginannualtotalcompensationof$96,278.The differencebetweensuchemployee’sannualtotalcompensationandsuchemployee’sFormW-2compensationrepresents (a)$3,767inmatchingcontributionsmadebytheCompanytosuchemployee’s401(k)Planaccountand(b)adecreaseof$1,666 intheperformance-basedbonuspaidtosuchemployeeinJanuary2023forservicein2022ascomparedtotheperformancebasedbonuspaidtosuchemployeeinJanuary2022forservicein2021.
7.WithrespecttotheannualtotalcompensationofMr.PowellBrown,weusedtheamountreportedinthe“Total”columnofthe SummaryCompensationTable.
Pay Versus Performance
InaccordancewiththeSEC’sdisclosurerequirementsregardingpayversusperformance(“PVP”),thissectionpresentstheSECdefined“CompensationActuallyPaid”(“CAP”).AlsorequiredbySEC’snewPVPrules,thissectioncomparesCAPtovarious measuresusedtogaugeourperformance.
Ourcompensationdecisionsaremadeindependentlyofdisclosurerequirements.CAPisasupplementalmeasuretobeviewed alongsideperformancemeasuresdescribedunder“CompensationDiscussionandAnalysis,”notinreplacement.
PayVersusPerformanceTable
InaccordancewiththeSEC’snewPVPrules,thefollowingtablesetsforthinformationconcerningthecompensationofourNamed ExecutiveOfficersforeachofthefiscalyearsendedDecember31,2022,2021and2020,andourfinancialperformanceforeach suchfiscalyear:
*Theequityawardadjustmentsshowninthiscolumnarecalculatedasfollows:
(2) TheaverageCompensationActuallyPaidtoourNamedExecutiveOfficers,otherthanJ.PowellBrown,PresidentandChiefExecutiveOfficeroftheCompany,for eachofthefiscalyearsendedDecember31,2022,2021and2020,iscalculated,asfollows.
($)
Average fairvalue attheend ofthe prioryear ofequity awards thatfailed tomeet vesting conditions inthe year ($)
Average valueof dividendsor other earningspaid onstockor option awardsnot otherwise reflectedin fairvalueor total compensation ($)
(3) PeeraverageamongArthurJ.Gallagher&Co,Aonplc,Marsh&McLennanCompanies,andWillisTowersWatsonPublicLimitedCompany.
Average totalequity award adjustments ($)
(4) See AnnexA foradditionalinformationregardingOrganicRevenuegrowth,whichisanon-GAAPfinancialmeasure,includingareconciliationtothemostclosely comparableGAAPfinancialmeasure.
RelationshipbetweenPayandPerformance
InaccordancewiththeSEC’snewPVPrules,weareprovidingthefollowinggraphsshowingtherelationshipsbetweeninformation presentedinthePVPtable.EquityawardsconstituteasignificantportionofcompensationforourNEOs,andasaresult,CAPwill varybasedonyear-over-yearchangesinourstockpriceresultinginappreciationordepreciationinthevalueofequityawards grantedtoourNEOs.ThevalueofequityawardswillnotberealizedbytheNEOsbeforeanyapplicableperformancegoalsare satisfiedandtheawardsvest.Theultimatevalueofsuchawardsissubjecttochangesinthestockprice.
RELATIONSHIPBETWEENCAP,ANDNETINCOMEANDORGANICREVENUEGROWTH
ThegraphbelowreflectstherelationshipbetweentheCEOandaverageNon-CEONEOCAP,theCompany’snetincomeandthe Company’sOrganicRevenuegrowthforthefiscalyearsendedDecember31,2022,2021and2020:
RELATIONSHIPBETWEENCAP,ANDCOMPANYTOTALSHAREHOLDERRETURNANDPEERGROUPTOTALSHAREHOLDER RETURN
ThegraphsbelowreflecttherelationshipbetweentheCEOandaverageNon-CEONEOCAP,theCompany’stotalshareholder return(assuminganinitialfixedinvestmentof$100)andthepeergroup’stotalshareholderreturn(assuminganinitialfixed investmentof$100)forthefiscalyearsendedDecember31,2022,2021and2020:
ListofMostImportantFinancialPerformanceMeasures
InaccordancewiththeSEC’snewPVPrules,thefollowingtabularlistsetsforththefinancialperformancemeasurestheCompany hasdeterminedarethemostimportantfinancialperformancemeasuresusedtolinkcompensationactuallypaidtoCompany performanceduringthelastfiscalyear:
FinancialPerformanceMeasure
OrganicRevenue(1) growthrate
AdjustedEBITDACMargin(1)
AdjustedEPS(1)
TotalShareholderReturn(2)
(1)ForadditionalinformationrelatedtohowwelinkourexecutivecompensationprogramstoAdjustedEBITDACMargin,OrganicRevenuegrowthandAdjustedEPS,see “CompensationDiscussionandAnalysis.”
