2024 was defined by an amalgamation of forces and events
that shaped the risk and insurance environment for our
clients, insurance company partners, communities and
firm – uncertainty around economic conditions and the
insurance rate environment, a changing political landscape,
increased frequency and severity of significant natural
catastrophes, and growing pressure in the U.S from legal
system abuse impacting the size and frequency of liability
judgements.
Hurricane season surpassed the average number of
storms including three hurricanes that made landfall
in Florida (Debby, Helene and Milton), and whose far-
reaching impacts were felt across Georgia, North Carolina,
Tennessee, and other parts of the eastern United States
and the Caribbean.
As I am writing this letter, the west coast experienced what
will likely be recognized as the most destructive wildfire in
history and potentially a top 5 insured loss of all time. As
the severity and frequency of catastrophic events continues
to evolve, so will the critical role we play in helping to
protect businesses, individuals and families.
The ultimate purpose of insurance is to smooth the jagged
edges of unexpected losses by aiding in the recovery and
restoration efforts when the unforeseen occurs, stepping
in with compassion to make businesses, individuals and
families financially whole. Insurance is a vital backstop
that makes it possible for individuals and businesses to
innovate, take calculated risk, make investments, create
jobs, grow economies and fulfill their professional and
personal pursuits and dreams. Quite simply, insurance is
essential to enable capitalism and our society to reach its
fullest potential via thoughtful risk taking and the resulting
innovations, financial success, and human progress.
I am extremely proud of our colleagues who worked
tirelessly to serve our clients throughout 2024, helping
them safeguard their lives and livelihoods and assisting
with recovery when faced with unexpected circumstances.
FEBRUARY 25, 2025
Year in review
The Baldwin Group Shareholder Letter | 1
Despite continued volatility both within the property
and casualty industry and in the broader economy, our
colleagues’ efforts to create and innovate solutions for
our clients and the resiliency of our business model
continues to be reaffirmed. Overall, we generated
another year of industry leading organic revenue
growth at 17%, supported by double-digit organic
revenue growth across all three of our operating
groups. Organic growth has long been for me the
strongest signal of health and momentum in an
insurance distribution business. It is a testament to
the positive impact our teams continue to deliver
across our clients and a resounding measure of health
and success for our firm as evidenced by this strong
indicator of client experience, colleague engagement,
and what this says for the high regard our clients have
for the advice and solutions we have delivered.
With an intense focus on efficient execution and
prudent expense management, we delivered 200
basis points of adjusted EBITDA margin expansion,
the most meaningful year by far since our initial public
offering (IPO), while maintaining our track-record of
industry leading organic growth at scale. We grew
adjusted free cash flow by over $65 million, or 97%,
reduced net leverage from 4.8x to 4.1x and satisfied
over $135 million of earnout-related cash payments.
In the first two months of 2025, we paid $26 million of
earnout-related liabilities in cash and, by the end of
the first quarter, we expect our remaining estimated
earnout liability to be approximately $10 million. This
marks a major milestone for the business – resulting
in an inflection point in the free cash flow our business
generates – which will yield further acceleration in our
ability to rapidly de-lever, significantly increasing growth
in our capital base, and growing capital allocation
flexibility.
2024
Our internal theme for 2024 was “Excellence
in Execution” – an apt description of the many
accomplishments we achieved as we eclipsed our fifth
anniversary as a public company.
As I reflect on this anniversary and all that has transpired
over the last five years, it both seems like yesterday
when we were ringing the opening bell at Nasdaq on
October 24, 2019, while at the same time, seeming
like a distant memory from a different era. Much has
transformed across our business and while our ethos
and culture today reflect the core of who we were five
years ago, the quality and scale of the business we have
built over the intervening years has exceeded my loftiest
expectations. Our launch into the public markets marked
the end of a nearly 20-year drought in commercial
insurance brokerage IPOs. At the time of our IPO, we had
less than 500 colleagues, total revenue of $138 million,
organic revenue growth of 10%, adjusted EBITDA of $29
million, and adjusted diluted earnings per share of $0.27.
At the time we debuted as a public company, we
were a regional firm largely built around our middle
market retail insurance broking business, nascent MGA
(“managing general agent”) and embedded personal lines
strategies. With energy, determination and conviction,
we moved quickly to acquire scale which was existential
to thrive as a public company. We invested deeply in
client capabilities across new markets and specialties.
We thoughtfully built out the infrastructure required to
operate the national firm we were rapidly becoming.
Importantly, we did all of this while maintaining and
enhancing our unique, industry-leading culture and
status as a destination for leading talent.
As I reflect on the year, several accomplishments
are top of mind
Total Revenue
Organic Revenue Growth
Adjusted EDITDA
Adjusted Diluted Earnings Per Share
IPO
(2019)
$138
10%
$29
$0.27
2024
$1,389
17%
$312
$1.50
5-year
growth
10.1x
1.7x
11.0x
5.5x
5-year
CAGR
59%
61%
41%
Today, our commercial property and casualty and
employee benefits retail broking business – Insurance
Advisory Solutions (IAS) – operates on a national scale
with deep industry and product specialty capabilities
across more than 2,000 professionals. Our MGA has
scaled, largely organically, from a team of less than 20
people managing a single product with roughly $60
million of premium, to a team of nearly 700 insurance
and technology professionals and over $1.1 billion of
gross written premium across roughly 20 products. Our
embedded personal insurance business – Mainstreet
Insurance Solutions (MIS) – has grown from a Florida
centric business managing roughly $200 million of
insurance premiums to the leading national purveyor
of embedded home insurance solutions at point of new
home sale and mortgage origination managing well
over $1 billion of premiums. Our business has truly
transformed over the last five years building meaningful
and often market leading positions across each of our
operating segments.
As I reflect on the journey, I have immense pride in our
partnered firms and team of more than 4,000 colleagues
across the country – together, we have far exceeded the
lofty goals we set forth at the time of our IPO. Across key
business metrics, we executed well in 2024 – and in many
ways, beyond our own expectations. In fiscal year 2024
(FY24), we generated revenues of $1.39 billion, a tenfold
increase from the time of our IPO, and adjusted EBITDA
of $312.5 million, an elevenfold increase. Adjusted diluted
earnings per share expanded more than five times to
$1.50 in FY24, representing a compound average growth
rate of over 40% since the IPO.
The Baldwin Group Shareholder Letter | 2
Leading measure of health in our client franchise: Durable double-digit
organic growth across operating segments
Our IAS operating group navigated some underlying
insurance rate and client exposure unit volatility
throughout the year, driven largely by our construction
and real estate client verticals. Through strong new
business momentum, we ultimately delivered 16%
organic revenue growth in the fourth quarter and 10%
for the full year, this in the face of ebbing rate and
exposure unit tailwinds for the year of 0.4%, which is
down 510 basis points from 5.5% in 2023. Highlights of
the year include $125 million in new business production
(a 40% increase over FY23), sales velocity of 21.5% (a 410
basis point increase over FY23), and 180 basis points of
adjusted EBITDA margin expansion, the second year in a
row of meaningful margin accretion.
Our Underwriting, Capacity and Technology Solutions
(UCTS) segment, whose MGA reached a milestone of $1
billion of gross written premium in the second quarter of
2024, posted another banner year with organic revenue
growth of 27%. Key contributors included Juniper Re,
our reinsurance brokerage business which completed its
first full year of operations in 2024, continued strength
across our home and multi-family programs, and
growing contributions from newly launched products.
We saw (expected) adjusted EBITDA margin pressure of
140 basis points as we invested in the launch of Juniper
Re and continued to rapidly scale our recently launched
products, which often operate with immature economics
and margin contribution for the first three to five years.
The Baldwin Group Shareholder Letter | 3
The underlying fundamentals across our business
continue to be strong on the heels of another double-digit
organic revenue growth year across all three segments.
During the past five years, we have been diligently
focused on investing into our business to build truly
differentiated capabilities and innovating across our go-
to-market strategies in a way that engenders sustainable
outsized performance.
New client relationships are the life blood that foster a
culture of innovation, growth, and high performance.
Across our business, we have developed differentiated
Strong financial performance, fueled by niche capabilities and growing,
often leading, market positions
go-to-market strategies that have enabled consistent
industry leading new business results. As the largest
contributor to organic growth, our ability to drive
industry-leading new business results meaningfully
insulates us from the ebbs and flows of insurance rate
and economic market cycles. This was on full display
with premium growth of 31% in our UCTS segment and
industry leading sales velocity of over 20% across our
IAS and MIS businesses which overcame nearly 800
basis points of headwinds from the moderating impact
of rate and exposure to generate double digit organic
growth during 2024.
We anticipate one to two additional years of margin
pressure in UCTS before that trend reverses as many
of our more recently launched products begin to
realize more mature economics.
Our MIS operating group, which posted 20%
organic growth, made great strides in growing our
reputation as the leading purveyor of embedded
home insurance solutions at point of new home
sale and mortgage origination. The most visible
example of this is at our Westwood franchise, which
onboarded six new builders in 2024 and powers
the home insurance experience for 18 of the top
25 homebuilders across the country. Our de novo
business operations targeting the mortgage and
real estate channels showed another strong year
of growth with momentum across our pipeline of
prospective mortgage and real estate partners and the
successful launch of our first fully embedded mortgage
partnership in the fourth quarter of 2024. Our
Medicare business had a record annual enrollment
period on the back of growth in contracted agents
of over 20%. In addition to continued momentum
and leading organic growth results, adjusted EBITDA
margin expanded 250 basis points as we continue
to grow into the de novo investments across our
mortgage and real estate channels.
•
Continued industry leading organic revenue growth of 17%, including double-digit organic revenue
growth across all three of our operating groups
•
Grew adjusted EBITDA by 25% and expanded adjusted EBITDA margin by 200 basis points
•
Grew adjusted free cash flow by 97% and reduced net leverage from approximately 4.8x to 4.1x while
making $135 million of earnout payments
•
Completed two opportunistic debt refinancings (the second of which closed in January 2025) which (1)
improved pricing on our term loan facility by 61 basis points (before an incremental 25 basis points
pricing improvement to Term SOFR + 2.75% once net leverage drops below 4.0x and (2) introduced a
fixed rate component to our debt stack via a $600 million offering of senior secured notes priced at
7.125%
•
Surpassed $1 billion of in force premium in the MGA, an increase of nearly 20x since our IPO
•
Completed the first full year for our reinsurance broking business, Juniper Re, establishing operations
in the U.S., Bermuda, and London
•
In the wake of our partnership integration work being largely completed, officially announced our
transition to The Baldwin Group, a unified go-to-market brand enabling us to more clearly and
efficiently convey the capabilities of our firm to all of our stakeholders
•
Streamlined business operations and simplified our story (in an accretive manner) via the sale of our
wholesale brokerage business, Connected Risk Solutions
•
Once again earned “Best Place to Work” accolades from numerous organizations, reflecting our
distinctive and winning culture; moreover, these results were validated by our annual internal
colleague Pulse survey, with excellent participation and the highest scores to date reflecting our highly
engaged and high-performing colleagues
2024 highlights
The Baldwin Group Shareholder Letter | 4
Financial benchmarks
Pro Forma Revenue ($mm)
Pro Forma Adjusted EBITDA ($mm)
Adjusted EBITDA ($mm)
Adjusted EBITDA Margin
Adjusted Net Income ($mm)
Adjusted Diluted Earnings Per Share
Adjusted Free Cash Flow ($mm)
Organic Revenue Growth
Total Revenue Growth
Pro Forma Revenue Growth
Annualized Revenue of New Partner Firms ($mm)
Enterprise Value ($bn)
Price Per Share
2022
$1,014.5
$202.9
$196.5
20%
$119.0
$1.03
$57.1
23%
73%
41%
$96.3
$4.1
$25.14
2021
$719.3
$175.0
$112.9
20%
$80.6
$0.80
$54.3
22%
135%
69%
$206.2
$4.9
$36.11
2020
$426.2
$109.9
$44.0
18%
$33.4
$0.46
$18.0
16%
75%
179%
$236.2
$3.1
$29.97
2019
$152.6
$34.0
$28.5
21%
$17.3
$0.28
$9.0
10%
73%
75%
$46.9
$1.0
$16.05
2024 YOY
Growth (%)
17%
27%
25%
35%
34%
97%
45%
61%
2023
$1,183.4
$244.0
$250.2
21%
$131.1
$1.12
$68.6
19%
24%
17%
-
$4.0
$24.02
2024
$1,382.8
$310.9
$312.5
22%
$176.9
$1.50
$134.9
17%
14%
17%
-
$5.8
$38.76
The Baldwin Group Shareholder Letter | 5
An effective business strategy must be grounded in clear,
quantifiable, yet simple intermediate and long-term goals
to engender maximum awareness and engagement
across an organization. At Baldwin we run an annual
strategic planning process which is rooted in the Hoshin
Kanri methodology. We think about the intermediate to
long-range in terms of five-to-ten-year increments, and
as such, date down our longer range aspirations on a
five-year cycle and look to distill our strategy into a clear,
easily understandable and quantifiable objective we can
rally around.
Setting our strategic vision is about much more than
prescribing a set of financial targets and metrics to
measure ourselves by. It is how we determine and land
on the key priorities and attributes we marshal the
organization around in order to achieve and exhibit what
we believe will ultimately lead to the very best outcomes
for all our stakeholders. This strategic vision then guides
decision making throughout our business. We share the
detailed results and objectives of our strategic planning
broadly inside our business, facilitating connectivity for
our colleagues to what we are working to accomplish
and empowering decision making in support of our
longer-term goals. We have always shared our high-level
aspirations with external stakeholders as well, providing
a lens through which to understand what we are working
towards and how we expect to get there.
Philosophically, we have always set goals for ourselves
aggressively. It is one of the ways by which we apply
pressure across our teams to achieve outcomes that
many would have otherwise not thought possible.
When arriving at these goals, we generally only know
60% to 70% of the underlying ways in which we will get
there, and when reviewing the annual objectives we
have set and cascaded throughout our organization, if
we are achieving them at a rate that is higher than 70%
broadly, then we have failed to set our objectives lofty
enough. This self-applied performance pressure and lofty
expectation management is a major part of how we were
able to meaningfully exceed the expectations we set at
the time of our IPO and 10x our business over the past
five years.
With that context of how we set and calibrate our
strategic objectives, I will reiterate that my transparency
around our 5-year financial objective is not guidance. It’s
a view into how we think about goal setting internally and
the art of the possible over the intermediate term.
In fact, as we give guidance, we’re likely to underwhelm
any extrapolations of this, which is intentional. With that
said, you can rest assured, the entire team at Baldwin is
working tirelessly every day to deliver amazing client and
stakeholder outcomes which should ensure over the long
run we meet and exceed the financial goals we set for
ourselves.
The last iteration of an aspirational longer-range goal for
us was “Top 10 in 10” which we socialized at the time of
our IPO in October of 2019. At the time, the tenth largest
U.S. broker as ranked by Business Insurance based on
2018 results had $1.3 billion of revenue. In the five years
since our IPO, we have exceeded that revenue threshold
and steadily marched up the list, from #44 on the same
Business Insurance list (as referenced above) with ~$80
million of annual revenue to #16 based on last years
published list with $1.2 billion of 2023 annual revenue.
When we launched this goal internally before our IPO,
it was largely thought of as exceedingly lofty and, for
many, considered out of reach for us. Today, “Top 10 in
10” is more clearly in view for our colleagues and remains
an important objective for us that I am confident we
will achieve over time. Now that we are halfway into
that journey, the biggest variable I see to our eclipsing
that industry rank in the next five years is the degree of
industry consolidation both below and above us during
the intervening time.
$3 Billion Revenue – 30% Margin – 5 Years to Achieve
As I discussed during our third quarter 2024 earnings call,
we have rolled out internally a goal to exceed $3 billion of
revenue with at least a 30% adjusted EBITDA margin over
the next 5 years. Having this goal, and the financial targets
broadly communicated throughout our business, enables
informed decision making, intentional and thoughtful
capital allocation, and aids our leaders in calibrating goal
setting and business management.
This goal clearly implies a business that 1) continues to
grow organically at an outsized rate relative to our peers,
2) accretes margin at a rate that should meaningfully
outpace peers given relative starting points, 3) will result
in a meaningfully improved free cash flow profile and
a step-function increase in and flexibility to allocate
capital, and 4) a return to executing on M&A, but in a
similarly thoughtful, prudent and discerning way that
you have seen from us in the past that unlocks value for
shareholders.
The Baldwin Group Shareholder Letter | 6
Organically, we are very excited about internal capital
deployment opportunities across all three of our segments.
In IAS, our reputation as a destination employer continues
to grow and generate increasing opportunity for onboarding
industry leading talent and expertise that fuel our growing
specialty platform spanning industry and risk product
verticals. Across our UCTS segment, we have growing
opportunities to welcome specialist underwriting talent,
launch new programs, and continue rapidly scaling our
nascent reinsurance broking franchise. In MIS, we have
built the leading position in embedded home-insurance
distribution across the new home builder channel and have
significant opportunities and momentum to scale across
mortgage, real estate brokerage and beyond. Across our
businesses, our investments in building an integrated,
modern technology stack positions us well to take advantage
of the latest technological innovations, including generative
artificial intelligence, to remain on the vanguard.
Inorganically, we will look to thoughtfully and selectively
invest in businesses that add unique and attractive talent,
desirable geographic representation, targeted industry
vertical and risk product expertise, and new MGA programs
with discernable moats, underwriting discipline, and
attractive scalability attributes. Importantly, our filter for
M&A has not, and will not change. First, we need to see clear
cultural alignment and buy-in. Second, there must exist clear
line-of-sight to how both Baldwin and the acquired business
are better off as a result of the contemplated business
combination beyond simple financial outcomes. Third, the
transaction must make financial sense. As a result of our tight
filter for quality (both qualitatively and quantitatively), we
expect M&A for us going forward will be episodic in nature.
Given the deep investments we have made through our P&L over the last five years to rapidly scale our business,
operating leverage is both immense and broad-based across our platform and will be readily achievable as we continue
to scale. This is already apparent as you look at the nearly 490 basis point reduction in our compensation and benefits
ratio from 2023 to 2024 and the over 150 basis point reduction in our operating expense ratio over the same time period.
More specifically, as I look to the discrete parts of our business, we have a number of attributes that give me confidence
in a path to meaningful margin accretion going forward.
•
Our corporate infrastructure is largely built out and sufficient to support a business twice our size, which should
result in natural operating leverage going forward.
•
Across our IAS segment, we have built out much of the leadership infrastructure required to continue scaling our
national footprint.
•
Within our UCTS segment, we’ve put in place a technology and human capital infrastructure capable of both scaling
our existing product suite and launching three to five new products annually.
•
Our MIS segment should have the most compelling margin profile over time as the significant P&L investments made
over the past three years in embedded technology platforms and capabilities soon transform into significant P&L
tailwinds. With an intentional focus on deepening moats around our privileged position in the insurance value chain,
we look forward to the future benefit of a highly accretive renewal book of business that should begin compounding
exponentially with very minimal renewal sales commission expense.
Achieving our ambition and five-year objective is far from a foregone conclusion and will require a high degree of
execution over the coming years. While there are risks and unknown setbacks that will occur, we have worked incredibly
hard to put the business in the best position possible to make it a reality.
The Baldwin Group Shareholder Letter | 7
I have opined often, and in past shareholder letters,
about the powerful dynamic of building and operating
a truly integrated business. I cannot emphasize it
enough…so here I am again…
As a reminder, in 2023 we had largely completed
integrations of all our partnerships, including in IAS,
aligning to the same tech stack, data foundation,
operating model, and a consistent go-to-market
strategy within each of our segments. In 2024, we
continued to make strides to harness the value of this
work. We announced a new consolidated go-to-market
brand and launched a rebranding effort across our
legacy partner brands. While it eliminated costs and
redundancies, the far greater, more impactful outcome
has been driving further momentum and efficacy at
point of sale.
The cohesion and accessibility of tools, resources
and expertise resulting from all of this work has
led to meaningful uptick in new business wins and
momentum. For example, we rolled out Stratus, our
pipeline management and sales enablement platform,
to sales leaders and risk advisors which helps to
manage pipelines, drive new business engagement,
Revisiting the power of building and operating a
truly integrated business
The Baldwin Group Shareholder Letter | 8
As we enter 2025, I am as confident and excited for the future as I have been in the recent history of our firm.
•
We have built an incredible foundation underpinned and fueled by a distinctive culture that enables us to attract and
develop a best-in-class team of professionals. The momentum we are seeing on the talent front has continued to
strengthen following our rebranding efforts, which will be a tailwind to our future organic growth.
•
2025 marks the end of the earnout and leverage overhangs that we’ve been navigating for the past 24+ months.
From here, we will see step-function improvements in our adjusted free cash flow and net leverage positions, the
result of which will be a level of financial flexibility we have not yet experienced as a public company. Even as we
see improvements in adjusted free cash flows, we intend to remain disciplined in our prioritization and allocation of
resources and excess capital. We remain committed to operating within our stated long-term net leverage target range
of 3-4x.
•
Adjusted EBITDA margin expansion will continue to be a key priority and, while we plan to deliver incremental margin
expansion each year for the foreseeable future, the magnitude of expansion will vary year to year. Inevitably, years of
step-function improvements will often be followed by more muted years. We anticipate 2025 will have more muted
margin expansion given the continued rapid scaling of new products in our MGA, the one-time impacts of transitioning
our QBE homeowners book of business and uncertainty related to the reinsurance market’s response to the California
wildfires.
•
On the macro front, there are signs of optimism and hope emerging from our clients during conversations with our
professionals in the marketplace. Our advisors and client experience colleagues are picking up on positive sentiments:
around anticipated momentum and opportunities their clients are seeing in their businesses, hope around the potential
impacts of deregulation and fiscal discipline from the U.S. Government and the stability that should bring to our nation’s
balance sheet along with the trickledown impacts to borrowing costs, mortgage rates, etc.
Looking ahead
and facilitate cross-sell opportunities leading to
increased visibility to where and how to access the tools
and resources to solve client needs.
Proof is in our results. Sales velocity in our IAS business,
an industry metric used to benchmark new client revenue
to prior year commissions and fees revenue, was 21.5%
in 2024, compared to industry median of roughly 11%
and 75th percentile of roughly 16%. Sales velocity in our
IAS business accelerated by 410 basis points over 2023
where our result was already industry leading. In many
ways, this is a result of all the work we have completed
to build an integrated operating business. This does not
happen in a world where everyone is left alone, operating
on different systems, and without alignment of go-to-
market strategy.
While our approach to building an integrated operating
business from day one certainly added some expense
initially as we drove accelerated integration efforts across
our M&A program, I am more confident than ever this
was the right approach and will drive immense value
over time. As we focus our sights on $3B/30 over the
coming years, the benefits of our integrated operating
platform will be a meaningful contributor to achieving
this objective.
As proud and excited as I am for what we have accomplished over the past five years, I am even more enthused for what
we want to accomplish over the next five. We remain focused on building the preeminent insurance and risk advisory
solutions firm in our industry and while the fundamental building blocks of what got us here, namely our investments at
the confluence of talent and technology, will continue to be critical to our future success, certain priorities will evolve. For
example, while scale was existential during the past five years, operational rigor and efficient execution at scale will be
existential over the next five years.
As we map out and prepare for the next five years of our growth story, we are more confident in our future due to the
strength of underlying fundamentals and the foundation and infrastructure we have built. As such, we have a business at
scale that knows how to grow organically at outsized rates realized through internally driven net new business generation.
A durable competitive advantage that when combined with growing flexibility for capital allocation sets the stage for what I
anticipate will be the most exciting and rewarding five years our company has experienced.
Here are some of the areas of focus across our business over the course of the next year:
The Baldwin Group Shareholder Letter | 9
•
We will further embrace our unique and celebrated culture with the roll-out of an updated Azimuth document, (what
I refer to as our cultural constitution), that will be accompanied by a new series of trainings and tools to ensure broad
based understanding, commitment, and alignment to who we are, what we stand for, and how that informs our behaviors
and decision making.
•
Our focus on innovating across the value chain in support of developing innovative client solutions will remain a bedrock
of our strategy, with continued work around expanding our capabilities in reinsurance, risk capital formation, and capital
management in support of our risk product portfolio.
•
We will accelerate our efforts to holistically solve more problems for existing clients across our spectrum of commercial
and consumer offerings, connecting opportunities for growth within and across operating groups, centers of excellence,
and industry practices.
•
Our training and development programs will expand as we continue to attract, retain, and grow the most talented
individuals in the industry. As a knowledge industry, our greatest and most enduring competitive advantage exists in our
ability to attract, develop, and retain the very best and brightest professionals.
•
The portfolio of commercial and consumer products, as well as internal and external distribution strategies, will continue
to expand through our MGA business, MSI.
•
We will continue the brand unification across the remainder of our retail broking businesses and turn to building broad,
lasting awareness of our firm as a leading destination for clients, partners, and colleagues.
•
Our efforts to build the leading “broker of the future” platform will continue in full force, harnessing the power of
technology and artificial intelligence to elevate the client and colleague experience while ensuring our colleagues are
positioned to spend the preponderance of their time doing meaningful and impactful client work.
Innovate, Execute, Excel in 2025
Today, I am more excited and confident about the future of our firm than I have ever been. We have been intentional around
building a durable, integrated business capable of withstanding all economic cycles and property and casualty market
conditions. The result of that is an ability to take market share in any environment whether our clients are experiencing
rapid growth or one where the economy is contracting and our clients are more reliant on us for thoughtful, differentiated
solutions that help them navigate challenges.
I extend my deepest appreciation to all our stakeholders who made the last five years a huge success. I especially want to
thank our clients – without their trust, loyalty, and satisfaction, our success would not be possible. We also appreciate our
insurance company partners with whom we trade with day-in and day-out and the communities in which we live and work
that have supported our success.
We have an amazing team of the industry’s most talented colleagues whose passion, grit and determination enabled these
amazing results and accomplishments and who will be instrumental in doing the same over the course of the next leg of our
journey as we pursue “$3B/30/5.” I remain grateful to them for the results they deliver and for their ongoing commitment
and engagement.
And with deep gratitude, I thank our shareholders, many of whom have been with us since our IPO. Notably, among our
public insurance broker peers, we rank at the high end of insider ownership, with more than 40% of our company owned by
colleagues and partners.
I am incredibly proud of the results we have achieved thus far. Our growth story is far from over, our future is bright, and I
can say to you with confidence, our best days remain ahead!
With gratitude and optimism,
Trevor Baldwin
Chief Executive Officer
In summary
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒
Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2024
or
☐
Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ________ to _________
Commission File Number: 001-39095
The Baldwin Insurance Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware
61-1937225
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
4211 W. Boy Scout Blvd., Suite 800, Tampa, Florida 33607
(Address of principal executive offices) (Zip code)
(866) 279-0698
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Class A Common Stock, par value $0.01 per share
BWIN
Nasdaq Global Select Market
Securities registered pursuant to Section 12(g) of the Act: None
______________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Note: Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their
obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to
submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company,
or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging
growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its
audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received
by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of June 30, 2024 (the last business day of the registrant’s second fiscal quarter), the registrant's aggregate market value of its voting and non-
voting common equity held by non-affiliates was $2,236,347,924.
As of February 20, 2025, there were 68,152,042 shares of Class A common stock outstanding and 49,440,870 shares of Class B common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy Statement for the 2025 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission
within 120 days of the end of the fiscal year to which this report relates are incorporated by reference into Part III of this Form 10-K.
THE BALDWIN INSURANCE GROUP, INC.
INDEX
Page
Note Regarding Forward-Looking Statements
4
Commonly Used Defined Terms
5
PART I
ITEM 1.
Business
7
ITEM 1A.
Risk Factors
15
ITEM 1B.
Unresolved Staff Comments
46
ITEM 1C.
Cybersecurity
46
ITEM 2.
Properties
48
ITEM 3.
Legal Proceedings
48
ITEM 4.
Mine Safety Disclosures
48
PART II
ITEM 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
49
ITEM 6.
Reserved
51
ITEM 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
51
ITEM 7A.
Quantitative and Qualitative Disclosures about Market Risk
74
ITEM 8.
Financial Statements and Supplementary Data
75
ITEM 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
115
ITEM 9A.
Controls and Procedures
115
ITEM 9B.
Other Information
115
ITEM 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
115
PART III
ITEM 10.
Directors, Executive Officers and Corporate Governance
116
ITEM 11.
Executive Compensation
116
ITEM 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
116
ITEM 13.
Certain Relationships and Related Transactions, and Director Independence
116
ITEM 14.
Principal Accountant Fees and Services
116
PART IV
ITEM 15.
Exhibits and Financial Statement Schedules
117
ITEM 16.
Form 10-K Summary
119
SIGNATURES
120
Note Regarding Forward-Looking Statements
We have made statements in this Annual Report on Form 10-K, including matters discussed under Item 1A. Risk Factors,
Item 3. Legal Proceedings, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,
and in other sections of this Annual Report on Form 10-K, that are forward-looking statements. In some cases, you can
identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,”
“believes,” “estimates,” “predicts,” “potential” or “continue,” the negative of these terms and other comparable terminology.
These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include
projections of our future financial performance, our anticipated growth strategies and anticipated trends in our business.
These statements are only predictions based on our current expectations and projections about future events. There are
important factors that could cause our actual results, level of activity, performance or achievements to differ materially
from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements,
including those factors discussed under Item 1A. Risk Factors.
Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee
future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes
responsibility for the accuracy and completeness of any of these forward-looking statements. We are under no duty to
update any of these forward-looking statements after the date of this Annual Report on Form 10-K to conform our prior
statements to actual results or revised expectations.
4
Commonly Used Defined Terms
The following terms have the following meanings throughout this Annual Report on Form 10-K unless the context indicates
or requires otherwise:
2019 Stockholders Agreement
Stockholders Agreement between Baldwin and the applicable holders of LLC Units in
Baldwin Holdings entered into on October 28, 2019
2024 Credit Agreement
Amended and Restated Credit Agreement, dated as of May 24, 2024, which is attached
as Annex I to the Amendment and Restatement Agreement, dated May 24, 2024,
between Baldwin Holdings, as borrower, JPMorgan Chase Bank, N.A., as the
Administrative Agent, the Guarantors party thereto and the Lenders party thereto, as
amended by Amendment No. 1 to Amended and Restated Credit Agreement, dated as
of December 4, 2024, and Amendment No. 2 to Amended and Restated Credit
Agreement, dated as of January 10, 2025
2024 Credit Facility
The 2024 Revolving Facility and 2024 Term Loan established pursuant to the 2024
Credit Agreement
2024 Revolving Facility
Our revolving credit facility under the 2024 Credit Facility with commitments in an
aggregate principal amount of $600 million, maturing May 24, 2029
2024 Stockholders Agreement
Stockholders Agreement between Baldwin and the applicable holders of LLC Units in
Baldwin Holdings entered into on October 30, 2024
2024 Term Loan
Our term loan facility under the 2024 Credit Facility with a principal amount of $840
million as of December 31, 2024, maturing May 24, 2031
Amended LLC Agreement
Third Amended and Restated Limited Liability Company Agreement of Baldwin
Holdings, as amended
API
Application programming interface
book of business
Insurance policies bound by us on behalf of our clients
bps
Basis points
Baldwin Holdings
The Baldwin Insurance Group Holdings, LLC (formerly Baldwin Risk Partners, LLC), our
operating company and a subsidiary of Baldwin
Baldwin
The Baldwin Insurance Group, Inc. (formerly BRP Group, Inc.), our parent company,
together, unless the context otherwise requires, with its consolidated subsidiaries,
including Baldwin Holdings and its consolidated subsidiaries and affiliates
clients
Our insureds
colleagues
Our employees
core commissions
Commissions and fees revenue excluding profit-sharing revenue and other income
Exchange Act
Securities Exchange Act of 1934, as amended
GAAP
Accounting principles generally accepted in the United States of America
insurance company partners
Insurance companies with which we have a contractual relationship
LLC Units
Membership interests of Baldwin Holdings
MGA
Managing General Agent
MSI
Our MGA platform
operating groups
Our reportable segments
partners
Companies that we have acquired, or in the case of asset acquisitions, the producers
partnerships
Strategic acquisitions made by the Company
Pre-IPO LLC Members
Trevor Baldwin, our Chief Executive Officer; Lowry Baldwin, our Chairman; BIGH, LLC,
an entity controlled by Lowry Baldwin; Elizabeth Krystyn, one of our founders; Laura
Sherman, one of our founders; Daniel Galbraith, President, The Baldwin Group and
CEO, Retail Brokerage Operations; Brad Hale, our Chief Financial Officer; and The
Villages Invesco, LLC, and certain other historical equity holders including equity
holders in companies that we have acquired or producers
QBE
QBE Insurance Corporation and its affiliates
5
QBE Program Administrator
Agreement
Agreement with an affiliate of QBE Holdings, Inc., the prior owner of Westwood, under
which our MSI business provides program administrator services to QBE Insurance
Corporation in connection with the portion of our builder-sourced homeowners book
that is underwritten by affiliates of QBE Insurance Corporation
reinsurance company partners
Reinsurance companies with which we have a contractual relationship
risk advisors
Our producers
SEC
U.S. Securities and Exchange Commission
Securities Act
Securities Act of 1933, as amended
Senior Secured Notes
7.125% senior secured notes with an aggregate principal amount of $600 million due
May 15, 2031
SOFR
Secured Overnight Financing Rate
Tax Receivable Agreement
Tax Receivable Agreement between Baldwin and certain holders of LLC Units in
Baldwin Holdings entered into on October 28, 2019
Westwood
Westwood Insurance Agency, a 2022 partner
Wholesale Business
Our specialty wholesale broker business, which was sold on March 1, 2024
6
PART I
ITEM 1. BUSINESS
The Company
The Baldwin Insurance Group, Inc. is a holding company and sole managing member of The Baldwin Insurance Group
Holdings, LLC (formerly Baldwin Risk Partners, LLC) (“Baldwin Holdings”) and its sole material asset is its ownership interest
in Baldwin Holdings, through which all of our business is conducted. In this Annual Report on Form 10-K, unless the
context otherwise requires, the words “Baldwin,” the “Company,” “we,” “us” and “our” refer to The Baldwin Insurance
Group, Inc., together with its consolidated subsidiaries, including Baldwin Holdings and its consolidated subsidiaries and
affiliates.
Baldwin is an independent insurance distribution firm providing indispensable expertise and insights that strive to give our
clients the confidence to pursue their purpose, passion and dreams. As a team of dedicated entrepreneurs and insurance
professionals, we have come together to help protect the possible for our clients. We do this by delivering bespoke client
solutions, services, and innovation through our comprehensive and tailored approach to risk management, insurance, and
employee benefits. We support our clients, colleagues, insurance company partners and communities through the
deployment of vanguard resources and capital to drive our organic and inorganic growth. When we consistently execute
for these key stakeholders, we believe that the outcome is an increase in value for our fifth stakeholder, our stockholders.
We are innovating the industry by taking a holistic and tailored approach to risk management, insurance and employee
benefits. Our growth plan includes continuing to recruit, train and develop industry leading talent, continuing to add
geographic representation, insurance product expertise and end-client industry expertise via our partnership strategy, and
continuing to build out our MGA platform (“MSI”), which delivers proprietary, technology-enabled insurance solutions to
our internal risk advisors as well as to a growing channel of external distribution partners. We are a destination employer
supported by an award-winning culture, powered by exceptional people and fueled by industry-leading growth and
innovation.
We represent over three million clients across the United States and internationally. Our 4,000 plus colleagues include
over 700 risk advisors, who are fiercely independent, relentlessly competitive and “insurance geeks.” We have
approximately 110 offices in 24 states, all of which are equipped to provide diversified products and services to empower
our clients at every stage through our three operating groups.
In 2011, we adopted the “Azimuth” as our corporate and cultural constitution. Named after a historical navigation tool
used to find “true north,” the Azimuth asserts our core values, business basics and stakeholder promises. The ideals
encompassed by the Azimuth support our mission to deliver indispensable, tailored insurance and risk management
insights and solutions to our clients. We strive to be regarded as the preeminent insurance advisory firm—fueled by
relationships, powered by people and exemplified by client adoption and loyalty. This type of environment is upheld by
the distinct vernacular we use to describe our services and culture. We are a firm, instead of an agency; we have
colleagues, instead of employees; and we have risk advisors, instead of producers/agents. We serve clients instead of
customers and we refer to our strategic acquisitions as partnerships. We refer to insurance brokerages that we have
acquired, or in the case of asset acquisitions, the producers, as partners.
Industry
Our core products include commercial property and casualty insurance, employee benefits insurance, personal lines
insurance, wealth management and retirement services, and Medicare. As a distributor of these products, we compete on
the basis of reputation, client service, industry insights and know-how, product offerings, ability to tailor our services to the
specific needs of a client and, to a lesser extent, price of our services. In the United States, our industry is comprised of
large, global participants, such as those described in the section titled “Competition” below. The remainder of our industry
is highly fragmented and comprised of over 30,000 regional and community participants that vary significantly in size and
scope.
Despite the recent consolidation in the insurance brokerage industry, the industry remains highly fragmented, and the
number of independent agencies has remained roughly constant since 2006. The fragmented industry landscape presents
us with the opportunity to continue acquiring high-quality partners.
7
Commission revenues are generally based on a percentage of the premiums paid by insureds and normally follow
premium levels. Insurance premiums are cyclical in nature and may vary widely based on market conditions. Various
factors, including competition for market share among underwriting enterprises, increased underwriting capacity and
improved economies of scale following consolidations, can result in flat or reduced property/casualty premium rates (a
“soft” market). A soft market tends to put downward pressure on commission revenues. Various countervailing factors,
such as greater than anticipated loss experience, unexpected loss exposure and capital shortages, can result in increasing
property/casualty premium rates (a “hard” market). A hard market tends to favorably impact commission revenues. Hard
and soft markets may be broad-based or more narrowly focused across individual product lines or geographic areas. As
markets harden, buyers of insurance (such as our brokerage clients), have historically tried to mitigate premium increases
and the higher commissions these premiums generate, including by raising their deductibles and/or reducing the overall
amount of insurance coverage they purchase. As the market softens, or costs decrease, these trends have historically
reversed. During a hard market, buyers may switch to negotiated fee in lieu of commission arrangements to compensate
us for placing their risks, or may consider the alternative insurance market, which includes self-insurance, captives, rent-a-
captives, risk retention groups and capital market solutions to transfer risk.
Commercial Property and Casualty Industry
Commercial property and casualty brokers provide businesses with access to property, professional liability, workers’
compensation, management liability, commercial auto insurance products as well as risk-management services. In
addition to negotiating competitive policy terms on behalf of clients, insurance brokers also serve as a distribution channel
for insurers and often perform much of the administrative functions. Insurance brokers generate revenues through
commissions, calculated as a percentage of total insurance premium, and through fees for management and consulting
services. We have relationships with leading commercial writers, as well as regional insurers who have a presence in our
target markets. We conduct commercial property and casualty business within all of our operating groups, which includes
manufacturing our own proprietary products and captive solutions within our Underwriting, Capacity & Technology
Solutions operating group. Current MGA products include commercial umbrella, commercial property, general liability and
management liability, with several additional commercial lines products in our existing product pipeline.
Employee Benefits Industry
Employee benefit advisors provide businesses and their employees with access to individual and group medical, dental,
life and disability coverage. In addition to functioning as distributors, employee benefits brokers also provide assistance
with benefit plan design. Employee benefits brokers’ capabilities often enable middle-market businesses to fully outsource
their employee benefits program design, management and administration without committing internal resources or
investing substantial capital in systems. Employee benefit advisors generate revenues through commissions and fees for
management and consulting services. In recent years, as a result of the Affordable Care Act (“ACA”), healthcare has
become increasingly more complex, and the demand has grown for sophisticated employee benefits consultants. We
expect this trend to continue and believe we remain well positioned as a result of our consistent investment in our
employee benefits capabilities. We conduct employee benefits business within our Insurance Advisory Solutions and
Mainstreet Insurance Solutions operating groups.
Personal Lines Industry
Personal lines brokers provide individual consumers with access to home, auto, umbrella and recreational insurance
products. Similar to commercial lines agents, personal lines insurance agents generate revenues through commissions
and fees for management and consulting services. In addition to negotiating competitive policy terms on behalf of clients,
insurance brokers also serve as a distribution channel for insurers and often perform much of the administrative
functions. We conduct personal lines business within all of our operating groups. We believe that embedded distribution
will play a meaningful role in the future of personal lines—to that end, we have made deep investments in technology to
enable our long-term vision of creating a one-stop, digital distribution platform for advisors, consumers and businesses
alike. We believe our retail agency model, embedded technology, national distribution capabilities and ability to build
proprietary products in our MSI platform uniquely position us to execute on this strategy.
Wealth Management and Retirement Services
Wealth management and retirement services is comprised of financial solutions for small and mid-sized businesses and
certain individuals. Our specialties include risk management, employee benefits, and retirement plan consulting. We
advise on corporate retirement plans and executive benefits focused on employee retention and engagement. We also
provide comprehensive financial planning and wealth management services to high-net-worth individuals and families.
Wealth management services can include investment advisory services, tax and financial planning, and other services. We
conduct wealth management and retirement services within our Insurance Advisory Solutions operating group.
8
Medicare Industry
In the U.S., Medicare provides health insurance to retirees, who by definition lack coverage via an employer sponsored
healthcare program. U.S. citizens typically become eligible for Medicare upon turning 65 years old. The Medicare market is
split between the Original Medicare Plan, a fee-for-service plan managed by the federal government which represents
approximately two-thirds of the market, and Medicare Advantage, a rapidly growing private Medicare option representing
approximately one-third of the market. Medicare advisors within our Mainstreet Insurance Solutions operating group
assist in determining optimal coverage and healthcare/doctor access based on an individual’s healthcare needs and
spending limitations.
Business Strategy
We believe our business strategy is centered around using the results of outstanding service to clients to reinvest the vast
majority of retained earnings into future growth, which we believe over time produces better and more sustainable results
for all of our stakeholders, including our clients, colleagues, insurance company partners, the communities in which we
work and live, and our stockholders. For our clients, our growth affords us the ability to provide better advice and an
expanded and more cost-effective suite of insurance solutions. For our colleagues, our growth provides expanded career
and development opportunities. For our insurance company partners, our growth facilitates expanded access to a more
diversified universe of clients and more distributed pools of risk. For our communities, our growth facilitates enhanced
economic contribution, and the ability of our colleagues to make charitable impacts. And for our stockholders, we believe
that revenue growth, along with margin accretion over time, will generate significant adjusted free cash flow and growth in
firm value.
We have taken, and will continue to take, a two-pronged approach to growing our business, which includes investing
meaningfully into our existing businesses to drive organic growth, and to drive inorganic growth via our partnership
strategy.
Over time, our organic growth will be driven primarily by our ability to continue to win new business, our ability to offer
and advise on a broader array of insurance solutions in an increasingly larger geographic footprint, and to capture an
increasingly larger portion of the economics associated with the sale of insurance. To achieve this, we have invested
heavily in our sales leadership infrastructure and recruitment of sales talent, technology talent and solutions to better
deliver insurance insights and solutions to our risk advisors and clients. In our MSI platform, we continue to deliver
proprietary and technology-enabled insurance solutions that provide our risk advisors and select external distribution
partners speed, ease of use, and certainty of execution, while also delivering Baldwin an enhanced share of the economics
associated with the underlying insurance transaction. Factors contributing to our organic growth include net new business
growth, fees, rate increases, retention, exposure unit growth, and contingent commissions. Contributions to organic
revenue growth from recent partnerships begins after we have owned the partner firm for 12 months.
We did not execute any partnerships during 2024 and we continue to anticipate relatively little partnership activity in 2025.
Though partnerships have contributed meaningful inorganic growth to Baldwin and we expect them to contribute to our
long-term growth strategy, we anticipate they will be episodic in nature going forward. Adding new colleagues through
partnerships can significantly bolster our geographic footprint, product expertise, and end-client industry expertise, while
adding incremental industry-leading talent to our organization. We are uniquely focused on the industry’s best and fastest
growing independent firms, and we believe we offer a truly differentiated value proposition to prospective partners
relative to our more mature and/or private equity-backed peers, which includes retained business decision-making
autonomy, leadership opportunities for new partners and an environment focused on entrepreneurialism and the
continued growth of our partners’ businesses. We believe our success attracting high quality partners has validated our
differentiated value proposition—we have consummated partnerships with 35 firms since the beginning of 2020, for a
total of $538.7 million of Acquired Revenue, which includes eight “Top 100” firms since 2020, more than any other peer in
our industry. We also have a highly systematic and regimented integration process for all new partners, which balances
ensuring proper operational, financial and accounting, and technology and cybersecurity controls with business decision-
making autonomy and impact on new colleagues.
We continue to make the investments designed to better service our clients and establish a competitive advantage in the
industry. Ongoing investments to date focused on, but are not limited to, the continued buildout of our MSI platform, the
continued buildout of our tech-enabled homeowners efforts (both in MSI and in our Mainstreet Insurance Solutions
business), enterprise-wide technology initiatives, the exploration of potential alternative capacity solutions, and the
continued hiring of risk advisors and sales leadership infrastructure in our Insurance Advisory Solutions and Mainstreet
Insurance Solutions operating groups.
9
Operating Groups
Effective January 1, 2024, the Company’s FounderShield Partner moved from the Underwriting, Capacity & Technology
Solutions operating group to the Insurance Advisory Solutions operating group. Prior year segment reporting information
has been recast to conform to the current organizational structure.
Baldwin’s business is divided into three operating groups: Insurance Advisory Solutions, Underwriting, Capacity &
Technology Solutions and Mainstreet Insurance Solutions.
Insurance Advisory Solutions Operating Group (“IAS”)
IAS provides expertly-designed commercial risk management, employee benefits and private risk management solutions
for businesses and high-net-worth individuals, as well as their families. Risk management solutions typically involve the
sale of a wide variety of both commercial and personal lines insurance products that mitigate risks for firms and
individuals. Employee benefits solutions can include health plans, dental plans, and retirement accounts for firms and
their employees. We are privileged to have partnered with some of the highest quality independent insurance brokers
across the country with vast and varied strategic capabilities and expertise. We have been intentional in recognizing and
elevating this talent across the organization to build world class industry-focused practice groups and product Centers of
Excellence that can be leveraged by the entire firm.
Underwriting, Capacity & Technology Solutions Operating Group (“UCTS”)
UCTS consists of three distinct businesses—MSI, our reinsurance brokerage business, Juniper Re, and our captive
management business. Through MSI, we manufacture proprietary, technology-enabled insurance products that are then
distributed (in many instances via technology and/or API integrations) internally via our risk advisors across our other
operating groups and externally via select distribution partners, with a focus on sheltered channels where our products
deliver speed, ease of use and certainty of execution. An example of this is our national embedded renters insurance
product sold at point of lease via integrations with property management software providers. As a prominent growth
driver for the Company, we have invested heavily in the expansion of our MGA product suite, which is now comprised of
more than 20 products across commercial, personal and professional lines. In 2024, we made a significant investment in
the development of new middle market oriented commercial lines products, which will go live in the first half of 2025.
UCTS’ Wholesale Business was sold in the first quarter of 2024 and its operations are included in our results through the
end of February 2024.
In January of 2025, we received final approval and a Certificate of Authority from the Texas Department of insurance to
form a Texas-domiciled reciprocal insurance exchange (the “Reciprocal”), for which we intend to serve as and own the
Attorney-in-Fact (“AIF”). We are in the process of finalizing a third-party led capitalization of the Reciprocal, ahead of
beginning to write business into the Reciprocal two to three months thereafter. Based on how we intend to structure the
Reciprocal, we do not expect to consolidate the Reciprocal's financial results, but the AIF entity will be a subsidiary in our
UCTS operating group.
Mainstreet Insurance Solutions Operating Group ("MIS")
MIS offers personal insurance, commercial insurance and life and health solutions to individuals and businesses in their
communities, with a focus on accessing clients via sheltered distribution channels, which include, but are not limited to,
new home builders, realtors, mortgage originators/lenders, master planned communities, and various other community
centers of influence. We have invested deeply in talent, technology and capabilities across MIS, including in Westwood's
homeowners solutions that are embedded in many of the top home builders in the U.S., the national expansion of our
distribution footprint through our National Mortgage and Real Estate Channel, and enhanced digital capabilities focused
on improving the risk advisor and client experience. Mainstreet Insurance Solutions also offers consultation for
government assistance programs and solutions, including traditional Medicare, Medicare Advantage and Affordable Care
Act, to seniors and eligible individuals through a network of primarily independent contractor agents.
Competition
The business of providing insurance products and services is highly competitive. We compete for clients on the basis of
reputation, client service, program and product offerings, and our ability to tailor products and services to meet the
specific needs of a client. We actively compete with numerous integrated financial services organizations as well as
insurance companies and brokers, producer groups, individual insurance agents, investment management firms,
independent financial planners and broker-dealers, including public participants, such as Aon plc, Marsh & McLennan
Companies, Inc., Willis Towers Watson plc, Arthur J. Gallagher & Co. and Brown & Brown Inc.; private company participants,
such as Hub International Limited and USI, Inc.; and in our personal lines business, Goosehead Insurance, Inc. and The
Woodlands Financial Group.
10
Clients and Insurers
Our clients are highly diversified and include individuals, professionals, businesses, including those in niche industries, and
specialty insurers. No material part of our business depends upon a single client or on a few clients. The loss of any one
client would not have a material adverse effect on our operations. In 2024, our largest single client represented less than
1% of our core commissions and fees.
We have relationships with a significant number of insurance company partners who contribute to the commissions and
fees we generate. While we do not have a dependency on any one insurance company partner, we derive a significant
portion of our core commissions and fees from a limited number of insurance company partners. In 2024, two insurance
company partners accounted for an aggregate of approximately 19% of our core commissions and fees.