(2)WhileTotalShareholderReturnisnotusedasoneofthemetricstiedtothepayoutsunderourincentiveplans,theactualvaluerealizedunderourequityincentive awardsisbasedupontheCompany’sTotalShareholderReturn(i.e.,stockpriceanddividendspaid)overtheapplicableperformanceandvestingperiods.
Other Important Information
SecurityOwnershipofManagementandCertainBeneficialOwners
Thefollowingtablesetsforth,asofFebruary27,2023,therecorddatefortheMeeting,informationastoourcommonstock beneficiallyownedby(1)eachofourdirectors,allofwhom,otherthanHughM.Brown,aredirectornominees,(2)eachNamed ExecutiveOfficernamedintheSummaryCompensationTable,(3)allofourdirectorsandcurrentexecutiveofficersasagroupand (4)anypersonorentitywhomweknowtobethebeneficialownerofmorethanfivepercentoftheoutstandingsharesofour commonstock.
(1) Unlessotherwiseindicated,theaddressofsuchpersonisc/oBrown&Brown,Inc.,300N.BeachSt.,DaytonaBeach,Florida32114.
(2) Beneficialownershipofshares,asdeterminedinaccordancewithapplicableSECrules,includessharesastowhichapersonhasorsharesvotingpower and/or investmentpower,orastowhichapersonhastherighttoacquirebeneficialownershipwithinthenext60days.Wehavebeeninformedthatallsharesshownareheld ofrecordwithsolevotingandinvestmentpower,exceptasotherwiseindicated.
(3) Thenumberandpercentageofsharesownedbythefollowingpersonsincludetheindicatednumberofsharesownedthroughour401(k)planasofFebruary27,2023: Mr.PowellBrown–41,904;Mr.Watts–0;Mr.JamesHays–585;Mr.BarrettBrown–10,545;Mr.Penny–19,283;Mr.Walker–0andallcurrentdirectorsand executiveofficersasagroup–72,317.
Thenumberandpercentageofsharesownedbythefollowingpersonsalsoincludetheindicatednumberofunvestedshareswhichsuchpersonshavebeengranted underourPSPasofFebruary27,2023:Mr.PowellBrown–32,000;Mr.Watts–0;Mr.BarrettBrown–0;Mr.Penny–0;Mr.Walker–0andallcurrentdirectorsand executiveofficersasagroup–32,000.ThesePSPshareshavevotinganddividendrightsduetosatisfactionofthefirstconditionofvestingbasedonstockprice performance,buttheholdersthereofcurrentlyhavenopowertosellordisposeoftheshares,andthesharesaresubjecttoforfeiture.
Inaddition,thenumberandpercentageofsharesownedbythefollowingpersonsalsoincludetheindicatednumberofunvestedshareswhichsuchpersonshave beengrantedunderour2010SIPand2019SIPasofFebruary27,2023andforwhichthefirstconditionofvestinghasbeensatisfied:Mr.PowellBrown–493,688; Mr.Watts–52,142;Mr.BarrettBrown–30,708;Mr.Penny–38,332;Mr.Walker–10,756andallcurrentdirectorsandexecutiveofficersasagroup–666,680.These 2010SIPand2019SIPshareshavevotinganddividendrightsduetosatisfactionofthefirstconditionofvesting,buttheholdersthereofcurrentlyhavenopowertosell ordisposeoftheshares,andthesharesaresubjecttoforfeiture.
Inaddition,thenumberandpercentageofsharesownedbythefollowingpersonsincludetheindicatednumberofunvestedshareswhichsuchpersonshavebeen grantedunderour2010SIPand2019SIPintheformoftime-based-onlygrantsasofFebruary27,2023:Mr.PowellBrown–72,987;Mr.Watts–48,728;Mr.Barrett Brown–40,336;Mr.Penny–41,607;Mr.Walker–9,094andallcurrentdirectorsandexecutiveofficersasagroup–303,691.Thesetime-basedonlygrantshave votinganddividendrights,buttheholdersthereofhavenopowertosellordisposeoftheshares,andthesharesaresubjecttoforfeitureintheeventthattherecipient doesnotcontinuetobeemployedwithusforaspecifiednumberofyearsfollowingthedateofgrant.
(4) OfthesharesbeneficiallyownedbyMr.HyattBrown,37,604,928areheldbyOrmondRiverside,LimitedPartnership,ofwhichSwakopmund,Inc.istheGeneralPartner thathasvotingandinvestmentpoweroversuchshares.Swakopmund,Inc.is100%ownedbytheSwakopmundTrustof2009,arevocabletrustcreatedbyMr.Hyatt Brown,whoisthesoletrusteethereofandretainsthesolevotingandinvestmentpowerswithrespecttoallthesharesofSwakopmund,Inc.Anadditional136,000 sharesareheldinanIRAaccount.
(5) Mr.HughBrown’sownershipincludes1,287sharesownedbyhisspouse,astowhichhedisclaimsbeneficialownership.
(6) Mr.PowellBrown’sownershipincludes30,558sharesownedbychildrenlivinginhishousehold,astowhichhedisclaimsbeneficialownership.
(7)
Mr.Proctor’sownershipincludes448sharesownedbyhisspouse,astowhichhedisclaimsbeneficialownership.
(8) Mr.BarrettBrown’sownershipincludes(a)2,324sharesownedbychildrenlivinginhishousehold,astowhichhedisclaimsbeneficialownership,and (b)90,000 sharespledgedascollateralforacreditfacilityextendedbyabanktoMr.BarrettBrown.
(9) Mr.Penny’sownershipincludes192sharesownedbychildrenlivinginhishousehold,astowhichhedisclaimsbeneficialownership,and357,056sharesownedjointly withspouse.
(10) IncludesamountsbeneficiallyownedbyallourcurrentdirectorsandexecutiveofficersasofFebruary27,2023,asagroup.
(11) TheamountshownisderivedfromaSchedule13G/AfiledbyBlackRock,Inc.(“BlackRock”)onFebruary1,2023reportingbeneficialownershipasofDecember31, 2022.AccordingtotheSchedule13G/A,BlackRockhassolevotingpowerover15,083,829shares,sharedvotingpowerover0shares,soledispositivepowerover 16,545,072sharesandshareddispositivepowerover0shares.
(12) TheamountshownisderivedfromaSchedule13G/AfiledbyTheVanguardGroup(“Vanguard”)onFebruary9,2023reportingbeneficialownershipasof December31,2022.AccordingtotheSchedule13G/A,Vanguardhassolevotingpowerover0shares,sharedvotingpowerover329,953shares,soledispositive powerover26,809,710sharesandshareddispositivepowerover969,443shares.
(13) TheamountshownisderivedfromaSchedule13G/AfiledbySelectEquityGroup,L.P.(“SelectEquity”)onFebruary14,2023reportingbeneficialownershipasof December31,2023.AccordingtotheSchedule13G/A,SelectEquityhassolevotingpowerover0shares,sharedvotingpowerover17,261,734shares,soledispositive powerover0sharesandshareddispositivepowerover17,261,734shares.
AnnualMeetingandProxySolicitationInformation
TheseproxymaterialsaremadeavailabletoshareholdersinconnectionwiththesolicitationofproxiesbytheBoardofDirectorsof Brown&Brown,Inc.tobevotedattheAnnualMeetingofShareholders,tobeheldvirtuallyat9:00a.m.(EDT)onWednesday,May3, 2023andatanypostponementsoradjournments.ThecloseofbusinessonFebruary27,2023hasbeenfixedastherecorddatefor thedeterminationofshareholdersentitledtonoticeofandtovoteattheMeeting.Atthecloseofbusinessontherecorddate,we hadoutstanding283,698,194sharesof$0.10parvaluecommonstock,entitledtoonevotepershare.Theseproxymaterialswere firstmailedtoshareholdersofrecordonMarch22,2023.
NoticeofInternetDelivery
AspermittedbySECrules,Brown&Brown,Inc.ismakingthisProxyStatementanditsAnnualReportavailabletoitsshareholders electronicallyviatheInternet.IfyoureceivedaNoticebymail,youwillnotreceiveaprintedcopyoftheproxymaterialsinthemail (unlessyourequestthem,asdescribedbelowandexplainedintheNotice).Instead,theNoticeinstructsyouonhowtoaccessand reviewalloftheimportantinformationcontainedintheProxyStatementandAnnualReport.TheNoticealsoinstructsyouonhow youmayvoteonline.IfyoureceivedaNoticebymailandwouldliketoreceiveaprintedcopyofourproxymaterials,youshould followtheinstructionsintheNoticeforrequestingthematerials.
AttendingtheVirtualAnnualMeeting
Bothshareholdersofrecordandshareholderswhoholdtheirsharesin“streetname”willneedtoregistertobeabletoattendthe AnnualMeetingvialiveaudiowebcast,submittheirquestionsduringthemeetingandvotetheirshareselectronicallyattheAnnual Meetingbyfollowingtheinstructionsbelow.
Ifyouareashareholderofrecord,youmust:
•Followtheinstructionsprovidedonyourproxycardtofirstregisterathttp://www.viewproxy.com/bbinsurance/2023/htype.aspby 11:59p.m.(EDT)onApril30,2023.Youwillneedtoenteryourname,phonenumberandemailaddressaspartoftheregistration, followingwhichyouwillreceiveanemailconfirmingyourregistration,aswellasthepasswordtoattendtheAnnualMeeting.
•OnthedayoftheAnnualMeeting,ifyouhaveproperlyregistered,youmayentertheAnnualMeetingbylogginginusingthelink andpasswordyoureceivedviaemailintheregistrationconfirmationyoureceivedwhenyouregisteredathttp:// www.viewproxy.com/bbinsurance/2023/htype.asp.
•IfyouwishtovoteyourshareselectronicallyattheAnnualMeeting,youwillneedtovisitwww.AALvote.com/BROduringthe AnnualMeetingwhilethepollsareopen(youwillneedthevirtualcontrolnumberincludedonyourproxycard).