Human Capital
Baldwin is an independent colleague-centric insurance solutions firm fueled by relationships, powered by people, and
exemplified by our ability to cultivate teams with deep expertise to perpetuate a winning culture and drive our high-
performing team dynamic to deliver the best of our firm to clients. Our success continues to be driven by our greatest
asset, our talented team of colleagues, each of which plays a crucial role in helping us achieve our firm goals. We attract
colleagues who share our passion for excellence and working collaboratively to harness the tremendous power in the
collective expertise of our firm. Our colleagues are inspired by and deeply committed to the Best Team Wins approach
outlined in our cultural guide, The Azimuth.
Powered by People
As of December 31, 2024, we had over 4,000 colleagues, the vast majority of whom are full-time. There were 4,052 full-
time colleagues (98% of total colleague population) and 64 part-time colleagues. The firm also partners with over 5,400
independent contracted agents, primarily supporting our Medicare business.
Baldwin is a place for colleagues to build a career, not just have a job, and we believe every colleague should feel a sense
of ownership in the firm. To promote that connection, we grant all newly-hired colleagues shares of Baldwin common
stock.
We highly value the powerful and innovative results that come from seeking and weighing a broad range of perspectives
and we strive to hire and promote talent that brings wide ranging diversity of thought, background, and experience.
•
More than half of our executive leadership team joined Baldwin from other industries, bringing unique
background and thoughtful insight on our continued best path to success.
•
As of December 31, 2024, women comprise 59% of our colleague population and 50% of our leadership positions.
•
We benefit from a wide age range and experience level within the firm. We have a robust mix of entry-level and
post-college colleagues. This balanced representation fosters our talent strategy of providing great mentoring and
learning opportunities for our developing colleagues.
•
Our talent acquisition team continues to proactively source and contact underrepresented candidates as part of
our recruiting process for open roles. Importantly, we hire for competency, capability, and potential, while
maintaining a competitive culture that values and rewards results.
Baldwin continues to focus on attracting and retaining the very best talent and creating an environment that is known to
be a destination for top talent. We maintain a strong annual retention rate, which was 79% for 2024. Our commitment to
rewarding our colleagues is evidenced by merit increases and bonuses we have continued to pay each year.
Culture and Belonging
Part of how we operate and support each other as a “Best Team” as outlined in our Azimuth, is by operating with
transparency and striving to make it easy for colleagues to know and trust each other striving to always do the right thing
in an open and authentic way. We actively seek out our colleagues’ input through our formal and anonymous Baldwin
Pulse Engagement survey, asking for feedback on a variety of topics including career path opportunities, trust in team and
leadership, and feeling valued. The results of this annual pulse check are always shared with colleagues and leadership so
thoughtful and meaningful improvements can be made to enhance engagement.
Another way we aim to create a sense of belonging for our colleagues is vigilant focus on remaining a destination
employer for top talent. We are continuously recognized for our people-first approach, our commitment to a culture of
continuous learning, and for providing a place where our colleagues learn, grow, and thrive.
•
Baldwin continued to be Great Place to Work-Certified™ and once again ranked as a Fortune Best Workplaces in
Financial Services and Insurance™ in 2024.
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We were also recognized by Top Workplaces USA as a 2024 nationally recognized employer for making the world
a better place to work by prioritizing a people-centered culture and giving employees a voice.
We have a variety of ways we promote our culture, support our communities, and take care of each other within the
Baldwin family.
•
We promote our colleagues actively participating in community outreach by providing three days of Community
Service PTO.
•
Our IAS International Aid and Development Practice enables International Development Organizations and Non-
Governmental Organizations to operate safely and securely, to help the most vulnerable communities in some of
the highest risk communities in the world.
•
To help any qualifying colleague experiencing extraordinary hardship, we provide the Baldwin True North
Colleague Fund (operated by America’s Charities, a 501(c)(3) non-profit organization), to which colleagues can also
contribute by making a donation. Baldwin has pledged up to $250,000 to the fund and is honored to provide an
additional dollar-for-dollar match for colleague contributions up to another $250,000.
•
We believe in having fun at work and celebrating our successes by promoting peer recognition at all levels of the
firm through our “Give a Wow” compliment program. We share “Give a Wows” with colleagues during our
quarterly Town Hall meetings.
Nurture and Grow Talent
At Baldwin, we care about our colleagues and their families from a holistic perspective and take great care in supporting
them in meaningful ways. We believe that by taking care of our colleagues, we empower them to live their best lives—both
professionally and personally. To that end, we offer a comprehensive benefits package designed to enhance overall well-
being. Our offerings include:
•
Health & Wellness: Comprehensive medical coverage, mental health services, and an Employee Assistance
Program (EAP)
•
Retirement Savings: A competitive 401(k) plan with employer matching, aiding colleagues in future planning
•
Flexible Time Off: Paid sick leave, recognition of 11 national holidays, and a Summer Friday Initiative providing
half-days off during the summer season
•
Parental & Family Support: Adoption Assistance Program and parental leave after one year of service
•
Financial & Legal Guidance: Expert referral services for financial and legal planning
•
Wellness & Fitness: The Baldwin Vitality Wellness Program in partnership with AAPTIV for customizable fitness
benefits
•
Health Savings Accounts (HSA): An employer contribution of $600+ to mitigate medical costs.
To promote an environment where all colleagues can learn, grow, and thrive, we provide education and training on a
variety of topics, including technical, professional, business development, client experience, leadership, and regulatory and
compliance. Some examples of the ways we continued to support colleague growth and colleague development in 2024
are listed below.
•
Expansion of our Azimuth Institute: The Azimuth Institute is our formal program to provide foundational and
progressive training for all of our IAS client-facing roles in the areas of job skills, system training, insurance
acumen, power skills, business development and leadership training for leaders. In 2024, we developed and
implemented a new 12-16 week program for one of our key client experience leader roles.
•
Enhancement of two of our core sales training programs:
◦
SCORE is a 10-week intensive training for new and developing risk advisors within our IAS business,
offered across multiple modalities.
◦
SCORE PRO is a 2-day advanced sales development program for established risk advisors interested in
taking their business development skills to the next level.
•
Additional leadership training and resources to support our leaders, including:
◦
Leadership Essentials: A leadership program designed to support newly hired and promoted leaders.
These instructor-facilitated workshops provide new leaders with tools and resources to help guide and
support their efforts in interviewing and hiring, communication, coaching, and influencing others.
◦
The Baldwin Group Leader Playbook: A comprehensive on-demand resource that helps leaders model
Azimuth values, develop themselves as coaches, hire and onboard top talent, and execute their roles with
excellence.
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Strategic Partnerships to offer robust curriculum for our colleagues and support their capabilities for professional
and self-development.
◦
The Institutes: We’re proud to partner with the premier educational purveyor of technical acumen to the
insurance industry, The Institutes. Through this partnership, we provide access to over 400 courses,
certification programs, and insurance-related designations, all of which are easily accessible through an
integration with our Baldwin learning management system.
◦
LinkedIn Learning: Through LinkedIn Learning, colleagues have access to thousands of skill-building
courses across a broad array of topics. Enhanced with AI coaching, role guides, and data driven insights,
this partnership broadens and deepens the resources available to our colleagues.
◦
Continuing Education: We support the licensing, continuing education, and professional development
needs of our colleagues by providing access to a variety of technical training certifications and
designations. Dedicated landing pages for WebCE and The Institutes make navigating ongoing education
seamless and keeps our colleagues on the vanguard of industry changes.
We also promote colleague growth and development through an ongoing performance feedback model, including 90-day
and 120-day check-ins for new colleagues, and a formal year-end performance check-in for all colleagues. Our
performance feedback processes enable every colleague to have clear alignment with how we execute on our goals,
maximize their performance potential, and drive their own development and growth through individual action plans.
Cultivating an Ethical Environment for our Colleagues and Clients
We take very seriously our responsibility to operate with the highest level of integrity and foster an ethical environment for
both our colleagues and clients. We have established numerous policies and procedures outlining our intention to live our
values and do business in a responsible and ethical manner, including providing avenues for asking questions or reporting
concerns about non-compliance. Many of these can be found publicly on our Company website at baldwin.com or our
investor relations website at ir.baldwin.com. Documented policies and procedures include, but are not limited to:
•
The Azimuth (our cultural and corporate constitution, available on our Company website);
•
The Baldwin Equal Employment Opportunity Policy, Statement of Policy Concerning Harassment, Open Door
Policy and internal formal employment complaint process;
•
Code of Business Conduct and Ethics (available in the “Governance” section of our investor relations website);
•
Whistleblower Policy, which governs reporting of concerns related to accounting, auditing and ethical violations
(available in the “Governance” section of our investor relations website);
•
Statement of Policy Concerning Trading in Company Securities, which prohibits colleagues from trading Baldwin
securities while in possession of Material Non-Public Information (available in the “Governance” section of our
investor relations website);
•
Privacy Policy, which governs how we handle personal client information in a responsible manner (available at the
bottom of our Company homepage);
•
Transparency & Disclosure Statement, which sets forth our commitment to fair dealings with our clients (available
at the bottom of our Company homepage); and
•
Anti-Corruption Policy, which defines our commitment to adhere to the Foreign Corrupt Practices Act (“FCPA”) and
avoid corrupt business practices (available in the “Governance” section of our investor relations website).
Seasonality
The insurance brokerage market is seasonal and our results of operations are somewhat affected by seasonal trends. Our
adjusted EBITDA and adjusted EBITDA margins are typically highest in the first quarter and lowest in the fourth quarter.
This variation is primarily due to fluctuations in our revenues, while overhead remains consistent throughout the year. Our
revenues are generally highest in the first quarter due to a higher degree of first quarter policy commencements and
renewals in certain IAS and MIS lines of business such as employee benefits, commercial and Medicare. In addition, a
higher proportion of our first quarter revenue is derived from our highest margin businesses.
Partnerships can significantly impact adjusted EBITDA and adjusted EBITDA margins in a given year and may increase the
amount of seasonality within the business, especially results attributable to partnerships that have not been fully
integrated into our business or owned by us for a full year.
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Regulation
Our activities in connection with insurance brokerage services are subject to regulation and supervision by state regulatory
authorities. State insurance laws are often complex and generally grant broad discretion to supervisory authorities in
adopting regulations and supervising regulated activities, which generally includes the licensing of insurance brokers and
agents, intermediaries and third-party administrators. Our continuing ability to provide insurance brokerage in the states
in which we currently operate is dependent upon our compliance with the rules and regulations promulgated by the
regulatory authorities in each of these states.
The health insurance industry is heavily regulated by the ACA, Centers for Medicare & Medicaid Services (“CMS”) and state
jurisdictions. Each jurisdiction has its own rules and regulations relating to the offer and sale of health insurance plans,
typically administered by a department of insurance, department of financial services, or similar regulatory authority. We
are required to maintain valid life or health agency or agent licenses in each jurisdiction in which we transact health
insurance business.
Regulations and guidelines issued by CMS place a number of requirements on health insurance carriers and agents and
brokers in connection with the marketing and sale of Medicare Advantage and Medicare Part D prescription drug plans.
We are subject to similar requirements of state insurance departments with respect to our marketing and sale of Medicare
Supplement plans. CMS and state insurance department regulations and guidelines include a number of prohibitions
regarding the ability to contact Medicare-eligible individuals and place many restrictions on the marketing of Medicare-
related plans. In addition, the laws and regulations applicable to the marketing and sale of Medicare-related plans are
ambiguous, complex and, particularly with respect to regulations and guidance issued by CMS for Medicare Advantage
and Medicare Part D prescription drug plans, change frequently.
We are subject to federal law and the laws of many states that require financial institutions to protect the security and
confidentiality of certain sensitive client information, notify clients about their policies and practices relating to collection,
disclosure and security of certain sensitive client information. The Health Insurance Portability and Accountability Act
(“HIPAA”) and regulations adopted pursuant to HIPAA require us to maintain the privacy of protected health information
that we collect on behalf of insurance company partners and employer-sponsored health plans, implement measures to
safeguard such information and provide notification in the event of certain breaches in the privacy or confidentiality of
such information. The use and disclosure of certain data that we collect from consumers is also regulated by the Gramm-
Leach-Bliley Act (“GLBA”) and state statutes implementing GLBA, which generally require brokers to provide clients with
notice regarding how their non-public personal health and financial information is used and the opportunity to “opt out” of
certain disclosures before sharing such information with a third party, and which generally require safeguards for the
protection of personal information.
In addition, we currently operate in the U.K. and Bermuda and as we continue to expand internationally, the global nature
of our operations increases the complexity and cost of compliance with laws and regulations which adds to our cost of
doing business. Many of these laws and regulations may have differing or conflicting legal standards across jurisdictions,
increasing further the complexity and cost of compliance. See Item 1A. “Risk Factors—Risks Relating to Legal, Compliance
and Regulatory Matters—Non-compliance with or changes in laws, regulations or licensing requirements applicable to us
could restrict our ability to conduct our business and/or could adversely affect our business, financial condition and results
of operations."
In addition, our portfolio of companies includes several registered investment advisors (“RIAs”), each of which are federally
registered with the SEC. Our portfolio includes a limited purpose broker dealer (“LPBD”), registered with the SEC, and the
Financial Industry Regulatory Authority (“FINRA”). These areas of our financial services business are also subject to rules
formulated by the SEC under both the Investment Advisers Act of 1940 (the “40 Act”) and the Exchange Act, as well as by
state securities regulators under applicable state law. Through a combination of the SEC, FINRA, the 40 Act and the
Exchange Act, our RIAs and the LPBD are heavily regulated in the areas of duties to clients, disclosures, communications,
contracting, fee sharing, oversight and audit.
As a publicly-traded company, we are required to file certain reports, and are subject to various marketing restrictions,
among other requirements, in connection with the Exchange Act and SEC regulations.
Climate Change Risk Management
As an insurance distribution firm, our operations do not have a large environmental footprint or significant direct
greenhouse gas emissions. However, we are committed to thoughtful stewardship of the environment and our resources
while managing the impact on our business.
Through our strategic planning process and risk management framework, we identify and track a number of ways in which
our industry, our clients, and our operations are being impacted by climate change issues today, or could be impacted by
climate change issues in the medium-to-long-term. We take a number of actions to address relevant opportunities and
risks.
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Evolving Client Solutions: Climate-related issues can have an impact on our clients in a number of ways, for which
we can offer relevant risk management guidance.
•
Promoting Client Safety: As a commitment to our clients’ safety and well-being, we provide resources and
information to help prepare for and protect against severe weather events.
•
Ensuring Operational Continuity: We recognize that workplace emergencies might result from extreme weather
events, exacerbated by the impacts of climate change, including hurricanes, floods, tornados, and other natural or
environmental disasters. In order to manage workplace emergencies, we have developed and implemented a
company-wide Emergency Preparedness Plan, which describes the process by which we respond when a major
event threatens to harm our organization, our stakeholders, or the general public. Critical elements of the Plan
include assigned responsibilities, relevant operating procedures, crisis communication guidelines, and evacuation
and recovery procedures.
Our Corporate Structure
Baldwin is a holding company and its sole material asset is a controlling ownership interest in Baldwin Holdings. Baldwin
has engaged to date only in activities relating to Baldwin Holdings. All of our business is conducted through Baldwin
Holdings and its consolidated subsidiaries and affiliates, and the financial results of Baldwin Holdings and its consolidated
subsidiaries are included in the consolidated financial statements of Baldwin.
Baldwin Holdings is currently taxed as a partnership for federal income tax purposes and, as a result, its members,
including Baldwin, pay taxes with respect to their allocable shares of its net taxable income. We expect that redemptions
and exchanges of LLC Units will result in increases in the tax basis in our share of the tangible and intangible assets of
Baldwin Holdings that otherwise would not have been available. These increases in tax basis may reduce the amount of
tax that we would otherwise be required to pay in the future. The Tax Receivable Agreement requires Baldwin to pay 85%
of the amount of such cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually
realize to Baldwin Holdings’ applicable LLC Members that redeem and exchange LLC Units. Furthermore, payments under
the Tax Receivable Agreement will give rise to additional tax benefits and therefore additional payments under the Tax
Receivable Agreement itself.
Available Information
We make available free of charge on our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d)
of the Exchange Act, as soon as reasonably practicable after those reports are electronically filed with, or furnished to, the
SEC. To access these filings, go to our investor relations website at ir.baldwin.com, click on “Financials” and then click on
“SEC Filings.” We also make available other reports filed with or furnished to the SEC under the Exchange Act, including our
proxy statements and reports filed by officers and directors under Section 16(a) of the Exchange Act, as well as our Code
of Business Conduct and Ethics, our Insider Trading and Whistleblower Policies, and charters for our Audit Committee,
Compensation Committee, Nominating and Corporate Governance Committee, Technology and Cyber Risk Committee and
Executive Committee. To access these filings, go to our investor relations website, click on “Governance” and then click on
“Governance Overview.” In addition, our website may include disclosure relating to certain non-GAAP financial measures
that we may make public orally, telephonically, by webcast, by broadcast or by similar means from time to time. The SEC
also maintains an internet site that contains reports, proxy and information statements, and other information filed
electronically by us with the SEC, which are available at www.sec.gov.
We may use our website as a channel of distribution of material company information. Financial and other material
information regarding the Company is routinely posted on and accessible through our website. Any information on our or
the SEC's website or obtained through any such website is not part of this Annual Report on Form 10-K.
Our Investor Relations Department can be contacted at ir@baldwin.com by going to our investor relations website, clicking
on “Resources” and then “Contact IR,” or by telephone at (813) 259-8032.
ITEM 1A. RISK FACTORS
Summary Risk Factors
Some of the factors that could materially and adversely affect our business, financial condition, results of operations or
prospects, include the following:
•
We may not have sufficient cash flows from operating activities, cash on hand and available capital sources to
service any indebtedness, pay contingent earnout liabilities, or finance other working capital needs, which could
force us to sell assets, cease operations or take other detrimental actions for our business.
•
We have debt outstanding that could adversely affect our financial flexibility and subjects us to restrictions and
limitations that could significantly impact our ability to effectively operate our business.
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•
We may incur significant additional indebtedness, which may affect our ability to satisfy our obligations under the
2024 Credit Agreement and indenture governing our Senior Secured Notes.
•
Downgrades in our credit ratings could increase future debt financing costs and limit the future availability of debt
financing.
•
Macroeconomic conditions, political events, other market conditions in the U.S. and around the world and a
decline in economic activity could have a material adverse effect on our financial condition and results of
operations.
•
Volatility or declines in premiums or other adverse trends in the insurance industry may seriously undermine our
profitability.
•
Because the commissions and fees we earn on the sale of certain insurance products is based on premiums and
commission rates set by our insurance company partners, any decreases in these premiums or commission rates,
or actions by our insurance company partners seeking repayment of commissions, could result in commissions
and fees decreases or expenses to us.
•
Quarterly and annual variations in our commissions that result from the timing of policy renewals and the net
effect of new and lost business production may have unexpected effects on our results of operations.
•
Conditions impacting our insurance company partners or other parties with whom we do business may impact
us.
•
If we are unable to apply technology effectively in driving value for our clients through technology-based solutions
or gain internal efficiencies through the application of technology and related tools, our results of operations,
client relationships, growth and compliance programs could be adversely affected.
•
Competition in our industry is intense and, if we are unable to compete effectively, we may lose clients and our
business, financial condition and results of operations may be negatively affected.
•
Our inability to retain or hire qualified colleagues, as well as the loss of any of our executive officers or senior
leaders, could negatively impact our reputation and/or ability to retain existing business and generate new
business.
•
The occurrence of natural or man-made disasters, health epidemics and pandemics, and associated
governmental responses, could result in declines in business and increases in claims that could adversely affect
our business, financial condition and results of operations.
•
Our inability to successfully recover should we experience a disaster or other business continuity problem could
cause material financial loss, loss of human capital, regulatory actions, reputational harm or legal liability.
•
Our ownership of one or more protected cells in certain captive insurance companies (and/or other ownership or
participation in similar risk-bearing structures or facilities) will subject us to limited underwriting risk through such
ownership and/or participation and may also subject us to limited claims expenses.
•
If our ability to enroll individuals during enrollment periods is impeded, our business, results of operations and
financial condition could be harmed.
•
Partnerships have been, and may in the future continue to be, important to our growth. We may not be able to
successfully identify and acquire partners or integrate partners into our company, and we may become subject to
certain liabilities assumed or incurred in connection with our partnerships that could harm our business, results
of operations and financial condition.
•
An impairment of goodwill could have a material adverse effect on our financial condition and results of
operations.
•
In connection with the implementation of our corporate strategies, we face risks associated with the entry into
new lines of business and the growth and development of these businesses.
•
Our business had historically been highly concentrated in the Southeastern United States. While we still maintain
a concentration in the Southeastern United States, our rapid growth has resulted in our having several regional
concentrations of our business, such that adverse economic conditions, natural disasters, loss trends or
regulatory changes in one of these regions could adversely affect our financial condition.
•
We derive a significant portion of our commissions and fees from a limited number of our insurance company
partners, the loss of which could result in additional expense and loss of market share.
•
Our business may be harmed if we lose our relationships with insurance and reinsurance company partners, fail
to maintain good relationships with insurance and reinsurance company partners, become dependent upon a
limited number of insurance and reinsurance company partners or fail to develop new insurance and reinsurance
company partner relationships.
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•
Our business, and therefore our results of operations and financial condition, may be adversely affected by
conditions that result in reduced insurer and/or reinsurer capacity.
•
We rely on third parties to perform key functions of our business operations, enabling our provision of services to
our clients. These third parties may act in ways that could harm our business.
•
We rely on a single vendor or a limited number of vendors to provide certain key products or services to us, and
the inability of these key vendors to meet our needs could have a material adverse effect on our business.
•
We have experienced significant growth in recent periods, and our recent growth rates may not be indicative of
our future growth. As our costs increase, we may not be able to generate sufficient revenue to achieve and, if
achieved, maintain profitability.
•
Certain of our results of operations and financial metrics may be difficult to predict as a result of seasonality.
•
E&O claims against us, and other incidents, claims, risks, exposures and/or liabilities that require us to make
claims against our insurance policies, may negatively affect our business, financial condition and results of
operations.
•
Non-compliance with or changes in laws, regulations or licensing requirements applicable to us could restrict our
ability to conduct our business and/or could adversely affect our business, financial condition and results of
operations.
•
Proposed tort reform legislation, if enacted, could decrease demand for casualty insurance, thereby reducing our
commissions revenues.
•
Our business depends on information processing systems. Data breaches or other security incidents with respect
to our or our vendors’ information processing systems may hurt our business, financial condition and results of
operations.
•
We are a holding company with our principal asset being our 58% ownership interest in Baldwin Holdings, and
our Pre-IPO LLC Members, whose interest in our business may be different from yours, have approval rights over
certain transactions and actions taken by us or Baldwin Holdings.
•
In certain circumstances, Baldwin Holdings will be required to make distributions to us and the other holders of
LLC Units, and the distributions that Baldwin Holdings will be required to make may be substantial.
•
We will be required to pay Baldwin Holdings’ LLC Members and any other persons that become parties to the Tax
Receivable Agreement for certain tax benefits we may receive, and the amounts we may pay could be significant.
Risks Relating to our Business Operations and Industry
We may not have sufficient cash flows from operating activities, cash on hand and available capital sources to service
any indebtedness, pay contingent earnout liabilities, or finance other working capital needs, which could force us to sell
assets, cease operations or take other detrimental actions for our business.
As of December 31, 2024, our cash and cash equivalents were $148.1 million and we had $588.0 million of available
borrowing capacity on the Revolving Facility under the 2024 Credit Agreement. We will continue to expend substantial cash
resources for the foreseeable future for servicing our debt obligations and future earnout payment liabilities. Following
the successful refinancing of our Term Loan B on January 10, 2025, borrowings under our 2024 Credit Agreement include
$935.8 million under the Term Loan B bearing interest of 7.30%, maturing May 2031. There were no outstanding
borrowings on the Revolving Facility, which has an expiration date of May 2029, however we had unused letters of credit
issued under the Revolving Facility of $12.0 million. On May 24, 2024, we issued $600.0 million in aggregate principal
amount of the 7.125% Senior Secured Notes due May 2031. In connection with certain prior partnerships and acquisitions
of select books of business, we are required to pay contingent earnouts. Based on estimates of the partners’ future
performance using financial projections for the earnout period, the aggregate estimated contingent earnout liabilities
included on our consolidated balance sheet at December 31, 2024 was $145.6 million, of which $4.7 million must be
settled in cash and the remaining $140.8 million can be settled in cash or stock at our option. The undiscounted estimated
contingent earnout obligation at December 31, 2024 was $185.2 million, of which $5.0 million must be settled in cash and
the remaining $180.2 million can be settled in cash or stock at our option. The maximum estimated exposure to the
contingent earnout liabilities was $268.8 million at December 31, 2024. There is no assurance that we will have sufficient
cash flows from operating activities, cash on hand and available capital sources to service any indebtedness or pay
contingent earnout liabilities when due, or finance other working capital needs, and failure to do so may result in a
material adverse effect on our business, operations, and financial condition. Refer to Item 7. Management’s Discussion
and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Contractual Obligations
and Commitments for further discussion of our debt obligations and contingent earnout liabilities.
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If our cash flows and capital resources are at any time insufficient to fund our obligations, we may be forced to reduce or
delay investments and capital expenditures, or to sell assets, seek additional capital, restructure or refinance our
indebtedness, or reduce or cease operations. There can be no assurance that additional capital or debt financing will be
available to us at any time. Even if additional capital is available, we may not be able to obtain debt or equity financing on
terms favorable to us. In the absence of such operating results and resources, we could face substantial liquidity problems
and might be required to reduce or curtail our operations.
We have debt outstanding that could adversely affect our financial flexibility and subjects us to restrictions and
limitations that could significantly impact our ability to effectively operate our business.
As of December 31, 2024, we had total consolidated debt outstanding of approximately $1.44 billion, collateralized by
substantially all of Baldwin Holdings' assets, including a pledge of all equity securities Baldwin Holdings holds in each of its
subsidiaries. During the year ended December 31, 2024, we had debt servicing costs of $583.5 million, inclusive of $453.8
million in principal repayments and $111.4 million of interest payments.
The level of debt we have outstanding during any period could adversely affect our financial flexibility. We also bear risk at
the time debt matures. Our ability to make interest and principal payments, to refinance our debt obligations and to fund
our planned capital expenditures will depend on our ability to generate cash from operations. Our ability to generate cash
from operations is, to a certain extent, subject to general economic, financial, competitive, legislative, regulatory and other
factors that are beyond our control, such as a high interest rate environment. The need to service our indebtedness will
also reduce our ability to use cash for other purposes, including earnouts, working capital, dividends to stockholders,
acquisitions, capital expenditures, share repurchases and general corporate purposes. If we cannot service our
indebtedness, we may have to take actions such as selling assets, raising additional equity or reducing or delaying capital
expenditures, strategic acquisitions and investments, any of which could impede the implementation of our business
strategy or prevent us from entering into transactions that would otherwise benefit our business. Additionally, we may not
be able to effect such actions, if necessary, on favorable terms, or at all. We may not be able to refinance any of our
indebtedness on favorable terms, or at all.
The 2024 Credit Agreement and indenture governing the Senior Secured Notes contain covenants that, among other
things, restrict our ability to make certain restricted payments, incur additional debt, engage in certain asset sales,
mergers, acquisitions or similar transactions, create liens on assets, engage in certain transactions with affiliates, change
our business or make certain investments and require us to comply with certain financial covenants. The restrictions in the
2024 Credit Agreement and indenture governing the Senior Secured Notes may prevent us from taking actions that we
believe would be in the best interest of our business and our stockholders and may make it difficult for us to execute our
business strategy successfully or effectively compete with companies that are not similarly restricted. We may also incur
future debt obligations that might subject us to additional or more restrictive covenants that could affect our financial and
operational flexibility, including our ability to pay dividends. We cannot make any assurances that we will be able to
refinance our debt or obtain additional financing on terms acceptable to us, or at all. A failure to comply with the
restrictions under the 2024 Credit Agreement and/or indenture governing the Senior Secured Notes could result in a
default under the financing obligations or could require us to obtain waivers from our lenders for failure to comply with
these restrictions. The occurrence of a default that remains uncured or the inability to secure a necessary consent or
waiver could cause our obligations with respect to our debt to be accelerated and have a material adverse effect on our
business, financial condition and results of operations.
We may incur significant additional indebtedness, which may affect our ability to satisfy our obligations under the 2024
Credit Agreement and indenture governing our Senior Secured Notes.
Under the terms of the 2024 Credit Agreement and indenture governing the Senior Secured Notes, we may be able to
incur significant additional indebtedness, including secured indebtedness, in the future. This could require us to dedicate a
substantial portion of our cash flow from operations to payments on our indebtedness, reduce the availability of our cash
flow to fund working capital and capital expenditures and execute on our partnership strategy, expose us to the risk of
increased interest rates and increase our vulnerability to adverse economic or industry conditions. If new indebtedness is
added to our current indebtedness levels, the related risks that we face could be increased, and we may not be able to
meet all of our debt obligations. Furthermore, the terms of any future indebtedness we may incur could include more
restrictive covenants, which could affect our financial and operational flexibility, including our ability to pay dividends.
Downgrades in our credit ratings could increase future debt financing costs and limit the future availability of debt
financing.
The major rating agencies routinely evaluate our credit profile and assign credit ratings to us. If we need to raise capital in
the future (for example, in order to maintain adequate liquidity, fund maturing debt obligations or finance acquisitions or
other initiatives), credit rating downgrades would increase our financing costs, and could limit our access to financing
sources. We may also face the risk of a credit rating downgrade if we do not retire or refinance the debt to levels
acceptable to the credit rating agencies in a timely manner.
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Macroeconomic conditions, political events, other market conditions in the U.S. and around the world and a decline in
economic activity could have a material adverse effect on our financial condition and results of operations.
Macroeconomic conditions, political events and other market conditions in the U.S. and around the world, including the
recent resurgence of inflation and interest rate increases, and the risk that the U.S. economy will decelerate into a
recession, affect the financial services industry. These conditions may reduce demand for our services or depress pricing
for those services, which could have a material adverse effect on our costs and results of operations. Changes in
macroeconomic and political conditions, such as the impact from rising inflation and interest rates could also shift
demand to services for which we do not have a competitive advantage, and this could negatively affect the amount of
business that we are able to obtain. Any changes in U.S. trade policy could trigger retaliatory actions by affected countries,
resulting in “trade wars,” which could affect volume of economic activity in the U.S., including demand for our services.
For example, the demand for insurance policies may be depressed by higher levels of inflation. In addition, a significant
portion of our operating expenses goes to employee compensation and benefits, which, in addition to other areas of our
operating expenses, are sensitive to inflation. To maintain our ability to successfully compete for the best talent, rising
inflation rates may require us to provide compensation increases beyond historical increases, which may significantly
increase our compensation costs. Consequently, inflation is expected to increase our operating expenses (both
compensation and non-compensation related) over time and may adversely impact our results of operating cash flow.
Moreover, we have various agreements to lease office space located in 24 states throughout the U.S. and part of such
leases contain effective annual rent escalations either fixed or indexed based on a consumer price index or other index.
During higher inflationary periods, our rent expenses may increase significantly, which may adversely affect to our
business, financial condition, results of operations, and cash flows.
Furthermore, during inflationary periods, interest rates have historically increased, which would have a direct effect on the
interest expense in case we decide to refinance our existing long-term borrowings, including the 2024 Credit Agreement,
or incur in any additional indebtedness.
In addition to macroeconomic conditions, political events and other market conditions, other factors such as business
commissions and fees, microeconomic conditions, and the volatility and strength of the capital markets, can affect our
business and economic environment. The demand for insurance generally rises as the overall level of economic activity
increases and generally falls as such activity decreases, affecting both the commissions and fees generated by our IAS, MIS
and UCTS operating groups. Downward fluctuations in the year-over-year insurance premiums charged by our insurance
company partners to protect against the same risk, referred to in the industry as softening of the insurance market, could
adversely affect our business as a significant portion of the earnings are determined as a percentage of premium charged
to our clients. Insolvencies and consolidations associated with an economic downturn could adversely affect our
brokerage business through the loss of clients by hampering our ability to place insurance business. Also, some of our
clients may experience liquidity problems or other financial difficulties in the event of a prolonged deterioration in the
economy, or any segment or sub-segment of the economy, which could have an adverse effect on our collectability of
receivables. Errors and omissions claims against us, which we refer to as E&O claims, may increase in economic
downturns, adversely affecting our brokerage business. In addition, other incidents, claims, risks, exposures and/or
liabilities that require us to make claims against our own policies of insurance may have a similar effect. Also, the volatility
or decline of economic or other market conditions could result in the increased surrender of insurance products or cause
individuals to forgo insurance, thereby impacting our contingent commissions, which are primarily driven by our insurance
company partners’ growth and profitability metrics. A decline in economic activity could have a material adverse effect on
our business, financial condition and results of operations.
Volatility or declines in premiums or other adverse trends in the insurance industry may seriously undermine our
profitability.
We derive most of our commissions and fees from our brokerage and related services. We do not determine the insurance
premiums on which our commissions are generally based. Moreover, insurance premiums are cyclical in nature and may
vary widely based on market conditions. Because of market cycles for insurance product pricing, which we cannot predict
or control, our brokerage commissions and fees and profitability can be volatile or remain depressed for significant
periods of time. In addition, there have been and may continue to be—including as a result of substantial increases in
insurance premiums— various trends in the insurance industry toward alternative insurance markets, including, among
other things, greater levels of self-insurance, captives, rent-a-captives, risk retention groups and non-insurance capital
markets-based solutions to traditional insurance and reinsurance needs. Our ability to generate premium-based
commission revenue may also be challenged by the growing desire of some clients to compensate brokers based upon flat
fees rather than a percentage of premium. This could negatively impact us because fees are generally not indexed for
inflation and might not increase with premiums as commissions do or with the level of service provided.
19
As traditional risk-bearing insurance companies continue to outsource the production of premium commissions and fees
to non-affiliated brokers or agents such as us, those insurance companies may seek to further minimize their expenses by
reducing the commission rates payable to insurance brokers or agents. The reduction of these commission rates, along
with general volatility or declines in premiums, may significantly affect our profitability. Because we do not determine the
timing or extent of premium pricing changes, it is difficult to precisely forecast our commission and contingent
commissions and fees, including whether they will significantly decline. As a result, we may have to adjust our budgets for
future acquisitions, capital expenditures, dividend payments, loan repayments and other expenditures to account for
unexpected changes in commissions and fees, and any decreases in premium rates may adversely affect our business,
financial condition and results of operations.
Because the commissions and fees we earn on the sale of certain insurance products is based on premiums and
commission rates set by our insurance company partners, any decreases in these premiums or commission rates, or
actions by our insurance company partners seeking repayment of commissions, could result in commissions and fees
decreases or expenses to us.
We derive commissions and fees from the sale of insurance products that are paid by our insurance company partners
from whom our clients purchase insurance. Because payments for the sale of insurance products are processed internally
by our insurance company partners, we may not receive a payment that is otherwise expected in any particular period
until after the end of that period, which can adversely affect our ability to budget for significant future expenditures.
Additionally, our insurance company partners or their affiliates may, under certain circumstances, seek the chargeback or
repayment of commissions as a result of policy lapse, surrender, cancellation, rescission, default or upon other specified
circumstances. As a result of the chargeback or repayment of commissions, we may incur an expense in a particular
period related to commissions and fees previously recognized in a prior period and reflected in our financial statements.
Such an expense could have a material adverse effect on our financial condition and results of operations, particularly if
the expense is greater than the amount of related commissions and fees retained by us.
The commission rates are set by our insurance company partners and are based on the premiums that the insurance
company partners charge. The potential for changes in premium rates is significant, due to pricing cyclicality in the
insurance market. In addition, the insurance industry has been characterized by periods of intense price competition due
to excessive underwriting capacity and periods of favorable premium levels due to shortages of capacity. Capacity could
also be reduced by our insurance company partners’ failing or withdrawing from writing certain coverages and/or
geographic areas that we offer our clients. Commission rates and premiums can change based on prevailing legislative,
economic and competitive factors that affect our insurance company partners. These factors, which are not within our
control, include the capacity of our insurance company partners to place new business, underwriting and non-
underwriting profits of our insurance company partners, consumer demand for insurance products, the availability of
comparable products from other insurance companies at a lower cost and the availability of alternative insurance
products, such as government benefits and self-insurance products, to consumers. We cannot predict the timing or extent
of future changes in commission rates or premiums or the effect any of these changes will have on our business, financial
condition and results of operations.
Quarterly and annual variations in our commissions that result from the timing of policy renewals and the net effect of
new and lost business production may have unexpected effects on our results of operations.
Our commission income (including profit-sharing contingent commissions and override commissions) can vary quarterly
or annually due to the timing of policy renewals and the net effect of new and lost business production. We do not control
the factors that cause these variations. Specifically, clients’ demand for insurance products can influence the timing of
renewals, new business and lost business (which includes policies that are not renewed and cancellations). In addition, we
rely on our insurance company partners for the payment of certain commissions. Quarterly and annual fluctuations in
commissions and fees based on increases and decreases associated with the timing of new business, policy renewals and
payments from our insurance company partners may adversely affect our financial condition, results of operations and
cash flows.
20
Profit-sharing contingent commissions are special revenue-sharing override commissions paid by our insurance company
partners based on the attainment of certain metrics such as the profitability, volume or growth of the business placed with
such companies generally during the prior year. These are not guaranteed payments and our insurance company partners
may change the calculations or potentially elect to stop paying them at all on an annual basis. Over the last two years
contingent commissions generally have been in the range of 7.0% to 9.0% of the year’s total core commissions and fees.
Increases in loss ratios experienced by our insurance company partners will result in a decreased profit to them and may
result in decreases in payments of contingent or profit-sharing commissions to us. Due to, among other things, potentially
poor macroeconomic conditions, the inherent uncertainty of loss in our clients’ industries and changes in underwriting
criteria (including profitability, volume or growth thresholds), due in part to the high loss ratios experienced by our
insurance company partners, we cannot predict the payment of these profit-sharing contingent commissions. Further, we
have no control over the ability of our insurance company partners to estimate loss reserves, which affects our ability to
make profit-sharing calculations. Override commissions are paid by our insurance company partners based on the
attainment of certain metrics such as the profitability, volume or growth of the business that we place with them and are
generally paid over the course of the year or in the beginning of the following year. Because profit-sharing contingent
commissions and override commissions materially affect our commissions and fees, any decrease in their payment to us
could adversely affect our results of operations, profitability and our financial condition.
See “—Our business had historically been highly concentrated in the Southeastern United States. While we still maintain a
concentration in the Southeastern United States, our rapid growth has resulted in our having several regional
concentrations of our business, such that adverse economic conditions, natural disasters, loss trends or regulatory
changes in one of these regions could adversely affect our financial condition.”
Conditions impacting our insurance company partners or other parties with whom we do business may impact us.
We have a significant amount of accounts receivable from our insurance company partners with whom we place
insurance. If those insurance company partners were to experience liquidity problems or other financial difficulties, we
could encounter delays or defaults in payments owed to us, which could have a significant adverse impact on our financial
condition and results of operations. The potential for one of our insurance company partners to cease writing insurance
we offer our clients could negatively impact overall capacity in the industry, which in turn could have the effect of reduced
placement of certain lines and types of insurance and reduced commissions and fees and profitability for us. Questions
about one of our insurance company partners’ perceived stability or financial strength may contribute to such insurance
company partners’ strategic decisions to focus on certain lines of insurance to the detriment of others. The failure of an
insurance company partner with whom we place insurance could result in E&O claims against us by our clients, and the
failure of our insurance company partners could make the E&O insurance we rely upon cost prohibitive or unavailable,
which could have a significant adverse impact on our financial condition and results of operations. In addition, if any of our
insurance company partners merge or if one of our large insurance company partners fails or withdraws from certain
geographic areas or from offering certain lines of insurance, overall risk-taking capital capacity could be negatively
affected, which could reduce our ability to place certain lines of insurance and, as a result, reduce our commissions and
fees and profitability. Such failures or insurance withdrawals on the part of our insurance company partners could occur
for any number of reasons, including large unexpected payouts related to climate events or other emerging risk areas.
If we are unable to apply technology effectively in driving value for our clients through technology-based solutions or
gain internal efficiencies through the application of technology and related tools, our results of operations, client
relationships, growth and compliance programs could be adversely affected.
Our future success depends, in part, on our ability to anticipate and respond effectively to the threat of, and the
opportunity presented by, digital disruption and other technology change. These may include new applications or
insurance-related services based on artificial intelligence, machine learning, robotics, blockchain or new approaches to
data mining. We may be exposed to competitive risks related to the adoption and application of new technologies by
established market participants (for example, through disintermediation) or new entrants such as technology companies,
Insurtech start-up companies and others. We must also develop and implement technology solutions and technical
expertise among our employees that anticipate and keep pace with rapid and continuing changes in technology, industry
standards, client preferences and control standards. We may not be successful in anticipating or responding to these
developments on a timely and cost-effective basis, and our ideas may not be accepted in the marketplace. Additionally, the
effort to gain technological expertise and develop new technologies in our business may require us to incur significant
expenses. Our technological development projects may also not deliver the benefits we expect once they are completed or
may be replaced or become obsolete more quickly than expected, which could result in the accelerated recognition of
expenses. If we cannot develop or implement new technologies as quickly as our competitors, or if our competitors
develop more cost-effective technologies or product offerings, we could experience a material adverse effect on our
results of operations, client relationships, growth and compliance programs. Our investments in new products and
services may not generate the expected returns, which could hinder our ability to generate organic growth in the future.
21
Competition in our industry is intense and, if we are unable to compete effectively, we may lose clients and our
business, financial condition and results of operations may be negatively affected.
The business of providing insurance products and services is highly competitive and we expect competition to intensify.
We compete for clients on the basis of reputation, client service, program and product offerings and our ability to tailor
products and services to meet the specific needs of a client.
We actively compete with numerous integrated financial services organizations as well as insurance company partners and
brokers, producer groups, individual insurance agents, investment management firms, independent financial planners and
broker-dealers. Competition may reduce the fees that we can obtain for services provided, which would have an adverse
effect on commissions and fees and margins. Many of our competitors have greater financial and marketing resources
than we do and may be able to offer products and services that we do not currently offer and may not offer in the future.
To the extent that banks, securities firms, insurance companies’ affiliates and the financial services industry may
experience further consolidation, we may experience increased competition from insurance companies and the financial
services industry, as a growing number of larger financial institutions increasingly, and aggressively, offer a wider variety of
financial services, including insurance intermediary services. In addition, a number of insurance companies are engaged in
the direct sale of insurance, primarily to individuals, and do not pay commissions to brokers or other market
intermediaries. Furthermore, we compete with various other companies that provide risk-related services or alternatives
to traditional insurance services, including Insurtech start-up companies, which are focused on using technology and
innovation, including artificial intelligence (AI), digital platforms, data analytics, robotics and blockchain, to simplify and
improve the client experience, increase efficiencies, alter business models and effect other potentially disruptive changes
in the industries in which we operate. In addition, in recent years, private equity sponsors have invested tens of billions of
dollars into the insurance sector, transforming existing players and creating new ones to compete with large brokers.
These new competitors, alliances among competitors or mergers of competitors could emerge and gain significant market
share, and some of our competitors may have or may develop a lower cost structure, adopt more aggressive pricing
policies or provide services that gain greater market acceptance than the services that we offer or develop. With respect to
our sale of Medicare-related insurance, we also compete with government-run health insurance exchanges. The federal
government operates a website where Medicare beneficiaries can purchase Medicare Advantage and Medicare Part D
prescription drug plans or be referred to carriers to purchase Medicare Supplement plans. We also compete with the
original Medicare program. The Affordable Care Act exchanges have websites where individuals and small businesses can
purchase health insurance, and they also have offline customer support and enrollment capabilities.
Competitors may be able to respond to the need for technological changes and innovate faster, or price their services
more aggressively. They may also compete for skilled professionals, finance acquisitions, fund internal growth and
compete for market share more effectively than we do. To respond to increased competition and pricing pressure, we may
have to lower the cost of our services or decrease the level of services provided to clients, which could have an adverse
effect on our business, financial condition and results of operations.
Some of our competitors may be able to sustain the costs of litigation more effectively than we can because they have
substantially greater resources. In the event that any of such competitors initiates litigation against us, such litigation, even
if without merit, could be time-consuming and costly to defend and may divert management’s attention and resources
away from our business and adversely affect our business, financial condition and results of operations.
Similarly, any increase in competition due to new legislative or industry developments could adversely affect us. These
developments include:
•
increased capital-raising by insurance companies, which could result in new capital in the industry, which in turn
may lead to lower insurance premiums and commissions;
•
insurance companies selling insurance directly to the insured without the involvement of a broker or other
intermediary;
•
changes in our business compensation model as a result of legal, policy and/or regulatory developments;
•
federal and state governments establishing programs to provide property insurance in catastrophe-prone areas
or other alternative market types of coverage that compete with, or completely replace, insurance products
offered by insurance companies;
•
climate change regulation in the U.S. and around the world moving us toward a low-carbon economy, which could
create new competitive pressures around innovative insurance solutions; and
•
increased competition from new market participants such as banks, accounting firms, consulting firms and
Internet or other technology firms offering risk management, insurance brokerage services or new distribution
channels for insurance, such as payroll firms.
New competition as a result of these or other competitive or industry developments could cause the demand for our
products and services to decrease, which could in turn adversely affect our business, financial condition and results of
operations.
22
Our inability to retain or hire qualified colleagues, as well as the loss of any of our executive officers or senior leaders,
could negatively impact our reputation and/or ability to retain existing business and generate new business.
Our success depends on our ability to attract and retain skilled and experienced personnel. There is significant
competition from within the insurance industry and from businesses outside the industry for exceptional employees,
especially in key positions. Our competitors may be able to offer a work environment with higher compensation or more
opportunities than we can. Any new personnel we hire may not be or become as productive as we expect, as we may face
challenges in adequately or appropriately integrating them into our workforce and culture. Our effort to retain and
develop personnel may also result in significant additional expenses, which could adversely affect our profitability. We can
make no assurances that qualified colleagues will continue to be employed or that we will be able to attract and retain
qualified personnel in the future. If we are not able to successfully attract, retain and motivate our colleagues, whether as
a result of an insufficient number of qualified applicants, difficulty in recruiting new colleagues, or inadequate resources to
train, integrate, and retain qualified colleagues, our business, financial condition, results of operations and reputation
could be materially and adversely affected.
In addition, we could be adversely affected if we fail to adequately plan for the succession of our senior leaders, including
our founders and key executives, or if one or more of them is the victim of any accident, injury, illness or other ailment. In
particular, our future success depends substantially on the continued service of our co-founder and Chairman, Lowry
Baldwin, and our Chief Executive Officer, Trevor Baldwin. The loss of our senior managers or other key personnel
(including the legacy management of certain joint ventures or acquired subsidiaries) in any circumstance, including any
limitation on the performance of their duties or short- or long-term absence as a result of any accident, injury, illness or
other ailment, or our inability to continue to identify, recruit and retain such personnel, could materially and adversely
affect our business, financial condition and results of operations.
The occurrence of natural or man-made disasters, health epidemics and pandemics and associated governmental
responses, could result in declines in business and increases in claims that could adversely affect our business, financial
condition and results of operations.
We are exposed to various risks arising out of natural disasters, including earthquakes, hurricanes, fires, floods, landslides,
tornadoes, typhoons, tsunamis, hailstorms, explosions, climate events or weather patterns and public health crises,
epidemics or pandemic health events, as well as man-made disasters, including acts of terrorism, military actions, cyber-
terrorism, explosions and biological, chemical or radiological events, and associated governmental responses. The
continued threat of terrorism and ongoing military actions may cause significant volatility in global financial markets, and a
natural or man-made disaster could trigger an economic downturn in the areas directly or indirectly affected by the
disaster. These consequences could, among other things, result in a decline in business and may also subject any
capitalized insurance facilities in which we choose to participate, to increased claims expenses from those areas. They
could also result in reduced underwriting capacity of our insurance and reinsurance company partners, making it more
difficult for our colleagues and contracted agents to place business. Disasters also could disrupt public and private
infrastructure, including communications and financial services, which could disrupt our ordinary business operations. Any
increases in loss ratios due to natural or man-made disasters could impact our contingent commissions, which are
primarily driven by both growth and profitability metrics.
A natural or man-made disaster also could disrupt the operations of our counterparties or result in increased prices for
the products and services they provide to us. Finally, a natural or man-made disaster could increase the incidence or
severity of E&O claims against us, or other incidents, claims, risks, exposures and/or liabilities that require us to make
claims against our insurance policies.
See “—Our business had historically been highly concentrated in the Southeastern United States. While we still maintain a
concentration in the Southeastern United States, our rapid growth has resulted in our having several regional
concentrations of our business, such that adverse economic conditions, natural disasters, loss trends or regulatory
changes in one of these regions could adversely affect our financial condition.”
23
Our inability to successfully recover should we experience a disaster or other business continuity problem could cause
material financial loss, loss of human capital, regulatory actions, reputational harm or legal liability.