Ifyoursharesareheldina“streetname,”youmust:
•Registerathttp://www.viewproxy.com/bbinsurance/2023/htype.aspby11:59p.m.(EDT)onApril30,2023.
Youwillneedtoenteryourname,phonenumberandemailaddress,andprovideacopyofthelegalproxy(whichmaybeuploaded totheregistrationwebsiteorsentviaemailtoVirtualMeeting@viewproxy.com)aspartoftheregistrationifyouplantovoteatthe meeting,followingwhichyouwillreceiveanemailconfirmingyourregistrationandavirtualcontrolnumberifyouplantovoteatthe meeting,aswellasthepasswordtoattendtheAnnualMeeting.
Pleasenote,ifyoudonotprovideacopyofthelegalproxy,youmaystillattendtheAnnualMeetingbyshowingproofofownership butwillbeunabletovoteyourshareselectronicallyattheAnnualMeeting.
•OnthedayoftheAnnualMeeting,ifyouhaveproperlyregistered,youmayentertheAnnualMeetingbylogginginusingthelink andpasswordyoureceivedviaemailintheregistrationconfirmationyoureceivedwhenyouregisteredathttp:// www.viewproxy.com/bbinsurance/2023/htype.asp.
•IfyouwishtovoteyourshareselectronicallyattheAnnualMeeting,youwillneedtovisitwww.AALvote.com/BROduringtheAnnual Meetingwhilethepollsareopen(youwillneedthevirtualcontrolnumberassignedtoyouinyourregistrationconfirmationemail).
FurtherinstructionsonhowtoattendtheAnnualMeetingvialiveaudiowebcast,includinghowtovoteyourshareselectronicallyat theAnnualMeetingarepostedonhttp://www.viewproxy.com/bbinsurance/2023/htype.aspunderFrequentlyAskedQuestions (FAQ).TheAnnualMeetingliveaudiowebcastwillbeginpromptlyat9:00a.m.(EDT)onMay3,2023.Weencourageyoutoaccess themeetingpriortothestarttime.Onlinecheck-inwillbeginat8:30a.m.(EDT),andyoushouldallowampletimeforthecheck-in procedures.
TechnicalDifficulties
WewillhavetechniciansreadytoassistyouwithanytechnicaldifficultiesyoumayhaveaccessingtheAnnualMeetingliveaudio webcast.Pleasebesuretocheckinby8:30a.m.(EDT)onMay3,2023,thedayoftheAnnualMeeting,sowemayaddressany technicaldifficultiesbeforetheAnnualMeetingliveaudiowebcastbegins.IfyouencounteranydifficultiesaccessingtheAnnual Meetingliveaudiowebcastduringthecheck-inormeetingtime,pleaseemailVirtualMeeting@viewproxy.comorcall(866)612-8937.
VotingYourShares;RequiredVotes
SharesrepresentedbydulyexecutedproxiesintheaccompanyingformthatwereceivepriortotheMeetingwillbevotedatthe Meeting.Ifyouspecifyintheproxyachoicewithrespecttoanymattertobeactedupon,thesharesrepresentedbysuchproxywill bevotedasspecified.Ifyourproxycardissignedandreturnedwithoutspecifyingavoteoranabstention,thesharesrepresented bysuchproxywillbevotedaccordingtotherecommendationoftheBoardofDirectors.
TheBoardofDirectorsknowsofnoothermattersthatmaybebroughtbeforetheMeeting.However,ifanyothermattersare properlypresentedforaction,itistheintentionofthenamedproxiestovoteonthemaccordingtotheirbestjudgment.
Ifyoursharesareheldin“streetname,”astockbrokerageaccountorbyabankorothernominee,youhavetherighttoprovide instructionsonvotingasrequestedbyyourbroker,bankornominee.UndertheNYSE’srules,yourbroker,bankornomineeis permittedtovoteyoursharesonthesecondproposalconcerningtheratificationoftheappointmentofDeloitte&ToucheLLPasour independentregisteredpublicaccountantsforthefiscalyearendingDecember31,2023evenifyourbroker,bankornomineehas notbeengivenspecificvotinginstructionsastothismatter.Yourbroker,bankornomineeisnotpermittedtovoteyourshareson thefirstorthirdproposals.
Afteryouhavereturnedaproxy,youmayrevokeitatanytimebeforeitisvotedbytakingoneofthefollowingactions:(i)giving writtennoticeoftherevocationtoourCorporateSecretaryat300NorthBeachSt.,DaytonaBeach,Florida32114,orbyemail to annualmeeting@bbins.com; (ii)executinganddeliveringaproxywithalaterdate;or(iii)votinginpersonattheMeeting.Votescast byproxyorinpersonattheMeetingwillbetabulatedbyAllianceAdvisors,LLC,andbyoneormoreinspectorsofelectionappointed attheMeeting,whowillalsodeterminewhetheraquorumispresentforthetransactionofbusiness.Aquorumispresentwhena majorityininterestofallthecommonstockoutstandingisrepresentedbyshareholderspresentinpersonorbyproxy.