Our operations are dependent upon our ability to protect our personnel, offices, and technology infrastructure against
damage from business continuity events that could have a significant disruptive effect on our operations. Should we
experience a local or regional disaster or other business continuity problem, such as an earthquake, hurricane, fire,
terrorist attack, pandemic, protest or riot, security breach, power loss, telecommunications failure or other natural or
man-made disaster, our continued success will depend, in part, on the availability of personnel, office facilities, and the
proper functioning of computer, telecommunication and other related systems and operations. In events like these, we
can experience near-term operational challenges in particular areas of our operations. We could potentially lose key
executives, personnel, client data or experience material adverse interruptions to our operations or delivery of services to
clients in a disaster recovery scenario. We may experience additional disruption due to system upgrades, outages, an
increase in remote work or other impacts as a result of health epidemics or pandemics. Our inability to successfully
recover should we experience a disaster or other business continuity problem, could materially interrupt our business
operations and cause material financial loss, loss of human capital, regulatory actions, reputational harm, damaged client
relationships, or legal liability. Our insurance coverage with respect to natural disasters is limited and is subject to
deductibles and coverage limits. Such coverage may not be adequate, or may not continue to be available at commercially
reasonable rates and terms.
Our ownership of one or more protected cells in certain captive insurance companies (and/or other ownership or
participation in similar risk-bearing structures or facilities) will subject us to limited underwriting risk through such
ownership and/or participation and may also subject us to limited claims expenses.
The Company currently owns, and may continue to own, from time to time, one or more protected cells in certain captive
insurance companies (and/or otherwise have an ownership interest in or participate in similar risk-bearing structures or
facilities) for the purpose of facilitating additional underwriting capacity for our clients and to participate in underwriting
results. While the Company’s underwriting risk through any such captive insurance company (and/or similar risk-bearing
structure or facility) would generally be limited (absent any regulatory requirement for the contribution of additional
capital or contractual obligation to fund any underwriting losses in excess of contributed capital), we may be subject to
claims expenses associated with any losses from these clients or programs, which could include losses from catastrophic
weather events. Our results of operations may be negatively impacted if any such captive insurance company (and/or
similar risk-bearing structure or facility) incurs claims expenses.
If our ability to enroll individuals during enrollment periods is impeded, our business, results of operations and financial
condition could be harmed.
It is difficult for the health insurance risk advisors we employ and our systems and processes to handle the increased
volume of health insurance transactions that occur in a short period of time during the healthcare reform annual open
enrollment period and the Medicare annual enrollment period. We hire additional colleagues on a temporary or seasonal
basis in a limited period of time to address the expected increase in the volume of health insurance transactions during
the Medicare annual enrollment period. We must ensure that our health insurance risk advisors and those of outsourced
call centers are timely licensed, trained and certified and have the appropriate authority to sell health insurance in a
number of states and for a number of different health insurance companies. We depend on our own colleagues, state
departments of insurance, government exchanges and insurance company partners for licensing, certification and
appointment. If our ability to market and sell Medicare-related health insurance and individual and family health insurance
is constrained during an enrollment period for any reason, such as technology failures, reduced allocation of resources,
any inability to timely employ, license, train, certify and retain our colleagues and our contractors and their health
insurance risk advisors to sell health insurance, interruptions in the operation of our website or systems or issues with
government-run health insurance exchanges, we could acquire fewer members, suffer a reduction in our membership and
our business, results of operations and financial condition could be harmed.
Partnerships have been, and may in the future continue to be, important to our growth. We may not be able to
successfully identify and acquire partners or integrate partners into our company, and we may become subject to
certain liabilities assumed or incurred in connection with our partnerships that could harm our business, results of
operations and financial condition.
Strategic acquisitions to complement and further expand our business, which we refer to as partnerships, have been an
important part of our competitive strategy. The acquisition landscape is competitive and accordingly we do not expect that
partnerships will be as important to our growth in 2025, although we will remain active in pursuing potential transactions.
Our ability to identify and complete acquisitions, or if we are inefficient or unsuccessful at integrating any partner into our
operations, may impact our ability to achieve our planned rates of growth or improve our market share, profitability or
competitive position in specific markets or services. The process of integrating a partner has created, and will continue to
create, operating difficulties. The risks we face include:
•
diversion of management time and focus from operating our core business to acquisition integration challenges;
24
•
excessive costs of deploying our business support and financial management tools in acquired companies;
•
delays in the successful integration of the partner into our operations;
•
failure to successfully integrate the partner into our operations, including cultural challenges associated with
integrating and retaining colleagues;
•
failure to achieve anticipated efficiencies or benefits, including through the loss of key clients or personnel of the
partner;
•
failure to realize our strategic objectives for the partner or further develop the partner; and
•
the consequences of the conduct of our acquired companies prior to their acquisition by us, including the
occurrence of data breaches or other cybersecurity attacks during the integration of information systems, as well
as increased costs associated with implementing state and regulatory compliance procedures, including data
privacy and cybersecurity protections.
Furthermore, when regulatory approval of our proposed partnerships is required, our ability to complete such
partnerships may be limited by an ongoing regulatory review or other issues with the relevant regulator.
There may be liabilities that we fail to discover while conducting due diligence, that we inadequately assess or that are not
properly disclosed to us. In particular, to the extent that any partner (i) failed to comply with or otherwise violated
applicable laws or regulations, (ii) failed to fulfill contractual obligations to clients, insurance company partners or other
third parties such as vendors, service providers or contracted agents, or (iii) incurred material liabilities or obligations to
clients that are not identified during the diligence process, we, as the successor owner, may be financially responsible for
these violations, failures and liabilities and may suffer financial or reputational harm or otherwise be adversely affected. In
addition, as part of a partnership, we may assume responsibilities and obligations of the partner pursuant to the terms
and conditions of agreements entered by the acquired entity that are not consistent with the terms and conditions that we
typically accept and require. We also may be subject to litigation or other claims in connection with a partner, including
claims from colleagues, clients, stockholders or other third parties. Any material liabilities we incur that are associated with
our partnerships could harm our business, results of operations and financial condition.
Our partnership strategy is also affected by our ability to secure additional debt or equity financing in the future to fund
acquisitions. We may not be able to obtain such additional financing or, if available, it may not be in amounts and on terms
acceptable to us. We cannot predict or guarantee that we will successfully identify suitable acquisition candidates,
consummate any partnership or integrate any partner. Any failure to do so could have an adverse impact on our business,
results of operations and financial condition.
An impairment of goodwill could have a material adverse effect on our financial condition and results of operations.
When we acquire partners, we record goodwill and other intangible assets. As of December 31, 2024, goodwill represented
40% of our total assets. Goodwill is not amortized and is subject to assessment for impairment at least annually. The
identification and measurement of goodwill impairment involves the estimation of the fair value of our reporting units. We
compare the fair value of each reporting unit with its carrying amount to determine if there is potential impairment of
goodwill. Management reviews the carrying value attributed to each reporting unit at least annually to determine if the
facts and circumstances suggest that there is impairment.
We may in the future be required to take additional goodwill or other asset impairment charges. Any such non-cash
charges could have a material adverse effect on our financial condition and results of operations.
In connection with the implementation of our corporate strategies, we face risks associated with the entry into new
lines of business and the growth and development of these businesses.
From time to time, either through partnerships or internal development, we may enter new lines of business or offer new
products and services within existing lines of business. These new lines of business or new products and services may
present additional risks, particularly in instances where the markets are not fully developed. Such risks include the
investment of significant time and resources; the possibility that these efforts will not be successful; the possibility that the
marketplace does not accept our products or services, or that we are unable to retain clients that adopt our new products
or services; and the risk of additional liabilities associated with these efforts. Other risks include developing knowledge of
and experience in the new lines of business, integrating the partner into our systems and culture, recruiting professionals
and developing and capitalizing on new relationships with experienced market participants. External factors, such as
compliance with new or revised regulations, competitive alternatives and shifting market preferences may also impact the
successful implementation of a new line of business. Failure to manage these risks in the acquisition or development of
new businesses could materially and adversely affect our business, financial condition and results of operations. In
addition, if we dispose of or otherwise exit certain businesses, there can be no assurance that we will not incur certain
disposition-related charges, or that we will be able to reduce overhead related to the divested assets. Our investments in
new products and services may not generate the expected returns, which could hinder our ability to generate organic
growth in the future.
25
Our business had historically been highly concentrated in the Southeastern United States. While we still maintain a
concentration in the Southeastern United States, our rapid growth has resulted in our having several regional
concentrations of our business, such that adverse economic conditions, natural disasters, loss trends or regulatory
changes in one of these regions could adversely affect our financial condition.
A significant portion of our business remains concentrated in the Southeastern U.S., with several other regional
concentrations. The insurance business is primarily a state-regulated industry, and therefore state legislatures may enact
laws that adversely affect the insurance industry. Because our business is concentrated in several regions of the U.S., we
face greater exposure to unfavorable changes in regulatory conditions in those regions than insurance intermediaries
whose operations are more diversified through a greater number of states. In addition, the occurrence of adverse
economic conditions, natural or other disasters, loss trends or other circumstances specific to or otherwise significantly
impacting these states could adversely affect our financial condition, results of operations and cash flows. Increases in loss
ratios, combined ratios and related costs experienced by our insurance company partners will result in a decreased profit
to them and may result in decreases in payments of contingent or profit-sharing commissions to us. This trend may also
cause one or more of our insurance company partners to reduce or cease writing insurance we offer our clients, whether
in part, entirely or on a geographic basis, which in turn could reduce our ability to place certain lines of insurance and, as a
result, reduce our commissions and fees and profitability.
In addition, we are susceptible to losses and interruptions caused by hurricanes (particularly in Florida, where our
headquarters and numerous offices are located), earthquakes, tornadoes, power shortages, telecommunications failures,
water shortages, floods, fire, extreme weather conditions, geopolitical events, such as terrorist acts, and other natural or
man-made disasters. Hurricanes and wildfires in particular may have an outsized impact on the insurance industry. We
expect to continue to grow our footprint throughout the country and beyond, but our plans to execute on this geographic
diversification effort may not be successful.
We derive a significant portion of our commissions and fees from a limited number of our insurance company partners,
the loss of which could result in additional expense and loss of market share.
For the year ended December 31, 2024, two insurance company partners accounted for an aggregate of approximately
19% of our total core commissions and fees. Should either of these insurance company partners seek to terminate their
respective arrangements with us or in the case of material financial impairment of such insurance company partners, we
could be forced to move our business to other insurance company partners and additional expense and loss of market
share could possibly result.
Our business may be harmed if we lose our relationships with insurance and reinsurance company partners, fail to
maintain good relationships with insurance and reinsurance company partners, become dependent upon a limited
number of insurance and reinsurance company partners or fail to develop new insurance and reinsurance company
partner relationships.
Our business typically enters into contractual agency relationships with insurance and reinsurance company partners that
are sometimes unique to Baldwin, but nonexclusive and terminable on short notice by either party for any reason. In
many cases, insurance and reinsurance company partners also have the ability to amend the terms of our agreements
unilaterally, including commission rates on short notice. Our insurance and reinsurance company partners may be
unwilling to allow us to sell their existing or new insurance products or may amend our agreements with them, for a
variety of reasons, including for competitive or regulatory reasons or because of a reluctance to distribute their products
through our platform. Our insurance company partners may decide to rely on their own internal distribution channels,
choose to exclude us from their most profitable or popular products, or decide not to distribute insurance products in
individual markets in certain geographies or altogether. The termination or amendment of our relationship with an
insurance and reinsurance company partner could reduce the variety of insurance products we offer. We also could lose a
source of, or be paid reduced commissions for, future sales and could lose renewal commissions for past sales. Our
business could also be harmed if we fail to develop new insurance and reinsurance company partner relationships.
In the future, it may become necessary for us to offer insurance products from a reduced number of insurance and
reinsurance company partners or to derive a greater portion of our commissions and fees from a more concentrated
number of insurance and reinsurance company partners as our business and the insurance industry evolve. Should our
dependence on a smaller number of insurance and reinsurance company partners increase, whether as a result of the
termination of insurance and reinsurance company partner relationships, insurance and reinsurance company partner
consolidation or otherwise, we may become more vulnerable to adverse changes in our relationships with our insurance
and reinsurance company partners, particularly in states where we offer insurance products from a relatively small
number of insurance and reinsurance company partners or where a small number of insurance companies dominate the
market. The termination, amendment or consolidation of our relationship with our insurance and reinsurance company
partners could harm our business, financial condition and results of operations.
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Our business, and therefore our results of operations and financial condition, may be adversely affected by conditions
that result in reduced insurer and/or reinsurer capacity.
Our results of operations depend on the continued capacity of our insurance and reinsurance company partners to
underwrite risk and provide coverage, in turn which depends on those insurance and reinsurance company partners’
ability to procure reinsurance. Capacity could also be reduced by insurance and reinsurance company partners failing or
withdrawing from writing certain coverages that we offer to our clients. To the extent that reinsurance becomes less
widely available or significantly more expensive, we may not be able to procure the amount or types of coverage that our
clients desire, and the coverage we are able to procure for our clients may be more expensive or limited.
We rely on third parties to perform key functions of our business operations, enabling our provision of services to our
clients. These third parties may act in ways that could harm our business.
We rely on third parties, and in some cases subcontractors, to provide services, data, and information, such as technology,
information security, billing systems, funds transfers, data processing and administration and support functions, that are
critical to our business operations. These third parties include correspondents, agents and other brokerage and
intermediaries, insurance markets, data providers, plan trustees, payroll service providers, benefits administrators,
software and system vendors, health plan providers, investment managers and providers of human resources, among
others. As we do not fully control the actions of these third parties, we are subject to the risk that their decisions, actions
or inactions may adversely impact us and replacing these service providers could create significant delays and expenses.
Because we do not control our vendors and our ability to monitor their cybersecurity is limited, we cannot ensure the
cybersecurity measures they take will be sufficient to protect any information we share with them or to which they may
have access. Due to applicable laws and regulations or contractual obligations, we may be held responsible for security
breaches, cyberattacks or other similar incidents attributed to our vendors as they relate to the information we share with
them or to which we grant them access. A failure by third parties to comply with service level agreements or regulatory or
legal requirements in a high-quality and timely manner, particularly during periods of our peak demand for their services,
could result in economic and reputational harm to us. In addition, we face risks as we transition from in-house functions to
third-party support functions and providers, or vice versa, that there may be disruptions in service or other unintended
results that may adversely affect our business operations. These third parties face their own technology, operating,
business, and economic risks, and any significant failures by them, including the improper use or disclosure of our
confidential client, colleague, consumer, or Company information, could cause harm to our reputation. An interruption in
or the cessation of service by any service provider as a result of systems failures, data breaches or other cybersecurity
incidents, capacity constraints, financial difficulties, or for any other reason could disrupt our operations, impact our ability
to offer certain products and services, and result in contractual or regulatory fines or penalties, liability claims from clients,
or colleagues, damage to our reputation, and harm to our business.
We rely on a single vendor or a limited number of vendors to provide certain key products or services to us, and the
inability of these key vendors to meet our needs could have a material adverse effect on our business.
Historically, we have contracted with and rely on a single vendor or a limited number of vendors to provide certain key
products or services to us such as information technology support and billing systems. If these vendors are unable to
meet our needs because they fail to perform adequately, are no longer in business, are experiencing shortages or supply
chain issues or discontinue a certain product or service we need, our business, financial condition and results of
operations may be adversely affected. By way of example, certain payment processing vendors of ours have in the past
discontinued or threatened to discontinue, and may in the future discontinue or threaten to discontinue, certain payment
processing products upon which we rely in certain parts of our business, which if executed upon could disrupt our ability
to operate those certain parts of our business and/or could require us to make substantial additional investments to
remediate.
While alternative sources for these products and services exist, in the event we are forced to rely on them, we may not be
able to develop these alternative sources quickly and cost-effectively or at all, which could materially impair our ability to
operate our business. Furthermore, our vendors may request changes in pricing, payment terms or other contractual
obligations between the parties, which could require us to make substantial additional investments.
We have experienced significant growth in recent periods, and our recent growth rates may not be indicative of our
future growth. As our costs increase, we may not be able to generate sufficient revenue to achieve and, if achieved,
maintain profitability.
We have experienced significant revenue growth in recent periods. In future periods, we may not be able to sustain
revenue growth consistent with recent history, or at all. We believe our revenue growth depends on a number of factors,
including, but not limited to, our ability to:
•
attract new clients, successfully deploy and implement our products, obtain client renewals and provide our
clients with excellent client support;
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•
increase our network of insurance company partners and the profit-sharing, override and/or contingent
commissions that we earn from such insurance company partners;
•
adequately expand, train, integrate and retain our colleagues, including our executive officers and senior leaders,
and maintain or increase our sales force’s productivity;
•
improve our internal control over financial reporting and disclosure controls and procedures to ensure timely and
accurate reporting of our operational and financial results;
•
successfully introduce new products and enhance existing products;
•
successfully deploy information technology assets for use by our colleagues and interaction with our clients and
insurance company partners;
•
adapt to the ever-changing regulatory and legal landscape;
•
protect sensitive, personal and confidential information and data within Baldwin’s custody from third-party bad
actors;
•
successfully identify and acquire new partners;
•
successfully integrate partnerships into the Company in an operationally efficient manner;
•
service our existing indebtedness;
•
access the capital markets or otherwise obtain access to capital to satisfy future needs of the Company;
•
successfully introduce our products to new markets and geographies; and
•
successfully compete against larger companies and new market entrants.
We may not successfully accomplish any of these objectives and ongoing macroeconomic and geopolitical uncertainty may
impact our ability to successfully accomplish any of the above, and as a result, it is difficult for us to forecast our future
results of operations. Our historical growth rate should not be considered indicative of our future performance and may
decline in the future. In future periods, our revenue could grow more slowly than in recent periods or decline for any
number of reasons, including those outlined above. If our revenue or revenue growth rates decline, investors’ perceptions
of our business may be adversely affected and the market price of common stock could decline.
Certain of our results of operations and financial metrics may be difficult to predict as a result of seasonality.
We have presented, and may continue to present, certain non-GAAP financial measures, such as adjusted EBITDA and
adjusted EBITDA margin, in filings with the SEC and other public statements. Any failure to accurately report and present
our non-GAAP financial measures could cause us to fail to meet our reporting obligations and could cause investors to
lose confidence in our reported financial and other information, which would likely have a negative effect on the trading
price of our stock.
The insurance brokerage market is seasonal and our results of operations are somewhat affected by seasonal trends. Our
adjusted EBITDA and adjusted EBITDA margins are typically highest in the first quarter and lowest in the fourth quarter.
This variation is primarily due to fluctuations in our revenue, while overhead remains consistent throughout the year. Our
revenues are generally highest in the first quarter due to the impact of contingent commission payments received in the
first quarter from insurance company partners that we cannot readily estimate before receipt without the risk of
significant reversal and a higher degree of first quarter policy commencements and renewals in certain IAS and MIS lines
of business such as employee benefits, commercial and Medicare. In addition, a higher proportion of our first quarter
revenue is derived from our highest margin businesses.
Partnerships can significantly impact adjusted EBITDA and adjusted EBITDA margins in a given year and may increase the
amount of seasonality within the business, especially results attributable to partnerships that have not been fully
integrated into our business or owned by us for a full year.
Damage to our reputation could have a material adverse effect on our business.
Our reputation is one of our key assets. We advise our clients on and provide services related to a wide range of subjects
and our ability to attract and retain clients depends greatly on the external perceptions of our level of service,
trustworthiness, business practices, financial condition and other subjective qualities. If a client is not satisfied with our
services, it could cause us to incur additional costs and impair profitability or lose the client relationship altogether, which
may negatively impact other clients’ perception regarding us. Our success is also dependent on maintaining a good
reputation with existing and potential colleagues, investors, insurance company partners, vendors, regulators and the
communities in which we operate. Negative perceptions or publicity regarding these or other matters, including our
association with clients or business partners who themselves have a damaged reputation, or from actual or alleged
conduct by us or our colleagues, could damage our reputation. Any of these matters could have a material adverse effect
on our business, financial condition and results of operations.
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Increasing scrutiny and changing expectations from investors, clients and our colleagues with respect to our
environmental, social and governance (“ESG”) practices may impose additional costs on us or expose us to new or
additional risks.
There is increased focus, including from governmental organizations, investors, employees and clients, on ESG issues such
as environmental stewardship, climate change, diversity and inclusion, pay equity, racial justice, workplace conduct and
cybersecurity and data privacy. There can be no certainty that we will manage such issues successfully, or that we will
successfully meet society’s expectations as to our proper role. Negative public perception, adverse publicity or negative
comments in social media, including as a result of actions taken by companies we acquire before the acquisition, could
damage our reputation, or harm our relationships with investors, other stakeholders, regulators and the communities in
which we operate, if we do not, or are not perceived to, adequately address these issues. Any harm to our reputation
could impact colleague engagement and retention and the willingness of clients and insurance company partners to do
business with us.
A variety of organizations have developed ratings to measure the performance of companies on ESG topics, and the
results of these assessments are widely publicized. Investments in funds that specialize in companies that perform well in
such assessments are increasingly popular, and major institutional investors have publicly emphasized the importance of
such ESG measures to their investment decisions. Unfavorable ratings of Baldwin or our industry, as well as omission of
inclusion of our stock into ESG-oriented investment funds may lead to negative investor sentiment and the diversion of
investment to other companies or industries, which could have a negative impact on our stock price.
The provision of advisory services to clients with respect to captive insurance, and specifically, utilization of an 831(b)
election, is subject to numerous, complex and frequently changing laws, regulations and governmental interpretations
of the same, and non-compliance or changes in laws and regulations or governmental interpretations of the same, could
harm our business, results of operations and financial condition.
We have an advisory services business that assists certain clients with establishment of captive insurance companies, for
their own purposes, which leverage the benefits of Section 831(b) of the Internal Revenue Code of 1986, as amended, and
which are subject to audit and oversight from the Internal Revenue Service (“IRS”). The IRS has conducted investigations,
and may be conducting investigations, of certain peers of ours that also provide similar services, with respect to whether
or not such third parties are acting as a tax shelter promoter in connection with those operations. We have no reason to
believe that we have been or are currently a target of any such investigation. If the IRS were to disallow 831(b) elections,
modify its guidance around 831(b) elections, or otherwise investigate our business and conclude that we are a tax shelter
promoter, such actions, whether or not merited, could harm our business, results of operations and financial condition.
If we fail to manage future growth effectively, our business could be materially adversely affected.
We have experienced rapid growth. This growth has placed significant demands on management and our operational
infrastructure. As we continue to grow, we must effectively integrate, develop and motivate a large number of new
colleagues, while maintaining the beneficial aspects of our Company culture. If we do not manage the growth of our
business and operations effectively, the quality of our services and efficiency of our operations could suffer and we may
not be able to execute on our business plan, which could harm our brand, results of operations and overall business.
Our corporate culture has contributed to our success, and if we cannot maintain this culture, or if we experience a
change in management, management philosophy or business strategy, our business may be harmed.
We believe that a significant contributor to our success has been our entrepreneurial and sales-oriented culture, as
outlined in the Azimuth, our corporate constitution. As we grow, including from the integration of colleagues and
businesses acquired in connection with previous or future partnerships, we may find it difficult to maintain important
aspects of our corporate culture, which could negatively affect our profitability or our ability to retain and recruit people of
the highest integrity and quality who are essential to our future success. We may face pressure to change our culture as
we grow, particularly if we experience difficulties in attracting competent personnel who are willing to embrace our
culture. In addition, as our organization grows and we are required to implement more complex organizational structures,
or if we experience a change in management, management philosophy or business strategy, we may find it increasingly
difficult to maintain the beneficial aspects of our corporate culture, which could negatively impact our future success.
Our results may be adversely affected by changes in the mode of compensation in the insurance industry.
In the past, state regulators have scrutinized the manner in which insurance brokers are compensated. For example, the
Attorney General of the State of New York brought charges against members of the insurance brokerage community.
These actions have created uncertainty concerning longstanding methods of compensating insurance brokers. Given that
the insurance brokerage industry has faced scrutiny from regulators in the past over its compensation practices, and the
transparency and discourse to clients regarding brokers’ compensation, it is possible that regulators may choose to revisit
the same or other practices in the future. If they do so, compliance with new regulations along with any sanctions that
might be imposed for past practices deemed improper could have an adverse impact on our future results of operations
and inflict significant reputational harm on our business.
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Climate risks, risks associated with the physical effects of climate events, and risks associated with governmental
responses to climate risks, could adversely affect our business, results of operations and financial condition.
The effects of climate events continue to create an alarming level of concern. The U.S. Congress, state legislatures and
federal and state regulatory agencies continue to propose numerous initiatives to supplement the global effort to address
climate and climate-related events. If new legislation or regulation is enacted, we could incur increased costs and capital
expenditures to comply with its limitations, which may impact our financial condition and operating performance.
In addition, the U.S. Federal Reserve has identified the climate as a systemic risk to the economy. It also reported that a
gradual change in investor sentiment regarding climate risk introduces the possibility of abrupt tipping points or
significant swings in sentiment, which could create unpredictable follow-on effects in financial markets. If this occurred,
not only would we be negatively impacted by the general economic decline, but a drop in the stock market affecting our
stock price could negatively impact our ability to grow through mergers and acquisitions financed using our common
stock.
The transition to a low-carbon economy could harm specific industries or sectors such as oil and gas in ways that could
impact our business. Our clients in certain industries may be more adversely affected by climate events and could go out
of business or have reduced needs for insurance-related services, which could adversely impact our revenues. Negative
publicity arising from our association with clients in disfavored businesses or industries, or the perception that we are not
sufficiently focused on climate risks, could damage our reputation with investors, clients, colleagues and regulators. In
addition, the transition to a low-carbon economy could give rise to the need for innovative insurance and risk
management solutions for entirely new industries and companies, as well as advice and services to bolster climate
resilience for existing companies. If we fail to innovate in response to these changes, we could lose market share to our
competitors or new market entrants that do.
Moreover, if our insurance company partners fail or withdraw from offering certain lines of coverage because of large
payouts related to climate events, overall risk-taking capital capacity could be negatively affected, which could reduce our
ability to place certain lines of coverage and, as a result, reduce our revenues and profitability.
Furthermore, climate events may pose physical risks to our business, such as the frequency and intensity of unfavorable
weather conditions, such as fires, hurricanes, tornadoes, drought, water shortages, rainfall, unseasonably warm. Overall,
climate events, their effects and the resulting, unknown impact could have a material adverse effect on our financial
condition and results of operations.
Risks Relating to Legal, Compliance and Regulatory Matters
E&O claims against us, and other incidents, claims, risks, exposures and/or liabilities that require us to make claims
against our insurance policies, may negatively affect our business, financial condition and results of operations.
We have significant insurance agency and brokerage operations, and are subject to claims and litigation in the ordinary
course of business resulting from alleged and actual E&O in placing insurance and rendering coverage advice. In addition,
many of our colleagues regularly interact with clients and prospective clients in the field, which increases the risks of
property and casualty claims arising from such interactions. Further, many of our office locations are in jurisdictions (such
as California, Texas and Florida) that see higher incidents of climate events (such as hurricanes, other aggressive weather
patterns and earthquakes). Dealing with any of these activities can involve the expenditure of substantial amounts of
money. Since E&O claims against us may allege our liability for all or part of the amounts in question, claimants may seek
large damage awards. These claims can involve significant defense costs. E&O could include failure to, whether negligently
or intentionally, place coverage on behalf of clients, provide our insurance company partners with complete and accurate
information relating to the risks being insured or appropriately apply funds that we hold on a fiduciary basis. It is not
always possible to prevent or detect E&O and other types of claims, and the precautions we take may not be effective in all
cases.
We have E&O insurance coverage to protect against the risk of liability resulting from our alleged and actual E&O. We also
maintain a variety of other property and casualty policies of insurance providing varying degrees of protection against loss
and damage to our property and liability for certain conduct of our colleagues. Prices for these policies of insurance and
the scope and limits of the coverage terms available depend on our claims history as well as market conditions that are
outside of our control. While we endeavor to purchase coverage that is appropriate to our assessment of our risk, we are
unable to predict with certainty the frequency, nature or magnitude of claims for direct or consequential damages or
whether our policies of insurance will cover such claims.
In establishing liabilities for claims, we utilize case level reviews by outside counsel and an internal analysis to estimate
potential losses. The liability is reviewed annually and adjusted as developments warrant. Given the unpredictability of
E&O and other claims and of litigation that could flow from them, it is possible that an adverse outcome in a particular
matter could have a material adverse effect on our results of operations, financial condition or cash flow in a given
quarterly or annual period.
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Non-compliance with or changes in laws, regulations or licensing requirements applicable to us could restrict our ability
to conduct our business and/or could adversely affect our business, financial condition and results of operations.
The industry in which we operate is subject to extensive regulation. We are subject to regulation and supervision at the
federal level in the U.S., in each applicable local jurisdiction in the U.S. and internationally both in the U.K. and Bermuda,
and would be subject to additional international regulations and supervision as we expand globally. In general, these
regulations are designed to protect clients and the insured and to protect the integrity of the financial markets, rather than
to protect stockholders or creditors. Our ability to conduct business in these jurisdictions depends on our compliance with
the rules and regulations, including securities laws, promulgated by federal, state and other regulatory and self-regulatory
authorities. Failure to comply with regulatory requirements, or changes in regulatory requirements or interpretations,
could result in actions by regulators, potentially leading to fines and penalties, adverse publicity and damage to our
reputation in the marketplace. There can be no assurance that we will be able to adapt effectively to any changes in law.
Furthermore, in some areas of our business, we act on the basis of our own or the industry's interpretations of applicable
laws or regulations, which may conflict from state to state. In the event those interpretations eventually prove different
from the interpretations of regulatory authorities, we may be penalized. In extreme cases, revocation of a subsidiary’s
authority to do business in one or more jurisdictions could result from failure to comply with regulatory requirements.
Due to the complexity, periodic modification and differing interpretations of state insurance laws and regulations, we may
not have always been, and we may not always be, in compliance with them. In addition, we could face lawsuits by clients,
the insured and other parties for alleged violations of certain of these laws and regulations. It is difficult to predict whether
changes resulting from new laws and regulations, as well as changes in interpretation of current laws and regulations, will
affect the industry or our business and, if so, to what degree.
As we grow our global presence, a risk exists that our employees or third parties acting on our behalf in countries outside
the U.S. could engage in business practices prohibited by applicable laws and regulations, including anti-bribery and anti-
corruption laws, and sanctions laws such as those administered by the U.S. Department of the Treasury’s Office of Foreign
Assets Control. Anti-bribery and anti-corruption laws, such as the FCPA and the U.K. Bribery Act, generally prohibit
companies from making improper payments to foreign officials and require companies to keep accurate books and
records and maintain appropriate internal controls. Trade and financial sanctions laws generally restrict the ability to
engage in trade with, or provide goods or services, to designated governments or other parties, or may require freezing of
such parties’ assets.
The complexity and cost of compliance with laws and regulations, including staffing needs, the development of new
policies, procedures and internal controls and providing training to employees in multiple locations, will also increase as
we grow our global presence, adding to our cost of doing business. Many of these laws and regulations may have differing
or conflicting legal standards across jurisdictions, increasing further the complexity and cost of compliance. In emerging
markets and other jurisdictions with less developed legal systems, local laws and regulations may not be established with
sufficiently clear and reliable guidance to provide us with adequate assurance that we are aware of all necessary licenses
to operate our business, that we are operating our business in a compliant manner, or that our rights are otherwise
protected. In addition, major political and legal developments in jurisdictions in which we do business may lead to new
regulatory costs and challenges.
Colleagues and principals who engage in the solicitation, negotiation or sale of insurance, or provide certain other
insurance services, generally are required to be licensed individually. Insurance and laws and regulations govern whether
licensees may share commissions with unlicensed entities and individuals. We believe that any payments we make to third
parties are in compliance with applicable laws. However, should any regulatory agency take a contrary position and
prevail, we will be required to change the manner in which we pay fees to such colleagues or principals or require entities
receiving such payments to become registered or licensed.
State insurance laws grant supervisory agencies, including state departments of insurance, departments of financials
services, and similar regulatory authorities, broad administrative authority. State insurance regulators and the National
Association of Insurance Commissioners continually review existing laws and regulations, some of which affect our
business. These supervisory agencies regulate many aspects of the insurance business, including, the licensing of
insurance brokers and agents and other insurance intermediaries, the handling of third-party funds held in a fiduciary
capacity and trade practices, such as marketing, advertising and compensation arrangements entered into by insurance
brokers and agents. This legal and regulatory oversight could reduce our profitability or limit our growth by increasing the
costs of legal and regulatory compliance, and by limiting or restricting the products or services we sell, the markets we
serve or enter, the methods by which we sell our products and services, and the form of compensation we can accept
from our clients, insurance company partners and third parties. Moreover, in response to perceived excessive cost or
inadequacy of available insurance, states have from time to time created state insurance funds and assigned risk pools,
which compete directly, on a subsidized basis, with private insurance providers.
Federal, state and other regulatory and self-regulatory authorities have focused on, and continue to devote substantial
attention to, the insurance industry as well as to the sale of products or services to seniors. Regulatory review or the
issuance of interpretations of existing laws and regulations may result in the enactment of new laws and regulations that
could adversely affect our operations or our ability to conduct business profitably. We are unable to predict whether any
such laws or regulations will be enacted and to what extent such laws and regulations would affect our business.
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Other legislative developments that could adversely affect us include: changes in our business compensation model as a
result of regulatory developments (for example, the Patient Protection and Affordable Care Act), and federal and state
governments establishing programs to provide health insurance or other alternative market types of coverage, that
compete with, or completely replace, insurance products offered by insurance carriers. Also, as climate risk issues become
more prevalent, the U.S. is beginning to respond to these issues. This increasing governmental focus on climate risks may
result in new environmental regulations that cause us to incur additional compliance costs, which may adversely impact
our results of operations and financial condition.
An increasing quantity of state legislatures and judiciaries, as well as the Federal Trade Commission, have begun
promulgating laws, orders and regulations that reflect a shifting sentiment against the enforceability of certain types of
restrictive covenant agreements, including non-compete agreements and non-solicitation agreements, that are core to our
business. The further promulgation of such laws, orders and regulations could adversely affect our operations or our
ability to conduct business profitably. We are unable to predict whether any such laws, orders or regulations will be
enacted, and if enacted, enforceable, and to what extent such laws and regulations would affect our business.
Proposed tort reform legislation, if enacted, could decrease demand for casualty insurance, thereby reducing our
commission revenues.
Legislation concerning tort reform has been considered, from time to time, in the United States Congress and in several
state legislatures. Among the provisions considered in such legislation have been limitations on damage awards, including
punitive damages, and various restrictions applicable to class action lawsuits. Enactment of these or similar provisions by
Congress, or by states in which we sell insurance, could reduce the demand for casualty insurance policies or lead to a
decrease in policy limits of such policies sold, thereby reducing our commission revenues.
Regulations affecting insurance company partners with which we place insurance affect how we conduct our operations.
Our insurance company partners are also regulated by state departments of insurance for solvency and other issues and
are subject to reserve requirements. We cannot guarantee that all insurance company partners with which we do business
comply with regulations instituted by state departments of insurance. We may need to expend resources to address
questions or concerns regarding our relationships with these insurance company partners, which diverts management
resources away from business operations.
Our business is subject to risks related to legal proceedings, regulatory investigations, and governmental inquiries and
actions.
We are subject to litigation, regulatory investigations and claims arising in the ordinary course of our business operations.
The risks associated with these matters often may be difficult to assess or quantify and the existence and magnitude of
potential claims often remain unknown for substantial periods of time. While we have insurance coverage for some of
these potential claims, others may not be covered by insurance, insurers may dispute coverage or any ultimate liabilities
may exceed our coverage. We may be subject to actions and claims relating to the sale, solicitation and negotiation of
insurance, including the suitability of such products and services, as well as denials of coverage from our insurance
company partners. Actions and claims may result in the rescission of such sales; consequently, our insurance company
partners may seek to recoup commissions paid to us, which may lead to legal action against us. The outcome of such
actions cannot be predicted and such claims or actions could have a material adverse effect on our business, financial
condition and results of operations.
We are subject to laws and regulations, as well as regulatory investigations. The insurance industry has been subject to a
significant level of scrutiny by various regulatory bodies, including state Attorneys General offices and state departments
of insurance, concerning certain practices within the insurance industry. These practices include, without limitation, the
receipt of contingent commissions by insurance brokers and agents from insurance companies and the extent to which
such compensation has been disclosed, the collection of agency fees, which we define as fees separate from commissions
charged directly to clients for efforts performed in the issuance of new insurance policies, bid rigging and related matters.
From time to time, our subsidiaries receive informational requests from governmental authorities.
There have been a number of revisions to existing, or proposals to modify or enact new, laws and regulations regarding
insurance agents and brokers. These actions have imposed or could impose additional obligations on us with respect to
our products sold. Some insurance companies have agreed with regulatory authorities to end the payment of contingent
commissions on insurance products, which could impact our commissions that are based on the volume, consistency and
profitability of business generated by us.
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We cannot predict the impact that any new laws, rules or regulations may have on our business, financial condition and
results of operations. Given the current regulatory environment and the number of our subsidiaries operating in local
markets throughout the country, it is possible that we will become subject to further governmental inquiries and
subpoenas and have lawsuits filed against us. Regulators may raise issues during investigations, examinations or audits
that could, if determined adversely, have a material impact on us. The interpretations of regulations by regulators may
change and statutes may be enacted with retroactive impact. We could also be materially adversely affected by any new
industry-wide regulations or practices that may result from these proceedings.
Our involvement in any investigations and lawsuits would cause us to incur additional legal and other costs and, if we were
found to have violated any laws, we could be required to pay fines, damages and other costs, perhaps in material
amounts. Regardless of final costs, these matters could have a material adverse effect on us by exposing us to negative
publicity, reputational damage, harm to client relationships or diversion of personnel and management resources.
In addition, we may from time to time be subject to certain litigation brought by one or more of our stockholders. The
outcome of any such litigation, particularly class action lawsuits, is difficult to assess or quantify. Plaintiffs in these types of
lawsuits may seek recovery of very large or indeterminate amounts, and the magnitude of the potential loss relating to
such lawsuits, including the possibility of having attorney’s fees awarded, may remain unknown for substantial periods of
time. The cost to defend such litigation may be significant. There may also be adverse publicity associated with litigation,
regardless of whether the allegations are valid or whether we are ultimately found liable. As a result, litigation may
materially adversely affect our businesses, financial condition and results of operations.
The marketing and sale of Medicare plans are subject to numerous, complex and frequently changing laws and
regulations, and non-compliance or changes in laws and regulations could harm our business, results of operations and
financial condition.
The marketing and sale of Medicare plans are subject to numerous laws, regulations and guidelines at the federal and
state level. The marketing and sale of Medicare Advantage and Medicare Part D prescription drug plans are principally
regulated by CMS. The marketing and sale of Medicare Supplement plans are principally regulated on a state-by-state
basis by state departments of insurance. The laws and regulations applicable to the marketing and sale of Medicare plans
are numerous, ambiguous and complex, and, particularly with respect to regulations and guidance issued by CMS for
Medicare Advantage and Medicare Part D prescription drug plans, change frequently. The telephone calls on which we
enroll individuals into Medicare Advantage and Medicare Part D prescription drug plans are required to be recorded.
Health insurance companies audit these recordings for compliance and listen to them in connection with their
investigation of complaints. In addition, Medicare eligible individuals may receive a special election period and the ability
to change Medicare Advantage and Medicare Part D prescription drug plans outside the Medicare annual enrollment
period in the event that the sale of the plan was not in accordance with CMS rules and guidelines. Given CMS’s scrutiny of
Medicare product health insurance companies and the responsibility of the insurance company partners for actions that
we take, insurance company partners may terminate our relationship with them or take other corrective action if our
Medicare product sales, marketing and operations are not in compliance or give rise to too many complaints. The
termination of our relationship with insurance company partners for this reason would reduce the products we are able to
offer, could result in the loss of commissions for past and future sales and would otherwise harm our business, results of
operations and financial condition.
As a result of the laws, regulations and guidelines relating to the sale of Medicare plans, we have altered, and likely will
have to continue to alter, our websites and sales process to comply with several requirements that are not applicable to
our sale of non-Medicare-related health insurance plans. For instance, many aspects of our online platforms and our
marketing material and processes, as well as changes to these platforms, materials and processes, including call center
scripts, must be filed on a regular basis with CMS and reviewed and approved by health insurance companies in light of
CMS requirements. In addition, certain aspects of our Medicare plan marketing partner relationships have been in the
past, and will be in the future, subjected to CMS and health insurance company review. Changes to the laws, regulations
and guidelines relating to Medicare plans, their interpretation or the manner in which they are enforced could be
incompatible with these relationships, our platforms or our sale of Medicare plans, which could harm our business, results
of operations and financial condition.
Due to changes in CMS guidance or enforcement or interpretation of existing guidance applicable to our marketing and
sale of Medicare products, or as a result of new laws, regulations and guidelines, CMS, state departments of insurance or
insurance company partners may determine to object to or not to approve aspects of our online platforms or marketing
material and processes and may determine that certain existing aspects of our Medicare-related business are not in
compliance. As a result, the progress of our Medicare operations could be slowed or we could be prevented from
operating aspects of our Medicare commissions and fees generating activities altogether, which would harm our business,
results of operations and financial condition, particularly if it occurred during the Medicare annual enrollment period.
We have received, and may in the future receive, inquiries from CMS or state departments of insurance regarding our
marketing and business practices and compliance with laws and regulations. Inquiries and proceedings initiated by the
government could adversely impact our health insurance licenses, require us to pay fines, require us to modify marketing
and business practices, result in litigation and otherwise harm our business, operating results or financial condition.
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In May 2021, CMS changed its process for the submission and approval of marketing materials related to Medicare
Advantage and Medicare Part D prescription drug plans. The practical application of the previous process allowed for a
lead carrier to handle most of the review and filing of Medicare plan marketing materials with CMS. The new process
requires each carrier to approve of each filed marketing material and has resulted in a more complicated and time
consuming process to get our marketing material filed with CMS and through the process with carriers. In October 2021,
CMS issued new guidance that significantly broadens the types of marketing materials that we are required to file with
CMS, including the requirement to file certain generic marketing materials that refer to the benefits or costs of Medicare
Advantage or Medicare Part D prescription drug plans but that do not specifically mention a health insurance carrier's
name or a specific plan. As a result, we now submit to each Medicare Advantage and Medicare Part D prescription drug
plan carrier with which we have a relationship a significantly larger number of marketing materials than we have in the
past. We may not be able to use certain of our marketing materials and implement our marketing programs effectively if
CMS or an insurance company partner has comments or disapproves of our marketing materials. If we do not timely file
the additional marketing materials with CMS, if insurance company partners do not adapt to the new CMS requirements
or increase the efficiency with which they review our marketing material, or if we or our marketing partners are not
successful in timely receiving insurance company partner or CMS approval of our marketing materials, it could harm our
sales and also harm our ability to efficiently change and implement new or existing marketing material, including call
center scripts and our websites, which could impact negatively in our business, operating results and financial condition,
particularly if such delay or non-compliance occurs during the Medicare annual enrollment period.
Efforts to reduce healthcare costs and alter healthcare financing practices could adversely affect our business.
The U.S. healthcare industry is subject to increased governmental regulation at both the federal and state levels. Certain
proposals have been made at the federal and state government levels in an effort to control healthcare costs, including
proposing to lower reimbursement under the Medicare program. These proposals include “single payor” government
funded healthcare and price controls on prescription drugs. If these or similar efforts are successful, our business and
operations could be materially adversely affected. In addition, changing political, economic and regulatory influences may
affect healthcare financing and reimbursement practices. If the current healthcare financing and reimbursement system
changes significantly, our business could be materially adversely affected. Congress periodically considers proposals to
reform the U.S. healthcare system such as the Patient Protection and Affordable Care Act and the Health Care and
Education Reconciliation Act in 2010. Our insurance company partners may react to these proposals and the uncertainty
surrounding them by reducing or delaying purchases of services that we provide. We cannot predict what effect, if any,
these proposals may have on our business. Other legislative or market-driven changes in the healthcare system that we
cannot anticipate could also materially adversely affect our consolidated results of operations, consolidated financial
position or consolidated cash flow from operations.
Risks Relating to Intellectual Property and Cybersecurity
Our business depends on information processing systems. Data breaches or other security incidents with respect to our
or our vendors' information processing systems may hurt our business, financial condition and results of operations.
Our ability to provide insurance services to clients and to create and maintain comprehensive tracking and reporting of
client accounts depends on our capacity to collect, store, retrieve and otherwise process data, manage significant
databases and expand and periodically upgrade our information processing capabilities. As our operations evolve, we will
need to continue to make investments in new and enhanced information systems. Additionally, as our information system
providers revise and upgrade their hardware, software and equipment technology, we may encounter difficulties
integrating these new technologies into our business. Interruption or loss of our information processing capabilities or
adverse consequences from implementing new or enhanced systems could have a material adverse effect on our
business, financial condition and results of operations.
In the course of providing financial services, we may electronically store, transmit or otherwise process personally
identifiable information, such as social security numbers or credit card or bank information, of clients or employees of
clients. Breaches in data security or infiltration of our network security by unauthorized persons could cause interruptions
in operations and damage to our reputation, among other adverse impacts. While we maintain policies, procedures and
technological safeguards designed to protect the security and privacy of this information, we cannot entirely eliminate the
risk of, and have in the past experienced, improper access to or disclosure of personally identifiable information and
related costs to mitigate the consequences from such events. Privacy laws, rules and regulations are matters of growing
public concern and are continuously changing in the states in which we operate. The failure to adhere to or successfully
implement procedures to respond to these laws, rules and regulations could result in legal liability or impairment to our
reputation.
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Further, despite security measures we and our vendors take, our systems and those of our vendors may be vulnerable to
physical break-ins, unauthorized access, viruses or other disruptive problems. As we continue to expand our business
through Partnerships, we may be exposed to increased vulnerability to data breaches, cybersecurity attacks and other
security incidents during the integration of information systems. If our systems or facilities were infiltrated or damaged,
our clients could experience data loss, financial loss and significant business interruption leading to a material adverse
effect on our business, financial condition and results of operations. We may be required to expend significant additional
resources to modify protective measures, to investigate and remediate vulnerabilities or other exposures or to make
required notifications.
Our business depends on a strong brand, and any failure to maintain, protect, defend and enhance our brand would hurt
our ability to grow our business, particularly in new markets where we have limited brand recognition.
We have developed, and will continue to develop, a strong brand that we believe has contributed significantly to the
success of our business. Maintaining, protecting and enhancing those brands is critical to growing our business,
particularly in new markets where we have limited brand recognition. If we do not successfully build and maintain a strong
brand, our business could be materially harmed. Maintaining and enhancing the quality of our brand may require us to
make substantial investments in areas such as marketing, community relations, outreach and employee training. We
actively engage in advertisements, targeted promotional mailings and email communications, and engage on a regular
basis in public relations and sponsorship activities. These investments may be substantial and may fail to encompass the
optimal range of traditional, online and social advertising media to achieve maximum exposure and benefit to our brand.
Moreover, our brand promotion activities may not generate brand awareness or yield increased revenue and, even if they
do, any increased revenue may not offset the expenses we incur in building our brand. If we fail to successfully promote
and maintain our brand or incur substantial expenses in an unsuccessful attempt to promote and maintain our brand, we
may fail to attract new clients or retain our existing clients to the extent necessary to realize a sufficient return on our
brand-building efforts.
We believe that our portfolio of trademarks (some of which are pending registration) have significant value and that these
and other intellectual property are valuable assets that are critical to our success. Unauthorized uses or other
infringement, misappropriation or violation of our trademarks, service marks or other intellectual property could diminish
the value of our brand and may adversely affect our business. Effective intellectual property protection may not be
available in every market in which we operate. Moreover, the laws of some countries do not protect intellectual property
and proprietary rights to the same extent as the laws of the United States, and mechanisms for enforcement of intellectual
property rights in some foreign countries may be inadequate. Additionally, we cannot guarantee that future trademark
registrations for pending or future applications will issue, or that any registered trademarks will be enforceable or provide
adequate protection of our intellectual property and other proprietary rights. The United States Patent and Trademark
Office and various foreign trademark offices also require compliance with a number of procedural, documentary, fee
payment and other similar provisions during the trademark registration process and after a registration has issued. There
are situations in which noncompliance can result in abandonment or cancellation of a trademark filing, resulting in partial
or complete loss of trademark rights in the relevant jurisdiction. If this occurs, our competitors might be able to enter the
market under identical or similar brands.
Failure to adequately protect our intellectual property rights could damage our brand and impair our ability to compete
effectively. Even where we have effectively secured statutory protection for our trademarks and other intellectual
property, our competitors and other third parties may infringe, misappropriate or otherwise violate our intellectual
property. In the course of litigation, or as a preventative measure, such competitors and other third parties may attempt
to challenge the scope of our rights or invalidate our intellectual property. If such challenges were to be successful, it could
limit our ability to prevent others from using similar marks or designs may ultimately result in a reduced distinctiveness of
our brand in the minds of consumers. Defending or enforcing our trademark rights, branding practices and other
intellectual property could result in the expenditure of significant resources and divert the attention of management,
which in turn may materially and adversely affect our business and results of operations, even if such defense or
enforcement is ultimately successful.
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Failure to obtain, maintain, protect, defend or enforce our intellectual property rights, or allegations that we have
infringed, misappropriated or otherwise violated the intellectual property rights of others, could harm our reputation,
ability to compete effectively, business, financial condition and results of operations.
Our success and ability to compete depends in part on our ability to obtain, maintain, protect, defend and enforce our
intellectual property. To protect our intellectual property rights, we rely on a combination of trademark and copyright laws
in the United States and certain other jurisdictions (whether via international convention, treaty or otherwise), trade secret
protection, confidentiality agreements and other contractual arrangements with our affiliates, colleagues, clients, partners
and others. However, such measures provide only limited protection and the steps that we take to protect our intellectual
property may be inadequate to deter infringement, misappropriation or other violation of our intellectual property or
proprietary information. Policing unauthorized use of our intellectual property is difficult, expensive and time-consuming,
particularly in countries where the laws may not be as protective of intellectual property rights as those in the United
States and where mechanisms for enforcement of intellectual property rights may be weak. We may be required to spend
significant resources to monitor and protect our intellectual property rights. In addition, we may be unable to detect the
unauthorized use of our intellectual property rights.