SharesofthecommonstockrepresentedbyproxiesreceivedbytheCompany(whetherthroughthereturnoftheenclosedproxy card,bytelephoneorovertheInternet),wheretheshareholderhasspecifiedhisorherchoicewithrespecttotheproposals describedinthisProxyStatement(includingtheelectionofdirectors),willbevotedinaccordancewiththespecification(s)somade.If yourproxyisproperlyexecutedbutdoesnotcontainvotinginstructions,orifyouvoteviatelephoneortheInternetwithout indicatinghowyouwanttovotewithrespecttoanyitem,yourshareswillbevoted“FOR”theelectionofallnomineesfortheBoard ofDirectors;“FOR”theratificationoftheappointmentofDeloitte&ToucheLLPastheCompany’sindependentregisteredpublic accountantsforthefiscalyearendingDecember31,2023;“FOR”theadvisoryvotetoapproveNamedExecutiveOfficer compensationand“ONEYEAR,”onanadvisorybasis,asthedesiredfrequencyofholdinganadvisoryvoteonthecompensationof theNamedExecutiveOfficers.
Avalidproxyalsogivestheindividualsnamedasproxiesauthoritytovoteintheirdiscretionwhenvotingthesharesonanyother mattersthatareproperlypresentedforactionattheMeeting.
Ifthesharesyouownareheldin“streetname”byabrokerorothernomineeentityandyouprovideinstructionstothebrokeror nomineeastohowtovoteyourshares,yourbrokerorothernomineeentity,astherecordholderofyourshares,isrequiredtovote yoursharesaccordingtoyourinstructions.UndertheNYSErules,certainproposals,suchastheratificationoftheappointmentofthe Company’sregisteredpublicaccountants,areconsidered“routine”matters,andbrokersandothernomineeentitiesgenerallymay voteonsuchmattersonbehalfofbeneficialownerswhohavenotfurnishedvotinginstructions.For“non-routine”matters,suchas theelectionofdirectors,the“sayonpay”advisoryvote,andtheadvisoryvoteonthedesiredfrequencyofholdinganadvisoryvote onthecompensationoftheNamedExecutiveOfficers,brokersandothernomineeentitiesmaynotvoteunlesstheyhavereceived votinginstructionsfromthebeneficialowner.A“brokernon-vote”occurswhenabrokerorothernomineeentitydoesnotvoteona particularproposalbecauseitdoesnothaveauthorityundertheNYSErulestovoteonthatparticularproposalwithoutreceiving votinginstructionsfromthebeneficialowner.
Brokernon-votes,aswellasproperlyexecutedproxiesmarked“ABSTAIN,”willbecountedforpurposesofdeterminingwhethera quorumispresentattheMeeting.
ForinformationregardingthevotingstandardforProposal1,see“VoteRequired;MajorityVoting;BoardRecommendation.”Inorder topass,eachofProposals2and3mustreceivetheaffirmativevoteofamajorityofthevotescastontheProposal.Abstentionsand brokernon-voteswillnothaveaneffectonProposals1,2or3.
WithrespecttoProposal4,thefrequencyreceivingthegreatestnumberofvotes(one,twoorthreeyears)willbeconsideredthe frequencyapprovedbyshareholders.Abstentionsandbrokernon-voteswillhavenoeffectonProposal4.
Proxiesmaybesolicitedbyourofficers,directorsandregularsupervisoryandexecutiveemployees,noneofwhomwillreceiveany additionalcompensationfortheirservices.Also,AllianceAdvisors,LLCmaysolicitproxiesonourbehalfatanapproximatecostof $12,000,plusreasonableexpenses.Suchsolicitationsmaybemadepersonallyorbymail,facsimile,telephone,messengerorviathe Internet.Wewillpaypersonsholdingsharesofcommonstockintheirnamesorinthenamesofnominees,butnotowningsuch sharesbeneficially,suchasbrokeragehouses,banksandotherfiduciaries,fortheexpenseofforwardingsolicitationmaterialsto theirprincipals.Wewillpayallofthecostsofsolicitationofproxies.
Ourexecutiveofficeislocatedat300N.BeachSt.,DaytonaBeach,Florida32114(telephonenumber(386)252-9601).
ProposalsofShareholders
PursuanttoapplicablerequirementsofRule14a-8undertheSecuritiesExchangeActof1934,proposalsofshareholdersintendedto bepresentedatthe2024AnnualMeetingofShareholdersmustbereceivedbyusnolaterthanNovember23,2023,inordertobe consideredforinclusioninourProxyStatementandformofproxy/votinginstructionrelatedtothatmeeting.Suchproposalswill needtobeinwritingandcomplywithSECregulationsregardingtheinclusionofshareholderproposalsinCompany-sponsored proxymaterials.
Forashareholder’snoticeofnominationofoneormoredirectornominationstobeincludedinourProxyStatementandformof proxy/votinginstructionspursuanttotheproxyaccessrightincludedinSection1.9ofourBy-Laws,theCompanymustreceivesuch writtennoticenoearlierthanthecloseofbusinessonDecember5,2023andnolaterthanthecloseofbusinessonJanuary4,2024. ThenoticemustcontaintheinformationrequiredinourBy-Laws,andtheshareholder(s)andnominee(s)mustcomplywiththe informationandotherrequirementinourBy-Lawsrelatingtotheinclusionofnomineesinourproxymaterials.