Failure to protect our intellectual property adequately could harm our reputation and affect our ability to compete
effectively. In addition, even if we initiate litigation against third parties, such as suits alleging infringement,
misappropriation or other violation of our intellectual property, we may not prevail. Litigation brought to protect and
enforce our intellectual property rights could be costly, time-consuming and distracting to management. Our efforts to
enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity
and enforceability of our intellectual property rights. Additionally, because of the substantial amount of discovery required
in connection with intellectual property litigation, there is a risk that some of our confidential information could be
compromised by disclosure during this type of litigation. An adverse determination of any litigation proceedings could put
our intellectual property at risk of being invalidated or interpreted narrowly and could put our related intellectual property
at risk of not issuing or being cancelled. There could also be public announcements of the results of hearings, motions, or
other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it
could have a material adverse effect on the price of our common stock. Any of the foregoing could adversely affect our
business, financial condition and results of operations.
Meanwhile, third parties may assert intellectual property-related claims against us, including claims of infringement,
misappropriation or other violation of their intellectual property, which may be costly to defend, could require the
payment of damages, legal fees, settlement payments, royalty payments and other costs or damages, including treble
damages if we are found to have willfully infringed, and could limit our ability to use or offer certain technologies, products
or other intellectual property. Any intellectual property claims, with or without merit, could be expensive, take significant
time and divert management’s resources, time and attention from other business concerns. Moreover, other companies,
including our competitors, may have the capability to dedicate substantially greater resources to enforce their intellectual
property rights and to defend claims that may be brought against them. Successful challenges against us could require us
to modify or discontinue our use of technology or business processes where such use is found to infringe, misappropriate
or otherwise violate the rights of others, or require us to purchase costly licenses from third parties, which may not be
available on commercially reasonable terms, or at all. Even if a license is available to us, it could be non-exclusive thereby
giving our competitors and other third parties access to the same technologies licensed to us, and we may be required to
pay significant upfront fees, milestone payments or royalties, which would increase our operating expenses. Any of the
foregoing could adversely affect our business, financial condition and results of operations.
Improper disclosure of confidential, personal or proprietary information, whether due to human error, misuse of
information by colleagues, contractors, vendors or third-party bad actors, or as a result of cyberattacks or other security
incidents with respect to our or our vendors’ systems, tools, information, processes or services, or failure to comply with
applicable laws, rules, regulations, orders, industry standards and contractual obligations regarding data privacy,
security and/or cybersecurity, could result in regulatory scrutiny, legal and financial liability, reputational harm, lost
revenue, and remediation costs, and could have an adverse effect on our business and/or operations.
We maintain confidential, personal and proprietary information relating to our Company, our colleagues, our insurance
company partners, our vendors and our actual and prospective clients. This information could include personally
identifiable information, protected health information, such as information regarding the medical history of clients,
financial information, and other categories of sensitive or protected information. We are subject to laws, rules, regulations,
orders, industry standards, contractual obligations and other legal obligations relating to the collection, use, retention,
security, transfer, storage, disposition and other processing of this information. These requirements may also apply to
transfers of information among our affiliates, as well as to transactions we enter into with unaffiliated third-parties.
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Cybersecurity risks have significantly increased in recent years, in part, because of the proliferation of new technologies,
the use of the internet and telecommunications technologies to exchange information and conduct transactions, and the
increased sophistication and activities of computer hackers, organized crime, terrorists, and other external parties,
including foreign state actors. We have in the past and may in the future be subject to cyberattacks. Future cyberattacks
could include computer viruses, malicious or destructive code, phishing attacks, social engineering attacks, denial of
service or information, improper access by employees or third-party partners or other security breaches that have or
could in the future result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of our
confidential, proprietary, personal, and other information concerning colleagues, clients, insurance company partners,
vendors or consumers, or otherwise materially disrupt our network access or business operations.
Cybersecurity breaches, cyberattacks and other similar incidents, including, among other things, computer viruses, denial
of service or information attacks, ransomware attacks, credential stuffing, social engineering, human error, fraud,
unauthorized parties gaining access to our information technology systems, malware infections, phishing campaigns and
vulnerability exploit attempts could disrupt the security of our internal systems and business applications or those of our
vendors and impair our ability to provide services to our clients and protect the privacy of their data. Any such incidents
may also compromise confidential business information, result in intellectual property or other confidential or proprietary
information being lost or stolen, including client, colleague or Company data, which could harm our reputation,
competitive position or otherwise adversely affect our business. Cyber threats are constantly evolving, which makes it
more difficult to detect cybersecurity incidents, assess their severity or impact in a timely manner, and successfully defend
against them. The hybrid and remote work environment is increasing the attack surface available to criminals, as more
companies and individuals work remotely and otherwise work online. Consequently, the risk of a cybersecurity incident
has increased, and as cybersecurity threats evolve, we may be required to expend significant additional resources to
continue to modify or enhance our protective measures or to investigate or remediate any information security
vulnerabilities, security breaches, cyberattacks or other similar incidents. We cannot provide assurances that our
preventative efforts, or those of our vendors or service providers, will be successful, and we may not be able to anticipate
all security breaches, cyberattacks or other similar incidents, detect or react to such incidents in a timely manner,
implement guaranteed preventive measures against such incidents, or adequately remediate any such incident.
Although we maintain policies, procedures and technical safeguards designed to protect the security and privacy of
confidential, personal and proprietary information, we cannot eliminate the risk of, and have in the past experienced,
improper access to or disclosure of personally identifiable information and related costs to mitigate the consequences
from such events. It is possible that the measures we implement, including our security controls over personal data and
training of colleagues on data security, may not prevent improper access to, disclosure of or misuse of confidential,
personal or proprietary information. This could cause harm to our reputation, create legal exposure or subject us to
liability under laws that protect personal data, resulting in increased costs or loss of commissions and fees. In addition,
improper access to or disclosure of personal and proprietary information could occur in a target we acquire prior to the
acquisition or as a result of actions taken prior to the acquisition or during the integration period. Even if we receive
indemnification for such events (which may not be the cure), such events could cause harm to our reputation, create legal
exposure or subject us to liability under laws that protect personal data.
The occurrence of any security breach, cyberattack or other similar incident with respect to our or our vendors’ systems, or
our failure to make adequate or timely disclosures to the public, regulators, law enforcement agencies or affected
individuals, as applicable, following any such event, could cause harm to our reputation, subject us to additional regulatory
scrutiny, expose us to civil litigation, fines, damages or injunctions or subject us to liability under applicable data privacy,
cybersecurity and other laws, rules and regulations, resulting in increased costs or loss of commissions and fees, any of
which could have a material adverse effect on our business, financial condition and results of operations. Additionally, we
cannot be certain that our insurance coverage will be adequate for cybersecurity liabilities actually incurred, that insurance
will continue to be available to us on economically reasonable terms, or at all, or that our insurer will not deny coverage as
to any future claim.
We are subject to complex and frequently changing laws, rules and regulations in the various jurisdictions in which we
operate relating to the collection, use, retention, security, transfer, storage, disposition and other processing of personal
information. For example, legislators in the United States have passed new and more robust cybersecurity legislation in
light of the recent broad-based cyberattacks at a number of companies. These and similar initiatives around the country
could increase the cost of developing, implementing or securing our networks, tools, systems and other information
technology assets and require us to allocate more resources to improved technologies, adding to our information
technology and compliance costs. Ensuring that our collection, use, retention, security, transfer, storage, disposition and
other processing of personal information complies with applicable laws, regulations, rules and standards regarding data
privacy and cybersecurity in relevant jurisdictions can increase operating costs, impact the development of new products
or services, and reduce operational efficiency.
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At the federal level, we are subject to, among other laws, rules and regulations, the Gramm-Leach-Bliley Act ("GLBA"),
which requires financial institutions to, among other things, periodically disclose their privacy policies and practices
relating to sharing personal information and, in some cases, enables retail customers to opt out of the sharing of certain
personal information with unaffiliated third parties. The GLBA also requires financial institutions to implement an
information security program that includes administrative, technical and physical safeguards to ensure the security and
confidentiality of nonpublic personal information, which can include customer records and information. We are also
subject to the rules and regulations promulgated under the authority of the Federal Trade Commission, which regulates
unfair or deceptive acts or practices, including with respect to data privacy and cybersecurity. Data privacy and
cybersecurity are also areas of increasing state legislative focus and we are, or may in the future become, subject to
various state laws and regulations regarding data privacy and cybersecurity. For example, the California Consumer
Protection Act of 2018 (the “CCPA”), which became effective on January 1, 2020, applies to for-profit businesses that
conduct business in California and meet certain revenue or data collection thresholds. The CCPA gives California residents
the right to, among other things, request disclosure of information collected about them and whether that information
has been sold to others, request deletion of personal information (subject to certain exceptions), opt out of the sale of
their personal information, and not be discriminated against for exercising these rights. The CCPA contains several
exemptions, including an exemption applicable to personal information that is collected, processed, sold or disclosed
pursuant to the GLBA. Further, effective in most material respects starting on January 1, 2023, the California Privacy Rights
Act (“CPRA”) has significantly modified the CCPA, including by expanding California residents’ rights with respect to certain
sensitive personal information. The CPRA also creates a new state agency which will be vested with authority to implement
and enforce the CCPA and the CPRA. Other states where we do business, or may in the future do business, or from which
we otherwise collect, or may in the future otherwise collect, personal information of residents have adopted or are
considering adopting similar laws. For example, Virginia and Colorado have recently adopted comprehensive data privacy
laws similar to the CCPA, which went into effect in January and July of 2023, respectively. In addition, some states have
passed laws that include affirmative data security obligations that may govern the ways in which we protect consumer
information. For example, Massachusetts law requires, among other things, that covered entities develop, implement, and
maintain a comprehensive, written information security program that is designed to protect personal information and that
includes specific prescribed safeguards. Further, laws in all 50 U.S. states and U.S. territories generally require businesses
to provide notice under certain circumstances to individuals (whether customers, prospects, employees, or otherwise)
whose personal information has been improperly accessed, disclosed or otherwise compromised as a result of a data
breach. Certain state laws and regulations may be more stringent, broader in scope, or offer greater individual rights, with
respect to personal information than federal or other state laws and regulations, and such laws and regulations may differ
from each other, which may complicate compliance efforts and increase compliance costs. Cybersecurity and data privacy
laws are constantly evolving, and we may be required to modify our practices regularly in an effort to maintain our
compliance with applicable law.
We are subject to the UK General Data Protection Regulation (“UK GDPR”) and may in the future be subject to the General
Data Protection Regulation (“GDPR”), which protect the personal data of individuals residing in the United Kingdom and
the European Union (whether customers, prospects, employees, or otherwise), respectively. Under the UK GDPR and the
GDPR, we are required, as applicable, among other obligations, to protect personal data using appropriate technical,
administrative, and organizational measures, to identify and maintain legal bases for processing personal data, to give
effect to data subject rights (including, for example, deletion, correction, and objection to or restriction of processing in
certain circumstances), to ensure that anyone we authorize to process personal data on our behalf is bound by
appropriate duties of confidentiality, to engage subprocessors pursuant to written agreements obligating them to protect
personal data in accordance with the UK GDPR or GDPR, as applicable, and controller instructions, and to transfer
personal data solely pursuant to authorized transfer mechanisms, including, where required, the Standard Contractual
Clauses.
We are also subject to Canada’s Personal Information Protection and Electronic Documents Act (“PIPEDA”), and its
provincial analogues in British Columbia and Alberta. Under PIPEDA, and its provincial counterparts, we are required,
among other things, to designate a privacy officer to be responsible for ensuring our compliance with relevant legislation,
to notify data subjects of the purposes for which their personal information will be processed, to publicly disclose
information about our policies and practices relating to the management of personal information, and to effect data
subjects’ requests to exercise their rights.
We are also subject to Bermuda’s Personal Information Protection Act (“PIPA”). Under PIPA, we are required, among other
things, to appoint a data protection officer responsible for ensuring compliance with PIPA, to effect data subject rights
(including for example and under certain circumstances, the right to access, the right to correct, the right to erasure, and
the right to object, etc.), to establish appropriate legal bases for processing personal data, and to assess the level of
protection provided by an overseas third-party recipient of personal data in advance of any transfer to any such third
party.
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Further, while we strive to publish and prominently display privacy policies that are accurate, comprehensive, and
compliant with applicable laws, regulations, rules and industry standards, we cannot ensure that our privacy policies and
other statements regarding our practices will be sufficient to protect us from claims, proceedings, liability or adverse
publicity relating to data privacy or cybersecurity. Although we endeavor to comply with our privacy policies, we may at
times fail to do so or be alleged to have failed to do so. The publication of our privacy policies and other documentation
that provide promises and assurances about privacy, data protection and cybersecurity can subject us to potential federal
or state action if they are found to be deceptive, unfair, insufficient, or misrepresentative of our actual practices.
Any actual or perceived failure to adhere to, or successfully implement processes in response to, changing legal or
regulatory requirements in this area or to comply with our privacy policies could result in legal liability, including litigation
(including class actions), claims, proceedings, regulatory fines, penalties or other sanctions, governmental investigations,
enforcement actions, the expenditure of substantial costs, time and other resources, damage to our reputation in the
marketplace and other adverse impacts, any of which could have a material adverse effect on our business, financial
condition and results of operations.
A failure or disruption of our operational processes or systems, whether due to technological error or human error or
misconduct, could negatively impact our reputation, customers, clients, businesses or results of operations and financial
condition.
We seek to maintain and develop new software or technology where appropriate to better serve our clients. This includes
developing new software, technology, and automated systems (including, but not limited to, billing systems) to support
our insurance products. Notwithstanding these upgrades and the proliferation of technology and technology-based risk
and control systems, our businesses ultimately rely on people as our greatest resource, and, from time to time, they have
in the past and may in the future make mistakes or engage in violations of applicable policies, laws, rules or procedures
that are not always caught immediately by our technological processes or by our controls and other procedures, which are
intended to prevent and detect such errors or violations. We have in the past and in the future could experience
operational incidents caused by human error due to failure to properly utilize software or technology or adhere to
applicable policies and procedures, calculation errors, mistakes in addressing emails, errors in software or model
development or implementation, or simple errors in judgment.
Operational incidents could result in financial losses as well as misappropriation, corruption, or loss of confidential client
specific information, including social security numbers, private health information, payment card numbers, or bank
account information. Such an incident could significantly negatively impact our reputation, customers, clients, businesses
or results of operations and financial condition. Cyber-related and other operational incidents can also result in legal and
regulatory proceedings, fines, and other costs.
We rely on the availability and performance of information technology services provided by third parties.
While we maintain some of our critical information technology systems, we also depend on third-party service providers to
provide important information technology services relating to, among other things, agency management services, sales
and service support, network, device and event monitoring, cybersecurity, electronic communications and certain finance
functions. If the service providers to which we outsource these functions do not perform effectively, we may not be able to
achieve the expected cost savings and may have to incur additional costs to correct errors made by such service providers.
Depending on the function involved, such errors may also lead to business disruption, processing inefficiencies, the loss of
or damage to intellectual property through a security breach, the loss of sensitive, personal or confidential data through a
security breach, or otherwise. While we and our third-party service providers have not experienced any significant
disruption, failure or breach impacting our or their information technology systems, any such disruption, failure or breach
could adversely affect our business, financial condition and results of operations.
Risks Relating to our Organizational Structure
We are a holding company with our principal asset being our 58% ownership interest in Baldwin Holdings, and our Pre-
IPO LLC Members, whose interest in our business may be different from yours, have approval rights over certain
transactions and actions taken by us or Baldwin Holdings.
We are a holding company, and our principal asset is our direct or indirect ownership of 58% of the outstanding LLC Units.
We have no independent means of generating commissions and fees.
Further, we are a party to the 2019 Stockholders Agreement entered into in connection with the initial public offering with
the Pre-IPO LLC Members. Pursuant to the terms of the 2019 Stockholders Agreement, so long as the Pre-IPO LLC
Members and their permitted transferees (collectively, the “Holders”) beneficially own at least 10% of the aggregate
number of outstanding shares of our common stock (the “Substantial Ownership Requirement”), the Holders have
approval rights over certain transactions and actions taken by us and Baldwin Holdings, including:
•
a merger, consolidation or sale of all or substantially all of the assets of Baldwin Holdings and its subsidiaries;
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•
any dissolution, liquidation or reorganization (including filing for bankruptcy) of Baldwin Holdings and its
subsidiaries or any acquisition or disposition of any asset for consideration in excess of 5% of our and our
subsidiaries' total assets on a consolidated basis;
•
the incurrence, guarantee, assumption or refinancing of indebtedness, or grant of a security interest, in excess of
10% of total assets (or that would cause aggregate indebtedness or guarantees thereof to exceed 10% of total
assets);
•
the issuance of certain additional equity interests of the Company, Baldwin Holdings or any of their subsidiaries in
an amount exceeding $10 million (other than pursuant to an equity incentive plan that has been approved by our
board of directors);
•
the establishment or amendment of any equity, purchase or bonus plan for the benefit of employees,
consultants, officers or directors;
•
any capital or other expenditure in excess of 5% of total assets;
•
the declaration or payment of dividends on Class A common stock or distributions by Baldwin Holdings on LLC
Units other than tax distributions as defined in the Amended LLC Agreement;
•
changing the number of directors on our board of directors;
•
hiring, termination or replacement of, establishment of compensation (including benefits) payable to, or making
other significant decisions involving, our or Baldwin Holdings' senior management and key employees, including
our Chief Executive Officer, including entry into or modification of employment agreements, adopting or
modifying plans relating to any incentive securities or employee benefit plans or granting incentive securities or
benefits under any existing plans;
•
changing our or Baldwin Holdings’ jurisdiction of incorporation or organization;
•
changing the location of our or Baldwin Holdings’ headquarters;
•
changing our or Baldwin Holdings’ name;
•
changing our or Baldwin Holdings’ fiscal year;
•
changing our public accounting firm;
•
amendments to our or Baldwin Holdings’ governing documents; and
•
adopting a shareholder rights plan.
Furthermore, the 2019 Stockholders Agreement provides that, for so long as the Substantial Ownership Requirement is
met, the Holders may designate the nominees for a majority of the members of our board of directors, including the
Chairman of our board of directors.
Notwithstanding the rights afforded to the Holders under the 2019 Stockholders Agreement and in connection with the
Lawsuit (as defined below), BIGH, LLC, an entity controlled by Lowry Baldwin, our Chairman, and the Holder of a majority
of the shares of the Company's Class B common stock held by all of the Holders (the “Majority Holder”), and the Company
entered into a consent and defense agreement (the “Consent Agreement”) pursuant to which the Majority Holder has
irrevocably consented to and approved, on behalf of itself and the other Holders, certain transactions and actions taken by
the Company and Baldwin Holdings (each, a “Specified Matter”) that the Independent Committee (as defined below)
determines in good faith are in the best interests of the Company and its stockholders in their capacity as such, in
satisfaction of the approval rights under the 2019 Stockholders Agreement with respect to such Specified Matter. Further,
the Majority Holder irrevocably agreed, on behalf of itself and the other Holders, not to designate any nominee for election
to service on our board of directors if the Independent Committee determines in good faith that action by our board of
directors in furtherance of the nomination of such person to our board of directors would not be in the best interests of
the Company and its stockholders in their capacity as such.
In connection with the Consent Agreement, our board of directors, with the consent of the Majority Holder under the 2019
Stockholders Agreement, has amended our By-laws to, among other things:
•
create a committee of our board of directors, composed of all directors then in office who our board of directors
determines both (i) qualify as an independent director under the corporate governance standards of Nasdaq (as
defined in the 10-K) and (ii) have no relationship with the Company or any Holder that would interfere with the
exercise of independent judgment in carrying out the responsibilities of a director (such committee, the
“Independent Committee”); and
•
empower the Independent Committee, acting unanimously, to make any and all determinations contemplated or
required by the Consent Agreement, subject to any additional power and authority as may be delegated to the
Independent Committee by our board of directors from time to time.
40
A group comprised of Lowry Baldwin, our Chairman; BIGH, LLC, an entity controlled by Lowry Baldwin; Elizabeth Krystyn;
Laura Sherman; Trevor Baldwin, our Chief Executive Officer; Dan Galbraith, President, The Baldwin Group and CEO, Retail
Brokerage Operations; Brad Hale, our Chief Financial Officer; and certain trusts established by such individuals, have
entered into a Voting Agreement, as amended, with Lowry Baldwin, our Chairman, pursuant to which, in connection with
any meeting of our stockholders or any written consent of our stockholders, each such person and trust party will agree to
vote or exercise their right to consent in the manner directed by Lowry Baldwin. As of September 30, 2024, Lowry Baldwin
through the Voting Agreement beneficially owns 23.9% of the voting power of our common stock.
Subsequent to the execution of the Consent Agreement, the Company and certain of the parties to the Stockholders
Agreement entered into a new stockholders agreement on October 30, 2024 (the “2024 Stockholders Agreement”) in
response to the Lawsuit (as defined and discussed in Note 20 to our consolidated financial statements included in Part II,
Item 8. Financial Statements and Supplementary Data of this report). The 2024 Stockholders Agreement will go into effect
if the final nonappeallable judgment in the Lawsuit does not find that the 2019 Stockholders Agreement is valid pursuant
to its terms. Once the operative provisions of the 2024 Stockholders Agreement are in effect and for so long as the
Substantial Ownership Requirement (as defined in the 2024 Stockholders Agreement) is met, the Holders will have
essentially the same rights contemplated by the 2019 Stockholders Agreement, including approval rights over certain
specified matters relating to us or Baldwin Holdings that must be satisfied prior to the occurrence of such specified
matters, including: a merger, consolidation or sale of all or substantially all of the assets of Baldwin Holdings and its
subsidiaries; any dissolution, liquidation or reorganization (including filing for bankruptcy) of Baldwin Holdings and its
subsidiaries or any acquisition or disposition of any asset for consideration in excess of 5% of our and our subsidiaries’
total assets on a consolidated basis; the incurrence, guarantee, assumption or refinancing of indebtedness, or grant of a
security interest, in excess of 10% of total assets (or that would cause aggregate indebtedness or guarantees thereof to
exceed 10% of total assets); the issuance of certain additional equity interests of the Company, Baldwin Holdings or any of
their subsidiaries for consideration in an amount exceeding $10 million (other than pursuant to an equity incentive plan
that has been approved by our board of directors); the establishment or amendment of any equity, purchase or bonus
plan for the benefit of employees, consultants, officers or directors; any capital or other expenditure in excess of 5% of
total assets; the declaration or payment of dividends on Class A common stock or distributions by Baldwin Holdings on
LLC Units other than tax distributions as defined in the Amended LLC Agreement; changing the number of directors on our
board of directors (other than certain automatic changes pursuant to our certificate of incorporation); hiring, termination
or replacement of, establishment of compensation (including benefits) payable to, or making other significant decisions
relating to, our or Baldwin Holdings' senior management and key employees, including our Chief Executive Officer,
including entry into or modification of employment agreements, adopting or modifying plans relating to any incentive
securities or employee benefit plans or granting incentive securities or benefits under any existing plans; changing our or
Baldwin Holdings’ jurisdiction of incorporation; changing the location of our or Baldwin Holdings’ headquarters; changing
our or Baldwin Holdings’ name; changing our or Baldwin Holdings’ fiscal year; changing our public accounting firm;
amendments to our or Baldwin Holdings’ governing documents; and adopting a shareholder rights plan. Furthermore, the
2024 Stockholders Agreement provides that, for so long as the Substantial Ownership Requirement is met, the Holders
may designate the nominees for a majority of the members of our board of directors, including the Chairman of our board
of directors.
This concentration of ownership and voting power may also delay, defer or even prevent an acquisition by a third party or
other change of control of our Company, which could deprive you of an opportunity to receive a premium for your shares
of Class A common stock and may make some transactions more difficult or impossible without the support of the
Holders, even if such events are in the best interests of stockholders other than the Holders. Furthermore, this
concentration of voting power with Holders may have a negative impact on the price of our Class A common stock. In
addition, the Holders will have the ability to designate the nominees for a majority of the members of our board of
directors, including the Chairman of our board of directors, until the Substantial Ownership Requirement is no longer met.
As a result, the Holders may not be inclined to permit us to issue additional shares of Class A common stock, including for
the facilitation of acquisitions, if it would dilute their holdings below the Substantial Ownership Requirement.
41
Furthermore, Holders’ interests may not be fully aligned with yours, which could lead to actions that are not in your best
interests. Because the Holders hold a majority of their economic interests in our business through Baldwin Holdings rather
than through Baldwin, they may have conflicting interests with holders of shares of our Class A common stock. For
example, the Holders may be in a different tax position than holders of shares of our Class A common stock, which could
influence their decisions regarding whether and when Baldwin Holdings should dispose of assets or incur new or
refinance existing indebtedness, especially in light of the existence of the Tax Receivable Agreement, and whether and
when we should undergo certain changes of control for purposes of the Tax Receivable Agreement or terminate the Tax
Receivable Agreement. In addition, the structuring of future transactions may take into consideration these tax or other
considerations even where no similar benefit would accrue to holders of shares of our Class A common stock. Pursuant to
the Bipartisan Budget Act of 2015, for tax years beginning after December 31, 2017, if the IRS makes audit adjustments to
Baldwin Holdings’ federal income tax returns, it may assess and collect any taxes (including any applicable penalties and
interest) resulting from such audit adjustment directly from Baldwin Holdings. If, as a result of any such audit adjustment,
Baldwin Holdings is required to make payments of taxes, penalties and interest, Baldwin Holdings’ cash available for
distributions to us may be substantially reduced. These rules are not applicable to Baldwin Holdings for tax years
beginning on or prior to December 31, 2017. In addition, the Holders’ significant ownership in us and approval rights
under the 2019 Stockholders Agreement and/or the 2024 Stockholders Agreement may discourage someone from making
a significant equity investment in us, or could discourage transactions involving a change in control, including transactions
in which you as a holder of shares of our Class A common stock might otherwise receive a premium for your shares over
the then-current market price.
In certain circumstances, Baldwin Holdings will be required to make distributions to us and the other holders of LLC
Units, and the distributions that Baldwin Holdings will be required to make may be substantial.
Under the Amended LLC Agreement, Baldwin Holdings will generally be required from time to time to make pro rata
distributions in cash to us and the other holders of LLC Units at certain assumed tax rates in amounts that are intended to
be sufficient to cover the taxes on our and the other LLC Unit holders’ respective allocable shares of the taxable income of
Baldwin Holdings. As a result of (i) potential differences in the amount of net taxable income allocable to us and the other
LLC Unit holders, (ii) the lower tax rate applicable to corporations than individuals and (iii) the favorable tax benefits that
we anticipate receiving from (a) previous acquisitions by Baldwin of LLC Units and future taxable redemptions or
exchanges of LLC Units for shares of our Class A common stock or cash and (b) payments under the Tax Receivable
Agreement, we expect that these tax distributions will be in amounts that exceed our tax liabilities and obligations to make
payments under the Tax Receivable Agreement. Our board of directors will determine the appropriate uses for any excess
cash so accumulated, which may include, among other uses, dividends, repurchases of our Class A common stock, the
payment of obligations under the Tax Receivable Agreement and the payment of other expenses. We will have no
obligation to distribute such cash (or other available cash other than any declared dividend) to our stockholders. No
adjustments to the redemption or exchange ratio of LLC Units for shares of Class A common stock will be made as a result
of either (i) any cash distribution by us or (ii) any cash that we retain and do not distribute to our stockholders. To the
extent that we do not distribute such excess cash as dividends on our Class A common stock and instead, for example,
hold such cash balances or lend them to Baldwin Holdings, holders of LLC Units would benefit from any value attributable
to such cash balances as a result of their ownership of Class A common stock following a redemption or exchange of their
LLC Units.
We will be required to pay Baldwin Holdings’ LLC Members and any other persons that become parties to the Tax
Receivable Agreement for certain tax benefits we may receive, and the amounts we may pay could be significant.
Previous acquisitions by Baldwin of LLC Units from Baldwin Holdings' LLC Members and future taxable redemptions or
exchanges by Baldwin Holdings’ LLC Members of LLC Units for shares of our Class A common stock or cash, as well as
other transactions described herein, are expected to result in tax basis adjustments to the assets of Baldwin Holdings that
will be allocated to us and thus produce favorable tax attributes. These tax attributes would not be available to us in the
absence of those transactions. The tax basis adjustments are expected to reduce the amount of tax that we would
otherwise be required to pay in the future.
The Tax Receivable Agreement with Baldwin Holdings’ LLC Members provides for the payment by us to Baldwin Holdings’
LLC Members of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that
we actually realize as a result of (i) any increase in tax basis in Baldwin’s assets resulting from (a) previous acquisitions by
Baldwin of LLC Units from Baldwin Holdings’ LLC Members, (b) the purchase of LLC Units from Baldwin Holdings’ LLC
Members using the net proceeds from any future offering, (c) redemptions or exchanges by Baldwin Holdings’ LLC
Members of LLC Units for shares of our Class A common stock or cash or (d) payments under the Tax Receivable
Agreement and (ii) tax benefits related to imputed interest resulting from payments made under the Tax Receivable
Agreement. The payment obligations under the Tax Receivable Agreement are our obligations and not obligations of
Baldwin Holdings.
42
The actual increases in tax basis with respect to future taxable redemptions, exchanges or purchases of LLC Units, as well
as the amount and timing of any payments we are required to make under the Tax Receivable Agreement will depend on a
number of factors, including the market value of our Class A common stock at the time of future redemptions or
exchanges, the prevailing federal tax rates applicable to us over the life of the Tax Receivable Agreement (as well as the
assumed combined state and local tax rate), the amount and timing of the taxable income that we generate in the future
and the extent to which future redemptions, exchanges or purchases of LLC Units are taxable transactions.
Payments under the Tax Receivable Agreement are not conditioned on Baldwin Holdings’ LLC Members’ continued
ownership of us. There may be a material negative effect on our liquidity if the payments under the Tax Receivable
Agreement exceed the actual benefits we receive in respect of the tax attributes subject to the Tax Receivable Agreement
and/or distributions to us by Baldwin Holdings are not sufficient to permit us to make payments under the Tax Receivable
Agreement.
In addition, although we are not aware of any issue that would cause the IRS to challenge the tax basis increases or other
benefits arising under the Tax Receivable Agreement, Baldwin Holdings’ LLC Members will not reimburse us for any
payments previously made if such tax basis increases or other tax benefits are subsequently disallowed, except that any
excess payments made to Baldwin Holdings’ LLC Members will be netted against future payments otherwise to be made
under the Tax Receivable Agreement, if any, after our determination of such excess. As a result, in such circumstances, we
could make payments to Baldwin Holdings’ LLC Members under the Tax Receivable Agreement that are greater than our
actual cash tax savings and we may not be able to recoup those payments, which could negatively impact our liquidity.
In addition, the Tax Receivable Agreement provides that, upon certain mergers, asset sales or other forms of business
combination, or certain other changes of control, our or our successor’s obligations with respect to tax benefits would be
based on certain assumptions, including that we or our successor would have sufficient taxable income to fully utilize the
increased tax deductions and tax basis and other benefits covered by the Tax Receivable Agreement. As a result, upon a
change of control, we could be required to make payments under the Tax Receivable Agreement that are greater than the
specified percentage of our actual cash tax savings, which could negatively impact our liquidity.
This provision of the Tax Receivable Agreement may result in situations where Baldwin Holdings’ LLC Members have
interests that differ from or are in addition to those of our other stockholders. In addition, we could be required to make
payments under the Tax Receivable Agreement that are substantial and in excess of our, or a potential acquirer’s, actual
cash savings in income tax.
Our obligations under the Tax Receivable Agreement will also apply with respect to any person who is issued LLC Units in
the future and who becomes a party to the Tax Receivable Agreement.
Finally, because we are a holding company with no operations of our own, our ability to make payments under the Tax
Receivable Agreement depends on the ability of Baldwin Holdings to make distributions to us. The 2024 Credit Agreement
restricts the ability of Baldwin Holdings to make distributions to us, which could affect our ability to make payments under
the Tax Receivable Agreement. To the extent that we are unable to make payments under the Tax Receivable Agreement
for any reason, such payments will be deferred and will accrue interest until paid, which could negatively impact our
results of operations and could also affect our liquidity in periods in which such payments are made.
We are dependent upon distributions from Baldwin Holdings to pay dividends, if any, and taxes, make payments under
the Tax Receivable Agreement and pay other expenses.
As the sole managing member of Baldwin Holdings, we intend to cause Baldwin Holdings to make distributions to the
holders of LLC Units and us, in amounts sufficient to (i) cover all applicable taxes payable by us and the holders of LLC
Units, (ii) allow us to make any payments required under the Tax Receivable Agreement and (iii) fund dividends to our
stockholders in accordance with our dividend policy, to the extent that our board of directors declares such dividends.
Deterioration in the financial conditions, earnings or cash flow of Baldwin Holdings and its subsidiaries for any reason
could limit or impair their ability to pay such distributions. Additionally, to the extent that we need funds and Baldwin
Holdings is restricted from making such distributions to us under applicable law or regulation, as a result of covenants in
its debt agreements or otherwise, we may not be able to obtain such funds on terms acceptable to us, or at all, and, as a
result, could suffer a material adverse effect on our liquidity and financial condition.
Risks Relating to Ownership of our Class A Common Stock
Some provisions of Delaware law and our certificate of incorporation and by-laws may deter third parties from acquiring
us and diminish the value of our Class A common stock.
Our certificate of incorporation and by-laws provide for, among other things:
•
division of our board of directors into three classes of directors, with each class as equal in number as possible,
serving staggered three-year terms;
43
•
until the Substantial Ownership Requirement is no longer met, the Holders may designate a majority of the
nominees for election to our board of directors, including the nominee for election to serve as Chairman of our
board of directors;
•
our ability to issue additional shares of Class A common stock and to issue preferred stock with terms that our
board of directors may determine, in each case without stockholder approval (other than as specified in our
certificate of incorporation);
•
the absence of cumulative voting in the election of directors; and
•
advance notice requirements for stockholder proposals and nominations.
These provisions in our certificate of incorporation and by-laws may discourage, delay or prevent a transaction involving a
change in control of our company that is in the best interest of our minority stockholders. Even in the absence of a
takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our Class A
common stock if they are viewed as discouraging future takeover attempts. These provisions could also make it more
difficult for stockholders to nominate directors for election to our board of directors and take other corporate actions.
Certain statutory provisions afforded to stockholders are not applicable to us.
Our certificate of incorporation and Stockholders Agreement provides that, to the fullest extent permitted by law, the
doctrine of “corporate opportunity” under Delaware law will only apply against our directors and officers and their
respective affiliates for competing activities related to insurance brokerage activities. This doctrine will not apply to any
business activity other than insurance brokerage activities. Furthermore, the Pre-IPO LLC Members have business
relationships outside of our business.
Provisions of state insurance law, applicable to the AIF and any protected cells we may own from time to time in certain
captive insurance companies (and/or other ownership or participation in similar risk-bearing structures or facilities),
requiring prior approval of change of control may render more difficult or discourage takeover attempts that you may
believe are in your best interests or that might result in a substantial profit to you.
State insurance codes generally require prior approval for a change of control of an insurance holding company by the
applicable state's department of insurance. Under such state insurance law, the acquisition of 10% or more of the
outstanding voting stock of an insurer or its holding company is usually presumed to be a change in control. Approval may
be withheld even if the transaction would be in the stockholders’ best interest if the state insurance department
determines that the transaction would be detrimental to policyholders.
We may issue a substantial amount of our common stock in the future, which could cause dilution to investors and
otherwise adversely affect our stock price.
A key element of our growth strategy is to make acquisitions. As part of our acquisition strategy, we may issue shares of
our common stock, as well as LLC Units of Baldwin Holdings, as consideration for such acquisitions. These issuances could
be significant. To the extent that we make acquisitions and issue our shares of common stock as consideration, your
equity interest in us will be diluted. Any such issuance will also increase the number of outstanding shares of common
stock that will be eligible for sale in the future. Persons receiving shares of our common stock in connection with these
acquisitions may be more likely to sell off their common stock, which may influence the price of our common stock. In
addition, the potential issuance of additional shares in connection with anticipated acquisitions could lessen demand for
our common stock and result in a lower price than might otherwise be obtained. We may issue a significant amount of our
common stock in the future for other purposes as well, including in connection with financings, including to finance the
cash portion of acquisition consideration to execute on our partnership strategy, for compensation purposes, in
connection with strategic transactions or for other purposes.
We expect that our stock price will be volatile, which could cause the value of your investment to decline, and you may
not be able to resell your shares for a profit.
Securities markets worldwide have experienced, and are likely to continue to experience, significant price and volume
fluctuations. This market volatility, as well as general economic, market or political conditions, could reduce the market
price of our Class A common stock regardless of our results of operations. The trading price of our Class A common stock
is likely to be volatile and subject to wide price fluctuations in response to various factors, including:
•
market conditions in the broader stock market in general, or in our industry in particular;
•
actual or anticipated fluctuations in our quarterly financials and results of operations;
•
introduction of new products and services by us or our competitors;
•
issuance of new or changed securities analysts’ reports or recommendations;
•
investor perceptions of us and the industries in which we or our clients operate;
44
•
low trading volumes or sales, or anticipated sales, of large blocks of our Class A common stock, including those by
our existing investors or our partners;
•
concentration of Class A common stock ownership;
•
additions or departures of key personnel;
•
regulatory or political developments;
•
litigation and governmental investigations;
•
changing economic and political conditions;
•
the perceived adequacy of our ESG efforts;
•
our ability or perceived ability to:
◦
attract new clients, successfully deploy and implement our products, obtain client renewals and provide our
clients with excellent client support;
◦
increase our network of insurance company partners and the profit-sharing, override and/or contingent
commissions that we earn from such insurance company partners;
◦
adequately expand, train, integrate and retain our colleagues, including our executive officers and senior
leaders, and maintain or increase our sales force’s productivity;
◦
improve our internal control over financial reporting and disclosure controls and procedures to ensure timely
and accurate reporting of our operational and financial results;
◦
successfully introduce new products and enhance existing products;
◦
successfully deploy information technology assets for use by our colleagues and interaction with our clients
and insurance company partners;
◦
adapt to the ever-changing regulatory and legal landscape;
◦
protect sensitive, personal and confidential information and data within Baldwin’s custody from third-party
bad actors;
◦
successfully identify and acquire new partners;
◦
successfully integrate partnerships into the Company in an operationally efficient manner;
◦
service our existing indebtedness;
◦
access the capital markets or otherwise obtain access to capital to satisfy future needs of the Company;
◦
successfully introduce our products to new markets and geographies; and
◦
successfully compete against larger companies and new market entrants.
•
announced or completed acquisitions of businesses or technologies by us or our competitors; and
•
new laws or regulations or new interpretations of existing laws or regulations applicable to our business,
including developments relating to the health care industry and the marketing and sale of Medicare plans.
These and other factors may cause the market price and demand for shares of our Class A common stock to fluctuate
substantially, which may limit or prevent investors from readily selling their shares of Class A common stock and may
otherwise negatively affect the liquidity of our Class A common stock. In addition, in the past, when the market price of a
stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the
company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs
defending the lawsuit. Such a lawsuit could also divert the time and attention of our management from our business,
which could significantly harm our profitability and reputation.
Our ability to pay dividends to our Class A common stockholders may be limited by our holding company structure,
contractual restrictions and regulatory requirements.
We are a holding company and have no material assets other than our ownership of LLC Units in Baldwin Holdings and we
do not have any independent means of generating commissions and fees. We intend to cause Baldwin Holdings to make
pro rata distributions to Baldwin Holdings’ LLC Members and us in an amount at least sufficient to allow us and Baldwin
Holdings’ LLC Members to pay all applicable taxes, to make payments under the Tax Receivable Agreement and to pay our
corporate and other overhead expenses. Baldwin Holdings is a distinct legal entity and may be subject to legal or
contractual restrictions that, under certain circumstances, may limit our ability to obtain cash from them. If Baldwin
Holdings is unable to make distributions, we may not receive adequate distributions, which could materially and adversely
affect our dividends and financial position and our ability to fund any dividends to Class A common stock.
45
Our board of directors will periodically review the cash generated from our business and the capital expenditures required
to finance our global growth plans and determine whether to declare periodic dividends to our stockholders. Our board of
directors will take into account general economic and business conditions, including our financial condition and results of
operations, capital requirements, contractual restrictions, including restrictions and covenants contained in the 2024
Credit Agreement, business prospects and other factors that our board of directors considers relevant. In addition, the
2024 Credit Agreement limits the amount of distributions that Baldwin Holdings can make to us and the purposes for
which distributions could be made. Accordingly, we may not be able to pay dividends to our Class A common stockholders
even if our board of directors would otherwise deem it appropriate. Refer to Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources for additional information.
Short selling could increase the volatility of our stock price of our Class A Common Stock.
Short selling is the practice of selling securities that the seller does not own but rather has borrowed or intends to borrow
from a third party with the intention of buying identical securities at a later date to return to the lender. A short seller
hopes to profit from a decline in the value of the securities between the sale of the borrowed securities and the purchase
of the replacement shares, as the short seller expects to pay less in that purchase than it received in the sale. As it is
therefore in the short seller’s interest for the price of the stock to decline, some short sellers publish, or arrange for the
publication of, opinions or characterizations regarding the relevant issuer, its business prospects and similar matters,
calculated to or which may create negative market momentum, and which may permit them to obtain profits for
themselves as a result of selling the stock short. These opinions and characterizations may contain falsehoods, incomplete
and deceptive statements and/or otherwise be misleading. Issuers whose securities have historically had limited trading
volumes, and issuers who are susceptible to relatively high volatility levels, can be particularly vulnerable to such short
seller attacks. In addition to impacting the pricing of our stock, such short seller attacks could also divert the time and
attention of our management from our business, which could significantly harm our profitability and reputation.
If securities analysts do not publish research or reports about our business or if they publish negative evaluations of our
Class A common stock, the price of our Class A common stock could decline.
The trading market for our Class A common stock will rely in part on the research and reports that industry or securities
analysts publish about us or our business. We currently have research coverage by industry and securities analysts. If no
or few analysts continue coverage of us, the trading price of our Class A common stock would likely decrease. If one or
more of the analysts covering our business downgrade their evaluations of our Class A common stock, the price of our
Class A common stock could decline. If one or more of these analysts cease to cover our Class A common stock, we could
lose visibility in the trading market for our Class A common stock, which in turn could cause our Class A common stock
price to decline.
If we experience material weaknesses or significant deficiencies in the future, or otherwise fail to maintain an effective
environment of internal controls, we may not be able to accurately or timely report our financial condition or results of
operations, which may adversely affect investor confidence in us and, as a result, the value of our common stock.
If we identify material weaknesses or significant deficiencies in our internal control over financial reporting in the future, or
if we are unable to comply with the demands that will be placed upon us as a public company, including the requirements
of Section 404 of the Sarbanes-Oxley Act, in a timely manner, we may be unable to accurately report our financial results,
or report them within the timeframes required by the SEC. In addition, if we are unable to disclose that our internal control
over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion
as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and
completeness of our financial reports, we may face restricted access to the capital markets, and our stock price may be
adversely affected.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
We face significant and persistent cybersecurity risks due to: the scope of geographies, networks and systems we must
defend against cybersecurity attacks; the complexity, technical sophistication, value, and widespread use of our systems,
products and processes; the attractiveness of our systems, products and processes to threat actors (including state-
sponsored organizations) seeking to inflict harm on us or our clients; and our use of third-party products, services and
components.
46
While we have not, as of the date of this Form 10-K, experienced a cybersecurity threat or incident that resulted in a
material adverse impact to our business or operations, there can be no guarantee that we will not experience such an
incident in the future. Such incidents, whether or not successful, could result in our incurring significant costs related to,
for example, rebuilding our internal systems, implementing additional threat protection measures, providing
modifications or replacements to our products and services, defending against litigation, responding to regulatory
inquiries or actions, paying damages, providing clients with incentives to maintain a business relationship with us, or
taking other remedial steps with respect to third parties, as well as incurring significant reputational harm. In addition,
these threats are constantly evolving, thereby increasing the difficulty of successfully defending against them or
implementing adequate preventative measures. We seek to detect and investigate unauthorized attempts and attacks
against our network, products and services, and to prevent their occurrence and recurrence where practicable through
changes or updates to our internal processes and tools and changes or updates to our products and services; however, we
remain potentially vulnerable to known or unknown threats. In some instances, we, our trading partners, our clients, and
our service providers and contractors can be unaware of a threat or incident or its magnitude and effects. Further, there is
increasing regulation regarding responses to cybersecurity incidents, including reporting to regulators, which could subject
us to additional liability and reputational harm. Refer to Item 1A. Risk Factors of this Annual Report on Form 10-K for more
information on our cybersecurity risks.
Our business involves the storage and transmission of a significant amount of confidential and sensitive information. As a
result, we take the confidentiality, integrity and availability of this highly sensitive information seriously and invest
significant time, effort and resources into protecting such information. Our cybersecurity strategy was designed with the
foregoing principles in mind and prioritizes detecting and responding to threats and effective management of security
risks.
To implement our cybersecurity strategy, we maintain various safeguards to secure the data we hold, including encrypting
sensitive data, utilizing a robust 24/7/365 security monitoring system, regularly assessing product features for security
vulnerabilities, conducting continuous internal penetration tests, and leveraging multi-factor authentication to help
effectively protect sensitive information and appropriate access rights. We also have data and cybersecurity protection
and control policies to facilitate a secure environment for sensitive information and to preserve the availability of critical
data and systems. We have processes in place to assess and manage vendor cybersecurity risks, which include initial and
periodic security program reviews through the use of third-party vendors who specialize in this subject matter. We have
engaged our independent, internal audit team that reports directly to the Chair of the Audit Committee of our board of
directors to audit our adherence to our cybersecurity policies. These audits help us assess our internal preparedness,
adherence to best practices and industry standards, and compliance with applicable laws and regulations as well as help
us to identify areas for continued focus and improvement. We conduct annual information security awareness training for
employees involved in the systems or processes connected to confidential and sensitive information. We also carry
insurance that provides certain, limited protection against potential losses arising from a cybersecurity incident.
The Technology & Cyber Risk Committee of our board of directors (the “TCRC”) is responsible for overseeing and reviewing
our cybersecurity program and cybersecurity risk exposure and the steps taken to monitor and mitigate such exposure.
The TCRC updates the full board of directors on cybersecurity matters periodically.
Our information security team for IAS, MIS and Corporate is led by our Chief Digital & Information Officer (“CDIO”), who
also serves as our Chief Information Security Officer (“CISO”) for IAS, MIS and Corporate. Our CDIO/CISO reports to our
President, The Baldwin Group & CEO, Retail Brokerage Operations. Our CDIO/CISO has served in the role since 2021 and
has experience in application security, intrusion detection, penetration testing, Continuous Threat Exposure Management
("CTEM"), and unconventional cyber-attack vectors, having previously led technology teams at Comerica Bank, HSBC,
Citibank and General Electric. Our CDIO/CISO oversees a team of information security professionals who are devoted full
time to assessing and managing cybersecurity threats on a day-to-day basis. Our CDIO/CISO attends each quarterly
meeting of the TCRC to brief members on information security matters and discuss cybersecurity risks generally.
Our information security team for UCTS is led by our Chief Technology Officer—UCTS (“CTO”), who also serves as our CISO
for UCTS. Our CTO/CISO reports to our President, The Baldwin Group & CEO, Underwriting, Capacity and Technology
Operations. Our CTO/CISO has served in the role since 2022 and has experience in application security, intrusion
detection, penetration testing, complex threat modeling, and unconventional cyber-attack vectors, having previously led
technology teams across various sectors, including financial services and travel management. Our CTO/CISO oversees a
team of information security professionals who are devoted full time to assessing and managing cybersecurity threats on
a day-to-day basis. Our CTO/CISO also attends each quarterly meeting of the TCRC to brief members on information
security matters and discuss cybersecurity risks generally.
In addition, our management team has established an internal Cyber Steering Committee (the “Cyber SteerCo”), which
includes processes designed to identify, assess, categorize, and monitor key current and evolving risks facing us, including
cybersecurity risks. Each of the CDIO/CISO and CTO/CISO sit on the Cyber SteerCo along with our General Counsel and
former CISO.
47
Management is made aware of current and evolving cybersecurity risks through the Cyber SteerCo reporting.
Furthermore, in the event of a material or potentially material cybersecurity event, our process as designed is intended to
result in senior members of management being promptly informed of such event and oversee triage, response, and
disclosure efforts pursuant to the terms of a documented incident response plan.
ITEM 2. PROPERTIES
Our corporate headquarters is located in leased offices in Tampa, Florida. The leases consist of approximately 105,000
square feet and expire in August 2030. Our insurance brokerage business leases office space in approximately 110
operating locations located in 24 states throughout the U.S. These offices are generally located in shopping centers, small
office parks and office buildings, with lease terms expiring through the next ten years. These facilities are suitable for our
needs and we believe that they are well maintained.
ITEM 3. LEGAL PROCEEDINGS
Please refer to Note 20 to our consolidated financial statements included in Part II, Item 8. Financial Statements and
Supplementary Data of this report for a discussion of legal proceedings to which the Company is subject.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
48
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES
OF EQUITY SECURITIES
Our Class A common stock is listed on the Nasdaq Global Select Market (“Nasdaq”) under the symbol “BWIN.” Our Class B
common stock is not listed nor traded on any stock exchange.
On February 20, 2025, there were 113 stockholders of record of our Class A common stock and 57 stockholders of record
of our Class B common stock. The number of record holders does not include persons who held shares of our Class A
common stock in nominee or “street name” accounts through brokers.
Dividend Policy
Subject to funds being legally available, we intend to cause Baldwin Holdings to make pro rata distributions to the holders
of LLC Units and us in an amount at least sufficient to allow us and the holders of LLC Units to pay all applicable taxes, to
make payments under the Tax Receivable Agreement and to pay our corporate and other overhead expenses. The
declaration and payment of any dividends will be at the sole discretion of our board of directors, which may change our
dividend policy at any time. We do not currently pay dividends outside of tax payments. Should that change, our board of
directors will take into account:
•
general economic and business conditions;
•
our financial condition and operating results;
•
our available cash and current and anticipated cash needs;
•
our capital requirements;
•
contractual, legal, tax and regulatory restrictions and implications on the payment of dividends by us to our
stockholders or by our subsidiaries (including Baldwin Holdings) to us; and
•
such other factors as our board of directors may deem relevant.
Baldwin is a holding company and has no material assets other than its ownership of LLC Units in Baldwin Holdings, and
as a consequence, our ability to declare and pay dividends to the holders of our Class A common stock will be subject to
the ability of Baldwin Holdings to provide distributions to us. If Baldwin Holdings makes such distributions, the holders of
LLC Units will be entitled to receive equivalent distributions from Baldwin Holdings. However, because we must pay taxes,
make payments under the Tax Receivable Agreement and pay our expenses, amounts ultimately distributed as dividends
to holders of our Class A common stock are expected to be less than the amounts distributed by Baldwin Holdings to the
holders of LLC Units on a per share basis.
Assuming Baldwin Holdings makes distributions to its members in any given year, the determination to pay dividends, if
any, to our Class A common stockholders out of the portion, if any, of such distributions remaining after our payment of
taxes, Tax Receivable Agreement payments and expenses (any such portion, an “excess distribution”) will be made by our
board of directors. Because our board of directors may determine to pay or not pay dividends to our Class A common
stockholders, our Class A common stockholders may not necessarily receive dividend distributions relating to excess
distributions, even if Baldwin Holdings makes such distributions to us.
Sales of Unregistered Securities
None.
49
Issuer Purchases of Equity Securities
The following table provides information about our repurchase of shares of our Class A common stock during the three
months ended December 31, 2024:
Total Number
of Shares
Purchased
(1)
Average Price
Paid per Share
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
Maximum Value
that may yet be
Purchased under
the Plans or
Programs
October 1, 2024 to October 31, 2024
55,914
$
49.10
—
$
—
November 1, 2024 to November 30, 2024
6,235
36.72
—
—
December 1, 2024 to December 31, 2024
64,301
48.93
—
—
Total
126,450
$
48.40
—
$
—
__________
(1)
We purchased 126,450 shares during the three months ended December 31, 2024, which were acquired from our employees to
cover required tax withholding on the vesting of shares granted under the Baldwin Omnibus Incentive and Partnership Inducement
Award Plans.
Performance Graph
The following performance graph compares the cumulative total shareholder return of an investment in our Class A
common stock from December 31, 2019 through December 31, 2024 to the cumulative total return of the Russell 2000
Index (“Russell 2000”) and the Standard & Poor Composite 1500 Insurance Brokers Index (“S&P 1500”). The graph assumes
that $100 was invested on December 31, 2019 and the reinvestment of dividends, if any. The share price performance
presented below is not necessarily indicative of future results.
Comparison of Cumulative Total Shareholder Return
Baldwin
Russell 2000
S&P 1500
12/31/19
12/31/20
12/31/21
12/31/22
12/31/23
12/31/24
50
100
150
200
250
50
ITEM 6. RESERVED
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction
with our consolidated financial statements and the related notes and other financial information included elsewhere in
this Annual Report on Form 10-K. In addition to historical consolidated financial information, the following discussion
contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results may differ materially
from those discussed in the forward-looking statements as a result of various factors, including those set forth in Item 1A.
Risk Factors and included elsewhere in this Annual Report on Form 10-K.
EXECUTIVE SUMMARY OF 2024 FINANCIAL RESULTS
We are an independent insurance distribution firm providing indispensable expertise and insights that strive to give our
clients the confidence to pursue their purpose, passion and dreams. The following is a summary of our 2024 financial
results.
Revenues for the year ended December 31, 2024 were $1.4 billion, an increase of $170.5 million, or 14%, year over year.
Core commissions and fees grew organically by $190.0 million as a result of new and renewal business from clients across
industry sectors and continued outperformance from MSI. In addition, profit-sharing and other revenue grew organically
by $6.9 million as a function of improvements in loss ratios and the number of policies sold for MIS and IAS, offset in part
by a reduction in UCTS profit-sharing revenue, which resulted from historically strong underwriting performance in 2023.
This growth was offset in part by commissions and fees of $28.8 million derived from our Wholesale Business between
March and December of 2023, for which there were no comparable revenues earned in 2024 as a result of the sale of the
business in the first quarter of 2024. In addition, investment income grew $5.2 million due to an improved cash
management strategy and growing yield on our invested cash.
Operating expenses for the year ended December 31, 2024 were $1.3 billion, an increase of $67.3 million, or 5%, year over
year. The increase in operating expenses was primarily attributable to commissions, employee compensation and
benefits, resulting in part from the correlation of compensation to our revenue growth, and as a result of investing in our
future as we continue to launch new products in our MSI product suite and expand our business. This increase was offset
in part by a decrease in the change in fair value of contingent consideration, which was primarily impacted by a gain
recognized in connection with the reclassification of colleague earnout incentives into compensation expense.
Interest expense, net, for the year ended December 31, 2024 was $123.6 million, an increase of $4.2 million, or 3%, year
over year. Interest expense, net, increased as a result of higher average borrowings, offset in part by lower average
interest rates resulting from our May 2024 debt refinancing and federal rate reductions. We expect interest expense to
remain relatively flat on a year-over-year basis. Refer to the Liquidity and Capital Resources section further below for
additional information on our May 2024 refinancing.
During the year ended December 31, 2024, we reported a gain on divestitures of $39.0 million, which was driven by a
$35.1 million gain recorded in connection with the sale of our Wholesale Business during the first quarter of 2024. We also
reported a loss on extinguishment and modification of debt of $15.1 million related to our May 2024 debt refinancing.
Net loss for the year ended December 31, 2024 was $41.1 million, or a $0.39 loss per fully diluted share, compared to a net
loss of $164.0 million, or a $1.50 loss per fully diluted share, in the same period of 2023.
Adjusted EBITDA for the year ended December 31, 2024 was $312.5 million, an increase of $62.3 million year over year.
Adjusted EBITDA margin was 22.5% for 2024, a 200 basis point expansion compared to 20.5% in 2023.
Adjusted net income for the year ended December 31, 2024 was $176.9 million, an increase of $45.8 million year over
year. Adjusted diluted EPS was $1.50 for 2024, an increase of 34% over $1.12 for 2023.
Organic revenue for the year ended December 31, 2024 was $1.4 billion compared to $1.2 billion for the same period of
2023. Organic revenue growth was $196.9 million, or 17%, for 2024 compared to $187.2 million, or 19%, for 2023.
Refer to the Non-GAAP Financial Measures section below for reconciliations of adjusted EBITDA, adjusted EBITDA margin,
adjusted net income, adjusted diluted EPS, organic revenue and organic revenue growth to the most directly comparable
GAAP financial measures.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
For a discussion of our 2022 financial results and a comparison of financial results for the years ended December 31, 2023
to 2022, refer to Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of
our Annual Report on Form 10-K filed with the SEC on February 28, 2024.
51
The following discussion and analysis of our financial condition and results of operations should be read in conjunction
with our financial statements as of December 31, 2024 and 2023 and for the years ended December 31, 2024, 2023 and
2022 and the related notes and other financial information included in Item 8. Financial Statements and Supplementary
Data of this Annual Report on Form 10-K.
In addition to historical financial information, the following discussion and analysis contains forward-looking statements
that involve risks, uncertainties and assumptions. Our actual results and timing of selected events may differ materially
from those anticipated in these forward-looking statements as a result of many factors, including those discussed under
Item 1A. Risk Factors.
The following is a discussion of our consolidated results of operations for the years ended December 31, 2024 and 2023.
For the Years Ended
December 31,
Variance
(in thousands, except percentages)
2024
2023
Amount
%
Revenues:
Core commissions and fees
$ 1,268,790
$ 1,107,575
$
161,215
15 %
Profit-sharing and other income
108,326
104,253
4,073
4 %
Commissions and fees
1,377,116
1,211,828
165,288
14 %
Investment income
11,921
6,727
5,194
77 %
Total revenues
1,389,037
1,218,555
170,482
14 %
Operating expenses:
Commissions, employee compensation and benefits
1,032,048
911,354
120,694
13 %
Other operating expenses
192,366
190,267
2,099
1 %
Amortization expense
102,730
92,704
10,026
11 %
Change in fair value of contingent consideration
(4,949)
61,083
(66,032)
(108) %
Depreciation expense
6,194
5,698
496
9 %
Total operating expenses
1,328,389
1,261,106
67,283
5 %
Operating income (loss)
60,648
(42,551)
103,199
n/m
Other income (expense):
Interest expense, net
(123,644)
(119,465)
(4,179)
3 %
Gain on divestitures
38,953
—
38,953
—
Loss on extinguishment and modification of debt
(15,113)
—
(15,113)
—
Other expense, net
(194)
(718)
524
(73) %
Total other expense
(99,998)
(120,183)
20,185
(17) %
Loss before income taxes
$
(39,350) $
(162,734) $
123,384
(76) %
__________
n/m not meaningful
Seasonality
The insurance brokerage market is seasonal and our results of operations are somewhat affected by seasonal trends. Our
adjusted EBITDA and adjusted EBITDA margins are typically highest in the first quarter and lowest in the fourth quarter.
This variation is primarily due to fluctuations in our revenues, while overhead remains consistent throughout the year. Our
revenues are generally highest in the first quarter due to a higher degree of first quarter policy commencements and
renewals in certain IAS and MIS lines of business such as employee benefits, commercial and Medicare. In addition, a
higher proportion of our first quarter revenue is derived from our highest margin businesses.
Partnerships can significantly impact adjusted EBITDA and adjusted EBITDA margins in a given year and may increase the
amount of seasonality within the business, especially results attributable to partnerships that have not been fully
integrated into our business or owned by us for a full year.
52
Commissions and Fees
We earn commissions and fees by facilitating the arrangement between insurance company partners and clients for the
carrier to provide insurance to the insured party. Our commissions are usually a percentage of the premium paid by the
insured and generally depend on the type of insurance, the particular insurance company partner and the nature of the
services provided. Under certain arrangements with clients, we earn pre-negotiated service fees for insurance placement
services. Additionally, we earn policy fees for acting in the capacity of an MGA and fulfilling certain administrative functions
on behalf of insurance company partners, including delivery of policy documents, processing payments and other
administrative functions. We may also receive profit-sharing commissions, which represent forms of variable
consideration paid by insurance company partners associated with the placement of coverage. Profit-sharing commissions
are generally based on underwriting results, but may also contain considerations for volume, growth or retention. Other
revenue streams include other ancillary income, premium financing income, and marketing income based on negotiated
cost reimbursement for fulfilling specific targeted Medicare marketing campaigns.
Commissions and fees increased $165.3 million, or 14%, year over year to $1.4 billion driven by organic growth in core
commissions and fees of $190.0 million related to new and renewal business across client industry sectors and continued
outperformance from MSI. In addition, profit-sharing and other revenue grew organically $6.9 million as a function of
improvements in loss ratios and the number of policies sold for MIS and IAS, offset in part by a reduction in UCTS profit-
sharing revenue, which resulted from historically strong underwriting performance in 2023. This growth was offset in part
by commissions and fees of $28.8 million derived from our Wholesale Business between March and December of 2023, for
which there were no comparable revenues earned in 2024 as a result of the sale of the business in the first quarter of
2024.
Investment Income
Investment income is earned by investing assets held in trust. Investment income increased $5.2 million year over year
due to improvements in our cash management strategy and growing yield on our invested cash.
Commissions, Employee Compensation and Benefits
Commissions, employee compensation and benefits is our largest expense. It consists of (i) base compensation comprising
salary, bonuses and benefits paid and payable to colleagues, commissions paid to colleagues and outside commissions
paid to others; and (ii) equity-based compensation associated with the grants of restricted and unrestricted stock awards
to senior management, colleagues, risk advisors and directors. We expect to continue to experience a general rise in
commissions, employee compensation and benefits expense commensurate with expected revenue growth as our
compensation arrangements with our colleagues and risk advisors contain significant bonus or commission components
driven by the results of our operations. In addition, we operate in competitive markets for human capital and need to
maintain competitive compensation levels as we expand geographically and create new products and services.
Commissions, employee compensation and benefits expense increased $120.7 million, or 13%, year over year, primarily
related to outside commissions, which increased $74.1 million, after excluding outside commissions related to the
Wholesale Business between March and December of 2023 of $15.8 million, due to growth in UCTS and MIS. In addition,
colleague earnout incentives, which relate to contingent earnout liabilities that were reclassified, at the partner's option, to
an earnout incentive bonus payable to colleagues, increased $33.4 million. Other increases, after excluding amounts
related to the Wholesale Business between March and December of 2023, were driven by continued investments in
headcount to support the growth of existing and new products, including colleague compensation (fixed compensation
plus share-based compensation) of $21.5 million, inside advisor commissions of $15.5 million, and benefits and other
expense of $12.3 million. These increases were partially offset by commissions, employee compensation and benefits
expense of $23.7 million incurred by our Wholesale Business between March and December of 2023, for which there were
no comparable costs incurred in 2024, and a decrease in severance expense of $12.6 million relating primarily to the
retirement of two of our executive officers at the end of 2023.
Other Operating Expenses
Other operating expenses include travel, accounting, legal and other professional fees, placement fees, rent, office
expenses and other costs associated with our operations. Our occupancy-related costs and professional services
expenses, in particular, generally increase or decrease in relative proportion to the number of our colleagues and the
overall size and scale of our business operations.
Other operating expenses increased $2.1 million year over year, driven by higher advertising and marketing costs of $2.5
million in connection with our rebranding, travel and entertainment of $2.1 million to support the growth in IAS, payment
processing fees for our MGA business of $1.9 million, and legal claims and settlements expense of $1.4 million. These
increases were offset by decreases to several other operating expenses due in part to certain cost saving measures we
have implemented, including the renegotiation of vendor contracts, and post partnership integration operational
efficiencies gained, including lower partnership integration and infrastructure-related costs of $3.7 million and rent
expense of $2.2 million.
53
Amortization Expense
Amortization expense increased $10.0 million year over year, primarily due to the acceleration of trade names
amortization in connection with rebranding within IAS and higher amortization of intangible assets recorded in connection
with our Westwood Partnership, which are amortized based on a pattern of estimated economic benefit, offset in part by a
reduction in amortization related to the write-off of intangible assets in connection with the sale of our Wholesale
Business during the first quarter of 2024.
Change in Fair Value of Contingent Consideration
Change in fair value of contingent consideration was a $4.9 million gain for the year ended December 31, 2024 compared
to a $61.1 million loss for the same period of 2023. Several of our partnership agreements contain provisions that permit
former selling shareholders to allocate portions of the earnout proceeds to colleagues who meaningfully contributed to
the partnered firm’s achievement of the earnout. When this determination is made, we record compensation expense that
is an offset to the change in contingent consideration and neutral to net income. As a result of this practice, the change in
fair value of contingent consideration for the year ended December 31, 2024 was reduced by $39.3 million of colleague
earnout incentives, which were reclassified, at the partner's option, from contingent earnout liabilities to an earnout
incentive bonus payable to colleagues, thereby resulting in a gain in the change in fair value of contingent consideration
and an increase to commissions, employee compensation and benefits expense. This gain was offset in part by positive
changes in revenue growth trends of certain partners and accretion of the contingent earnout obligations approaching
their respective measurement dates.
Interest Expense, Net
Interest expense, net, increased $4.2 million year over year resulting from higher average borrowings, offset in part by
lower average interest rates resulting from the May 2024 debt refinancing and federal rate reductions. We expect interest
expense to remain relatively flat on a year-over-year basis due to an anticipated increase in borrowings from our revolving
credit facility to fund the settlement of contingent earnout liabilities, offset by lower expected average interest rates.
Refer to Item 7A. Quantitative and Qualitative Disclosures About Market Risk for further discussion of the impact of
interest rates on our results of operations, financial condition and cash flows.
Gain on Divestitures
Gain on divestitures of $39.0 million for the year ended December 31, 2024 was driven by a $35.1 million gain recorded in
connection with the sale of our Wholesale Business during the first quarter of 2024.
Loss on Extinguishment and Modification of Debt
Loss on extinguishment and modification of debt of $15.1 million for the year ended December 31, 2024 relates to the
May 2024 debt refinancing.
FINANCIAL CONDITION—COMPARISON OF CONSOLIDATED FINANCIAL CONDITION AT DECEMBER 31, 2024 TO
DECEMBER 31, 2023.
Our total assets and total liabilities increased $32.8 million and $42.9 million, respectively, year over year. The most
significant changes in assets and liabilities are described below.
Premiums, commissions and fees receivable, net increased $74.3 million and premiums payable to insurance companies
increased $85.7 million. The increase in each can be attributed to our revenue growth and the timing of cash collections
and payments.
Intangible assets, net decreased $63.9 million as a result of amortization expense of $102.7 million, offset in part by
capitalized software development costs of $38.4 million related to infrastructure to support our business.
Long term debt increased $428.0 million and our revolving line of credit decreased $341.0 million due to the May 2024
refinancing in which we upsized the term loan under a new $840 million senior secured first lien term loan facility and
entered into a new senior secured first lien revolving facility with commitments in an aggregate principal amount of
$600 million. Proceeds from the May 2024 refinancing were used to paydown our revolving line of credit.
Contingent earnout liabilities decreased $130.9 million resulting from settlements of $126.2 million and a change in fair
value of contingent consideration gain of $4.9 million, which was impacted by the reclassification of $39.3 million of
colleague earnout incentives to commissions, employee compensation and benefits expense.
Assets and liabilities held for sale of $64.4 million and $43.9 million, respectively, at December 31, 2023 were written off in
connection with the sale of our Wholesale Business on March 1, 2024. Refer to Note 3 to our consolidated financial
statements included elsewhere in this Annual Report on Form 10-K for more information.
54
NON-GAAP FINANCIAL MEASURES
Adjusted EBITDA, adjusted EBITDA margin, organic revenue, organic revenue growth, adjusted net income and adjusted
diluted earnings per share (“EPS”), are not measures of financial performance under GAAP and should not be considered
substitutes for GAAP measures, including commissions and fees (for organic revenue and organic revenue growth), net
income (loss) (for adjusted EBITDA and adjusted EBITDA margin), net income (loss) attributable to Baldwin (for adjusted
net income) or diluted earnings (loss) per share (for adjusted diluted EPS), which we consider to be the most directly
comparable GAAP measures. These non-GAAP financial measures have limitations as analytical tools, and when assessing
our operating performance, you should not consider these non-GAAP financial measures in isolation or as substitutes for
commissions and fees, net income (loss), net income (loss) attributable to Baldwin, diluted earnings (loss) per share or
other consolidated income statement data prepared in accordance with GAAP. Other companies in our industry may
define or calculate these non-GAAP financial measures differently than we do, and accordingly, these measures may not
be comparable to similarly titled measures used by other companies.
We define adjusted EBITDA as net income (loss) before interest, taxes, depreciation, amortization, change in fair value of
contingent consideration and certain items of income and expense, including share-based compensation expense,
transaction-related partnership and integration expenses, severance, and certain non-recurring items, including those
related to raising capital. We believe that adjusted EBITDA is an appropriate measure of operating performance because it
eliminates the impact of income and expenses that do not relate to business performance, and that the presentation of
this measure enhances an investor’s understanding of our financial performance.
Adjusted EBITDA margin is adjusted EBITDA divided by total revenues. Adjusted EBITDA margin is a key metric used by
management and our board of directors to assess our financial performance. We believe that adjusted EBITDA margin is
an appropriate measure of operating performance because it eliminates the impact of income and expenses that do not
relate to business performance, and that the presentation of this measure enhances an investor’s understanding of our
financial performance. We believe that adjusted EBITDA margin is helpful in measuring profitability of operations on a
consolidated level.
Adjusted EBITDA and adjusted EBITDA margin have important limitations as analytical tools. For example, adjusted EBITDA
and adjusted EBITDA margin:
•
do not reflect any cash capital expenditure requirements for the assets being depreciated and amortized that
may have to be replaced in the future;
•
do not reflect changes in, or cash requirements for, our working capital needs;
•
do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our
ongoing operations;
•
do not reflect the interest expense or the cash requirements necessary to service interest or principal payments
on our debt;
•
do not reflect share-based compensation expense and other non-cash charges; and
•
exclude certain tax payments that may represent a reduction in cash available to us.
We calculate organic revenue based on commissions and fees for the relevant period by excluding (i) the first twelve
months of commissions and fees generated from new partners and (ii) commissions and fees from divestitures. Organic
revenue growth is the change in organic revenue period-to-period, with prior period results adjusted to (i) include
commissions and fees that were excluded from organic revenue in the prior period because the relevant partners had not
yet reached the twelve-month owned mark, but which have reached the twelve-month owned mark in the current period,
and (ii) exclude commissions and fees related to divestitures from organic revenue. For example, commissions and fees
from a partner acquired on June 1, 2023 are excluded from organic revenue for 2023. However, after June 1, 2024, results
from June 1, 2023 to December 31, 2023 for such partners are compared to results from June 1, 2024 to December 31,
2024 for purposes of calculating organic revenue growth in 2024. Organic revenue growth is a key metric used by
management and our board of directors to assess our financial performance. We believe that organic revenue and organic
revenue growth are appropriate measures of operating performance as they allow investors to measure, analyze and
compare growth in a meaningful and consistent manner.
We define adjusted net income as net income (loss) attributable to Baldwin adjusted for depreciation, amortization,
change in fair value of contingent consideration and certain items of income and expense, including share-based
compensation expense, transaction-related partnership and integration expenses, severance, and certain non-recurring
costs that, in the opinion of management, significantly affect the period-over-period assessment of operating results, and
the related tax effect of those adjustments. We believe that adjusted net income is an appropriate measure of operating
performance because it eliminates the impact of income and expenses that do not relate to business performance.
55
Adjusted diluted EPS measures our per share earnings excluding certain expenses as discussed above and assuming all
shares of Class B common stock were exchanged for Class A common stock on a one-for-one basis. Adjusted diluted EPS is
calculated as adjusted net income divided by adjusted diluted weighted-average shares outstanding. We believe adjusted
diluted EPS is useful to investors because it enables them to better evaluate per share operating performance across
reporting periods.
Adjusted EBITDA and Adjusted EBITDA Margin
The following table reconciles adjusted EBITDA and adjusted EBITDA margin to net loss, which we consider to be the most
directly comparable GAAP financial measure:
For the Years
Ended December 31,
(in thousands, except percentages)
2024
2023
Revenues
$ 1,389,037
$ 1,218,555
Net loss
$
(41,081)
$
(164,019)
Adjustments to net loss:
Interest expense, net
123,644
119,465
Amortization expense
102,730
92,704
Share-based compensation
65,503
56,222
Colleague earnout incentives
41,917
8,020
Gain on divestitures
(38,953)
—
Loss on extinguishment and modification of debt
15,113
—
Transaction-related partnership and integration expenses
10,501
20,728
Income and other taxes
(1)
7,184
1,285
Depreciation expense
6,194
5,698
Severance
5,756
18,514
Change in fair value of contingent consideration
(4,949)
61,083
Loss on interest rate caps
244
1,670
Other
(2)
18,682
28,834
Adjusted EBITDA
$
312,485
$
250,204
Net loss margin
(3) %
(13) %
Adjusted EBITDA margin
22.5 %
20.5 %
__________
(1)
Other taxes in 2024 include the Tax Receivable Agreement expense and other operating tax expense, such as state taxes, under
GAAP.
(2)
Other addbacks to adjusted EBITDA include certain income and expenses that are considered to be non-recurring or non-
operational, including certain recruiting costs, professional fees, litigation costs and bonuses.
Organic Revenue and Organic Revenue Growth
The following table reconciles organic revenue and organic revenue growth to commissions and fees, which we consider
to be the most directly comparable GAAP financial measure:
For the Years
Ended December 31,
(in thousands, except percentages)
2024
2023
Commissions and fees
$ 1,377,116
$ 1,211,828
Partnership commissions and fees
(1)
—
(44,696)
Organic revenue
$ 1,377,116
$ 1,167,132
Organic revenue growth
(2)
$
196,922
$
187,213
Organic revenue growth %
(2)
17 %
19 %
56
__________
(1)
Includes the first twelve months of such commissions and fees generated from newly acquired partners.
(2)
Organic revenue for the year ended December 31, 2023 used to calculate organic revenue growth for the year ended December 31,
2024 was $1.18 billion, which is adjusted to exclude commissions and fees from divestitures that occurred during 2024.
Adjusted Net Income and Adjusted Diluted EPS
The following table reconciles adjusted net income to net loss attributable to Baldwin and reconciles adjusted diluted EPS
to diluted loss per share, which we consider to be the most directly comparable GAAP financial measures:
For the Years
Ended December 31,
(in thousands, except per share data)
2024
2023
Net loss attributable to Baldwin
$
(24,518) $
(90,141)
Net loss attributable to noncontrolling interests
(16,563)
(73,878)
Amortization expense
102,730
92,704
Share-based compensation
65,503
56,222
Colleague earnout incentives
41,917
8,020
Gain on divestitures
(38,953)
—
Loss on extinguishment and modification of debt
15,113
—
Transaction-related partnership and integration expenses
10,501
20,728
Depreciation
6,194
5,698
Income tax expense
6,537
—
Amortization of deferred financing costs
5,841
5,129
Severance
5,756
18,514
Change in fair value of contingent consideration
(4,949)
61,083
Loss on interest rate caps, net of cash settlements
2,544
12,588
Other
(1)
18,682
28,834
Adjusted pre-tax income
196,335
145,501
Adjusted income taxes
(2)
19,437
14,405
Adjusted net income
$
176,898
$
131,096
Weighted-average shares of Class A common stock outstanding - diluted
63,455
60,135
Dilutive weighted-average shares of Class A common stock
3,598
3,874
Exchange of Class B common stock
(3)
50,896
53,132
Adjusted diluted weighted-average shares outstanding
117,949
117,141
Diluted loss per share
$
(0.39) $
(1.50)
Effect of exchange of Class B common stock and net loss attributable to
noncontrolling interests per share
0.04
0.10
Other adjustments to loss per share
2.01
2.64
Adjusted income taxes per share
(0.16)
(0.12)
Adjusted diluted EPS
$
1.50
$
1.12
___________
(1)
Other addbacks to adjusted net income include certain income and expenses that are considered to be non-recurring or non-
operational, including certain recruiting costs, professional fees, litigation costs and bonuses.
(2)
Represents corporate income taxes at assumed effective tax rate of 9.9% applied to adjusted pre-tax income.
(3)
Assumes the full exchange of Class B common stock for Class A common stock pursuant to the Amended LLC Agreement.
57
INSURANCE ADVISORY SOLUTIONS OPERATING GROUP RESULTS
IAS provides expertly-designed commercial risk management, employee benefits and private risk management solutions
for businesses and high-net-worth individuals, as well as their families, through our national footprint, which has
assimilated some of the highest quality independent insurance brokers in the country with vast and varied strategic
capabilities and expertise.
Effective January 1, 2024, our FounderShield Partner moved from UCTS to IAS. Prior year results of operations for IAS
below have been recast to conform to the current organizational structure.
For the Years
Ended December 31,
Variance
(in thousands, except percentages)
2024
2023
Amount
%
Revenues:
Core commissions and fees
$
641,286
$
580,692
$
60,594
10 %
Profit-sharing and other income
64,871
61,651
3,220
5 %
Commissions and fees
706,157
642,343
63,814
10 %
Investment income
5,779
3,732
2,047
55 %
Total revenues
711,936
646,075
65,861
10 %
Operating expenses:
Commissions, employee compensation and benefits
534,379
447,196
87,183
19 %
Other operating expenses
79,323
81,768
(2,445)
(3) %
Amortization expense
60,222
53,793
6,429
12 %
Change in fair value of contingent consideration
(10,458)
38,306
(48,764)
(127) %
Depreciation expense
1,485
1,546
(61)
(4) %
Total operating expenses
664,951
622,609
42,342
7 %
Operating income
46,985
23,466
23,519
100 %
Total other income
5,172
183
4,989
n/m
Income before income taxes
$
52,157
$
23,649
$
28,508
121 %
__________
n/m not meaningful
Commissions and Fees
IAS generates (i) commissions for placing insurance policies on behalf of its insurance company partners; (ii) profit-sharing
income based on either the underlying book of business or performance, such as loss ratios; and (iii) fees from consulting
and service fee arrangements, which are in place with certain clients for a negotiated fee.
IAS commissions and fees increased $63.8 million, or 10%, year over year to $706.2 million due primarily to organic growth
in core commissions and fees. Growth in our core commissions and fees was driven by 21% sales velocity (new business
as a percentage of prior year commissions and fees), which improved 410 bps over the prior-year period, and resultant
new business across client industry sectors. New business growth was offset by a 510 bps headwind in underlying rate
and exposure year over year, largely attributable to catastrophe-exposed real estate and construction project work
weakness, as well as a decrease in retention of 140 bps, attributable to rate fatigue. In addition, profit-sharing revenue
increased $3.2 million primarily resulting from improvements in loss ratios and the number of policies sold.
Investment Income
IAS investment income increased $2.0 million year over year due to improvements in our cash management strategy and
growing yield on our invested cash.
58
Commissions, Employee Compensation and Benefits
Commissions, employee compensation and benefits expense for IAS increased $87.2 million, or 19%, year over year
primarily due to an increase in colleague compensation of $36.4 million, driven by continued investments in headcount to
support our growth, coupled with an increase in colleague compensation allocated to IAS that was previously recognized
in Corporate and Other. IAS commissions, employee compensation and benefits expense for 2024 also included an
increase related to colleague earnout incentives of $30.8 million for contingent earnout liabilities that were reclassified, at
the partner's option, to an earnout incentive bonus payable to colleagues. In addition, inside advisor commissions
increased $14.5 million, or 9%, in line with the growth in IAS’ core commissions and fees.
Other Operating Expenses
Other operating expenses for IAS decreased $2.4 million year over year, driven by cost savings measures we have
implemented, including the renegotiation of vendor contracts and post partnership integration operational efficiencies
gained, including various expense reductions of $3.8 million and lower professional fees of $1.2 million. These savings
were partially offset by higher costs for travel and entertainment to support the growth in IAS of $2.8 million and higher
legal claims and settlement expense of $0.4 million.
Amortization Expense
IAS amortization expense increased $6.4 million year over year due to the acceleration of trade names amortization in
connection with rebranding within IAS.
Change in Fair Value of Contingent Consideration
Change in fair value of contingent consideration for IAS was a $10.5 million gain for the year ended December 31, 2024
compared to a $38.3 million loss for the same period of 2023. The fair value gain related to contingent consideration for
the year ended December 31, 2024 was impacted by the reclassification of $39.3 million of colleague earnout incentives to
commissions, employee compensation and benefits expense, offset in part by positive changes in revenue growth trends
of certain partners.
59
UNDERWRITING, CAPACITY & TECHNOLOGY SOLUTIONS OPERATING GROUP RESULTS
UCTS consists of three distinct businesses—MSI, our reinsurance brokerage business, Juniper Re, and our captive
management business. Through MSI, we manufacture proprietary, technology-enabled insurance products with a focus on
sheltered channels where our products deliver speed, ease of use and certainty of execution, an example of which is our
national embedded renters insurance product sold at point of lease via integrations with property management software
providers. Our MGA product suite is now comprised of more than 20 products across personal, commercial and
professional lines. UCTS’ Wholesale Business was sold in the first quarter of 2024 and its operations are included in our
results through February 29, 2024.
Effective January 1, 2024, our FounderShield Partner moved from UCTS to IAS. Prior year results of operations for UCTS
below have been recast to conform to the current organizational structure.
For the Years
Ended December 31,
Variance
(in thousands, except percentages)
2024
2023
Amount
%
Revenues:
Core commissions and fees
$
455,845
$
377,294
$
78,551
21 %
Profit-sharing and other income
13,032
25,205
(12,173)
(48) %
Commissions and fees
468,877
402,499
66,378
16 %
Investment income
4,062
2,040
2,022
99 %
Total revenues
472,939
404,539
68,400
17 %
Operating expenses:
Commissions, employee compensation and benefits
361,717
298,108
63,609
21 %
Other operating expenses
41,313
41,995
(682)
(2) %
Amortization expense
14,950
15,963
(1,013)
(6) %
Change in fair value of contingent consideration
5,085
20,930
(15,845)
(76) %
Depreciation expense
568
621
(53)
(9) %
Total operating expenses
423,633
377,617
46,016
12 %
Operating income
49,306
26,922
22,384
83 %
Total other income
34,107
859
33,248
n/m
Income before income taxes
$
83,413
$
27,781
$
55,632
200 %
__________
n/m not meaningful
Commissions and Fees
UCTS generates (i) commissions for underwriting and placing insurance policies on behalf of its insurance company
partners; (ii) policy fee and installment fee revenue for acting in the capacity of an MGA and fulfilling certain administrative
functions on behalf of insurance company partners, including delivery of policy documents, processing payments and
other administrative functions; (iii) profit-sharing income, generally based on the profitability of the underlying book of
business of the policies it generates on behalf of its insurance company partners; and (iv) fees from service fee
arrangements, which are in place with certain customers for a negotiated fee.
UCTS commissions and fees increased $66.4 million, or 16%, year over year to $468.9 million, due to organic growth in
core commissions and fees. Growth in our core commissions and fees was driven by continued outperformance in our
multi-family business (accounting for $35.7 million of the increase in core commissions and fees), momentum in our
homeowners product (accounting for $36.8 million of the increase in core commissions and fees) and commercial
umbrella product (accounting for $9.9 million of the increase in core commissions and fees), and growing contribution
from our reinsurance brokerage business and commercial property program. This growth was offset in part by core
commissions and fees of $26.8 million derived from our Wholesale Business between March and December of 2023, for
which there were no comparable revenues earned in 2024. Core commissions and fees growth, excluding such revenue
related to the Wholesale Business between March and December of 2023, was 30.
60
Profit-sharing and other revenue decreased $12.2 million year over year, of which, $7.5 million is a function of strong
profit-sharing revenue in 2023, which resulted from historically strong underwriting performance in that year. The
remaining decrease relates to profit-sharing and other income earned by our Wholesale Business between March and
December of 2023, for which there were no comparable revenues earned in 2024, and a reduction in other income.
Investment Income
UCTS investment income increased $2.0 million year over year due to improvements in our cash management strategy
and growing yield on our invested cash.
Commissions, Employee Compensation and Benefits
Commissions, employee compensation and benefits expense for UCTS includes both outside commissions paid to
partners that distribute our MGA products and compensation paid primarily to colleagues. Commissions, employee
compensation and benefits expense for UCTS increased $63.6 million year over year, primarily driven by outside
commissions, which increased $66.8 million, or 35%, in line with the growth in UCTS core commissions and fees after
excluding outside commissions relating to the Wholesale Business between March and December of 2023 of $15.8 million.
Other increases, after excluding amounts relating to the Wholesale Business between March and December of 2023,
included benefits and other expense of $7.0 million and colleague compensation of $8.9 million, which were driven by
continued investments in headcount to support the growth of existing and new products, coupled with an increase in
colleague compensation allocated to UCTS that was previously recognized in Corporate and Other. These increases were
partially offset by compensation costs of $23.7 million incurred by our Wholesale Business between March and December
of 2023, for which there were no comparable costs incurred in 2024.
Other Operating Expenses
Other operating expenses for UCTS were relatively flat year over year. Other operating expenses for the current year
included higher costs due to fulfilling certain administrative functions on behalf of insurance company partners (including
an increase in payment processing fees) of $3.2 million, generally higher costs to support the growth of the business and
the launch of new products of $1.6 million, legal claims and settlement expense of $0.7 million, and travel and
entertainment of $0.5 million to support growth. These increases were offset in part by reductions in partnership
integration expenses of $4.2 million and professional fees of $1.2 million.
Amortization Expense
UCTS amortization expense decreased $1.0 million year over year, primarily due to the write-off of intangible assets in
connection with the sale of our Wholesale Business during the first quarter of 2024.
Change in Fair Value of Contingent Consideration
Change in fair value of contingent consideration for UCTS was a $5.1 million loss for the year ended December 31, 2024
compared to a $20.9 million loss for the same period of 2023. The fair value loss related to contingent consideration for
2024 was impacted by positive changes in revenue growth trends of certain partners and accretion of the contingent
earnout obligations approaching their respective measurement dates.
Total Other Income
Total other income for UCTS increased $33.2 million year over year, driven by a $35.1 million gain recorded in connection
with the sale of our Wholesale Business during the first quarter of 2024.
61
MAINSTREET INSURANCE SOLUTIONS OPERATING GROUP RESULTS
MIS offers personal insurance, commercial insurance, and life and health solutions to individuals and businesses in their
communities, with a focus on accessing clients via sheltered distribution channels, which include, but are not limited to,
new home builders, realtors, mortgage originators/lenders, master planned communities, and various other community
centers of influence. MIS also offers consultation for government assistance programs and solutions, including traditional
Medicare, Medicare Advantage and Affordable Care Act, to seniors and eligible individuals through a network of primarily
independent contractor agents.
For the Years
Ended December 31,
Variance
(in thousands, except percentages)
2024
2023
Amount
%
Revenues:
Core commissions and fees
$
250,825
$
217,300
$
33,525
15 %
Profit-sharing and other income
30,423
17,397
13,026
75 %
Commissions and fees
281,248
234,697
46,551
20 %
Investment income
35
—
35
—
Total revenues
281,283
234,697
46,586
20 %
Operating expenses:
Commissions, employee compensation and benefits
176,156
148,240
27,916
19 %
Other operating expenses
35,593
31,698
3,895
12 %
Amortization expense
26,452
22,848
3,604
16 %
Change in fair value of contingent consideration
424
1,847
(1,423)
(77) %
Depreciation expense
715
570
145
25 %
Total operating expenses
239,340
205,203
34,137
17 %
Operating income
41,943
29,494
12,449
42 %
Total other income (expense)
(15)
30
(45)
(150) %
Income before income taxes
$
41,928
$
29,524
$
12,404
42 %
Commissions and Fees
MIS generates (i) commissions for placing insurance policies on behalf of its insurance company partners; (ii) profit-sharing
income based on either the underlying book of business or performance, such as loss ratios; and (iii) commissions and
fees in the form of marketing income, which is earned through co-branded marketing campaigns with our insurance
company partners.
MIS commissions and fees increased $46.6 million, or 20%, year over year to $281.2 million, due to organic growth in core
commissions and fees. Key drivers of the organic growth in MIS core commissions and fees included our Westwood
Partner (accounting for $15.7 million of the year-over-year increase in core commissions and fees), our legacy Mainstreet
business (accounting for $13.9 million of the year-over-year increase in core commissions and fees), and the national
mortgage and real estate channel (accounting for $4.1 million of the year-over-year increase in core commissions and
fees). In addition, MIS profit-sharing and other income increased $13.0 million primarily resulting from improvements in
MIS loss ratios and the number of policies sold.
Commissions, Employee Compensation and Benefits
Commissions, employee compensation and benefits expense for MIS increased $27.9 million, or 19%, year over year,
primarily due to outside commissions, which increased $15.3 million, or 25%, relating to growth in our Westwood and
legacy Mainstreet businesses. Other increases included colleague compensation of $7.6 million, inside advisor
commissions of $3.5 million and benefits and other of $2.2 million, which were driven by continued investments in
headcount to support our growth, coupled with an increase in colleague compensation allocated to MIS that was
previously recognized in Corporate and Other.
62
Other Operating Expenses
Other operating expenses in MIS increased $3.9 million year over year, driven by higher technology-related costs to
support the growth of the business of $1.1 million, licenses and taxes of $0.7 million, advertising and marketing of $0.7
million, and travel and entertainment of $0.3 million.
Amortization Expense
MIS amortization expense increased $3.6 million year over year, primarily driven by the amortization of intangible assets
recorded in connection with our Westwood Partnership, which are amortized based on a pattern of estimated economic
benefit.
CORPORATE AND OTHER RESULTS
For the Years
Ended December 31,
Variance
(in thousands, except percentages)
2024
2023
Amount
%
Revenues:
Commissions and fees
$
(79,166) $
(67,711) $
(11,455)
17 %
Investment income
2,045
955
1,090
114 %
Total revenues
(77,121)
(66,756)
(10,365)
16 %
Operating expenses:
Commissions, employee compensation and benefits
(40,204)
17,810
(58,014)
(326) %
Other operating expenses
36,137
34,806
1,331
4 %
Amortization expense
1,106
100
1,006
n/m
Depreciation expense
3,426
2,961
465
16 %
Total operating expenses
465
55,677
(55,212)
(99) %
Operating income (loss)
(77,586)
(122,433)
44,847
(37) %
Other expense:
Interest expense, net
(123,642)
(119,652)
(3,990)
3 %
Loss on extinguishment and modification of debt
(15,113)
—
(15,113)
—
Other expense, net
(507)
(1,603)
1,096
(68) %
Total other expense
(139,262)
(121,255)
(18,007)
15 %
Loss before income taxes
$
(216,848) $
(243,688) $
26,840
(11) %
__________
n/m not meaningful
Commissions and Fees
Corporate and Other records the elimination of intercompany revenue from the operating groups. During 2024, UCTS
recorded commissions revenue shared with other operating groups of $77.6 million and MIS recorded commissions
revenue shared within the same operating group of $1.6 million.
A substantial portion of the intercompany commissions revenue recorded during 2024 is related to the QBE Program
Administrator Agreement. We expect intercompany commissions revenue to continue to grow as we serve as the MGA on
more intersegment revenue such as homeowners insurance sold through MIS.
63
Commissions, Employee Compensation and Benefits
Commissions, employee compensation and benefits expense in Corporate and Other decreased $58.0 million year over
year, driven by a reduction in colleague compensation of $31.5 million, due in part to a decrease in corporate-related
headcount, including the retirement of two of our executive officers at the end of 2023, coupled with a decrease in
colleague compensation previously recognized in Corporate and Other that is now allocated to the operating groups.
Other decreases included severance of $11.9 million relating to the retirement of two of our executive officers at the end
of 2023 as mentioned above, and $11.5 million relating to an increase in intercompany commissions expense eliminations.
A significant portion of the year-over-year increase in intercompany commissions expense eliminated through Corporate
and Other is related to the QBE Program Administrator Agreement. We expect intercompany commissions expense to
continue to increase as we serve as the MGA on more intersegment revenue such as homeowners insurance sold through
MIS.
Other Operating Expenses
Other operating expenses in Corporate and Other increased $1.3 million year over year due to an increase in tax
receivable agreement expense of $4.6 million, higher advertising and marketing costs of $1.4 million connected to our
rebranding, and higher licenses and taxes expense of $0.7 million. These increases were offset in part by decreases due, in
part, to certain cost saving measures we have implemented, including the renegotiation of vendor contracts, and
operational efficiencies gained from partnership integration projects by our operating groups, which resulted in various
costs savings of $2.1 million, and reductions in professional fees of $2.0 million and travel and entertainment of $1.5
million.
Amortization Expense
Corporate and Other amortization expense increased $1.0 million year over year due to capitalized software development
costs.
Interest Expense, Net
Interest expense, net, in Corporate and Other increased $4.0 million year over year resulting from higher average
borrowings, offset in part by lower average interest rates resulting from the May 2024 debt refinancing and federal rate
reductions. We expect interest expense to remain relatively flat on a year-over-year basis due to an anticipated increase in
borrowings from our revolving credit facility to fund the settlement of contingent earnout liabilities, offset by a lower
expected average interest rate.
Loss on Extinguishment and Modification of Debt
Loss on extinguishment and modification of debt in Corporate and Other of $15.1 million relates to the May 2024 debt
refinancing.
LIQUIDITY AND CAPITAL RESOURCES
Our primary liquidity needs for the foreseeable future will include cash to (i) provide capital to facilitate the organic growth
of our business and to fund future partnerships, (ii) pay operating expenses, including cash compensation to our
colleagues and expenses related to being a public company, (iii) make payments under the Tax Receivable Agreement,
(iv) pay interest and principal due on borrowings under the 2024 Credit Facility and Senior Secured Notes, (v) pay
contingent earnout liabilities, (vi) pay income taxes, and (vii) fund potential investments in third-party businesses that
support the growth of our business, which may include Emerald Bay or sponsorship of, and a minority, non-controlling
interest in, other investment funds, the purpose of which may include facilitating the establishment of additional and
alternative capacity that supports the growth of our MSI business.
We have historically financed our operations and funded our debt service through the sale of our insurance products and
services, and we have financed significant cash needs to fund growth via the acquisition of partners through debt and
equity financing.
On May 24, 2024, we repaid in full our then-outstanding debt with proceeds from an offering of $600 million in aggregate
principal amount of 7.125% senior secured notes due May 15, 2031 (the “Senior Secured Notes”) and borrowings under a
new $840 million senior secured first lien term loan facility maturing May 24, 2031 (the “2024 Term Loan”). In connection
with the refinancing, we also established a new senior secured first lien revolving facility with commitments in an
aggregate principal amount of $600 million maturing May 24, 2029 (the “2024 Revolving Facility” and, together with the
2024 Term Loan, the “2024 Credit Facility”). Proceeds from the issuance of the Senior Secured Notes and the 2024 Term
Loan were also used to pay related fees, costs, expenses and accrued interest. Refer to Note 11 to our consolidated
financial statements included in Part II, Item 8. Financial Statements and Supplementary Data of this report for more
information relating to the terms of the Senior Secured Notes and 2024 Credit Facility.
64
On January 10, 2025, the 2024 Credit Agreement was amended to, among other things, provide for $100 million of
incremental term B loans (the loans thereunder, the “2025 Term Loans”), increasing the aggregate principal amount of our
existing $835.8 million senior secured first lien term loan facility maturing on May 24, 2031 to $935.8 million. The proceeds
of the 2025 Term Loans were used to repay in full all of the 2024 Term Loans outstanding under the 2024 Credit
Agreement.
In the near term, we intend to fund our earnout obligations with cash and cash equivalents, including unused proceeds
from the issuance of the Senior Secured Notes and the 2024 Term Loan, cash flow from operations and available
borrowings under the 2024 Revolving Facility. From time to time, we will consider raising additional debt or equity
financing if and as necessary to support our growth, including in connection with the exploration of partnership
opportunities or to refinance existing obligations on an opportunistic basis.
As of December 31, 2024, our cash and cash equivalents were $148.1 million and we had $588.0 million of available
borrowing capacity on the Revolving Facility under the 2024 Credit Agreement. We believe that our cash and cash
equivalents, cash flow from operations and available borrowings will be sufficient to fund our working capital and meet
our commitments for the next twelve months and beyond.
See Item 1A. “Risk Factors—Risks Relating to our Business Operations and Industry—Partnerships have been, and may in
the future continue to be, important to our growth. We may not be able to successfully identify and acquire partners or
integrate partners into our company, and we may become subject to certain liabilities assumed or incurred in connection
with our partnerships that could harm our business, results of operations and financial condition.”
Contractual Obligations and Commitments
The following table represents our contractual obligations and commitments, aggregated by type, at December 31, 2024:
Payments Due by Period
(in thousands)
Total
Less than
1 year
1-3 years
3-5 years
More than
5 years
Operating leases
(1)
$
99,311
$
21,210
$
37,935
$
27,815
$
12,351
Debt obligations payable
(2)
2,107,516
114,410
226,903
224,347
1,541,856
Undiscounted estimated contingent earnout
obligations
(3)
185,205
181,691
3,514
—
—
USF Grant
3,352
856
1,696
800
—
Total
$ 2,395,384
$ 318,167
$ 270,048
$ 252,962
$ 1,554,207
__________
(1)
Represents noncancelable operating leases for our facilities. Operating lease expense was $21.5 million and $23.2 million for the
years ended December 31, 2024 and 2023, respectively.
(2)
Represents scheduled debt obligation and estimated interest payments for our Senior Secured Notes and 2024 Term Loan.
(3)
Represents the total expected future payments to be made to partners and colleagues for earnout-related obligations at December
31, 2024.
Our contractual obligations and commitments are comprised of operating lease obligations, principal and interest
payments on our borrowings under the Senior Secured Notes and the 2024 Term Loan, estimated payments of contingent
earnout liabilities and our commitment to the University of South Florida (“USF”).
Our operating lease obligations represent noncancelable agreements for our corporate headquarters and office space for
our insurance brokerage business. Our operating lease agreements expire through August 2035. These obligations do not
include leases with an initial term of twelve months or less, which are expensed as incurred. We may extend, terminate or
otherwise modify or sub-lease facilities as needed to best suit the needs of our business. The lease term is the non-
cancelable period of the lease and includes options to extend or terminate the lease when it is reasonably certain that an
option will be exercised.
Our debt obligations at December 31, 2024 include borrowings outstanding under the Senior Secured Notes of $600.0
million and the 2024 Term Loan of $835.8 million. Estimated interest payments for outstanding borrowings on the Senior
Secured Notes and 2024 Term Loan in the table above were calculated based on the applicable interest rates at December
31, 2024 of 7.125% and 7.61%, respectively, through their respective due dates of May 15, 2031 and May 24, 2031.