Inaddition,ourBy-Lawsrequirethatforanyshareholderproposalforotherbusinessordirectornominationtobeproperlybrought beforethe2024AnnualMeetingofShareholders,theshareholderproposalordirectornominationmustcomplywiththeadvance noticerequirementssetforthinourBy-Laws,andtheCompanymustreceivewrittennoticeofthematternoearlierthanthecloseof businessonJanuary4,2024andnolaterthanthecloseofbusinessonFebruary3,2024.Eachsuchwrittennoticemustcontainthe informationsetforthinourBy-Laws.TheadvancenoticerequirementinourBy-LawssupersedesthenoticeperiodinRule14a-4(c)(1) undertheSecuritiesExchangeActof1934regardingdiscretionaryproxyauthoritywithrespecttoshareholderbusiness.
InadditiontosatisfyingtheforegoingrequirementsunderourBy-Laws,tocomplywiththeuniversalproxyrules,shareholderswho intendtosolicitproxiesinsupportofdirectornomineesotherthantheCompany’snomineesmustprovidenoticethatsetsforththe informationrequiredbyRule14a-19undertheExchangeActnolaterthanMarch4,2024.
AnyshareholderproposalsornominationsshouldbesenttoourCorporateSecretaryat300N.BeachSt.,DaytonaBeach,Florida32114.
Other Matters
Our2022AnnualReporttoShareholders(the“AnnualReport”)accompaniesthisProxyStatement.Wewillprovidetoany shareholder,uponthewrittenrequestofsuchperson,acopyofourAnnualReportonForm10-K,includingthefinancialstatements andtheexhibitsthereto,forthefiscalyearendedDecember31,2022,asfiledwiththeSECpursuanttoRule13a-1underthe SecuritiesExchangeActof1934,asamended.AnysuchrequestshouldbedirectedtoBrown&Brown,Inc.,300NorthBeachSt., DaytonaBeach,Florida32114Attention:CorporateSecretary.NochargewillbemadeforcopiesofsuchAnnualReportonForm10-K; however,areasonablechargewillbemadeforcopiesoftheexhibits.
OnlyonecopyofthisProxyStatementandtheaccompanyingAnnualReportisbeingdeliveredtoshareholderswhosharean addressunlesswehavereceivedcontraryinstructionsfromoneormoreofsuchshareholders.Wewillpromptlydeliveraseparate copyofthisProxyStatementandtheaccompanyingAnnualReporttoanyshareholderatasharedaddresstowhichasinglecopyof thesedocumentshasbeendelivereduponourreceiptofawrittenororalrequestfromthatshareholderdirectedtotheaddress shownabove,ortousat(386)252-9601.AnyshareholdersharingasinglecopyoftheProxyStatementandAnnualReportwho wishestoreceiveaseparatemailingofthesematerialsinthefuture,oranyshareholderssharinganaddressandreceivingmultiple copiesofthesematerialswhowishtoshareasinglecopyofthesedocuments,shouldalsonotifyusattheaddressandtelephone numbershownabove.
ThematerialreferredtointhisProxyStatementunderthecaptions“CompensationDiscussionandAnalysis,”“Compensation CommitteeReport,”and“ReportoftheAuditCommittee”shallnotbedeemedsolicitingmaterialorotherwisedeemedfiledandshall notbedeemedtobeincorporatedbyanygeneralstatementofincorporationbyreferenceinanyfilingsmadeundertheSecurities Actof1933,asamended,ortheSecuritiesExchangeActof1934,asamended.
ByOrderoftheBoardofDirectors ANTHONYM.ROBINSON AssistantSecretaryDaytonaBeach,Florida
March22,2023
Annex A Information Regarding Non-GAAP Financial Measures
ThisProxyStatementcontainsreferencestoOrganicRevenue,OrganicRevenue–adjusted,AdjustedEBITDAC,AdjustedEBITDAC Margin,andAdjustedEPS,whicharenon-GAAPfinancialmeasures.Thesemeasuresarenotinaccordancewith,oranalternativeto theGAAPinformationprovidedinthefinancialstatementscontainedinourAnnualReportonForm10-K.AreconciliationofthisnonGAAPfinancialinformationtoourGAAPinformationiscontainedinthis AnnexA
OrganicRevenue,OrganicRevenue–adjusted,OrganicRevenuegrowthandOrganicRevenuegrowth–adjusted. Weview OrganicRevenue,OrganicRevenue–adjusted,OrganicRevenuegrowthandOrganicRevenuegrowth–adjustedasimportant indicatorswhenassessingandevaluatingourperformanceonaconsolidatedbasisandforeachofoursegmentsbecausethey allowustodetermineacomparable,butnon-GAAP,measurementofrevenuegrowththatisassociatedwiththerevenuesources thatwereapartofourbusinessinboththecurrentandprioryearandthatareexpectedtocontinueinthefuture.Webelieve presentingthesenon-GAAPfinancialmeasuresallowsreadersofourfinancialstatementstomeasure,analyzeandcompareour consolidatedgrowth,andthegrowthofeachofoursegments,inameaningfulandconsistentmanner.