65
Substantially all of our partnerships and certain acquisitions of select books of business that do not constitute a complete
business enterprise include contractual earnout provisions. We record an estimation of the fair value of the contingent
earnout obligations at the partnership date as a component of the consideration paid. Our contingent earnout obligations
are measured at fair value each reporting period based on the present value of the expected future payments to be made
to partners in accordance with the provisions outlined in the respective purchase agreements. The recorded obligations
are based on estimates of the partners’ future performance using financial projections for the earnout period. The
aggregate estimated contingent earnout liabilities included on our consolidated balance sheet at December 31, 2024 was
$145.6 million, of which $4.7 million must be settled in cash and the remaining $140.8 million can be settled in cash or
stock at our option. The undiscounted estimated contingent earnout obligation presented in the table above represents
the total expected future payments to be made to the partners. The undiscounted estimated contingent earnout
obligation at December 31, 2024 was $185.2 million, of which $5.0 million must be settled in cash and the remaining
$180.2 million can be settled in cash or stock at our option. The maximum estimated exposure to the contingent earnout
liabilities was $268.8 million at December 31, 2024.
As of December 31, 2024, we have a remaining commitment to USF to donate $3.4 million through October 2028. The gift
will provide support for the School of Risk Management and Insurance in the USF Muma College of Business. It is currently
anticipated that Lowry Baldwin, the Company's Chairman, will fund half of this commitment.
Effects of Inflation
Certain of our lease agreements feature annual rent escalations either fixed or based on a consumer price index or other
index, which, historically, have not had a material impact on our results of operations, including our results of operations
for the years ended December 31, 2024, 2023 and 2022. Although we have recently sustained high levels of inflation, we
do not anticipate the inflation rates for 2025 to have a material impact on our results of operations. We have monitored
and will continue to monitor the components of compensation costs and operating expenses for the potential impact of
inflation.
Off-Balance Sheet Arrangements
We do not invest in any off-balance sheet vehicles that provide liquidity, capital resources, market or credit risk support, or
engage in any activities that expose us to any liability that is not reflected in our consolidated financial statements except
for those described under this Liquidity and Capital Resources section.
Dividend Policy
Assuming Baldwin Holdings makes distributions to its members in any given year, the determination to pay dividends, if
any, to our Class A common stockholders out of the portion, if any, of such distributions remaining after our payment of
taxes, Tax Receivable Agreement payments and expenses (any such portion, an “excess distribution”) will be made at the
sole discretion of our board of directors. Our board of directors may change our dividend policy at any time. Refer to Item
5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—
Dividend Policy for additional information.
Tax Receivable Agreement
Baldwin is a party to the Tax Receivable Agreement with Baldwin Holdings’ LLC Members that provides for the payment by
Baldwin to Baldwin Holdings’ LLC Members of 85% of the amount of cash savings, if any, in U.S. federal, state and local
income tax or franchise tax that Baldwin actually realizes as a result of (i) any increase in tax basis in Baldwin Holdings
assets resulting from (a) previous acquisitions by Baldwin of LLC Units from Baldwin Holdings’ LLC Members, (b) the
acquisition of LLC Units from Baldwin Holdings’ LLC Members using the net proceeds from any future offering, (c)
redemptions or exchanges by Baldwin Holdings’ LLC Members of LLC Units and the corresponding number of shares of
Class B common stock for shares of Class A common stock or cash or (d) payments under the Tax Receivable Agreement,
and (ii) tax benefits related to imputed interest resulting from payments made under the Tax Receivable Agreement.
66
Holders of LLC Units (other than Baldwin) may, subject to certain conditions and transfer restrictions described above,
redeem or exchange their LLC Units for shares of Class A common stock of Baldwin on a one-for-one basis. Baldwin
Holdings intends to make an election under Section 754 of the Internal Revenue Code of 1986, as amended, and the
regulations thereunder (the “Code”) effective for each taxable year in which a redemption or exchange of LLC Units for
shares of Class A common stock occurs, which is expected to result in increases to the tax basis of the assets of Baldwin
Holdings at the time of a redemption or exchange of LLC Units. The redemptions or exchanges are expected to result in
increases in the tax basis of the tangible and intangible assets of Baldwin Holdings. These increases in tax basis may
reduce the amount of tax that Baldwin would otherwise be required to pay in the future. The Tax Receivable Agreement
with Baldwin Holdings’ LLC Members provides for the payment by us to Baldwin Holdings’ LLC Members of 85% of the
amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that Baldwin actually realizes as a
result of the transactions listed in the preceding paragraph. This payment obligation is an obligation of Baldwin and not of
Baldwin Holdings. For purposes of the Tax Receivable Agreement, the cash tax savings in income tax will be computed by
comparing the actual income tax liability of Baldwin (calculated with certain assumptions) to the amount of such taxes that
Baldwin would have been required to pay had there been no increase to the tax basis of the assets of Baldwin Holdings as
a result of the redemptions or exchanges and had Baldwin not entered into the Tax Receivable Agreement. Estimating the
amount of payments that may be made under the Tax Receivable Agreement is by its nature imprecise, insofar as the
calculation of amounts payable depends on a variety of factors. The actual increase in tax basis, as well as the amount and
timing of any payments under the Tax Receivable Agreement, will vary depending upon a number of factors, including the
timing of redemptions or exchanges, the price of shares of our Class A common stock at the time of the redemption or
exchange, the extent to which such redemptions or exchanges are taxable, the amount and timing of our income, the tax
rates then applicable and the portion of our payments under the Tax Receivable Agreement constituting imputed interest.
We account for the effects of these increases in tax basis and associated payments under the Tax Receivable Agreement
arising from future redemptions or exchanges as follows:
•
we record an increase in deferred tax assets for the estimated income tax effects of the increases in tax basis
based on enacted federal and state tax rates at the date of the redemption or exchange;
•
to the extent we estimate that we will not realize the full benefit represented by the deferred tax asset, based on
an analysis that will consider, among other things, our expectation of future earnings, we reduce the deferred tax
asset with a valuation allowance; and
•
we record 85% of the estimated realizable tax benefit (which is the recorded deferred tax asset less any recorded
valuation allowance) as an increase to the liability due under the Tax Receivable Agreement and the remaining
15% of the estimated realizable tax benefit as an increase to additional paid-in capital.
All of the effects of changes in any of our estimates after the date of the redemption or exchange will be included in net
income. Similarly, the effect of subsequent changes in the enacted tax rates will be included in net income.
During 2024, we exchanged 2,869,808 LLC Units of Baldwin Holdings on a one-for-one basis for shares of Baldwin's Class A
common stock and cancelled the corresponding shares of Baldwin's Class B common stock. We receive an increase in our
share of the tax basis in the net assets of Baldwin Holdings due to the interests being redeemed. We have assessed the
realizability of the net deferred tax assets and in that analysis have considered the relevant positive and negative evidence
available to determine whether it is more likely than not that some portion or all of the deferred tax assets will be realized.
We have recorded a full valuation allowance against the deferred tax assets at Baldwin as of December 31, 2024, which will
be maintained until there is sufficient evidence to support the reversal of all or some portion of these allowances.
As of December 31, 2024, we have recorded a Tax Receivable Agreement liability of $4.8 million associated with the
payments to be made to current or former Baldwin Holdings’ LLC Members subject to the Tax Receivable Agreement.
Deferred Tax Assets
To determine the realizability of our deferred tax assets, we analyzed all evidence – both positive and negative. This
includes, but is not limited to, history and/or projections of future earnings, future reversals of existing temporary tax
differences and tax planning strategies. The Company has a history of cumulative losses over a three-year period (2022,
2023 and 2024), which indicates significant negative evidence. Based on the weight of evidence, the Company has
determined that its deferred tax assets are not more likely than not to be realized. Accordingly, we maintain a full
valuation allowance against our deferred tax assets. As the Company emerges from its cumulative loss position, we will
reassess the realizability of our deferred tax assets and the necessity for a full valuation allowance.
67
Sources and Uses of Cash
The following table summarizes our cash flows from operating, investing and financing activities for the periods indicated:
For the Years
Ended December 31,
Variance
(in thousands)
2024
2023
Net cash provided by operating activities
$
102,151
$
44,644
$
57,507
Net cash provided by (used in) investing activities
13,299
(21,922)
35,221
Net cash used in financing activities
(29,644)
(26,230)
(3,414)
Net increase (decrease) in cash and cash equivalents and restricted
cash
85,806
(3,508)
89,314
Cash and cash equivalents and restricted cash at beginning of year
226,963
230,471
(3,508)
Cash and cash equivalents and restricted cash at end of year
$
312,769
$
226,963
$
85,806
Operating Activities
The primary sources and uses of cash for operating activities are net income (loss) adjusted for non-cash items and
changes in assets and liabilities, or operating working capital, and payment of contingent earnout consideration. Net cash
provided by operating activities increased $57.5 million year over year, driven by better operating leverage.
Investing Activities
The primary sources and uses of cash for investing activities relate to cash consideration paid to fund partnerships and
other investments to grow our business. Net cash provided by investing activities increased $35.2 million year over year,
driven by net cash proceeds from divestitures of $57.0 million, relating primarily to the sale of our Wholesale Business
during 2024, offset in part by a decrease in cash relating to higher capital expenditures of $19.7 million due to software
development projects for infrastructure to support our business.
Financing Activities
The primary sources and uses of cash for financing activities relate to the issuance of our Class A common stock; debt
servicing costs in connection with our long-term debt and revolving line of credit, as well as purchases, sales and
settlements of interest rate caps to mitigate interest rate volatility on that debt; payment of contingent earnout
consideration; and other equity transactions. Net cash used in financing activities increased $3.4 million year over year,
driven by an increase in net proceeds from borrowings on our credit facilities of $99.4 million resulting from the May 2024
debt refinancing, offset in part by decreases in cash from additional payments of contingent earnout consideration
classified as financing activity of $70.7 million, higher borrowing costs of $13.0 million, and fewer cash settlements from
interest rate caps of $8.6 million.
RECENT ACCOUNTING PRONOUNCEMENTS
Please refer to Note 1 to our consolidated financial statements included in Item 8. Financial Statements and
Supplementary Data of this Annual Report on Form 10-K for a discussion of recent accounting pronouncements that may
impact us.
68
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our consolidated financial statements are prepared in accordance with GAAP, which requires management to make
estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Our estimates, judgments and assumptions are continually evaluated based on
historical experience, known or expected trends, independent valuations and other factors we believe to be reasonable
under the circumstances. As future events and their effects cannot be determined with precision, actual results could
differ significantly from these estimates. Our most critical accounting policies and estimates, as discussed below, govern
the more significant judgments and estimates used in the preparation of our consolidated financial statements and could
have a material impact on our financial condition or results of operations.
Critical Accounting Policies
Revenue Recognition
Commission revenue is earned at a point in time upon the effective date of bound insurance coverage, as no performance
obligation exists after coverage is bound. The Company makes its best estimate of direct bill commissions at the policy
effective date, particularly in employee benefits within IAS, which is subject to change based on enrollment and other
factors over the policy period.
Commission revenue is recorded net of an allowance for estimated policy cancellations. The allowance for estimated
policy cancellations is determined based on an evaluation of historical and current cancellation data.
Medicare contracts in the MIS operating group are multi-year arrangements in which we are entitled to renewal
commissions. However, we have applied a constraint to renewal commissions that limits revenue recognized when a risk
of significant reversals exists based on: (i) historical renewal patterns; and (ii) the influence of external factors outside of
our control, including policyholder discretion over plans and insurance company partner relationship, political influence,
and a contractual provision, which limits our right to receive renewal commissions to ongoing compliance and regulatory
approval of the relevant insurance company partner and compliance with the Centers for Medicare and Medicaid Services.
Profit-sharing commissions represent a form of variable consideration, which includes additional commissions over base
commissions received from insurance company partners. A constraint of variable consideration is necessary when
commissions and fees are subject to significant reversal. Profit-sharing commissions associated with loss performance are
uncertain, and therefore, are subject to significant reversal as loss data remains subject to material change. Management
estimates profit-sharing commissions using historical outcomes and known trends impacting premium volume or loss
ratios, subject to a constraint. The constraint is relieved when management estimates commissions and fees that are not
subject to significant reversal, which often coincides with the earlier of written notification from the insurance company
partner that the target has been achieved or cash collection. Year-end amounts incorporate estimates subject to a
constraint or where applicable, are based on confirmation from insurance company partners after calculation of premium
volume or loss ratios that are impacted by catastrophic losses.
Costs to obtain contracts include compensation in the form of producer commissions paid on new business. These
incremental costs are capitalized as deferred commission expense and amortized over five years, which represents
management’s estimate of the average period over which a client maintains its initial coverage relationship with the
original insurance company partner.
The nature of estimates used in recognizing commissions and fees revenue do not involve a significant level of subjectivity,
judgment, or estimation uncertainty that could have a material impact on the Company's results of operations.
Critical Accounting Estimates
We have determined that there are significant judgments and uncertainties included in the application of guidance for
impairment of intangible assets and goodwill; valuation of contingent consideration; and valuation allowance for deferred
tax assets. The nature of the estimates and assumptions used and the impact the estimates and assumptions could have
on our actual results are discussed in the tables below.
69
Description
Judgments and Uncertainties
Effect if Actual Results Differ from
Assumptions
Impairment of Intangible Assets
We evaluate our definite-lived
intangible assets for impairment
whenever events or changes in
circumstances indicate that the
carrying amount of such assets may
not be recoverable. These events and
circumstances include, but are not
limited to: higher than expected
attrition for relationships; a current
expectation that an intangible asset
will be disposed of significantly before
the end of its previously estimated
useful life, such as when we classify a
business as held for sale; or a
significant adverse change in the
extent or manner in which we use an
intangible asset.
Undiscounted cash flow analyses are
used to determine if impairment
exists; if impairment is determined to
exist, the loss is calculated based on
estimated fair value.
Our impairment evaluations require us
to apply judgment in determining
whether a triggering event has
occurred, including the evaluation of
whether it is more-likely-than-not that
an intangible asset will be disposed of
significantly before the end of its
previously estimated useful life.
Incorrect estimation of useful lives
may result in inaccurate amortization
charges over future periods leading to
future impairment.
Our impairment loss calculations
contain uncertainties because they
require management to make
assumptions and to apply judgment to
estimate future cash flows and asset
fair values, including forecasting useful
lives of the assets and selecting the
discount rate that reflects the risk
inherent in future cash flows.
During the last three years, we have
not made any changes in the
accounting methodology used to
evaluate the impairment of intangible
assets or to estimate the useful lives of
our intangible assets.
At December 31, 2024, we had $953.5
million of intangible assets, which are
included in each of our reporting units
and in Corporate and Other at the
following amounts:
Insurance Advisory Solutions—$636.9
million
Underwriting, Capacity & Technology
Solutions—$103.8 million
Mainstreet Insurance Solutions
—$206.5 million
Corporate and Other—$6.2 million
We performed a qualitative analysis of
each of our asset groups as of October
1, 2024 and determined that there
were no events or changes in
circumstances that had occurred to
indicate that the carrying amount of
our intangible assets may not be
recoverable. The Company also
determined there were no triggering
events through December 31, 2024
that would cause the Company to
perform an interim period analysis.
We did not record impairment charges
for intangible assets in 2024, 2023 or
2022.
70
Description
Judgments and Uncertainties
Effect if Actual Results Differ from
Assumptions
Impairment of Goodwill
Goodwill is not amortized but rather
tested at least annually for
impairment, or more often if events or
changes in circumstances indicate it is
more-likely-than-not that the carrying
amount of the asset may not be
recoverable. Goodwill is tested for
impairment at the reporting unit level,
which represents the operating
segment. Goodwill is tested for
impairment by either performing a
qualitative evaluation or a quantitative
test. The qualitative evaluation is an
assessment of factors to determine
whether it is more-likely-than-not that
the fair value of a reporting unit is less
than its carrying amount, including
goodwill. We may elect not to perform
the qualitative assessment for some or
all of our reporting units and instead
perform a quantitative impairment
test.
We estimate the fair value of each
reporting unit using a combination of
the income approach and the market
approach.
The income approach incorporates the
use of a discounted cash flow method
in which the estimated future cash
flows and terminal value are calculated
for each reporting unit and then
discounted to present value using an
appropriate discount rate.
The market approach estimates fair
value of a reporting unit by using
market comparables for reasonably
similar public companies.
Our impairment evaluations require us
to apply judgment in determining
whether a triggering event has
occurred.
The valuation of our reporting units
requires significant judgment in
evaluation of recent indicators of
market activity and estimated future
cash flows, discount rates, and other
factors. Our impairment analyses
contain inherent uncertainties due to
uncontrollable events that could
positively or negatively impact
anticipated future economic and
operating conditions.
In making these estimates, the
weighted-average cost of capital is
utilized to calculate the present value
of future cash flows and terminal
value. Many variables go into
estimating future cash flows, including
estimates of our future revenue
growth and operating results. When
estimating our projected revenue
growth and future operating results,
we consider industry trends, economic
data, and our competitive advantage.
During the last three years, we have
not made any changes in the
accounting methodology used to
evaluate impairment of goodwill.
At December 31, 2024, we had $1.4
billion of goodwill. Our goodwill is
included in each of our operating
groups at the following amounts:
Insurance Advisory Solutions—$932.5
million
Underwriting, Capacity & Technology
Solutions—$235.6 million
Mainstreet Insurance Solutions
—$244.3 million
On October 1, 2024, we performed an
impairment evaluation for each of our
reporting units beginning with a
qualitative assessment. We
determined that based on the overall
results of the qualitative analysis and
the outlook of our reporting units,
company and industry, there was no
indication of goodwill impairment.
Therefore, no further testing was
required. We did not record goodwill
impairment charges during 2024, 2023
or 2022.
71
Description
Judgments and Uncertainties
Effect if Actual Results Differ from
Assumptions
Valuation of Contingent Consideration
Substantially all of our partnerships
and certain acquisitions of select
books of business that do not
constitute a complete business
enterprise include contingent
consideration arrangements, which
are based on the acquired company
achieving thresholds related to future
revenues, total insured value or
number of rented units. The structure
of these contingent earnout
arrangements can reduce the risk of
overpaying for acquisitions if the
projected financial results are not
achieved.
The fair values of these contingent
consideration arrangements are
included as part of the purchase price
of the acquired companies on their
respective acquisition dates. For each
transaction, we estimate the fair value
of contingent earnout payments as
part of the initial purchase price and
record the estimated fair value of
contingent consideration as a liability
on the consolidated balance sheets.
The fair values of the earnout
arrangements are estimated by
discounting the expected future
contingent payments to present value
using a variation of the income
approach, specifically using a Monte
Carlo Simulation approach. We have 9
partners with a corresponding
contingent consideration liability still
outstanding at December 31, 2024.
The fair value of the contingent
consideration arrangements is
estimated by simulating the metrics
corresponding to a payment using a
Monte Carlo Simulation approach and
discounting the expected future
contingent payments to present value.
The key assumptions used in our
valuation were: (i) forecast of revenue,
total insured value or number of
rented units, (ii) the volatility
associated with the revenues, total
insured value or number of rented
units, (iii) risk-adjusted discount rate
applied to forecasted revenues, total
insured value or number of rented
units, and (iv) the credit-adjusted
discount rate related to the payment
of the contingent consideration.
These estimates are influenced by
many factors, including historical
financial information, guideline public
company data, and management's
expectations for future revenue of the
acquired businesses, total insured
value and number of rented units, as
well as market conditions, economic
conditions and the company’s
performance. Changes in these inputs
could have a significant impact on the
fair value of the contingent
consideration liability.
We review and re-assess the estimated
fair value of contingent consideration
on a quarterly basis, and the updated
fair value could be materially different
from the initial estimates or prior
quarterly amounts; however, the fair
value of contingent consideration
liabilities becomes less uncertain as
partners approach their respective
measurement dates. Any changes in
the estimated fair value of contingent
consideration and adjustments to the
estimated fair value related to
unobservable inputs will be recognized
within change in fair value of
contingent consideration in the
consolidated statements of
comprehensive loss. We recognized a
$4.9 million benefit related to the
change in fair value of contingent
consideration in 2024.
At December 31, 2024, we recorded
$145.6 million of contingent
consideration liabilities related to the 9
contingent consideration
arrangements still outstanding and the
total potential maximum of the
remaining contingent consideration
payments is $268.8 million. If all
remaining revenue, insured value, and
rented units targets were to be
achieved, our partners would be
entitled to payments of up to $258.8
million in calendar year 2025 for
achieving targets through September
30, 2025; and $10.0 million in calendar
year 2026 for achieving targets
through September 30, 2026. If the
actual achievement of contingent
consideration payments in 2025
through 2026 was at the maximum
target amounts, we would record an
additional $123.2 million of expense
over the next two years.
72
Description
Judgments and Uncertainties
Effect if Actual Results Differ from
Assumptions
Valuation Allowance for Deferred Tax Assets
We record a tax provision for the
anticipated tax consequences of the
reported results of operations. We
compute the provision for income
taxes using the asset and liability
method, under which deferred tax
assets and liabilities are recognized for
the expected future tax consequences
of temporary differences between the
financial reporting and tax bases of
assets and liabilities, and for operating
losses and tax credit carryforwards.
We measure deferred tax assets and
liabilities using the currently enacted
tax rates in each jurisdiction that
applies to taxable income in effect for
the years in which those tax assets are
expected to be realized or settled.
We are required to establish a
valuation allowance for deferred tax
assets and record a charge to income
if it is determined, based on available
evidence at the time the determination
is made, that it is more likely than not
that some portion or all of the
deferred tax assets will not be realized.
Our evaluation of the realizability of
the deferred tax assets contains
uncertainties because it requires
management to make assumptions
and to apply judgment to estimate
future taxable income or loss. Many
variables go into estimating future
taxable income or loss, including
estimates of our future revenue
growth and management's
expectations of ongoing investments.
Our evaluation also requires
management to consider significant,
objective evidence to determine if it is
more likely than not that we will be
able to realize our deferred tax assets
in the future. Considerations include
recent results of operations, projected
future taxable income, tax-planning
strategies, potential changes in tax law
and rates, and future reversals of
existing taxable temporary differences.
During the last three years, we have
not made any changes in the
accounting methodology used to
evaluate the realizability of the
deferred tax assets.
We review and re-assess our
cumulative three-year loss before
income taxes on a quarterly basis.
Deferred tax assets have been
reduced by a full valuation allowance
at December 31, 2024 due to a
determination that it is more likely
than not that all of the deferred tax
assets will not be realized based on
the weight of all available evidence.
If we had concluded that it was more
likely than not that the full deferred
tax assets will be realized, our
valuation allowance would have been
reversed and we would have
recognized deferred tax assets of
approximately $169.1 million, before
indirect tax considerations, on our
consolidated balance sheet at
December 31, 2024.
If we did not have a valuation
allowance established, we would have
recognized an income tax benefit of
approximately $3.1 million, before
indirect tax considerations, for the
year ended December 31, 2024.
73
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the potential loss arising from adverse changes in market rates and prices, such as premium amounts,
interest rates and equity prices. We are exposed to market risk through our investments and borrowings under the 2024
Credit Facility. We use derivative instruments to mitigate our risk related to the effect of rising interest rates on our cash
flows. However, we do not use derivative instruments for trading or speculative purposes.
Our invested assets are held primarily as cash and cash equivalents and restricted cash. To a lesser extent, we may also
utilize certificates of deposit, U.S. treasury securities and professionally managed short duration fixed income funds. These
investments are subject to market risk. The fair values of our invested assets at December 31, 2024 and 2023
approximated their respective carrying values due to their short-term duration and therefore, such market risk is not
considered to be material.
At December 31, 2024, we had $835.8 million of borrowings outstanding under the 2024 Term Loan and no outstanding
borrowings under our 2024 Revolving Facility. At December 31, 2024, the 2024 Term Loan bore interest based on a
variable rate of term SOFR, plus an applicable margin of 325 bps. An increase of 100 basis points on the term SOFR rate at
December 31, 2024 would have increased our annual interest expense for the 2024 Credit Facility by $8.4 million.
We have entered into interest rate cap agreements to limit the potential impact of interest rate changes on cash flows. The
interest rate caps limit the variability of the base rate to the amount of the cap. The interest rate cap agreements in place
at December 31, 2024 mitigate the interest rate volatility on $1.2 billion of debt to a maximum base rate of 7.00% through
November 2025.
74
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID: 238)
76
The Baldwin Insurance Group, Inc. Consolidated Financial Statements
Consolidated Balance Sheets
79
Consolidated Statements of Comprehensive Loss
80
Consolidated Statements of Stockholders’ Equity and Mezzanine Equity
81
Consolidated Statements of Cash Flows
82
Notes to Consolidated Financial Statements
1. Business and Basis of Presentation
84
2. Significant Accounting Policies
85
3. Business Divestitures
91
4. Variable Interest Entities
92
5. Revenue
93
6. Contract Assets and Liabilities
94
7. Deferred Commission Expense
94
8. Property and Equipment. Net
94
9. Intangible Assets, Net and Goodwill
95
10. Accrued Expenses and Other Current Liabilities
96
11. Long-Term Debt
96
12. Leases
99
13. Stockholders’ Equity and Noncontrolling Interest
100
14. Related Party Transactions
102
15. Share-Based Compensation
103
16. Retirement Plan
105
17. Income Taxes
105
18. Earnings (Loss) Per Share
107
19. Fair Value Measurements
107
20. Commitments and Contingencies
109
21. Segment Information
110
22. Subsequent Events
114
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of The Baldwin Insurance Group, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of The Baldwin Insurance Group, Inc. and its
subsidiaries (the "Company") as of December 31, 2024 and 2023, and the related consolidated statements of
comprehensive loss, of stockholders' equity and mezzanine equity and of cash flows for each of the three years
in the period ended December 31, 2024, including the related notes (collectively referred to as the
"consolidated financial statements"). We also have audited the Company's internal control over financial
reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects,
the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and
its cash flows for each of the three years in the period ended December 31, 2024 in conformity with accounting
principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in
all material respects, effective internal control over financial reporting as of December 31, 2024, based on
criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining
effective internal control over financial reporting, and for its assessment of the effectiveness of internal control
over financial reporting, included in Management’s Annual Report on Internal Control Over Financial Reporting
appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial
statements and on the Company's internal control over financial reporting based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and
are required to be independent with respect to the Company in accordance with the U.S. federal securities laws
and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement, whether due to error or fraud, and whether effective internal control over
financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of
material misstatement of the consolidated financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the consolidated financial statements. Our audit of internal control over financial
reporting included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audits also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our
opinions.
76
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of management and directors of the
company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the
consolidated financial statements that was communicated or required to be communicated to the audit
committee and that (i) relates to accounts or disclosures that are material to the consolidated financial
statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication
of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as
a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the
critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition – Direct Bill Commission Revenue for the Insurance Advisory Services (IAS) Reportable Segment
As described in Notes 2 and 21 to the consolidated financial statements, the Company’s direct bill commission
revenue for IAS was $351.3 million for the year ended December 31, 2024. The Company earns commission
revenue by providing insurance placement services to insureds (“Clients”) under direct bill arrangements with
insurance companies with which the Company has a contractual relationship (“Insurance Company Partners”).
Commission revenues are usually a percentage of the premium paid by Clients and generally depend upon the
type of insurance, the Insurance Company Partner and the nature of the services provided. Commissions for
brokerage services may be invoiced near the effective date of the underlying policy or over the term of the
arrangement in installments during the policy period. However, regardless of the payment terms, commissions
are recognized at a point in time upon the effective date of bound insurance coverage, as no performance
obligation exists after coverage is bound.
The principal consideration for our determination that performing procedures relating to revenue recognition
for direct bill commission revenue for the IAS reportable segment is a critical audit matter is a high degree of
auditor effort in performing procedures related to the Company’s revenue recognition for these direct bill
arrangements.
77
Addressing the matter involved performing procedures and evaluating audit evidence in connection with
forming our overall opinion on the consolidated financial statements. These procedures included testing the
effectiveness of controls relating to the revenue recognition process, including controls over the recording of
direct bill commission revenue for the IAS reportable segment upon the effective date of bound insurance
coverage. These procedures also included, among others, testing the revenue recognized for a sample of
revenue transactions by obtaining and inspecting source documents, such as commission statements, invoices,
and cash receipts. Testing revenue recognized involved (i) evaluating the timing of revenue recognition based
upon the effective date of the bound insurance coverage and (ii) recalculating the amount of revenue
recognized. The procedures performed also included testing a sample of revenue transactions recorded near
period end to evaluate whether they were recognized in the appropriate period.
/s/ PricewaterhouseCoopers LLP
Tampa, Florida
February 25, 2025
We have served as the Company’s auditor since 2019.
78
THE BALDWIN INSURANCE GROUP, INC.
Consolidated Balance Sheets
December 31,
(in thousands, except share and per share data)
2024
2023
Assets
Current assets:
Cash and cash equivalents
$
148,120
$
116,209
Restricted cash
164,649
104,824
Premiums, commissions and fees receivable, net
702,096
627,791
Prepaid expenses and other current assets
11,625
12,730
Assets held for sale
—
64,351
Total current assets
1,026,490
925,905
Property and equipment, net
21,972
22,713
Right-of-use assets
72,367
85,473
Other assets
48,041
38,134
Intangible assets, net
953,492
1,017,343
Goodwill
1,412,369
1,412,369
Total assets
$
3,534,731
$
3,501,937
Liabilities, Mezzanine Equity and Stockholders’ Equity
Current liabilities:
Premiums payable to insurance companies
$
641,267
$
555,569
Producer commissions payable
73,126
64,304
Accrued expenses and other current liabilities
160,631
144,934
Related party notes payable
5,635
1,525
Colleague earnout incentives
32,826
8,020
Current portion of contingent earnout liabilities
142,949
215,157
Liabilities held for sale
—
43,931
Total current liabilities
1,056,434
1,033,440
Revolving line of credit
—
341,000
Long-term debt, less current portion
1,398,054
968,183
Contingent earnout liabilities, less current portion
2,610
61,310
Operating lease liabilities, less current portion
68,775
78,999
Other liabilities
61
123
Total liabilities
2,525,934
2,483,055
Commitments and contingencies (Note 20)
Mezzanine equity:
Redeemable noncontrolling interest
453
394
Stockholders’ equity:
Class A common stock, par value $0.01 per share, 300,000,000 shares authorized;
67,979,419 and 64,133,950 shares issued and outstanding at December 31, 2024 and
2023, respectively
680
641
Class B common stock, par value $0.0001 per share, 100,000,000 shares authorized;
49,552,686 and 52,422,494 shares issued and outstanding at December 31, 2024 and
2023, respectively
5
5
Additional paid-in capital
793,954
746,671
Accumulated deficit
(211,423)
(186,905)
Total stockholders’ equity attributable to Baldwin
583,216
560,412
Noncontrolling interest
425,128
458,076
Total stockholders’ equity
1,008,344
1,018,488
Total liabilities, mezzanine equity and stockholders’ equity
$
3,534,731
$
3,501,937
See accompanying Notes to Consolidated Financial Statements.
79
THE BALDWIN INSURANCE GROUP, INC.
Consolidated Statements of Comprehensive Loss
For the Years Ended December 31,
(in thousands, except share and per share data)
2024
2023
2022
Revenues:
Commissions and fees
$
1,377,116
$
1,211,828
$
980,720
Investment income
11,921
6,727
—
Total revenues
1,389,037
1,218,555
980,720
Operating expenses:
Commissions, employee compensation and benefits
1,032,048
911,354
719,445
Other operating expenses
192,366
190,267
173,708
Amortization expense
102,730
92,704
81,738
Change in fair value of contingent consideration
(4,949)
61,083
32,307
Depreciation expense
6,194
5,698
4,620
Total operating expenses
1,328,389
1,261,106
1,011,818
Operating income (loss)
60,648
(42,551)
(31,098)
Other income (expense):
Interest expense, net
(123,644)
(119,465)
(71,072)
Gain on divestitures
38,953
—
—
Loss on extinguishment and modification of debt
(15,113)
—
—
Other income (expense), net
(194)
(718)
26,137
Total other expense
(99,998)
(120,183)
(44,935)
Loss before income taxes
(39,350)
(162,734)
(76,033)
Income tax expense
1,731
1,285
715
Net loss
(41,081)
(164,019)
(76,748)
Less: net loss attributable to noncontrolling interests
(16,563)
(73,878)
(34,976)
Net loss attributable to Baldwin
$
(24,518) $
(90,141) $
(41,772)
Comprehensive loss
$
(41,081) $
(164,019) $
(76,748)
Comprehensive loss attributable to noncontrolling interests
(16,563)
(73,878)
(34,976)
Comprehensive loss attributable to Baldwin
(24,518)
(90,141)
(41,772)
Basic and diluted loss per share
$
(0.39) $
(1.50) $
(0.74)
Basic and diluted weighted-average shares of Class A common stock
outstanding
63,455,148
60,134,776
56,825,348
See accompanying Notes to Consolidated Financial Statements.
80
THE BALDWIN INSURANCE GROUP, INC.
Consolidated Statements of Stockholders’ Equity and Mezzanine Equity
Stockholders' Equity
Mezzanine
Equity
Class A
Common Stock
Class B
Common Stock
Additional
Paid-in
Capital
Accumulated
Deficit
Stockholder
Notes
Receivable
Non-
controlling
Interest
Total
Redeemable
Non-
controlling
Interest
(in thousands, except share data)
Shares
Amount
Shares
Amount
Balance at December 31,
2021
58,602,859 $ 586
56,338,051 $
6
$ 663,002 $ (54,992) $
(219) $ 578,904
$ 1,187,287
$
269
Net income (loss)
—
—
—
—
—
(41,772)
—
(35,194)
(76,966)
218
Equity issued in business
combinations
226,338
2
—
—
2,525
—
—
2,282
4,809
—
Share-based
compensation, net of
forfeitures
777,037
8
29,430
—
30,658
—
—
(2,100)
28,566
—
Redemption and
cancellation of Class B
common stock
1,841,134
18
(1,862,563)
(1)
8,106
—
—
(8,123)
—
—
Tax distributions to
Baldwin Holdings' LLC
Members
—
—
—
—
—
—
—
(4,321)
(4,321)
—
Repayment of stockholder
notes receivable
—
—
—
—
—
—
177
—
177
—
Balance at December 31,
2022
61,447,368
614
54,504,918
5
704,291
(96,764)
(42) 531,448
1,139,552
487
Net income (loss)
—
—
—
—
—
(90,141)
—
(74,170) (164,311)
292
Share-based
compensation, net of
forfeitures
676,512
7
—
—
23,685
—
—
19,995
43,687
—
Redemption of Class B
common stock
2,082,424
21
(2,082,424)
—
19,975
—
—
(19,996)
—
—
Cancellation of Class A
common stock
(72,354)
(1)
—
—
(1,280)
—
—
1,281
—
—
Tax distributions to
Baldwin Holdings' LLC
Members
—
—
—
—
—
—
—
(482)
(482)
—
Repayment of stockholder
notes receivable
—
—
—
—
—
—
42
—
42
—
Distributions to variable
interest entities
—
—
—
—
—
—
—
—
—
(385)
Balance at December 31,
2023
64,133,950
641
52,422,494
5
746,671
(186,905)
—
458,076
1,018,488
394
Net income (loss)
—
—
—
—
—
(24,518)
—
(16,886)
(41,404)
323
Share-based
compensation, net of
forfeitures
975,661
10
—
—
23,926
—
—
18,400
42,336
—
Redemption of Class B
common stock
2,869,808
29
(2,869,808)
—
23,357
—
—
(23,386)
—
—
Tax distributions to
Baldwin Holdings' LLC
Members
—
—
—
—
—
—
—
(11,076)
(11,076)
—
Distributions to variable
interest entities
—
—
—
—
—
—
—
—
—
(264)
Balance at December 31,
2024
67,979,419 $ 680
49,552,686 $
5
$ 793,954 $ (211,423) $
—
$ 425,128
$ 1,008,344
$
453
See accompanying Notes to Consolidated Financial Statements.
81
THE BALDWIN INSURANCE GROUP, INC.
Consolidated Statements of Cash Flows
For the Years Ended December 31,
(in thousands)
2024
2023
2022
Cash flows from operating activities:
Net loss
$
(41,081) $
(164,019) $
(76,748)
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:
Depreciation and amortization
108,924
98,402
86,358
Change in fair value of contingent consideration
(4,949)
61,083
32,307
Share-based compensation expense
65,503
60,008
47,389
Payment of contingent earnout consideration in excess of purchase price
accrual
(23,395)
(24,326)
(49,926)
Gain on divestitures
(38,953)
—
—
Loss on extinguishment of debt
1,034
—
—
Amortization of deferred financing costs
5,841
5,129
5,120
(Gain) loss on interest rate caps
244
1,670
(26,220)
Other loss
665
361
135
Changes in operating assets and liabilities, net of effect of acquisitions and
divestitures:
Premiums, commissions and fees receivable, net
(73,762)
(132,269)
(183,006)
Prepaid expenses and other current assets
(7,213)
(6,849)
(10,383)
Right-of-use assets
16,703
17,963
(13,492)
Accounts payable, accrued expenses and other current liabilities
81,561
132,655
173,362
Colleague earnout incentives
24,806
8,020
—
Operating lease liabilities
(13,777)
(13,184)
16,531
Other liabilities
—
—
(3,889)
Net cash provided by (used in) operating activities
102,151
44,644
(2,462)
Cash flows from investing activities:
Proceeds from divestitures, net of cash transferred
56,977
3,259
—
Capital expenditures
(41,049)
(21,376)
(21,979)
Cash consideration paid for asset acquisitions
(268)
(2,118)
(3,356)
Investments in and loans to business ventures
(3,861)
(1,687)
(1,103)
Proceeds from repayment of loans to business ventures
1,500
—
—
Cash consideration paid for business combinations, net of cash received
—
—
(387,919)
Net cash provided by (used in) investing activities
13,299
(21,922)
(414,357)
Cash flows from financing activities:
Payment of contingent earnout consideration up to amount of purchase price
accrual
(98,678)
(27,949)
(48,309)
Proceeds from revolving line of credit
106,000
111,000
512,000
Payments on revolving line of credit
(447,000)
(275,000)
(42,000)
Proceeds from refinancing of long-term debt
1,440,000
170,000
—
Payments relating to extinguishment and modification of long-term debt
(996,177)
—
—
Payments on long-term debt
(6,761)
(9,376)
(8,509)
Payments of deferred financing costs
(17,988)
(4,998)
(1,821)
Proceeds from the sale and settlement of interest rate caps
2,300
10,918
21,246
Purchase of interest rate caps
—
—
(3,838)
Tax distributions to Baldwin Holdings' LLC Members
(11,076)
(482)
(9,393)
Proceeds from repayment of stockholder notes receivable
—
42
177
Distributions to variable interest entities
(264)
(385)
—
Net cash provided by (used in) financing activities
(29,644)
(26,230)
419,553
Net increase (decrease) in cash and cash equivalents and restricted cash
85,806
(3,508)
2,734
Cash and cash equivalents and restricted cash at beginning of year
226,963
230,471
227,737
Cash and cash equivalents and restricted cash at end of year
$
312,769
$
226,963
$
230,471
See accompanying Notes to Consolidated Financial Statements.
82
THE BALDWIN INSURANCE GROUP, INC.
Consolidated Statements of Cash Flows (Continued)
For the Years Ended December 31,
(in thousands)
2024
2023
2022
Supplemental schedule of cash flow information:
Cash paid for interest
$
111,397
$
105,386
$
62,702
Cash paid for taxes
2,745
1,430
1,419
Disclosure of non-cash investing and financing activities:
Conversion of contingent earnout liability to related party notes payable and
to settle related party notes receivable
$
5,636
$
—
$
2,143
Right-of-use assets obtained in exchange for operating lease liabilities
2,794
6,414
24,910
Capital expenditures incurred but not yet paid
2,804
3,583
855
Right-of-use assets increased through lease modifications and reassessments
767
1,063
5,905
Contingent earnout liabilities assumed in business combinations and asset
acquisitions
224
723
14,918
Increase (decrease) in goodwill resulting from measurement period
adjustments for prior year business combinations
—
(211)
5,534
Equity interest issued in business combinations and asset acquisitions
—
—
4,809
Equity issued in satisfaction of a liability
—
—
711
Reconciliation of cash and cash equivalents and restricted cash:
Cash and cash equivalents and restricted cash per consolidated balance
sheet
$
221,033
Restricted cash included in assets held for sale
5,930
Cash and cash equivalents and restricted cash at end of year per
consolidated statements of cash flows
$
226,963
See accompanying Notes to Consolidated Financial Statements.
83
THE BALDWIN INSURANCE GROUP, INC.
Notes to Consolidated Financial Statements
1. Business and Basis of Presentation
The Baldwin Insurance Group, Inc. was incorporated in the state of Delaware on July 1, 2019 as BRP Group, Inc. and, on
May 2, 2024, was renamed The Baldwin Insurance Group, Inc.
The Baldwin Insurance Group, Inc. is a holding company and sole managing member of The Baldwin Insurance Group
Holdings, LLC (formerly Baldwin Risk Partners, LLC) (“Baldwin Holdings”) and its sole material asset is its ownership interest
in Baldwin Holdings, through which all of its business has been and is conducted. In these consolidated financial
statements, unless the context otherwise requires, the words “Baldwin,” and the “Company” refer to The Baldwin
Insurance Group, Inc., together with its consolidated subsidiaries, including Baldwin Holdings and its consolidated
subsidiaries and affiliates.
Baldwin is a diversified insurance agency and services organization that markets and sells insurance products and services
to its clients throughout the U.S. A significant portion of the Company’s business is concentrated in the Southeastern U.S.,
with several other regional concentrations. Baldwin and its subsidiaries operate through three reportable segments
(“operating groups”), including Insurance Advisory Solutions, Underwriting, Capacity & Technology Solutions and
Mainstreet Insurance Solutions, which are discussed in more detail in Note 21.
Principles of Consolidation
The consolidated financial statements include the accounts of Baldwin and its wholly-owned subsidiaries. All intercompany
transactions and balances have been eliminated in consolidation.
As the sole manager of Baldwin Holdings, Baldwin operates and controls all the business and affairs of Baldwin Holdings,
and has the sole voting interest in, and controls the management of, Baldwin Holdings. Accordingly, Baldwin consolidates
Baldwin Holdings in its consolidated financial statements, resulting in a noncontrolling interest related to the membership
interests of Baldwin Holdings (the “LLC Units”) held by Baldwin Holdings’ members in the Company’s consolidated financial
statements.
The Company has prepared these consolidated financial statements in accordance with Accounting Standards Codification
(“ASC”) Topic 810, Consolidation (“Topic 810”). Topic 810 requires that if an enterprise is the primary beneficiary of a
variable interest entity, the assets, liabilities, and results of operations of the variable interest entity should be included in
the consolidated financial statements of the enterprise. The Company has recognized certain entities as variable interest
entities, of which the Company is the primary beneficiary, and has included the accounts of these entities in the
consolidated financial statements. Refer to Note 4 for additional information regarding the Company’s variable interest
entities.
Topic 810 also requires that the equity of a noncontrolling interest shall be reported on the consolidated balance sheets
within total equity of the Company. Certain redeemable noncontrolling interests are reported on the consolidated balance
sheets as mezzanine equity. Topic 810 also requires revenues, expenses, gains, losses, net income or loss, and other
comprehensive income or loss to be reported in the consolidated financial statements at consolidated amounts, which
include amounts attributable to the owners of the parent and the noncontrolling interests. Refer to the Redeemable
Noncontrolling Interest and Noncontrolling Interest sections of Note 2 for additional information.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the
United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ
from these estimates. Significant estimates underlying the accompanying consolidated financial statements include the
application of guidance for revenue recognition; impairment of intangible assets and goodwill; the valuation of contingent
consideration; and the valuation allowance for deferred tax assets.
Changes in Presentation
As previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, beginning
on January 1, 2024, the Company’s FounderShield Partner moved from the Underwriting, Capacity & Technology Solutions
operating group to the Insurance Advisory Solutions operating group. Prior year segment reporting information in Note 21
has been recast to conform to the current organizational structure.
84
In addition, certain prior year amounts have been reclassified to conform to current year presentation. These
reclassifications had no impact on the Company's previously reported consolidated financial position, results of operations
or cash flows.
Recently Issued Accounting Standards
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.
2023-09, Income Taxes (Topic 740)—Improvements to Income Tax Disclosures (“ASU 2023-09”) to enhance the transparency
and usefulness of income tax disclosures. ASU 2023-09 requires disclosure of specific categories and disaggregation of
information in the rate reconciliation table using both percentages and reporting currency amounts. ASU 2023-09 also
requires disclosure of disaggregated information related to income taxes paid, income or loss from continuing operations
before income tax expense or benefit, and income tax expense or benefit from continuing operations. This guidance is
effective for fiscal years beginning after December 15, 2024. The Company expects the adoption of this standard to
expand its income tax disclosures, but otherwise have no impact on the consolidated financial statements.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense
Disaggregation Disclosures (Subtopic 220-40)—Disaggregation of Income Statement Expenses ("ASU 2024-03") to improve the
disclosures about a public business entity's expenses and supply more detailed information about the types of expenses
in commonly presented expense captions. These expense captions include purchases of inventory, employee
compensation, depreciation, amortization, and depletion in commonly presented expense captions such as cost of sales,
selling, general and administrative expense, and research and development. This guidance is effective for annual reporting
periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. The
Company expects the adoption of this standard to expand its expense disclosures, but otherwise have no impact on the
consolidated financial statements.
Recently Adopted Accounting Standards
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (“Topic 280”)—Improvements to Reportable Segment
Disclosures (“ASU 2023-07”) to enhance the disclosure requirements for reportable segments. ASU 2023-07 requires
disclosure of significant segment expenses regularly provided to the chief operating decision maker (“CODM”), as well as
an aggregate amount of other segment items included within segment profit or loss and a description of its composition.
Additionally, ASU 2023-07 requires a description of how the CODM utilizes the reported measure of segment operating
results to assess segment performance. ASU 2023-07 also requires enhanced interim disclosure requirements effectively
making annual disclosures a requirement for interim reporting. The annual requirements of ASU 2023-07 became effective
for the Company January 1, 2024, at which time it was adopted. The Company has included the new disclosures in Note 21
as required. New interim period disclosures are required for fiscal years beginning January 1, 2025 and will be included in
the Company’s Quarterly Reports on Form 10-Q beginning for the quarter ending March 31, 2025.
2. Significant Accounting Policies
Revenue Recognition
The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“Topic 606”).
The Company earns commission revenue by providing insurance placement services to insureds (“clients”) under direct bill
and agency bill arrangements with insurance company partners for private risk management, commercial risk
management, employee benefits and Medicare insurance types. Commission revenues are usually a percentage of the
premium paid by clients and generally depend upon the type of insurance, the insurance company partner and the nature
of the services provided. In some cases, the Company shares commissions with other agents or brokers who have acted
jointly with the Company in a transaction. The Company controls the fulfillment of the performance obligation and its
relationship with its insurance company partners and the outside agents. Commissions shared with downstream agents or
brokers are recorded in commission, employee compensation and benefits expense in the consolidated statements of
comprehensive loss.
Commission revenue is recorded net of allowances for estimated policy cancellations, which are determined based on an
evaluation of historical and current cancellation data.
Commissions for brokerage services may be invoiced near the effective date of the underlying policy or over the term of
the arrangement in installments during the policy period. However, regardless of the payment terms, commissions are
recognized at a point in time upon the effective date of bound insurance coverage, as no performance obligations exists
after coverage is bound.
The Company earns service fee revenue for providing insurance placement services to clients for a negotiated fee, and
consulting revenue is earned by providing specialty insurance consulting. Service fee and consulting revenues from certain
agreements are recognized over time depending on when the services within the contract are satisfied and when the
Company has transferred control of the related services to the customer.
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Profit-sharing commissions represent bonus-type revenue that is earned by the Company as a sales incentive provided by
certain insurance company partners. The Company receives profit-sharing commissions based primarily on underwriting
results, but may also contain considerations for volume, growth, loss performance or retention. Profit-sharing
commissions associated with relatively predictable measures are estimated and recognized over time. The profit-sharing
commissions are recorded as the underlying policies that contribute to the achievement of the metric are placed with any
adjustments recognized when payments are received or as additional information that affects the estimate becomes
available. Profit-sharing commissions associated with loss performance are uncertain, and therefore, are subject to
significant reversal as loss data remains subject to material change. Management estimates profit-sharing commissions
using historical outcomes and known trends impacting premium volume or loss ratios, subject to a constraint. The
constraint is relieved when management estimates the revenue is not subject to significant reversal, which often coincides
with the earlier of written notice from the insurance company partner that the target has been achieved, or cash
collection. Year-end amounts incorporate estimates subject to a constraint or where applicable, are based on confirmation
from insurance company partners after calculation of premium volume or loss ratios that are impacted by catastrophic
losses.
The Company earns policy fee revenue for acting in its capacity as a managing general agent (“MGA”) on behalf of the
insurance company partner and fulfilling certain services including delivery of policy documents, processing payments and
other administrative functions during the term of the insurance policy. Policy fee revenue is deferred and recognized over
the life of the policy. These deferred amounts are recognized as contract liabilities, which are included as a component of
accrued expenses and other current liabilities on the consolidated balance sheets. The Company earns installment fee
revenue for payment processing services performed on behalf of the insurance company partner related to policy
premiums paid on an installment basis. The Company recognizes installment fee revenue in the period the services are
performed.
The Company also earns investment income, which primarily consists of interest earnings on available cash invested in
treasury money market funds. The Company recognizes investment income in the period the revenue is earned.