AdjustedEBITDACandAdjustedEBITDACMargin. WeviewAdjustedEBITDACandAdjustedEBITDACMarginasimportant indicatorswhenassessingandevaluatingourperformancebecauseitallowsustodetermineacomparable,butnon-GAAP, measurementofouroperatingmarginsinameaningfulandconsistentmanner.
AdjustedEPS. AdjustedEPSmeansourearningspershare,excludingtheimpactofthechangeinestimatedacquisitionearn-out payablesandanyotheritems(forexample,extraordinary,nonrecurringitems)thattheCompensationCommitteedeterminestobe appropriatelydisregardedforallgrantssubjecttoavestingconditionofAdjustedEPS.WebelievethatAdjustedEPSprovidesa meaningfulrepresentationofouroperatingperformanceandisalsopresentedtoimprovethecomparabilityofourresultsbetween periodsbyeliminatingtheimpactofcertainitemsthathaveahighdegreeofvariability.
Wepresentsuchnon-GAAPsupplementalfinancialinformation,aswebelievesuchinformationprovidesadditionalmeaningful methodsofevaluatingcertainaspectsofouroperatingperformancefromperiodtoperiodonabasisthatmaynotbeotherwise apparentonaGAAPbasis.Ourindustrypeersmayprovidesimilarsupplementalnon-GAAPinformationwithrespecttooneormore ofthesemeasures,althoughtheymaynotusethesameorcomparableterminologyandmaynotmakeidenticaladjustments.This supplementalfinancialinformationshouldbeconsideredinadditionto,notinlieuof,ourConsolidatedFinancialStatements.
ReconciliationofTotalCommissionsandFeestoOrganicRevenueGrowthand OrganicRevenueGrowth–Adjusted
Thereconciliationoftotalcommissionsandfees,includedintheConsolidatedStatementofIncome,toOrganicRevenuefortheyear endedDecember31,2022,isasfollows:
endedDecember31,2021isasfollows:
Thereconciliationoftotalcommissionsandfees,includedintheConsolidatedStatementofIncome,toOrganicRevenuefortheyear endedDecember31,2020,isasfollows:
Thereconciliationoftotalcommissionsandfees,includedintheConsolidatedStatementofIncome,toOrganicRevenuegrowthand OrganicRevenuegrowth–adjusted,whichexcludesaone-time,non-cashincreaseofapproximately$8millioninthecommissions andfeesearnedbyoneofthebusinessesinourNationalProgramssegmentin2018resultingsolelyfromourimplementationofthe NewRevenueStandard(the“2018ProgramsBusinessNewRevenueStandardAdjustment”),fortheyearendedDecember31,2019 isasfollows:
(1) TheRetailsegmentincludescommissionsandfeesreportedinthe“Other”columnoftheSegmentInformationinNote16oftheNotestotheConsolidatedFinancial Statements,whichincludescorporateandconsolidationitems.
(2) Totalcorecommissionsandfeesisdefinedastotalcommissionsandfeesless(i)profit-sharingcontingentcommissions(revenuesfrominsurancecompaniesbased uponthevolumeandthegrowthand/orprofitabilityofthebusinessplacedwithsuchcompaniesduringtheprioryear(“Contingents”))andless(ii)forallfiscalyears endedDecember31,2021andearlier,guaranteedsupplementalcommissions(commissionsfrominsurancecompaniesbasedsolelyuponthevolumeofthe business placedwithsuchcompaniesduringthecurrentyear(“GSCs”)).
(3) “OrganicRevenue,”whichisanon-GAAPfinancialmeasure,isdefinedastotalcorecommissionsandfeesless(i)thefirsttwelvemonthsofcommission andfee revenuesgeneratedfromacquisitions,less(ii)divestedbusiness(netcommissionsandfeesgeneratedfromoffices,andbooksofbusinesssoldbytheCompany)with theassociatedrevenueremovedfromthecorrespondingperiodoftheprioryear,less(iii)forthecalculationofOrganicRevenuein2021and2022,the period-overperiodimpactofForeignCurrencyTranslation,less(iv)forthecalculationofOrganicRevenuein2018,theimpactoftheNewRevenueStandard.
For2022,NationalProgramssegmentOrganicRevenuegrowthwasadjustedtoincludetheimpactofcertainofficeswithinthe ServicessegmentforwhichMr.Walkerhadresponsibilityin2022(collectively,the“2022Office-BasedAdjustments”).Thegrowth rateforNationalProgramssegmentOrganicRevenue–adjusted,whichisanon-GAAPfinancialmeasure,fortheyearended December31,2022,isasfollows:
(1) Totalcorecommissionsandfees,whichisanon-GAAPfinancialmeasure,isdefinedastotalcommissionsandfees,less(i)Contingents,andless(ii)forallfiscalyears endedDecember31,2021andearlier,GSCs.