The Company pays an incremental amount of compensation in the form of producer commissions on new business. These
incremental costs are capitalized as deferred commission expense and amortized over five years, which represents
management’s estimate of the average benefit period for new business. The Company has concluded that this period is
consistent with the transfer to the client of the services to which the asset relates.
Due to the relatively short time period between the information gathering phase and binding insurance coverage, the
Company has determined that costs to fulfill contracts are not significant. Therefore, costs to fulfill a contract are
expensed as incurred.
Cash and Cash Equivalents
The Company considers all highly liquid short-term instruments with original maturities of three months or less to be cash
equivalents. These instruments held by the Company included money market funds at December 31, 2024 and 2023.
Money market funds are carried at cost, which approximates fair value, and are considered Level 1 measurements within
the fair value hierarchy. As of December 31, 2024, the Company's money market funds totaled $237.5 million.
Restricted Cash
Restricted cash includes amounts that are legally restricted as to use or withdrawal. Restricted cash represents cash
collected from clients that is payable to insurance company partners and for which segregation of this cash is required by
contract with the relevant insurance company providing coverage or by law within the state. The Company also holds
restricted cash specifically in its role as an MGA.
Premiums, Commissions and Fees Receivable, Net
Premiums receivable represent premiums due from clients when the Company acts in its capacity as insurance agent or
broker on behalf of the insurance company partner. In an agency bill contract, the Company typically collects premiums
from clients and, after deducting its authorized commissions, remits the net premiums to the appropriate insurance
company partners. Commissions receivable reflect commissions due from insurance company partners. In a direct bill
contract, the insurance company partners collect the premiums directly from clients and remit the applicable commissions
to the Company. Fees receivable represent policy fees, consulting fees, service fees and other related amounts due from
clients in service transactions.
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Premiums, commissions and fees receivable are reported net of allowances for estimated policy cancellations. The
allowance for estimated policy cancellations was $18.7 million and $12.6 million at December 31, 2024 and 2023,
respectively, which represents a reserve for future reversals in commission and fee revenues related to the potential
cancellation of client insurance policies that were in force as of each year end. The allowance for estimated policy
cancellations is established through a charge to revenues. The allowance for estimated policy cancellations is offset in part
by a producer commissions chargeback of $10.3 million and $5.7 million at December 31, 2024 and 2023, respectively. The
producer commissions chargeback is established through a charge to commissions, employee compensation and benefits
expense and is netted against producer commissions payable on the consolidated balance sheets.
The Company recognizes an allowance for credit losses that reflects the Company's estimate of expected credit losses for
its premiums, commissions and fees receivable. This allowance is not significant during any periods presented.
Property and Equipment, Net
Property and equipment is stated at cost less accumulated depreciation. For financial reporting purposes, depreciation of
property and equipment is calculated using the straight-line method over the estimated useful lives of the assets as
follows:
Useful Life
(in Years)
Leasehold improvements
5 - 10
Furniture
7
Equipment
5
Other
3
Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful life or the
reasonably assured lease term at inception of the lease. When assets are retired or otherwise disposed of, the cost and
related accumulated depreciation are removed from the accounts. The difference between the net book value of the
assets and proceeds from disposal is recognized as a gain or loss on disposal, which is included in other income (expense),
net in the consolidated statements of comprehensive loss. Routine maintenance and repairs are charged to expense as
incurred, while costs of improvements and renewals are capitalized.
Property and equipment is evaluated for impairment whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. An asset is considered to be impaired when the sum of the undiscounted future
net cash flows expected to result from the use of the asset and its eventual disposition does not exceed its carrying
amount. The amount of the impairment loss, if any, is measured as the amount by which the carrying value of the asset
exceeds its fair value.
Capitalized Software
The Company capitalizes certain costs to develop software for internal use as capitalized software in accordance with ASC
Topic 350-40, Internal-Use Software. Costs incurred during the preliminary project stage and post-implementation stage of
an internal-use software project are expensed as incurred while costs incurred during the application development stage
of an internal-use software project are capitalized. Costs related to updates and enhancements to the software are only
capitalized if they result in additional functionality to the Company. Capitalized software is included as a component of
software under intangible assets, net on the consolidated balance sheets. The Company amortizes capitalized software on
the straight-line basis over estimated useful lives of three to five years. Refer to Note 9 for additional information
regarding capitalized software.
Intangible Assets, Net and Goodwill
The Company has recognized separately identifiable intangible assets in connection with strategic acquisitions made by
the Company (“partnerships”), as well as those related to software purchased and developed for internal use. Intangible
assets identified in a partnership are recorded at fair value on the acquisition date. The excess of the purchase price in a
business combination over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed
is assigned to goodwill.
Intangible assets are stated at cost, less accumulated amortization, and consist of acquired relationships, software and
trade names. Acquired relationships and trade names are being amortized based on a pattern of economic benefit over
estimated useful lives of 15 to 20 years and one to five years, respectively. Software is amortized on the straight-line basis
over estimated useful lives of two to five years.
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Management assesses the fair value of acquired relationships, software and trade names by considering the estimated
future cash flow benefits associated with ownership of the assets through the use of recognized income approach
valuation methods. The valuation of these intangible assets involves significant assumptions concerning matters such as
revenue and expense growth rates, customer attrition rates, obsolescence rates, royalty rates and discount rates.
The Company reviews its definite-lived intangible assets and other long-lived assets for impairment whenever an event
occurs that indicates the carrying amount of an asset may not be recoverable. No impairment was recorded for the years
ended December 31, 2024, 2023 or 2022.
Goodwill is subject to an impairment assessment on an annual basis or whenever indicators of impairment are present.
On October 1, 2024, the Company performed an impairment evaluation for each of its reporting units beginning with a
qualitative assessment. The qualitative factors we considered included general economic conditions, limitations on
accessing capital, industry and market considerations, cost factors such as commissions expense that could have a
negative effect on future cash flows, overall financial performance including declining cash flows and a decline in actual or
anticipated commissions and fees, earnings or key statistics, and other entity-specific events such as changes in
management and loss of key personnel or clients. We determined that based on the overall results of the qualitative
analysis and the outlook of our reporting units, company and industry, there was no indication of goodwill impairment. As
such, no further testing was required. No impairment was recorded for the years ended December 31, 2024, 2023 or 2022.
Deferred Financing Costs, Net
Deferred financing costs consist of origination fees and debt issuance costs related to obtaining and amending credit
facilities. The Company has recorded these costs as an asset and liability on the consolidated balance sheets in accordance
with ASC Topic 835-30, Interest. Deferred financing costs associated with revolving credit facilities are included in other
assets on the consolidated balance sheets while those related to term loans and senior secured notes are recorded as an
offset to long-term debt. At December 31, 2024 and 2023, deferred financing costs included in other assets were $9.5
million and $6.4 million, net of accumulated amortization of $4.6 million and $3.5 million, respectively. Deferred financing
costs and original issue discount included in long-term debt totaled $45.1 million and $32.0 million, net of accumulated
amortization of $15.8 million and $11.7 million, at December 31, 2024 and 2023, respectively. Such costs are amortized
using the effective interest method over the terms of the respective debt. Amortization of deferred financing costs, which
is included in interest expense, net in the accompanying consolidated statements of comprehensive loss, was
approximately $5.8 million for the year ended December 31, 2024 and $5.1 million for each of the years ended December
31, 2023 and 2022, respectively.
Derivative Instruments
The Company utilizes derivative financial instruments, consisting of interest rate caps, to manage the Company’s interest
rate exposure. Derivative instruments are recognized as assets or liabilities at fair value on the consolidated balance
sheets. The Company has not designated these derivatives as hedging instruments for accounting purposes and,
accordingly, the changes in fair value of these derivatives are recognized in earnings. Cash payments and receipts under
the derivative instruments are classified within cash flows from financing activities in the accompanying consolidated
statements of cash flows. The Company does not use derivative instruments for trading or speculative purposes.
Equity Method Investments
The Company holds equity method investments in entities in which it has deemed to have significant influence over the
operating and financial policies of the investee. These investments are accounted for using the equity method of
accounting in accordance with ASC Topic 323, Investments—Equity Method and Joint Ventures. Under the equity method
of accounting, investments, which are included as a component of other assets on the consolidated balance sheets, are
initially recorded at cost and subsequently adjusted for the Company's proportionate share of the investee's earnings or
losses, distributions received from the investee, and other comprehensive income of the investee. The income or loss
from equity method investments is included as a component of other income (expense), net in the consolidated
statements of comprehensive loss.
At December 31, 2024, the Company had a 2.5% ownership interest in Emerald Bay Risk Solutions LLC ("Emerald Bay"),
with a carrying value of $2.1 million. Despite the Company owning less than 3-5% of the outstanding voting stock, the
Company exercises significant influence over Emerald Bay due to the Company’s representation on Emerald Bay’s board
of directors and the significance of transactions completed between Emerald Bay and the Company.
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Self-Insurance Reserve
The Company has a self-insured health insurance plan for which it carries an insurance program with specific retention
levels or high per-claim deductibles for expected losses. The Company records a liability for all unresolved claims and for
an estimate of incurred but not reported (“IBNR”) claims at the anticipated cost that falls below its specified retention
levels or per-claim deductible amounts. In establishing reserves, the Company considers actuarial assumptions and
judgments regarding economic conditions and the frequency and severity of claims. The Company had an IBNR reserve of
$3.2 million and $3.8 million at December 31, 2024 and 2023, respectively, which is included in accrued expenses and
other current liabilities on the consolidated balance sheets.
Leases
The Company accounts for leases under ASC Topic 842, Leases (“Topic 842”). A lease is an agreement between two or
more parties that creates enforceable rights and obligations that conveys the right to control the use of an identified asset
for a period of time in exchange for consideration. Topic 842 requires an entity to determine whether a contract is a lease
or contains a lease at the inception of the contract, considering all relevant facts and circumstances. There are two main
components in determining if a contract is a lease: (i) a right to use an identified asset and (ii) control over the use of the
identified asset. A customer does not have the right to use an identified asset if, at inception of the contract, a supplier has
the substantive right to substitute the asset throughout the period of use. Control over the use of the identified asset
requires a customer to obtain “substantially all the economic benefits” and to have the “ability to direct the use of the
asset.”
Topic 842 requires the recognition of right-of-use assets and lease liabilities on the balance sheet. Leases are classified at
their commencement date, which is defined as the date on which the lessor makes the underlying asset available for use
by the lessee, as either operating or finance leases based on the economic substance of the agreement. The Company
recognizes right-of-use assets and lease liabilities on its consolidated balance sheets for operating leases. Lease liabilities
are measured at the lease commencement date as the present value of the future lease payments determined using
either (i) the interest rate implicit in the lease, if readily determinable, or (ii) the Company's incremental borrowing rate on
the lease commencement date. Right-of-use assets are measured as the lease liability plus initial direct costs and prepaid
lease payments less lease incentives. The lease term is the non-cancelable period of the lease and includes options to
extend or terminate the lease when it is reasonably certain that an option will be exercised.
The Company elected to not separate lease and non-lease components and instead accounts for them as a single lease
component for all classes of underlying assets. The Company does not include variable payments that are not based on an
index or rate in the single lease component, regardless of whether they are related to the lease or non-lease component.
The Company elected to not recognize a lease liability or right-of-use asset on the consolidated balance sheets for leases
with an initial term of 12 months or less. Operating lease expenses on capitalized leases and short-term leases are
recognized on a straight-line basis over the respective lease term, inclusive of rent escalation provisions and rent holidays,
as a component of other operating expense in the consolidated statements of comprehensive loss.
Colleague Earnout Incentives
Colleague earnout incentives represents the unpaid portion of contingent earnout liabilities that were reclassified, at the
partner's option, to an earnout incentive bonus payable to colleagues. Refer to the contingent earnout liabilities
rollforward in Note 19 for additional information.
Contingent Earnout Liabilities
The Company accounts for contingent consideration relating to business combinations as a contingent earnout liability
and an increase to goodwill at the date of acquisition and continually remeasures the liability at each balance sheet date
by recording changes in fair value through change in fair value of contingent consideration in the consolidated statements
of comprehensive loss. The ultimate settlement of contingent earnout liabilities relating to business combinations may be
for amounts that are materially different from the amounts initially recorded and may cause volatility in the Company’s
results of operations.
The Company accounts for contingent consideration relating to asset acquisitions as a contingent earnout liability and an
increase to the cost of the acquired assets on a relative fair value basis at the date of acquisition. Once recognized, the
contingent earnout liability is not derecognized until the contingency is resolved and the consideration is issued or
becomes issuable. If the amount initially recognized as a liability exceeds the fair value of the contingent consideration
issued or issuable, the entity recognizes that amount as a reduction to the cost of the acquired assets. The ultimate
settlement of contingent earnout liabilities relating to asset acquisitions may be for amounts that are materially different
from the amounts initially recorded.
The Company determines the fair value of contingent earnout liabilities based on future cash flow projections under
various potential scenarios and weighs the probability of these outcomes as discussed further in Note 19.
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Assets and Liabilities Held for Sale
The Company classifies assets and related liabilities as held for sale (the “disposal group”) when: (i) management has
committed to a plan to sell the disposal group, (ii) the disposal group is available for immediate sale, (iii) there is an active
program to locate a buyer, (iv) the sale and transfer of the disposal group is probable within one year, (v) the disposal
group is being actively marketed for sale at a price that is reasonable in relation to its current fair value, and (vi) it is
unlikely that significant changes will be made to the plan to sell the disposal group.
Assets and liabilities held for sale are presented separately within the consolidated balance sheets with any adjustments
necessary to measure the disposal group at the lower of its carrying value or fair value less costs to sell. Goodwill is
allocated to the disposal group based on the relative fair value of the disposal group and the portion of the reporting unit
to be retained. Any loss on held for sale assets and liabilities is included as a component of other income (expense), net in
the consolidated statements of comprehensive loss. Depreciation of property and equipment and amortization of
intangible and right-of-use assets are not recorded while these assets are classified as held for sale. For each period the
disposal group remains classified as held for sale, its recoverability is reassessed and any necessary adjustments are made
to its carrying value. Refer to Note 3 for a summary of the major classes of assets and liabilities held for sale at December
31, 2023.
Redeemable Noncontrolling Interest
ASC Topic 480, Distinguishing Liabilities from Equity, requires noncontrolling interests that are redeemable for cash or other
assets to be classified outside of permanent equity if they are redeemable (i) at a fixed or determinable price on a fixed or
determinable date, (ii) at the option of the holder, or (iii) upon the occurrence of an event that is not solely within the
control of the issuer.
Redeemable noncontrolling interests are reported at estimated redemption value measured as the greater of estimated
fair value at the end of each reporting period or the historical cost basis of the redeemable noncontrolling interest
adjusted for cumulative earnings or loss allocations. The resulting increases or decreases to redemption value, if
applicable, are recognized as adjustments to retained earnings.
Noncontrolling Interest
Noncontrolling interests are reported at historical cost basis adjusted for cumulative earnings or loss allocations and
classified as a component of stockholders’ equity on the consolidated balance sheets.
Income Taxes
Baldwin Holdings is treated as a partnership for U.S. federal, state and local income tax purposes. As a partnership,
Baldwin Holdings’ taxable income or loss is included in the taxable income of its members. Baldwin and The Baldwin
Group Colleague Inc., an indirect subsidiary of Baldwin, are both C corporations and taxable entities.
The Company accounts for income taxes pursuant to the asset and liability method, which requires the recognition of
deferred income tax assets and liabilities related to the expected future tax consequences arising from temporary
differences between the carrying amounts and tax bases of assets and liabilities based on enacted statutory tax rates
applicable to the periods in which the temporary differences are expected to reverse. Any effects of changes in income tax
rates or laws are included in income tax expense in the period of enactment.
The Company and its subsidiaries follow ASC Topic 740, Income Taxes. A component of this standard prescribes a
recognition and measurement threshold of uncertain tax positions taken or expected to be taken in a tax return. For those
benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing
authorities. Management has evaluated the Company’s tax positions and concluded that the Company has taken no
uncertain tax positions that require adjustment to the financial statements to comply with the provisions of this guidance.
The Company does not expect any of its tax positions to change significantly in the near term.
Tax Receivable Agreement
The Company’s future exchanges of LLC Units from Baldwin Holdings’ LLC Members and the corresponding number of
shares of Class B common stock for shares of Class A common stock, is expected to result in increases in its share of the
tax basis of the tangible and intangible assets of Baldwin Holdings, which will increase the tax depreciation and
amortization deductions that otherwise would not have been available to Baldwin. These increases in tax basis and tax
depreciation and amortization deductions are expected to reduce the amount of cash taxes that Baldwin would otherwise
be required to pay in the future. Baldwin has entered into a Tax Receivable Agreement with the other members of Baldwin
Holdings that requires Baldwin to pay them 85% of the amount of cash savings, if any, in U.S. federal, state, and local
income tax that Baldwin actually realizes (or, under certain circumstances, is deemed to realize) as a result of the increases
in tax basis in connection with exchanges by the recipients described above and certain other tax benefits attributable to
payments under the Tax Receivable Agreement.
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Share-Based Compensation
Share-based payments to directors, officers, colleagues and consultants are measured based on the estimated grant-date
fair value. The grant-date fair value of restricted and unrestricted stock awards is equal to the market value of Baldwin’s
Class A common stock on the date of grant. The Company also issues stock awards that vest based on service conditions,
performance conditions, or market conditions. The Company applies the Black-Scholes option-pricing model, a Monte
Carlo Simulation, or a lattice model, depending on the vesting conditions, in determining the fair value of performance-
based restricted stock unit awards to colleagues. The Company recognizes share-based compensation expense over the
requisite service period for awards expected to ultimately vest. The Company recognizes forfeitures as they occur. Refer to
Note 15 for additional information regarding our share-based compensation plans.
Fair Value of Financial Instruments
The carrying values of the Company’s financial assets and liabilities, including cash and cash equivalents, restricted cash,
premiums, commissions and fees receivable, premiums payable to insurance companies, producer commissions payable
and accrued expenses and other current liabilities, approximate their fair values because of the short maturity and
liquidity of those instruments.
Contingencies
The Company accounts for contingencies in accordance with ASC Topic 450-20, Loss Contingencies. Liabilities for loss
contingencies arising from various claims and legal actions are recorded when it is probable that a liability has been
incurred and the amount is reasonably estimable. In certain cases, where a range of loss exists, the Company accrues the
minimum amount in the range if no amount within the range is a better estimate than any other amount. Refer to Note 20
for additional information regarding the Company's contingencies.
Concentrations
For the year ended December 31, 2024, one insurance company partner accounted for approximately 10% of the
Company's commissions and fees. There were no revenue concentrations for the years ended December 31, 2023 or
2022.
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash
equivalents and restricted cash. The Company manages this risk by using high credit worthy financial institutions. Interest-
bearing accounts and noninterest-bearing accounts are insured by the Federal Deposit Insurance Corporation (“FDIC”) up
to $250,000. Deposits exceed amounts insured by the FDIC. The Company has not experienced any losses from its
deposits.
3. Business Divestitures
Since its launch in January 2020, the Company's specialty wholesale broker business (the “Wholesale Business”), operating
within the Underwriting, Capacity & Technology Solutions operating group, had not benefited from the same degree of
capital allocation, focus and prioritization as the retail and MGA businesses. After assessing the various paths forward for
the Wholesale Business, near the end of 2023, management concluded that a plan to sell the Wholesale Business created
the greatest opportunity for both the Company and the Wholesale Business.
As of December 31, 2023, the Wholesale Business met the criteria to be classified as held for sale. The assets and liabilities
were recorded as held for sale at their carrying value, which was determined to be lower than the fair value of the net
assets less costs to sell and, as a result, no loss was recorded relating to the reclassification. The divestiture did not meet
the criteria to be reported as discontinued operations and the Company continued to report the operating results for its
Wholesale Business as continuing operations in the consolidated statements of comprehensive loss through February 29,
2024.
On March 1, 2024, the Company closed on the sale of its Wholesale Business for proceeds of approximately 58.9 million,
subject to certain customary purchase price adjustments. The Company derecognized assets of $61.8 million, which
included 9.5 million of goodwill, and liabilities of 39.9 million. The Company recognized a pre-tax gain on the sale of 35.1
million (after post-closing adjustments), which is included as a component of gain on divestitures in the consolidated
statements of comprehensive loss for the year ended December 31, 2024.
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The table below provides a summary of the major classes of assets and liabilities that were classified as held for sale on
the consolidated balance sheets as of December 31, 2023:
(in thousands)
December 31,
2023
Restricted cash
$
5,930
Premiums, commissions and fees receivable, net
36,470
Property and equipment, net
50
Right-of-use assets
310
Other assets
395
Intangible assets, net
11,716
Goodwill
9,480
Assets held for sale
$
64,351
Premiums payable to insurance companies
$
42,289
Producer commissions payable
955
Accrued expenses and other current liabilities
(1)
589
Operating lease liabilities, less current portion
98
Liabilities held for sale
$
43,931
__________
(1)
Includes the current portion of operating lease liabilities.
4. Variable Interest Entities
Topic 810 requires a reporting entity to consolidate a variable interest entity (“VIE”) when the reporting entity has a
variable interest or combination of variable interests that provide the entity with a controlling financial interest in the VIE.
The Company continually assesses whether it has a controlling financial interest in each of its VIEs to determine if it is the
primary beneficiary of the VIE and should, therefore, consolidate each of the VIEs. A reporting entity is considered to have
a controlling financial interest in a VIE if it has (i) the power to direct the activities of a VIE that most significantly impact the
VIE’s economic performance, and (ii) the obligation to absorb the losses of, or the right to receive benefits from, the VIE
that could potentially be significant to the VIE.
The Company determined that it is the primary beneficiary of its VIEs, which include Laureate Insurance Partners, LLC, BKS
Smith, LLC, BKS MS, LLC and BKS Partners Galati Marine Solutions, LLC. The Company has consolidated its VIEs into the
accompanying consolidated financial statements.
Total revenues and expenses of the Company’s consolidated VIEs included in the consolidated statements of
comprehensive loss were $2.3 million and $1.1 million, respectively, for the year ended December 31, 2024, $2.0 million
and $1.1 million, respectively, for the year ended December 31, 2023, and $1.7 million and $1.0 million, respectively, for
the year ended December 31, 2022.
Total assets and liabilities of the Company's consolidated VIEs included on the consolidated balance sheets were $1.6
million and $0.1 million, respectively, at December 31, 2024 and $0.8 million and $0.2 million, respectively, at December
31, 2023. The assets of the consolidated VIEs can only be used to settle the obligations of the consolidated VIEs and the
creditors of the liabilities of the consolidated VIEs do not have recourse to the Company.
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5. Revenue
The following table provides disaggregated revenues by major source:
For the Years Ended December 31,
(in thousands)
2024
2023
2022
Commission revenue
(1)(2)
$
1,129,903
$
967,552
$
786,794
Profit-sharing revenue
(3)
95,532
93,437
66,091
Consulting and service fee revenue
(4)
78,168
74,637
61,244
Policy fee and installment fee revenue
(5)
60,719
65,386
55,362
Other income
(6)
12,794
10,816
11,229
Investment income
(7)
11,921
6,727
—
Total revenues
$
1,389,037
$
1,218,555
$
980,720
__________
(1)
Commission revenue is earned by providing insurance placement services to clients under direct bill and agency bill arrangements
with insurance company partners for private risk management, commercial risk management, employee benefits and Medicare
insurance types.
(2)
During the years ended December 31, 2024, 2023 and 2022, commission revenue included direct bill revenue of $603.2 million,
$544.2 million and $444.9 million, respectively, and agency bill revenue of $526.7 million, $423.3 million and $341.9 million,
respectively.
(3)
Profit-sharing revenue represents bonus-type revenue that is earned by the Company as a sales incentive provided by certain
insurance company partners.
(4)
Service fee revenue is earned for providing insurance placement services to clients for a negotiated fee and consulting revenue is
earned by providing specialty insurance consulting and other advisory services.
(5)
Policy fee revenue represents revenue earned for acting in the capacity of an MGA and fulfilling certain administrative functions on
behalf of insurance company partners, including delivery of policy documents, processing payments and other administrative
functions. Installment fee revenue represents revenue earned by the Company for providing payment processing services on behalf
of insurance company partners related to policy premiums paid on an installment basis.
(6)
Other income includes other ancillary income, premium financing income, and marketing income that is based on agreed-upon cost
reimbursement for fulfilling specific targeted Medicare marketing campaigns.
(7)
Investment income represents interest earnings on available cash invested in treasury money market funds.
The application of Topic 606 requires the use of management judgment. The following are the areas of most significant
judgment as it relates to Topic 606:
•
The Company considers the policyholders as representative of its customers in the majority of contractual
relationships, with the exception of Medicare contracts in its Mainstreet Insurance Solutions operating group,
where the insurance company partner is considered its customer.
•
Medicare contracts in the Mainstreet Insurance Solutions operating group are multi-year arrangements in which
the Company is entitled to renewal commissions. However, the Company has applied a constraint to renewal
commissions that limits revenue recognized when a risk of significant reversals exists based on: (i) historical
renewal patterns; and (ii) the influence of external factors outside of the Company’s control, including
policyholder discretion over plans and insurance company partner relationship, political influence, and a
contractual provision, which limits the Company’s right to receive renewal commissions to ongoing compliance
and regulatory approval of the relevant insurance company partner and compliance with the Centers for
Medicare and Medicaid Services.
•
The Company recognizes separately contracted commission revenue at the effective date of insurance placement
and considers any ongoing interaction with the customer to be insignificant in the context of the obligations of the
contract.
•
Variable consideration includes estimates of direct bill commissions, reserves for policy cancellations and accruals
for profit-sharing income.
•
Costs to obtain a contract are deferred and recognized over five years, which represents management’s estimate
of the average benefit period for new business.
•
Due to the relatively short time period between the information gathering phase and binding insurance coverage,
the Company has determined that costs to fulfill contracts are not significant. Therefore, costs to fulfill a contract
are expensed as incurred.
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6. Contract Assets and Liabilities
Contract assets arise when the Company recognizes (i) revenue for amounts which have not yet been billed and (ii)
receivables for premiums to be collected on behalf of insurance company partners. Contract liabilities relate to payments
received in advance of performance under the contract before the transfer of a good or service to the customer. Contract
assets are included in premiums, commissions and fees receivable, net and contract liabilities are included in accrued
expenses and other current liabilities on the consolidated balance sheets. The balances of contract assets and liabilities
arising from contracts with customers were as follows:
December 31,
(in thousands)
2024
2023
Contract assets
(1)
$
411,683
$
342,692
Contract liabilities
40,780
30,281
__________
(1)
Contract assets representing unbilled revenue comprised $240.2 million and $158.1 million at December 31, 2024 and 2023,
respectively.
During the year ended December 31, 2024, the Company recognized revenue of $30.3 million related to the contract
liabilities balance at December 31, 2023.
7. Deferred Commission Expense
The Company pays an incremental amount of compensation in the form of producer commissions on new business. In
accordance with ASC Topic 340, Other Assets and Deferred Costs, these incremental costs are deferred and amortized
over five years, which represents management’s estimate of the average benefit period for new business. Deferred
commission expense represents producer commissions that are capitalized and not yet expensed and are included in
other assets on the consolidated balance sheets. The table below provides a rollforward of deferred commission expense:
For the Years
Ended December 31,
(in thousands)
2024
2023
Balance at beginning of year
$
26,205
$
21,669
Costs capitalized
17,383
12,032
Amortization
(9,744)
(7,145)
Deferred commission expense classified as held for sale
—
(351)
Balance at end of year
$
33,844
$
26,205
8. Property and Equipment, Net
Property and equipment, net consists of the following:
December 31,
(in thousands)
2024
2023
Equipment
$
21,666
$
17,779
Leasehold improvements
11,452
8,400
Furniture
8,075
7,262
Construction in process
316
2,728
Other
522
514
Total property and equipment
42,031
36,683
Accumulated depreciation
(20,059)
(13,970)
Property and equipment, net
$
21,972
$
22,713
Depreciation expense recorded for property and equipment was $6.2 million, $5.7 million and $4.6 million for the years
ended December 31, 2024, 2023 and 2022, respectively.
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9. Intangible Assets, Net and Goodwill
Intangible assets consist of the following:
December 31, 2024
December 31, 2023
(in thousands)
Gross
Carrying
Value
Accumulated
Amortization
Net Carrying
Value
Gross
Carrying
Value
Accumulated
Amortization
Net Carrying
Value
Acquired relationships
(1)
$ 1,136,326
$
(259,125) $
877,201
$ 1,135,834
$
(186,487) $
949,347
Software
(2)
138,119
(65,190)
72,929
99,733
(46,543)
53,190
Trade names
27,924
(24,562)
3,362
27,924
(13,118)
14,806
Total intangible assets
$ 1,302,369
$
(348,877) $
953,492
$ 1,263,491
$
(246,148) $ 1,017,343
__________
(1)
Acquired relationships exclude $20.7 million of gross carrying value and $9.4 million of accumulated amortization classified as held
for sale at December 31, 2023
(2)
At December 31, 2024 and 2023, capitalized software had a gross carrying value of $66.9 million and $28.5 million, respectively, and
accumulated amortization of $10.3 million and $1.4 million, respectively.
The Company had asset acquisitions during each of the years ended December 31, 2024 and 2023, which resulted in the
addition of acquired relationships of 0.5 million and 3.5 million, respectively, each with estimated weighted-average useful
lives of 15 years.
Amortization expense recorded for intangible assets was $102.7 million, $92.7 million and $81.7 million for the years
ended December 31, 2024, 2023 and 2022, respectively. Amortization expense recorded for capitalized software, which is
included as a component of intangible assets amortization, was $8.9 million and $1.4 million for the years ended
December 31, 2024 and 2023, respectively.
Future annual estimated amortization expense over the next five years for intangible assets is as follows (in thousands):
For the Years Ending December 31,
Amortization
2025
$
99,475
2026
96,372
2027
81,834
2028
70,613
2029
65,711
The changes in carrying value of goodwill by operating group are as follows:
(in thousands)
Insurance
Advisory
Solutions
Underwriting,
Capacity &
Technology
Solutions
Mainstreet
Insurance
Solutions
Total
Balance at December 31, 2022
(1)
$
932,487
$
245,069
$
244,504
$ 1,422,060
Goodwill classified as held for sale
(2)
—
(9,480)
—
(9,480)
Measurement period adjustments
(3)
—
—
(211)
(211)
Balance at December 31, 2024 and 2023
$
932,487
$
235,589
$
244,293
$ 1,412,369
__________
(1)
Beginning balances were recast to account for goodwill related to the Company’s FounderShield Partner, which moved from the
Underwriting, Capacity & Technology Solutions operating group to the Insurance Advisory Solutions operating group. Refer to Note 1
for additional information.
(2)
Refer to Note 3 for additional information regarding goodwill classified as held for sale.
(3)
Measurement period adjustments recorded during 2023 relating to businesses acquired in 2022 decreased current liabilities by $0.2
million.
95
10. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following:
December 31,
(in thousands)
2024
2023
Accrued compensation and benefits
$
67,036
$
53,728
Contract liabilities
40,780
30,281
Current portion of operating lease liabilities
17,078
16,704
Accrued expenses
12,351
23,274
Current portion of long-term debt
8,400
10,243
Accrued interest
6,194
2,009
Other
8,792
8,695
Accrued expenses and other current liabilities
$
160,631
$
144,934
11. Long-Term Debt
As of December 31, 2023, the JPM Credit Agreement, as amended, provided for senior secured credit facilities in an
aggregate principal amount of 2 billion, which consisted of (i) a term loan facility in the principal amount of 1 billion
maturing in October 2027 (the “Term Loan B”) and (ii) a revolving credit facility with commitments in an aggregate principal
amount of $600 million maturing in April 2027 (the “Revolving Facility”).Borrowings under the Revolving Facility accrued
interest at SOFR plus 210 bps to SOFR plus 310 bps based on total net leverage ratio. At December 31, 2023, outstanding
borrowings under the Term Loan B and the Revolving Facility had applicable interest rates of 8.97% and 8.46%,
respectively.
On May 24, 2024, Baldwin Holdings refinanced the amounts outstanding under the Term Loan B and the Revolving Facility
with a portion of the proceeds from an offering of $600 million in aggregate principal amount of 7.125% senior secured
notes due May 15, 2031 (the “Senior Secured Notes”) and borrowings under a new $840 million senior secured first lien
term loan facility maturing May 24, 2031 (the “2024 Term Loan”). In connection with the refinancing, Baldwin Holdings also
established a new senior secured first lien revolving facility with commitments in an aggregate principal amount of
$600 million maturing May 24, 2029 (the “2024 Revolving Facility” and, together with the 2024 Term Loan, the “2024 Credit
Facility”).
In connection with the Senior Secured Notes and the 2024 Credit Facility, the Company incurred $32.0 million in debt
issuance costs, of which $18.0 million were capitalized as deferred financing costs that will be amortized over the term of
the Senior Secured Notes. A substantial portion of the deferred financing costs relate to the Senior Secured Notes and
2024 Term Loan and are recorded as an offset to long-term debt on the consolidated balance sheets, while those
associated with the 2024 Revolving Facility are included in other assets. The remaining costs of $14.0 million, consisting of
third-party financing costs related to the portion of the Term Loan B refinancing that was accounted for as a modification
of debt, were expensed during the year ended December 31, 2024. The Company recorded an additional loss of $1.0
million related to the partial extinguishment of the Term Loan B during the year ended December 31, 2024. All remaining
previously unamortized deferred financing costs continue to be amortized over the term of the 2024 Term Loan and 2024
Revolving Facility, as appropriate. The aggregate loss on extinguishment and modification of debt of $15.1 million was
reported separately in the consolidated statements of comprehensive loss for the year ended December 31, 2024.
Senior Secured Notes
The Senior Secured Notes were issued by Baldwin Holdings and a wholly-owned corporate subsidiary of Baldwin Holdings
(the “co-issuer” and, together with Baldwin Holdings, the “issuers”) pursuant to an indenture, dated as of May 24, 2024 (the
“indenture”), by and among the issuers, the guarantors named therein and U.S. Bank Trust Company, National Association,
as trustee and notes collateral agent. Interest on the Senior Secured Notes is payable semi-annually in arrears on May 15
and November 15 of each year, beginning on November 15, 2024. The Senior Secured Notes are jointly, severally and
unconditionally guaranteed on a senior secured basis by the guarantors that guarantee or will guarantee indebtedness
under the 2024 Credit Facility (the “guarantees”). The Senior Secured Notes and the guarantees rank pari passu in right of
payment with all existing and future senior indebtedness of the issuers and the guarantors, including indebtedness under
the 2024 Credit Facility, and are secured on a first-lien basis by the collateral that secures indebtedness under the 2024
Credit Facility.
96
The Senior Secured Notes may be redeemed in whole or in part, at any time on or after May 15, 2027 at the redemption
prices set forth in the indenture, plus accrued and unpaid interest. Prior to May 15, 2027, the issuers may also redeem
some or all of the Senior Secured Notes at a price equal to 100% of the principal amount thereof, plus accrued and unpaid
interest, plus the applicable “make-whole” premium described in the indenture. In addition, the issuers may redeem (i)
until May 15, 2027, up to 40% of the then outstanding principal amount of the Senior Secured Notes (which includes
additional notes, if any) with an amount not to exceed the net cash proceeds from certain equity offerings, at a
redemption price equal to 107.125% of the aggregate principal amount thereof and (ii) at any time prior to May 15, 2027,
up to 10% of the then outstanding principal amount of the Senior Secured Notes (which includes additional notes, if any)
during any twelve-month period following the issue date of the Senior Secured Notes (provided that such period
commencing on the issue date of the Senior Secured Notes shall end on May 15, 2025) at a redemption price equal to
103% of the aggregate principal amount thereof, in each case, plus accrued and unpaid interest, if any, up to the
redemption date. In addition, if certain kinds of “changes of control” occur, the issuers must offer to purchase the Senior
Secured Notes at the prices set forth in the indenture, plus accrued and unpaid interest, if any, to, but excluding, the date
of purchase.
The indenture governing the Senior Secured Notes contains covenants that, among other things, limit the ability of the
issuers and their restricted subsidiaries to:
•
incur additional debt or issue certain preferred shares;
•
incur liens or use assets as security in other transactions;
•
make certain distributions, investments and other restricted payments;
•
engage in certain transactions with affiliates; and
•
merge or consolidate or sell, transfer, lease or otherwise dispose of all or substantially all of their assets.
The issuers were in compliance with all such covenants at December 31, 2024.
The indenture also provides for customary events of default.
2024 Credit Facility
The 2024 Term Loan was issued at 99.75% of par and bears interest at a rate of term SOFR, plus an applicable margin of
325 bps, with a margin step-down to 300 bps at a first lien net leverage ratio of 4.00x or below. At December 31, 2024, the
outstanding borrowings on the 2024 Term Loan of $835.8 million had an applicable interest rate of 7.61%.
The outstanding borrowings under the 2024 Term Loan are required to be prepaid with: (a) up to 50% of excess cash flow
(which will be reduced to 25% and 0% if specified total first lien net leverage ratios are met); (b) 100% of the net cash
proceeds of certain asset dispositions, subject to certain thresholds and reinvestment provisions; and (c) 100% of the net
proceeds of debt that is incurred in violation of the 2024 Credit Agreement.
The 2024 Term Loan requires quarterly principal payments of $2.1 million, with the balance payable in full on the maturity
date thereof. Quarterly amortization payments may be reduced by any mandatory or voluntary prepayments including
excess cash flow payments.
The interest rate for the 2024 Revolving Facility is term SOFR, plus a credit spread adjustment of 10 bps, plus an applicable
margin of 200 bps to 300 bps based on a total first lien net leverage ratio. There were no outstanding borrowings on the
2024 Revolving Facility at December 31, 2024; however, the 2024 Revolving Facility is subject to a commitment fee of 0.40%
on the unused capacity at December 31, 2024, which may be reduced to 0.35%, 0.30% or 0.25% if total net leverage ratio
reduces to certain specified levels in the future. The Company will pay a letter of credit fee equal to the margin then in
effect with respect to term SOFR loans under the 2024 Revolving Facility multiplied by the daily amount available to be
drawn under any letter of credit, a fronting fee and any customary documentary and processing charges for any letter of
credit issued under the 2024 Credit Agreement. At December 31, 2024, the Company had unused letters of credit issued
under the Revolving Facility of $12.0 million.
All obligations under the 2024 Credit Facility are jointly, severally and unconditionally guaranteed on a senior secured
basis by certain of Baldwin Holdings’ direct and indirect subsidiaries (the “guarantors”) that also guarantee the Senior
Secured Notes, subject to certain legal and tax limitations and other agreed exceptions, and are secured by substantially
all the assets of Baldwin Holdings and the guarantors, subject to certain agreed limitations.
97
The 2024 Credit Agreement, the definitive agreement for the 2024 Credit Facility, provides that Baldwin Holdings has the
right at any time to request incremental facilities in an aggregate principal amount not to exceed the sum of (a) the greater
of (1) $285.0 million and (2) 100% of Consolidated EBITDA (as defined in the 2024 Credit Agreement) for the most recently
completed four fiscal quarter period for which internal financial statements are available plus (b) all voluntary
prepayments and/or redemptions of term loan facilities and certain other indebtedness secured on a pari passu basis with
the obligations under the 2024 Credit Facility and all voluntary commitment reductions of the 2024 Revolving Facility
(except in each case to the extent financed with proceeds from the incurrence of long-term indebtedness) plus (c) an
amount such that, after giving effect to the incurrence of any such incremental facility pursuant to this clause (c) (which
shall be deemed to include the full amount of any incremental revolving facility assuming that the full amount of such
facility was drawn) and after giving effect to any acquisition, disposition, debt incurrence, debt retirement and other
transactions to be consummated in connection therewith, Baldwin Holdings would be in compliance, on a pro forma basis,
with a total first lien net leverage ratio of 5.50x or below. The lenders under the 2024 Credit Agreement are not under any
obligation to provide any such incremental facilities and any such incremental facilities will be subject to certain customary
conditions.
The 2024 Credit Agreement contains certain financial, affirmative and negative covenants that are customary for a senior
credit facility of this type. The negative covenants in the 2024 Credit Agreement include limitations (subject to agreed
exceptions) on the ability of Baldwin Holdings and its material subsidiaries to:
•
incur additional indebtedness (including guarantees);
•
incur liens;
•
make investments, loans and advances;
•
implement mergers, consolidations and sales of assets (including sale and lease-back transactions);
•
make restricted payments or enter into restrictive agreements (including those with negative pledge clauses);
•
enter into transactions with affiliates on non-arm’s-length terms;
•
change the business conducted by Baldwin Holdings and its subsidiaries;
•
prepay, or make redemptions and repurchases of specified indebtedness;
•
use the proceeds of the loans under the 2024 Credit Agreement in certain prohibited manners;
•
make certain amendments to the organizational documents of Baldwin Holdings and its material subsidiaries;
and
•
change Baldwin Holdings’ fiscal year.
The 2024 Credit Agreement contains a financial maintenance covenant requiring Baldwin Holdings to maintain a total first
lien net leverage ratio at or below 7.00 to 1.00 on a pro forma basis. The 2024 Credit Agreement also contains certain
customary events of default with certain cure periods, as applicable. Baldwin Holdings was in compliance with all such
covenants at December 31, 2024.
Debt Maturities
Future annual maturities of long-term debt are as follows as of December 31, 2024:
(in thousands)
Amount
Payments for the years ending December 31,
2025
$
8,400
2026
8,400
2027
8,400
2028
8,400
2029
8,400
Thereafter
1,393,800
Total long-term debt
1,435,800
Less: unamortized debt discount and issuance costs
(29,346)
Net long-term debt
$
1,406,454
98
January 2025 Refinancing
On January 10, 2025, the 2024 Credit Agreement was amended to, among other things, provide for $100 million of
incremental term B loans (the loans thereunder, the “2025 Term Loans”), increasing the aggregate principal amount of
Baldwin Holdings’ existing $835.8 million senior secured first lien term loan facility maturing on May 24, 2031 to
$935.8 million. The proceeds of the 2025 Term Loans were used to repay in full all of the 2024 Term Loans outstanding
under the 2024 Credit Agreement.
The 2025 Term Loans bear interest at term SOFR, plus an applicable margin of 300 bps, with a margin step-down to 275
bps at a first lien net leverage ratio of 4.00x or below. The 2025 Term Loans are otherwise subject to the same terms to
which the 2024 Term Loans were subject under the 2024 Credit Agreement.
Interest Rate Caps
The Company uses interest rate caps to mitigate its exposure to interest rate risk on its debt by limiting the impact of
interest rate changes on cash flows. The interest rate caps limit the variability of the applicable base rate to the amount of
the cap. At December 31, 2024, the Company held two interest rate caps each with a notional amount of $600.0 million
and interest rate cap of 7.00% expiring on November 30, 2025. The interest rate caps, which are included as a component
of other assets on the consolidated balance sheets, are recorded at an aggregate fair value of less than $0.1 million and
$2.6 million at December 31, 2024 and 2023, respectively. The Company recognized a loss on interest rate caps of $0.2
million and $1.7 million for the years ended December 31, 2024 and 2023, respectively. The gain or loss on interest rate
caps is included as a component of other income (expense), net in the consolidated statements of comprehensive loss.
12. Leases
The Company has operating leases relating to its facilities and office equipment with terms expiring though August 2035.
Determination of whether a new contract is a lease is made at contract inception or at the modification date for a modified
contract. The Company's operating leases may require fixed rental payments, variable lease payments based on usage or
sales and fixed non-lease costs relating to the leased asset. Fixed non-lease costs such as common-area maintenance
costs are included in the measurement of the right-of-use asset and lease liability as the Company does not separate lease
and non-lease components. Variable lease payments are generally not included in the measurement of the right-of-use
asset and lease liability and are recorded as lease expense in the period incurred. Short-term leases of 12 months or less
are expensed in conjunction with the Company's short-term policy election.
The Company's operating leases may include renewal or termination options. Options to extend or terminate leases are
excluded from balance sheet recognition until the options are reasonably certain to be exercised. The Company only
included executed options to extend its leases in its calculation of right-of-use assets and lease liabilities at December 31,
2024.
Operating lease right-of-use assets and lease liabilities were as follows:
December 31,
(in thousands)
2024
2023
Assets:
Right-of-use assets
$
72,367 $
85,473
Liabilities:
Operating lease liabilities, current portion
$
17,078 $
16,704
Operating lease liabilities, non-current
68,775
78,999
Total operating lease liabilities
$
85,853 $
95,703
The components of the lease costs were as follows:
For the Years Ended December 31,
(in thousands)
2024
2023
2022
Operating lease costs
$
21,504 $
23,195 $
19,921
Variable lease costs
5,175
3,677
3,073
99
Supplemental cash flow information relating to our leases was as follows:
For the Years Ended December 31,
(in thousands)
2024
2023
2022
Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows used in operating leases
$
21,719 $
19,587 $
17,125
Operating lease non-cash items:
Right-of-use assets obtained in exchange for operating lease
liabilities
$
2,794 $
6,414 $
24,910
Right-of-use assets increased through lease modifications and
reassessments
767
1,063
5,905
Weighted average remaining lease terms and discount rates were as follows:
December 31,
2024
2023
Operating leases:
Remaining lease term
5.2 years
5.4 years
Discount rate
5.4 %
5.3 %
Future minimum lease payments under non-cancelable operating lease agreements at December 31, 2024 were as
follows:
(in thousands)
Minimum Future
Lease Payments
For the years ending December 31,
2025
$
21,210
2026
19,571
2027
18,364
2028
14,920
2029
12,895
Thereafter
12,351
Total minimum lease payments
99,311
Less: amounts representing interest or imputed interest
(13,458)
Present value of lease liabilities
$
85,853
13. Stockholders’ Equity and Noncontrolling Interest
Capital Stock
Baldwin’s certificate of incorporation authorized capital stock consisting of 300 million shares of Class A common stock
with a par value $0.01 per share, 100 million shares of Class B common stock with a par value of $0.0001 per share, and 50
million shares of preferred stock with a par value of $0.01 per share.
100
The following table shows a rollforward of our common stock outstanding for the prior three years:
Class A
Common Stock
Class B
Common Stock
Shares issued at December 31, 2021
58,602,859
56,338,051
Shares issued in connection with partnerships
226,338
—
Common stock and restricted stock grants under Omnibus Incentive Plan, net of
forfeitures and shares withheld for taxes
784,630
—
Common stock and restricted stock grants under Partnership Inducement Award
Plan, net of forfeitures and shares withheld for taxes
(7,593)
—
Redemption of Class B shares of common stock for Class A shares
1,841,134
(1,841,134)
Equity issued in satisfaction of a liability
—
29,430
Forfeiture of unvested Class B shares
—
(21,429)
Shares issued at December 31, 2022
61,447,368
54,504,918
Common stock and restricted stock grants under Omnibus Incentive Plan, net of
forfeitures and shares withheld for taxes
854,067
—
Common stock and restricted stock grants under Partnership Inducement Award
Plan, net of forfeitures and shares withheld for taxes
(177,555)
—
Redemption of Class B shares of common stock for Class A shares
2,082,424
(2,082,424)
Cancellation of Class A shares to settle obligation from partner
(72,354)
—
Shares issued at December 31, 2023
64,133,950
52,422,494
Common stock and restricted stock grants under Omnibus Incentive Plan, net of
forfeitures and shares withheld for taxes
1,203,880
—
Common stock and restricted stock grants under Partnership Inducement Award
Plan, net of forfeitures and shares withheld for taxes
(228,219)
—
Redemption of Class B shares of common stock for Class A shares
2,869,808
(2,869,808)
Shares issued at December 31, 2024
67,979,419
49,552,686
Class A Common Stock
Stockholders of Baldwin’s Class A common stock are entitled to one vote for each share held of record on all matters on
which stockholders are entitled to vote generally, including the election or removal of directors, although they do not have
cumulative voting rights in the election of directors. Stockholders of Class A common stock are entitled to receive
dividends when and if declared by our board of directors, subject to any restrictions on the payment of dividends.
Upon our liquidation, dissolution or winding up and after payment in full of all amounts required to be paid to creditors
and to the holders of preferred stock having liquidation preferences, if any, the stockholders of Class A common stock will
be entitled to receive pro rata our remaining assets available for distribution.
Class B Common Stock
The Class B common stock can be exchanged (together with a corresponding number of LLC Units) for shares of Class A
common stock on a one-for-one basis, subject to certain restrictions, and the shares of Class B common stock will be
cancelled on a one-for-one basis with the redemption or exchange. Except for transfers to us pursuant to the Amended
LLC Agreement or to certain permitted transferees, Baldwin Holdings’ LLC Members are not permitted to sell, transfer or
otherwise dispose of any LLC Units or shares of Class B common stock.
Each share of Class B common stock entitles the stockholder to one vote per share, together with holders of Class A
common stock as a single class, on all matters submitted to a vote of our stockholders. If at any time the ratio at which LLC
Units are redeemable or exchangeable for shares of Class A common stock changes from one-for-one, the number of
votes to which Class B common stockholders are entitled will be adjusted accordingly. Class B common stockholders will
vote together with Class A common stockholders as a single class on all matters on which stockholders are entitled to vote
generally, except as otherwise required by law. Class B common stockholders do not have cumulative voting rights in the
election of directors, nor do they have any right to receive dividends or to receive a distribution upon a liquidation or
winding up of Baldwin.
101
Noncontrolling Interest
Baldwin is the sole managing member of Baldwin Holdings. As such, Baldwin consolidates Baldwin Holdings in its
consolidated financial statements, resulting in a noncontrolling interest related to the LLC Units held by Baldwin Holdings’
LLC Members in its consolidated financial statements.