(2) “OrganicRevenue,”whichisanon-GAAPfinancialmeasure,isdefinedastotalcorecommissionsandfeesless(i)thefirsttwelvemonthsofcommission andfee revenuesgeneratedfromacquisitions,less(ii)divestedbusiness(netcommissionsandfeesgeneratedfromoffices,andbooksofbusinesssoldbytheCompany)with theassociatedrevenueremovedfromthecorrespondingperiodoftheprioryear,less(iii)forthecalculationofOrganicRevenuein2021and2022,the period-overperiodimpactofForeignCurrencyTranslation,less(iv)forthecalculationofOrganicRevenuein2018,theimpactoftheNewRevenueStandard.
For2021,NationalProgramssegmentOrganicRevenuegrowthwasadjustedto(i)excludetheimpactofcertainofficeswithinthe NationalProgramssegmentforwhichChrisL.Walker,ExecutiveVicePresidentandPresident–NationalProgramssegment,didnot haveresponsibilityin2021,and(ii)includetheimpactofcertainofficeswithintheServicesandWholesaleBrokeragesegmentsfor whichMr.Walkerhadresponsibilityin2021(collectively,the“2021Office-BasedAdjustments”).ThegrowthrateforNational ProgramssegmentOrganicRevenue–adjusted,whichisanon-GAAPfinancialmeasure,fortheyearendedDecember31,2021,is asfollows:
(1) Totalcorecommissionsandfees,whichisanon-GAAPfinancialmeasure,isdefinedastotalcommissionsandfees,less(i)Contingents,andless(ii)forallfiscalyears endedDecember31,2021andearlier,GSCs.
(2) “OrganicRevenue,”whichisanon-GAAPfinancialmeasure,isdefinedastotalcorecommissionsandfeesless(i)thefirsttwelvemonthsofcommission andfee revenuesgeneratedfromacquisitions,less(ii)divestedbusiness(netcommissionsandfeesgeneratedfromoffices,andbooksofbusinesssoldbytheCompany)with theassociatedrevenueremovedfromthecorrespondingperiodoftheprioryear,less(iii)forthecalculationofOrganicRevenuein2021and2022,the period-overperiodimpactofForeignCurrencyTranslation,less(iv)forthecalculationofOrganicRevenuein2018,theimpactoftheNewRevenueStandard.
ReconciliationofIncomeBeforeIncomeTaxestoAdjustedEBITDACand ReconciliationofIncomeBeforeIncomeTaxesMargintoAdjustedEBITDACMargin
Thereconciliationofincomebeforeincometaxes,includedintheConsolidatedStatementofIncome,toAdjustedEBITDACforthe yearsendedDecember31,2022and2021,andthereconciliationofIncomeBeforeIncomeTaxesMargin,includedinthe ConsolidatedStatementofIncome,toAdjustedEBITDACMarginfortheyearsendedDecember31,2022and2021isasfollows:
(1) “EBITDAC,”whichisanon-GAAPfinancialmeasure,isdefinedasincomebeforeinterest,incometaxes,depreciation,amortizationandthechangeinestimated acquisitionearn-outpayables.
(2) IncomeBeforeIncomeTaxesMarginiscalculatedastheCompany’sincomebeforeincometaxes,asreported,dividedbytotalrevenues,asreported.
(3) “EBITDACMargin,”whichisanon-GAAPfinancialmeasure,isdefinedasEBITDACdividedbytotalrevenues.
(4) “AdjustedEBITDAC”and“AdjustedEBITDACMargin,”whicharebothnon-GAAPfinancialmeasures,aredefinedasEBITDACandEBITDACMargin,respectively,in eachcaseadjustedtoexclude(i)thepositiveimpactofthenetgainondisposalresultingfromsalesofbooksofbusiness,(ii)thenegativeimpactoftheCompany’s non-cashstock-basedcompensationexpenseinexcessofwhatwasreflectedintheCompany’sBoard-approvedannualbudget,(iii)for2022,thenegativeimpactof theAcquisition/IntegrationCosts,and(iv)theimpactofForeignCurrencyTranslation.
ReconciliationofDilutedNetIncomePerSharetoAdjustedEPS
Thereconciliationofdilutedearningspershare,includedintheConsolidatedStatementofIncome,toAdjustedEPSforthe12-month periodsendedDecember31,2021,2020,and2019,isasfollows:
(inthousands,exceptfordilutednetincomepershareandAdjustedEPS,unaudited)
(1) After-taxeffectofadjustmentscalculatedusingtheCompany’seffectivetaxratefortherespectiveyear.
(2) Theafter-taxadjustmentsare:(1)for2019,anadjustmenttoexcludethenegativeimpactofthe2019LegalMatterin2019and(ii)for2020,anadjustmenttoexclude thenegativeimpactofthe2020LegalMatterin2020.
(3) Anon-GAAPfinancialmeasure.