The following table summarizes the ownership interest in Baldwin Holdings:
December 31, 2024
December 31, 2023
LLC Units
Percentage
LLC Units
Percentage
Interest in Baldwin Holdings held by Baldwin
67,979,419
58 % 64,133,950
55 %
Noncontrolling interest in Baldwin Holdings held by
Baldwin Holdings’ LLC Members
49,552,686
42 % 52,422,494
45 %
Total
117,532,105
100 % 116,556,444
100 %
14. Related Party Transactions
Due to/from Related Parties
The Company had 1.5 million due from related parties at December 31, 2023, which included amounts due from partners
for post-closing cash requirements in accordance with partnership agreements. This receivable at December 31, 2023 also
included $0.8 million for a loan made to Emerald Bay, an entity formed for the benefit of the MGA business, and to which
the Company, Lowry Baldwin, the Company's Chairman, and members of the Company's executive management team
have made capital commitments. All amounts due from related parties, which were included in prepaid expenses and
other current assets on the consolidated balance sheets, had been repaid at December 31, 2024.
The Company funded an initial investment in Emerald Bay of $2.4 million during the year ended December 31, 2024.
Investments are included in other assets on the consolidated balance sheets.
Related party notes payable of $5.6 million and $1.5 million at December 31, 2024 and 2023, respectively, relate to the
settlement of contingent earnout consideration for certain of the Company's partners.
Commission Revenue
The Company serves as a broker for Holding Company of the Villages, Inc. (“The Villages”), a significant shareholder, and
certain affiliated entities. Commission revenue recorded from transactions with The Villages and affiliated entities was $2.4
million for the year ended December 31, 2024 and $2.1 million for each of the years ended December 31, 2023 and 2022.
The Company serves as a broker for certain entities in which a member of our board of directors has a material interest.
Commission revenue recorded from transactions with these entities was $0.2 million for the year ended December 31,
2024 and $0.3 million for each of the years ended December 31, 2023 and 2022.
Commissions and Consulting Expense
Two brothers of Lowry Baldwin, the Company's Chairman, collectively received producer commissions from the Company
comprising approximately $0.6 million during each of the years ended December 31, 2024, 2023 and 2022.
Rent Expense
The Company has various agreements to lease office space from wholly-owned subsidiaries of The Villages. Rent expense
ranges from approximately $3,000 to $14,000 per month, per lease. Lease agreements expire on various dates through
December 2027. Total rent expense incurred with respect to The Villages and its wholly-owned subsidiaries was
approximately $0.7 million for the year ended December 31, 2024 and $0.4 million for each of the years ended December
31, 2023 and 2022. Total right-of-use assets and operating lease liabilities included on the Company's balance sheets
relating to these lease agreements were $1.3 million and $1.4 million, respectively, at December 31, 2024, and $1.4 million
each at December 31, 2023.
The Company has various agreements to lease office space from other related parties. Rent expense ranges from
approximately $2,000 to $59,000 per month, per lease. Lease agreements expire on various dates through December
2030. Total rent expense incurred with respect to other related parties was approximately $3.7 million, $3.9 million and
$3.8 million for the years ended December 31, 2024, 2023 and 2022, respectively. Total right-of-use assets and operating
lease liabilities included on the Company's balance sheets relating to these lease agreements were $9.7 million and $10.3
million, respectively, at December 31, 2024 and $12.9 million and $13.4 million, respectively, at December 31, 2023.
102
Other
Lowry Baldwin, the Company's Chairman, paid $0.4 million, $0.3 million and $0.3 million of Baldwin Holdings' commitment
to the University of South Florida (“USF”) during each of the years ended December 31, 2024, 2023 and 2022, respectively.
Refer to Note 20 for additional information regarding this commitment.
15. Share-Based Compensation
Omnibus Incentive Plan and Partnership Inducement Award Plan
The Company adopted an Omnibus Incentive Plan (the “Omnibus Plan”) and a Partnership Inducement Award Plan (the
“Inducement Plan” and collectively with the Omnibus Plan, the “Plans”) to motivate and reward colleagues and certain
other individuals to perform at the highest level and contribute significantly to the Company’s success, thereby furthering
the best interests of Baldwin Insurance Group’s stockholders. The Plans permit the grant of both nonqualified and
incentive stock options, stock appreciation rights, restricted stock awards (“RSAs”), restricted stock unit awards (“RSUs”),
other performance awards (including performance-based RSUs (“PSUs”) issued in connection with the Long-Term Incentive
Plan (“LTIP”) for executives), cash-based awards and share-based awards to the Company’s directors, officers, colleagues
and, solely with respect to the Omnibus Plan, consultants. The aggregate value of all compensation paid to a non-
employee director under the Omnibus Plan in any calendar year may not exceed $250,000 and awards granted under the
Inducement Plan require a minimum vesting period of one year.
The Plans are administered by the Compensation Committee, the members of which are independent members of the
board of directors. The Compensation Committee assesses issuances under the Plans in the context of the Company's
fully-diluted capital composition, which includes shares of Class A common stock and Class B common stock.
The total number of shares of Class A common stock authorized for issuance under the Omnibus Plan and Inducement
Plan was 10,793,035 and 3,000,000, respectively, at December 31, 2024. Under the Omnibus Plan, the number of shares of
Class A common stock reserved for issuance will increase on the first day of each fiscal year by the lesser of (i) 2% of the
aggregate shares of Class A and Class B common stock outstanding on the last day of the immediately preceding fiscal
year and (ii) such number of shares as determined by the Company’s board of directors. In accordance therewith, the
number of authorized shares of Class A common stock reserved for issuance under the Omnibus Plan increased by
2,350,642 shares effective January 1, 2025.
At December 31, 2024, there were 2,351,733 and 1,854,673 shares of Class A common stock available for grant under the
Omnibus Plan and Inducement Plan, respectively. The Company issues new shares of Class A common stock upon the
grant of RSAs and the vesting of PSUs. During the year ended December 31, 2024, the Company made awards of RSAs,
PSUs and fully-vested shares under the Plans to its non-employee directors, officers, colleagues and consultants. Fully-
vested shares issued to directors, officers and colleagues during the year ended December 31, 2024 were vested upon
issuance while RSAs issued to colleagues and consultants generally either cliff vest after three to four years or vest ratably
over three to five years. The vesting of RSAs and PSUs issued to the Company's executive officers is discussed below under
Long-Term Incentive Plan.
103
The following table summarizes the activity for awards granted by the Company under the Plans:
Shares
Weighted-
Average Grant-
Date Fair Value
Per Share
Non-vested awards outstanding at December 31, 2021
3,215,731
$
28.83
Granted
1,258,300
26.58
Vested and settled
(756,655)
28.24
Forfeited
(122,073)
26.75
Non-vested awards outstanding at December 31, 2022
3,595,303
28.26
Granted
1,855,051
28.97
Vested and settled
(1,541,042)
25.93
Forfeited
(387,722)
32.17
Non-vested awards outstanding at December 31, 2023
3,521,590
29.22
Granted
1,992,423
31.80
Vested and settled
(1,708,427)
28.37
Forfeited
(334,204)
29.52
Non-vested awards outstanding at December 31, 2024
3,471,382
31.08
Non-vested awards outstanding at December 31, 2024 that are expected to vest
2,892,524
31.41
The total fair value of shares that vested and settled under the Plans was $48.5 million, $40.0 million and $21.4 million for
the years ended December 31, 2024, 2023 and 2022, respectively. Non-vested awards outstanding at December 31, 2024
include 698,898 PSUs expected to vest, which have an aggregate intrinsic value of $27.1 million and a weighted-average
remaining contractual term of 1.3 years.
Share-based compensation is recognized ratably over the vesting period of the respective awards and includes expense
related to issuances under the Plans and, prior to 2023, advisor incentive awards. Share-based compensation also includes
the portion of annual bonuses that are payable in fully-vested shares of Class A common stock. The Company recognizes
share-based compensation expense for the Plans net of actual forfeitures. The Company recorded share-based
compensation expense of $65.5 million, $56.2 million and $47.4 million for the years ended December 31, 2024, 2023 and
2022, respectively. Share-based compensation expense is included in commissions, employee compensation and benefits
expense in the consolidated statements of comprehensive loss. The Company had $58.8 million of total unrecognized
compensation cost related to non-vested shares at December 31, 2024, which is expected to be recognized over a
weighted-average period of 2.0 years.
Long-Term Incentive Plan
During the years ended December 31, 2024, 2023 and 2022, the Compensation Committee awarded the Company’s
executive officers incentive compensation awards under the LTIP consisting of (i) PSUs with an aggregate target grant date
value of $5.8 million, $7.6 million and $5.1 million, respectively, and (ii) RSAs with an aggregate grant date value of $0.4
million, $0.4 million and $1.5 million, respectively. The incentive compensation awards granted during the years ended
December 31, 2024, 2023 and 2022 have an aggregate maximum value of $19.6 million, $25.9 million and $14.2 million,
respectively.
As part of the adoption of the LTIP each year, the Compensation Committee approves the form of PSU award agreement
(the “Form PSU Award Agreement”) under the Omnibus Plan in connection with the granting of PSUs to its executive
officers. The Form PSU Award Agreement provides for the granting of PSUs, which generally vest in the quarter following
the end of a performance period of three years. The number of PSUs, if any, that will actually be earned pursuant to a PSU
award will depend on the level of performance achieved with respect to applicable performance goals during the
applicable performance period. The RSAs vest in equal annual installments over five years.
Valuation Assumptions
The fair value of PSUs with market conditions was estimated on the grant date using a Monte Carlo analysis to model the
value of the PSUs using the following assumptions. Expected volatility is based on an average of implied volatility on the
valuation date and the one-year historical volatility of Baldwin and publicly-traded companies within a peer group and, in
previous years, the Russell 3000 Index. The risk-free interest rate is based on the U.S. Treasury rates in effect at the time of
the grant. Expected term is based on the remaining measurement period of the awards at the grant date. The
assumptions used in calculating the fair value of the PSUs with market conditions are set forth in the table below.
104
For the Years Ended December 31,
2024
2023
2022
Expected volatility minimum
22 %
18 %
19 %
Expected volatility maximum
55 %
364 %
267 %
Risk-free interest rate
4.48 %
4.41 %
2.00 %
Expected term
2.8 years
2.9 years
2.8 years
16. Retirement Plan
The Company sponsors a 401(k) retirement plan for colleagues who meet specific age and service requirements. This plan
allows for participants to make salary deferral contributions. Employer matching and profit-sharing contributions to this
plan are discretionary. Company contributions were $15.9 million, $16.9 million and $11.4 million for the years ended
December 31, 2024, 2023 and 2022, respectively.
17. Income Taxes
Baldwin is the sole managing member of Baldwin Holdings, which is treated as a partnership for U.S. federal, state and
local income tax purposes. As a partnership, Baldwin Holdings is not subject to U.S. federal and certain state and local
income taxes. Any taxable income or loss generated by Baldwin Holdings is passed through to and included in the taxable
income or loss of its partners, including Baldwin, on a pro rata basis. Baldwin is subject to U.S. federal income taxes, in
addition to state and local income taxes, with respect to Baldwin’s allocable share of income of Baldwin Holdings.
Components of income tax expense include the following:
For the Years Ended December 31,
(in thousands)
2024
2023
2022
Current
Federal
$
19 $
75 $
18
State and local
1,712
1,250
693
Total current income tax expense
1,731
1,325
711
Deferred
Federal
—
(40)
(2)
State and local
—
—
6
Total deferred income tax expense
—
(40)
4
Total income tax expense
$
1,731 $
1,285 $
715
Income tax expense at the Company’s effective tax rate differed from the statutory tax rate as follows:
For the Years Ended December 31,
(in thousands)
2024
2023
2022
Loss before income taxes
$
(39,350) $
(162,734) $
(76,033)
Noncontrolling interest
3,088
18,357
9,415
Tax provision at statutory rate (21%)
(8,263)
(34,593)
(15,966)
Effect of:
Valuation allowance
4,878
20,574
8,787
True-up and adjustments
4,463
128
(502)
State rate change
(3,517)
(479)
824
State and local income tax
1,310
(5,799)
(2,659)
Share-based compensation
(383)
778
124
IRC 162(m)
155
987
152
Other
—
1,332
540
Total income tax expense
$
1,731 $
1,285 $
715
105
The following table summarizes the components of deferred tax assets and liabilities:
December 31,
(in thousands)
2024
2023
Deferred tax assets
Investment in partnerships
$
117,799 $
105,398
163(j) limitation carryforward
36,005
22,313
Net operating loss
12,260
9,719
Capitalized transaction costs
1,898
1,955
Charitable contributions
1,107
757
Total deferred tax assets
169,069
140,142
Less: valuation allowance
(169,069)
(140,142)
Net deferred tax assets
$
— $
—
Deferred tax balances reflect the impact of temporary differences between the carrying amount of assets and liabilities
and their tax basis and are stated at the tax rates in effect when the temporary differences are expected to be recovered
or settled. The Company assessed the future realization of the tax benefit of its existing deferred tax assets and concluded
that it is more likely than not that all of the deferred tax assets will not be realized in the future. As a result, the Company
recorded a valuation allowance of $169.1 million and $140.1 million against its deferred tax assets at December 31, 2024
and 2023, respectively.
As of December 31, 2024, the Company has not recognized any uncertain tax positions, penalties, or interest as
management has concluded that no such positions exist. The Company is subject to federal examination for tax years
beginning with the year ended December 31, 2020 and state examination for tax years beginning with the year ended
December 31, 2019. The Company is not currently subject to income tax audits in any U.S. or state jurisdictions for any tax
year. In addition, all of our federal net operating losses and 163(j) interest expense limitations can be carried forward
indefinitely while our state net operating losses will begin to expire in 2040.
Tax Receivable Agreement
Baldwin Holdings makes an election under Section 754 of the Internal Revenue Code of 1986, as amended, and the
regulations thereunder (the “Code”) effective for each taxable year in which a redemption or exchange of LLC Units and
corresponding Class B common stock for shares of Class A common stock occurs. Exchanges result in tax basis
adjustments to the assets of Baldwin Holdings, which produce favorable tax attributes and reduce the amount of tax that
Baldwin is required to pay. The Company has determined that it is more likely than not that these benefits will not be
realized.
Baldwin is a party to the Tax Receivable Agreement with Baldwin Holdings’ LLC Members that provides for the payment by
Baldwin to Baldwin Holdings’ LLC Members of 85% of the amount of cash savings, if any, in U.S. federal, state and local
income tax or franchise tax that Baldwin actually realizes as a result of (i) any increase in tax basis in Baldwin Holdings
assets resulting from (a) previous acquisitions by Baldwin of LLC Units from Baldwin Holdings’ LLC Members, (b) the
acquisition of LLC Units from Baldwin Holdings’ LLC Members using the net proceeds from any future offering, (c)
redemptions or exchanges by Baldwin Holdings’ LLC Members of LLC Units and the corresponding number of shares of
Class B common stock for shares of Class A common stock or cash or (d) payments under the Tax Receivable Agreement,
and (ii) tax benefits related to imputed interest resulting from payments made under the Tax Receivable Agreement.
This payment obligation is an obligation of Baldwin and not of Baldwin Holdings. For purposes of the Tax Receivable
Agreement, the cash tax savings in income tax will be computed by comparing the actual income tax liability of Baldwin
(calculated with certain assumptions) to the amount of such taxes that Baldwin would have been required to pay had
there been no increase to the tax basis of the assets of Baldwin Holdings as a result of the redemptions or exchanges and
had Baldwin not entered into the Tax Receivable Agreement. Estimating the amount of payments that may be made under
the Tax Receivable Agreement is by its nature imprecise, insofar as the calculation of amounts payable depends on a
variety of factors. While the actual increase in tax basis, as well as the amount and timing of any payments under the Tax
Receivable Agreement, will vary depending upon a number of factors, including the timing of redemptions or exchanges,
the price of shares of our Class A common stock at the time of the redemption or exchange, the extent to which such
redemptions or exchanges are taxable and the amount and timing of our income. The Company accounts for the effects of
these increases in tax basis and associated payments under the Tax Receivable Agreement arising from future
redemptions or exchanges as follows:
•
records an increase in deferred tax assets for the estimated income tax effects of the increases in tax basis based
on enacted federal and state tax rates at the date of the redemption or exchange;
106
•
to the extent it is estimated that the Company will not realize the full benefit represented by the deferred tax
asset, based on an analysis that will consider, among other things, our expectation of future earnings, the
Company reduces the deferred tax asset with a valuation allowance; and
•
records 85% of the estimated realizable tax benefit (which is the recorded deferred tax asset less any recorded
valuation allowance) as an increase to the liability due under the Tax Receivable Agreement and the remaining
15% of the estimated realizable tax benefit as an increase to additional paid-in capital.
All of the effects of changes in any of our estimates after the date of the redemption or exchange will be included in net
income. Similarly, the effect of subsequent changes in the enacted tax rates will be included in net income.
As of December 31, 2024, the Company has recorded a Tax Receivable Agreement liability of $4.8 million associated with
the payments to be made to current or former Baldwin Holdings’ LLC Members subject to the Tax Receivable Agreement,
which is included in accrued expenses and other current liabilities on the consolidated balance sheets.
18. Earnings (Loss) Per Share
Basic earnings (loss) per share is computed by dividing net income (loss) attributable to Baldwin by the weighted-average
number of shares of Class A common stock outstanding during the period. Diluted earnings (loss) per share is computed
giving effect to all potentially dilutive shares of common stock.
The following table sets forth the computation of basic and diluted loss per share:
For the Years Ended December 31,
(in thousands, except per share data)
2024
2023
2022
Basic and diluted loss per share:
Loss attributable to Baldwin
$
(24,518) $
(90,141) $
(41,772)
Shares used for basic and diluted loss per share:
Basic and diluted weighted-average shares of Class A common
stock outstanding
63,455
60,135
56,825
Basic and diluted loss per share
$
(0.39) $
(1.50) $
(0.74)
Potentially dilutive securities consist of unvested stock awards, including RSAs and PSUs, in addition to shares of Class B
common stock, which can be exchanged (together with a corresponding number of LLC Units) for shares of Class A
common stock on a one-for-one basis. The following potentially dilutive securities were excluded from the Company's
diluted weighted-average number of shares outstanding calculation for the periods presented as their inclusion would
have been anti-dilutive.
For the Years Ended December 31,
2024
2023
2022
Unvested RSAs and PSUs
3,597,954
3,874,639
3,595,303
Shares of Class B common stock
50,895,956
53,132,031
54,504,918
The shares of Class B common stock do not share in the earnings or losses attributable to Baldwin, and therefore, are not
participating securities. Accordingly, a separate presentation of basic and diluted earnings per share of Class B common
stock under the two-class method has not been included.
19. Fair Value Measurements
ASC Topic 820, Fair Value Measurement (“Topic 820”) established a framework for measuring fair value. That framework
provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy
gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1
measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value
hierarchy under Topic 820 are described below:
Level 1:
Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active
markets that the Company has the ability to access.
Level 2:
Inputs to the valuation methodology are quoted market prices for similar instruments in active markets,
quoted prices for identical or similar instruments in markets that are not active, and model-based valuation
techniques for which all significant assumptions are observable in the market.
Level 3:
Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
107
The fair value measurement level for assets and liabilities within the fair value hierarchy is based on the lowest level of any
input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable
inputs and minimize the use of unobservable inputs.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table summarizes the Company’s assets and liabilities measured at fair value on a recurring basis within
each level of the fair value hierarchy:
Fair Value Hierarchy
Level 1
Level 2
Level 3
December 31,
December 31,
December 31,
(in thousands)
2024
2023
2024
2023
2024
2023
Assets:
Interest rate caps
$
— $
— $
18 $
2,562 $
— $
—
Total assets measured at fair
value
$
— $
— $
18 $
2,562 $
— $
—
Liabilities:
Contingent earnout liabilities
$
— $
— $
— $
— $
145,559 $
276,467
Total liabilities measured at fair
value
$
— $
— $
— $
— $
145,559 $
276,467
Interest Rate Caps
The fair value of interest rate caps is determined using the market standard methodology of discounting the future
expected cash receipts that would occur if variable interest rates rise above the strike rate of the caps. The variable
interest rates used in the calculation of projected receipts on the caps are based on an expectation of future interest rates
derived from observable market interest rate curves and volatilities.
Contingent Earnout Liabilities
Methodologies used for liabilities measured at fair value on a recurring basis within Level 3 of the fair value hierarchy are
based on limited unobservable inputs. These methods may produce a fair value calculation that may not be indicative of
the net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods
are appropriate and consistent with other market participants, the use of methodologies or assumptions to determine the
fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
The fair value of contingent earnout liabilities is based on sales projections for the acquired entities, which are reassessed
each reporting period. Based on the Company’s ongoing assessment of the fair value of its contingent earnout liabilities,
the Company recorded a net increase (decrease) in the estimated fair value of such liabilities of $(4.9) million, $61.1 million
and $32.3 million for the years ended December 31, 2024, 2023 and 2022, respectively. The Company has assessed the
maximum estimated exposure to the contingent earnout liabilities to be $268.8 million at December 31, 2024.
The Company measures contingent earnout liabilities at fair value each reporting period using significant unobservable
inputs classified within Level 3 of the fair value hierarchy. The Company uses a probability weighted value analysis as a
valuation technique to convert future estimated cash flows to a single present value amount. The significant unobservable
inputs used in the fair value measurements are sales projections over the earnout period, and the probability outcome
percentages assigned to each scenario. Significant increases or decreases to either of these inputs would result in a
significantly higher or lower liability with a higher liability capped by the contractual maximum of the contingent earnout
liabilities. Ultimately, the liability will be equivalent to the amount settled, and the difference between the fair value
estimate and amount settled will be recorded in earnings for business combinations, or as a change in the cost of the
assets acquired for asset acquisitions.
108
The fair value of the contingent earnout liabilities is based on Monte Carlo simulations that measure the present value of
the expected future payments to be made to partners in accordance with the provisions outlined in the respective
purchase agreements, which is a Level 3 fair value measurement. In determining fair value, the Company estimates the
partner’s future performance using financial projections developed by management for the partner and market
participant assumptions that were derived for revenue growth, the number of rental units tracked or the insured value of
sourced homeowners insurance. Revenue growth rates generally ranged from 20% to 25% at December 31, 2024 and from
10% to 35% at December 31, 2023. The Company estimates future payments using the earnout formula and performance
targets specified in each purchase agreement and these financial projections. These payments are generally discounted to
present value using a risk-adjusted rate that takes into consideration market-based rates of return that reflect the ability of
the partner to achieve the targets. These discount rates generally ranged from 7.50% to 13.75% at December 31, 2023.
However, due to the short-term nature of any remaining material contingent earnout liabilities at December 31, 2024, a
discount rate has not been applied to the remaining balance. Changes in financial projections, market participant
assumptions for revenue growth, or the risk-adjusted discount rate, would result in a change in the fair value of contingent
consideration.
The following table sets forth a summary of the changes in the fair value of the Company’s contingent earnout liabilities,
which are measured at fair value on a recurring basis utilizing Level 3 assumptions in their valuation:
For the Years Ended December 31,
(in thousands)
2024
2023
Balance at beginning of year
$
276,467
$
266,936
Change in fair value of contingent consideration
(1)
(4,949)
61,083
Fair value of contingent consideration issuances
224
723
Settlement of contingent consideration
(2)
(126,183)
(52,275)
Balance at end of year
$
145,559
$
276,467
__________
(1)
The Company reclassified $41.9 million and $8.5 million of its contingent earnout liabilities through the issuance of colleague earnout
incentives during the years ended December 31, 2024 and 2023, respectively, which results in a reduction to the change in fair value
of contingent consideration and an increase to commissions, employee compensation and benefits expense in the consolidated
statements of comprehensive loss.
(2)
The Company settled $5.6 million of its contingent earnout liabilities through the issuance of related party notes payable during the
year ended December 31, 2024. The consolidated statement of cash flows for the year ended December 31, 2024 includes
$1.5 million of payments of contingent earnout consideration related to a similar non-cash settlement in a prior period.
Fair Value of Assets and Liabilities Not Measured at Fair Value
The fair value of long-term debt and the revolving line of credit is based on an estimate using a discounted cash flow
analysis and current borrowing rates for similar types of borrowing arrangements. The carrying amount and estimated fair
value of long-term debt and the revolving line of credit were as follows:
Fair Value
Hierarchy
December 31, 2024
December 31, 2023
(in thousands)
Carrying
Amount
Estimated Fair
Value
Carrying
Amount
Estimated Fair
Value
Long-term debt
(1)
Level 2
$ 1,435,800 $ 1,450,479 $
998,737 $
997,489
Revolving line of credit
Level 2
—
—
341,000
335,963
__________
(1)
The carrying amount of long-term debt reflects outstanding borrowings, which are presented net of unamortized debt discount and
issuance costs of $29.3 million and $20.3 million at December 31, 2024 and 2023, respectively, on the consolidated balance sheets.
20. Commitments and Contingencies
Commitments
As of December 31, 2024, the Company has a remaining commitment to USF to donate $3.4 million through October 2028.
The gift will provide support for the School of Risk Management and Insurance in the USF Muma College of Business. It is
currently anticipated that Lowry Baldwin, the Company's Chairman, will fund half of the amounts to be donated by the
Company.
109
Legal Proceedings
The Company is involved in various claims and legal actions arising in the ordinary course of business. A liability is
recorded when a loss is considered probable and is reasonably estimable in accordance with GAAP. When a material loss
contingency is reasonably possible but not probable, the Company will disclose the nature of the claim and, if possible, an
estimate of the loss or range of loss. In the opinion of management, the ultimate resolution of these matters will not have
a material adverse effect on the Company’s consolidated financial position, results of operations or liquidity.
On February 8, 2023, Ruby Wagner, a putative Class A stockholder of the Company, filed a class action lawsuit (the
“Lawsuit”), on behalf of herself and other similarly situated stockholders in the Delaware Court of Chancery against the
Company seeking declaratory judgment that certain provisions of the 2019 Stockholders Agreement between the
Company and the Pre-IPO LLC Members are invalid and unenforceable as a matter of Delaware law. On May 28, 2024, the
Court of Chancery issued an opinion (the “Chancery Court Opinion”) that certain provisions of the 2019 Stockholders
Agreement granting approval rights related to amending the Company’s certificate of incorporation and making significant
decisions relating to the Company’s senior management, are facially invalid, void, and unenforceable under Delaware law.
An implementing order, presently in effect, was entered on June 20, 2024. The Chancery Court Opinion also held that a
severability provision in the 2019 Stockholders Agreement allows the Pre-IPO LLC Members to demand a “suitable and
equitable substitute” for the approval rights that were deemed invalid, such as the issuance of a so-called golden share of
preferred stock in the Company. Following the Chancery Court Opinion, a counterparty to the 2019 Stockholders
Agreement requested the issuance of such golden share. An independent committee of our board of directors, advised by
independent counsel, determined that entering into a contractual agreement containing substantially the same rights as
those contained in the 2019 Stockholders Agreement, as authorized by a newly-enacted provision of Delaware law, rather
than issuance of a golden share, would be in the best interests of the Company and our stockholders and, following
negotiation, the Company entered into the 2024 Stockholders Agreement on October 30, 2024. On January 22, 2025, the
Court of Chancery granted plaintiff an award of attorneys' fees and expenses in the amount of $2.4 million (the "Fee
Award"). The Company appealed the Chancery Court Opinion and the Fee Award on February 21, 2025. Due to the
Company's appeal, management has estimated the potential range of loss from the ultimate disposition of this matter to
be between $0, if the appeal is successful, and $2.4 million, if the Fee Award is upheld, a significant portion of which may
be covered by insurance.
21. Segment Information
Effective January 1, 2024, the Company’s FounderShield Partner moved from the Underwriting, Capacity & Technology
Solutions operating group to the Insurance Advisory Solutions operating group. Prior year segment reporting information
within this note has been recast to conform to the current organizational structure.
Baldwin’s business is divided into three operating groups: Insurance Advisory Solutions, Underwriting, Capacity &
Technology Solutions and Mainstreet Insurance Solutions.
•
The Insurance Advisory Solutions (“IAS”) operating group provides expertly-designed commercial risk
management, employee benefits and private risk management solutions for businesses and high-net-worth
individuals, as well as their families, through our national footprint which has assimilated some of the highest
quality independent insurance brokers in the country with vast and varied strategic capabilities and expertise.
•
The Underwriting, Capacity & Technology Solutions (“UCTS”) operating group consists of three distinct businesses
—its MGA platform (“MSI”), the reinsurance brokerage business, Juniper Re, and our captive management
business. Through MSI, the Company manufactures proprietary, technology-enabled insurance products that are
then distributed (in many instances via technology and/or API integrations) internally via risk advisors across its
other operating groups and externally via select distribution partners, with a focus on sheltered channels where
its products deliver speed, ease of use and certainty of execution, an example of which is the national embedded
renters insurance product sold at point of lease via integrations with property management software providers.
UCTS’ Wholesale Business was sold in the first quarter of 2024 and its operations are included in UCTS’ results
through February 29, 2024.
•
The Mainstreet Insurance Solutions (“MIS”) operating group offers personal insurance, commercial insurance and
life and health solutions to individuals and businesses in their communities, with a focus on accessing clients via
sheltered distribution channels, which include, but are not limited to, new home builders, realtors, mortgage
originators/lenders, master planned communities, and various other community centers of influence. The MIS
operating group also offers consultation for government assistance programs and solutions, including traditional
Medicare, Medicare Advantage and Affordable Care Act, to seniors and eligible individuals through a network of
primarily independent contractor agents.
In all its operating groups, the Company generates commissions from insurance placement under both agency bill and
direct bill arrangements, and profit-sharing income based on either the underlying book of business or performance, such
as loss ratios. All operating groups also generate other ancillary income.
In the IAS and UCTS operating groups, the Company generates fees from service fee and consulting arrangements. Service
fee arrangements are in place with certain clients for providing insurance placement services.
110
In the UCTS operating group, the Company generates fees from policy fee and installment fee arrangements. Policy fee
revenue is earned for acting in the capacity of an MGA and providing payment processing services and other
administrative functions on behalf of insurance company partners.
In the MIS operating group, the Company generates commissions and fees from marketing income, which is earned
through co-branded Medicare marketing campaigns with the Company’s insurance company partners.
In addition, the Company generates investment income in all its operating groups and the Corporate and Other non-
reportable segment.
The Company’s chief operating decision maker, the chief executive officer, evaluates the performance of its reportable
segments based on net income (loss) and net income (loss) before interest, taxes, depreciation, amortization, and one-
time transactional-related expenses or non-recurring items. The chief operating decision maker considers actual, actual-
to-prior year variances, and budget-to-actual variances on a monthly basis for both profit measures to manage resources
and make decisions about the business. However, only segment net income (loss), as the measure of segment profit or
loss that is most consistent with GAAP measurement principles, is disclosed below.
Summarized financial information regarding the Company’s operating groups is shown in the following tables. The
Corporate and Other non-reportable segment includes any expenses not allocated to the operating groups and corporate-
related items, including interest expense. Intersegment revenue and expenses are eliminated through Corporate and
Other. Service center expenses and other overhead are allocated to the Company’s operating groups based on either
revenue or headcount as applicable to each expense.
The Company changed its measure of operating group profitability during the year ended December 31, 2024. In previous
years, commissions, employee compensation and benefits expense relating to the Company’s growth services colleagues
was primarily recognized in Corporate and Other. During 2024, the Company began allocating growth services colleague
compensation amongst the respective operating groups. This change in measurement resulted in an increase to
commissions, employee compensation and benefits expense in each of the operating groups and a decrease in Corporate
and Other.
111
For the Year Ended December 31, 2024
(in thousands)
Insurance
Advisory
Solutions
Underwriting,
Capacity &
Technology
Solutions
Mainstreet
Insurance
Solutions
Corporate
and Other
Total
Revenues:
Commission revenue
(1)(2)
$
569,434
$
388,810
$
250,825
$
(79,166) $ 1,129,903
Profit-sharing revenue
60,935
12,464
22,133
—
95,532
Consulting and service fee revenue
71,852
6,316
—
—
78,168
Policy fee and installment fee revenue
—
60,719
—
—
60,719
Other income
3,936
568
8,290
—
12,794
Investment income
5,779
4,062
35
2,045
11,921
Total revenue
711,936
472,939
281,283
(77,121)
1,389,037
Expenses:
Outside commissions
(2)
11,009
260,204
77,782
(79,166)
269,829
Inside advisor commissions
167,695
1,618
29,560
—
198,873
Fixed compensation
206,029
53,453
38,601
4,965
303,048
Benefits and other
82,925
32,757
22,974
8,466
147,122
Share-based compensation
25,511
9,326
6,719
23,947
65,503
Severance
1,895
1,757
520
1,584
5,756
Colleague earnout incentives
39,315
2,602
—
—
41,917
Commissions, employee compensation
and benefits
534,379
361,717
176,156
(40,204)
1,032,048
Selling expense
23,098
4,414
15,754
6,866
50,132
Operating expense
54,714
36,602
19,449
28,172
138,937
Administrative expense
63,016
15,681
27,511
144,390
250,598
All other expenses, net
(3)
(15,403)
(28,888)
495
2,199
(41,597)
Total expense
659,804
389,526
239,365
141,423
1,430,118
Net income (loss)
$
52,132
$
83,413
$
41,918
$
(218,544) $
(41,081)
Other segment disclosures:
Change in fair value of contingent
consideration
$
(10,458) $
5,085
$
424
$
—
$
(4,949)
Depreciation and amortization expense
61,707
15,518
27,167
4,532
108,924
Interest (income) expense, net
(4)
(26)
32
123,642
123,644
Gain on divestitures
3,843
35,110
—
—
38,953
Loss on extinguishment and modification
of debt
—
—
—
(15,113)
(15,113)
Capital expenditures
6,110
17,626
8,897
8,416
41,049
At December 31, 2024
Total assets
$ 2,329,152
$
621,407
$
524,576
$
59,596
$ 3,534,731
__________
(1)
During the year ended December 31, 2024, commission revenue for the IAS, UCTS and MIS operating groups included direct bill
revenue of $351.3 million, $6.1 million and $248.8 million, respectively, and agency bill revenue of $218.2 million, $382.7 million and
$2.0 million, respectively.
(2)
During the year ended December 31, 2024, the UCTS operating group recorded commission revenue shared with other operating
groups of $77.6 million; and the MIS operating group recorded commission revenue shared within the same operating group of $1.6
million. Commission revenue shared within the same operating group and passed through to other operating groups is eliminated
through Corporate and Other.
(3)
All other expenses include change in fair value of contingent consideration, gain on divestitures, other income (expense), net, income
tax expense.
112
For the Year Ended December 31, 2023
(in thousands)
Insurance
Advisory
Solutions
Underwriting,
Capacity &
Technology
Solutions
Mainstreet
Insurance
Solutions
Corporate
and Other
Total
Revenues:
Commission revenue
(1)(2)
$
512,211
$
305,752
$
217,300
$
(67,711) $
967,552
Profit-sharing revenue
56,549
21,174
15,714
—
93,437
Consulting and service fee revenue
68,481
6,156
—
—
74,637
Policy fee and installment fee revenue
—
65,386
—
—
65,386
Other income
5,102
4,031
1,683
—
10,816
Investment income
3,732
2,040
—
955
6,727
Total revenue
646,075
404,539
234,697
(66,756)
1,218,555
Expenses:
Outside commissions
(2)
7,480
209,188
62,461
(67,711)
211,418
Inside advisor commissions
153,212
4,530
26,073
2,927
186,742
Fixed compensation
191,929
53,220
36,359
12,920
294,428
Benefits and other
79,500
26,974
20,808
8,729
136,011
Share-based compensation
3,693
3,727
1,343
47,458
56,221
Severance
3,362
469
1,196
13,487
18,514
Colleague earnout incentives
8,020
—
—
—
8,020
Commissions, employee compensation
and benefits
447,196
298,108
148,240
17,810
911,354
Selling expense
19,750
3,954
14,680
7,297
45,681
Operating expense
60,011
37,441
16,523
26,419
140,394
Administrative expense
56,962
17,124
23,821
123,879
221,786
All other expenses, net
(3)
38,520
20,131
2,011
2,697
63,359
Total expense
622,439
376,758
205,275
178,102
1,382,574
Net income (loss)
$
23,636
$
27,781
$
29,422
$
(244,858) $
(164,019)
Other segment disclosures:
Change in fair value of contingent
consideration
$
38,306
$
20,930
$
1,847
$
—
$
61,083
Depreciation and amortization expense
55,339
16,584
23,418
3,061
98,402
Interest (income) expense, net
(157)
—
(30)
119,652
119,465
Capital expenditures
1,330
7,571
3,482
8,993
21,376
At December 31, 2023
Total assets
$ 2,292,729
$
646,404
$
518,593
$
44,211
$ 3,501,937
__________
(1)
During the year ended December 31, 2023, commission revenue for the IAS, UCTS and MIS operating groups included direct bill
revenue of $325.2 million, $44.0 million and $215.6 million, respectively, and agency bill revenue of $187.0 million, $261.8 million and
$1.7 million, respectively.
(2)
During the year ended December 31, 2023, the UCTS operating group recorded commission revenue shared with other operating
groups of $65.9 million; and the MIS operating group recorded commission revenue shared within the same operating group of $1.8
million. Commission revenue shared within the same operating group and passed through to other operating groups is eliminated
through Corporate and Other.
(3)
All other expenses include change in fair value of contingent consideration, other income (expense), net, income tax expense.
113
For the Year Ended December 31, 2022
(in thousands)
Insurance
Advisory
Solutions
Underwriting,
Capacity &
Technology
Solutions
Mainstreet
Insurance
Solutions
Corporate
and Other
Total
Revenues:
Commission revenue
(1)(2)
$
464,672
$
218,983
$
145,981
$
(42,842) $
786,794
Profit-sharing revenue
47,075
9,757
9,259
—
66,091
Consulting and service fee revenue
56,686
4,558
—
—
61,244
Policy fee and installment fee revenue
—
55,362
—
—
55,362
Other income
5,309
4,122
1,798
—
11,229
Total revenue
573,742
292,782
157,038
(42,842)
980,720
Expenses:
Outside commissions
(2)
8,428
153,502
37,891
(42,842)
156,979
Inside advisor commissions
140,759
4,985
19,522
(10,309)
154,957
Fixed compensation
172,135
33,982
26,799
13,990
246,906
Benefits and other
74,785
15,189
13,322
9,852
113,148
Share-based compensation
—
—
—
46,201
46,201
Severance
431
155
198
470
1,254
Commissions, employee compensation
and benefits
396,538
207,813
97,732
17,362
719,445
Selling expense
15,642
2,976
9,021
8,217
35,856
Operating expense
56,993
23,507
15,247
31,216
126,963
Administrative expense
57,537
17,048
16,203
77,167
167,955
All other expenses, net
(3)
25,114
7,037
583
(25,485)
7,249
Total expense
551,824
258,381
138,786
108,477
1,057,468
Net income (loss)
$
21,918
$
34,401
$
18,252
$
(151,319) $
(76,748)
Other segment disclosures:
Change in fair value of contingent
consideration
$
25,156
$
6,627
$
524
$
—
$
32,307
Depreciation and amortization expense
53,222
16,024
14,856
2,256
86,358
Interest (income) expense, net
(232)
—
(30)
71,334
71,072
Capital expenditures
1,738
5,655
3,018
11,568
21,979
__________
(1)
During the year ended December 31, 2022, commission revenue for the IAS, UCTS and MIS operating groups included direct bill
revenue of $300.1 million, $40.6 million and $143.9 million, respectively, and agency bill revenue of $164.6 million, $178.4 million and
$2.1 million, respectively.
(2)
During the year ended December 31, 2022, the IAS operating group recorded commission revenue shared with other operating
groups of $1.7 million; the UCTS operating group recorded commission revenue shared with other operating groups of $39.2 million;
and the MIS operating group recorded commission revenue shared within the same operating group of $1.9 million. Commission
revenue shared within the same operating group is eliminated through Corporate and Other.
(3)
All other expenses include change in fair value of contingent consideration, other income (expense), net, income tax expense.
22. Subsequent Events
During January and February 2025, the Company made aggregate payments of $25.6 million to settle contingent earnout
liabilities with several of its partners, inclusive of amounts reclassified to colleague earnout incentives. The contingent
earnout liability is included in current portion of contingent earnout liabilities and colleague earnout incentives are
included on the face of the consolidated balance sheets at December 31, 2024.
On January 10, 2025, the 2024 Credit Agreement was amended to, among other things, provide for $100 million of
incremental term B loans. Refer to Note 11 for additional information on the refinancing.
114
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial
Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this Annual Report on Form 10-K.
The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means
controls and other procedures of a company that are designed to ensure that information required to be disclosed by a
company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the
reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management,
including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding
required disclosure. Management recognizes that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its
judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, our
Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were
effective at a reasonable assurance level as of December 31, 2024.
Management's Annual Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.
Internal control over financial reporting is a process designed by, or under the supervision of, our principal executive
officer and principal financial officer, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of our consolidated financial statements for external purposes in accordance with generally accepted
accounting principles. Management’s internal control over financial reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of our assets, (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles and that our receipts and
expenditures are being made only in accordance with authorizations of management, acting under authority delegated to
them by our board of directors, and (iii) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.
Management, including our Chief Executive Officer and our Chief Financial Officer, assessed the effectiveness of our
internal control over financial reporting as of December 31, 2024. In making this assessment, management used the
criteria established in Internal Control—Integrated Framework (2013) set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”). Based on this assessment, management has concluded that our
internal control over financial reporting was effective as of December 31, 2024 to provide reasonable assurance regarding
the reliability of financial reporting and preparation of the consolidated financial statements in accordance with generally
accepted accounting principles. The effectiveness of our internal control over financial reporting as of December 31, 2024
has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their
report, which is included in the Report of Independent Registered Public Accounting Firm section under Item 8. Financial
Statements and Supplementary Data of this Annual Report on Form 10-K.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the quarter ended December
31, 2024, which were identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15
and 15d-15 under the Exchange Act, that materially affected, or that are reasonably likely to materially affect, our internal
control over financial reporting.
ITEM 9B. OTHER INFORMATION
Insider Trading Arrangements and Policies
During the three months ended December 31, 2024, none of our directors or officers adopted or terminated any contract,
instruction or written plan for the purchase or sale of our securities intended to satisfy the affirmative defense conditions
of Rule 10b5-1(c) or any non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K).
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
None.
115
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this item is incorporated herein by reference to the definitive Proxy Statement to be filed with
the SEC pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Annual Report on Form
10-K.
We have adopted a Code of Business Conduct and Ethics that applies to all employees, including executive officers, and to
directors. The Code of Business Conduct and Ethics is available on the Governance Overview page of our investor relations
website at ir.baldwin.com. Any approved amendments to, or waiver of, any provision of the Code of Business Conduct and
Ethics will be posted on our investor relations website at the aforementioned address.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by reference to the definitive Proxy Statement to be filed with
the SEC pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Annual Report on Form
10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
The information required by this item is incorporated herein by reference to the definitive Proxy Statement to be filed with
the SEC pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Annual Report on Form
10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item is incorporated herein by reference to the definitive Proxy Statement to be filed with
the SEC pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Annual Report on Form
10-K.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this item is incorporated herein by reference to the definitive Proxy Statement to be filed with
the SEC pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Annual Report on Form
10-K.
116
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following documents are filed as part of this Annual Report on Form 10-K.
(1) Consolidated financial statements: Refer to Item 8. Financial Statements and Supplementary Data elsewhere in this
Annual Report on Form 10-K.
(2) Consolidated financial statement schedules. All schedules are omitted for the reason that the information is included
in the consolidated financial statements or the notes thereto or that they are not required or are not applicable.
(3) Exhibits: The exhibits listed in the accompanying index are filed, furnished or incorporated by reference as part of this
Annual Report on Form 10-K.
3.1
Amended and Restated Certificate of Incorporation of the Company (incorporated herein by reference to
Exhibit 3.1 of the registrant’s Current Report on Form 8-K filed with the Securities and Exchange
Commission on October 31, 2019).
3.2
Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation
(incorporated herein by reference to Exhibit 3.1 of the registrant’s Current Report on Form 8-K filed with
the Securities and Exchange Commission on October 15, 2020).
3.3
Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation
(incorporated herein by reference to Exhibit 3.3 of the registrant’s Quarterly Report on Form 10-Q filed
with the Securities and Exchange Commission on May 7, 2024).
3.4
Second Amended and Restated By-Laws of the Company (incorporated herein by reference to Exhibit 3.4
of the registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on
May 7, 2024).
3.5
First Amendment to the Second Amended and Restated By-laws of The Baldwin Insurance Group, Inc.
(incorporated herein by reference to Exhibit 3.1 of the registrant’s Current Report on Form 8-K filed with
the Securities and Exchange Commission on October 31, 2024).
4.1
Indenture, dated as of May 24, 2024, by and among The Baldwin Insurance Group Holdings, LLC, The
Baldwin Insurance Group Holdings Finance, Inc., the guarantors named on the signature pages thereto
and U.S. Bank Trust Company, National Association, as trustee and notes collateral agent (incorporated
herein by reference to Exhibit 4.1 of the registrant’s Current Report on Form 8-K filed with the Securities
and Exchange Commission on May 29, 2024).
4.2
Form of 7.125% Senior Secured Notes due 2031 (included in Exhibit 4.1) (incorporated herein by reference
to Exhibit 4.2 of the registrant’s Current Report on Form 8-K filed with the Securities and Exchange
Commission on May 29, 2024).
4.3*
Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934, as
Amended.
10.1†
Employment Agreement, dated as of October 28, 2019, between Baldwin Holdings and Trevor L. Baldwin
(incorporated herein by reference to Exhibit 10.1 of the registrant’s Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 24, 2020).
10.2†
Amended and Restated Employment Agreement, dated as of October 28, 2019, between Baldwin Holdings
and Daniel Galbraith (incorporated herein by reference to Exhibit 10.9 of the registrant’s Registration
Statement on Form S-1 filed with the Securities and Exchange Commission on June 22, 2020).
10.3†
Summary of Mr. Galbraith's One-Time Promotion Bonus Payment (incorporated herein by reference to
Exhibit 10.3 of the registrant's Annual Report on Form 10-K filed with the Securities and Exchange
Commission on February 28, 2024).
10.4†
Amended and Restated Employment Agreement, dated as of October 28, 2019, between Baldwin Holdings
and Bradford Hale (incorporated herein by reference to Exhibit 10.4 of the registrant’s Annual Report on
Form 10-K filed with the Securities and Exchange Commission on March 1, 2022).
10.5†
Amendment No. 1 to Amended and Restated Employment Agreement, dated as of March 23, 2020,
between Baldwin Holdings and Bradford Hale (incorporated herein by reference to Exhibit 10.5 of the
registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 1,
2022).
10.6†
Amendment No. 2 to Amended and Restated Employment Agreement, dated as of April 1, 2021,
between Baldwin Holdings and Bradford Hale (incorporated herein by reference to Exhibit 10.6 of
the registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on
March 1, 2022).
Exhibit No.
Description of Exhibit
117
10.7†*
Amended and Restated Employment Agreement, dated as of October 4, 2021, between Baldwin Holdings
and Jim Roche.
10.8†
Amended and Restated Employment Agreement, dated as of January 31, 2022, between Baldwin Holdings
and Seth Cohen (incorporated herein by reference to Exhibit 10.10 of the registrant's Annual Report on
Form 10-K filed with the Securities and Exchange Commission on February 28, 2023).
10.9†
The Company's Omnibus Incentive Plan (incorporated herein by reference to Exhibit 10.6 of the
registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on
September 23, 2019).
10.10†*
Form of the Company's Omnibus Incentive Plan Restricted Stock Award Agreement.
10.11†*
Form of the Company's Omnibus Incentive Plan Performance-Based Restricted Stock Unit Award
Agreement.
10.12†
Form of Baldwin Holdings' Restricted Unit Agreement (incorporated herein by reference to Exhibit 10.11 of
the registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission
on September 23, 2019).
10.13†
The Company's Partnership Inducement Award Plan (as amended November 16, 2021) (incorporated
herein by reference to Exhibit 99 of the registrant’s Registration Statement on Form S-8 (Registration No.
333-261126) filed with the Securities and Exchange Commission on November 16, 2021).
10.14†
The Baldwin Insurance Group Holdings, LLC Executive Severance and Change in Control Benefit Program,
dated as of November 1, 2024 (incorporated herein by reference to Exhibit 10.1 of the registrant’s
Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 4,
2024).
10.15†
Form of Acknowledgement of The Baldwin Insurance Group Holdings, LLC Executive Severance and
Change in Control Benefit Program (incorporated herein by reference to Exhibit 10.2 of the registrant’s
Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 4,
2024).
10.16
Third Amended and Restated Limited Liability Company Agreement of Baldwin Holdings dated as of
October 7, 2019, by and among Baldwin Holdings and its members (incorporated herein by reference to
Exhibit 10.5 of the registrant’s Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 24, 2020).
10.17
First Amendment to the Third Amended and Restated Limited Liability Company Agreement of Baldwin
Holdings dated as of November 3, 2020, by and among Baldwin Holdings and its members (incorporated
herein by reference to Exhibit 10.15 of the registrant's Annual Report on Form 10-K filed with the
Securities and Exchange Commission on February 28, 2023).
10.18
Second Amendment to the Third Amended and Restated Limited Liability Company Agreement of Baldwin
Holdings, effective as of May 2, 2024 (incorporated herein by reference to Exhibit 10.1 of the registrant’s
Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 7, 2024).
10.19†
Form of Director and Executive Officer Indemnification Agreement (incorporated herein by reference to
Exhibit 10.12 of the registrant’s Registration Statement on Form S-1 filed with the Securities and
Exchange Commission on September 23, 2019).
10.20
Stockholders Agreement, dated as of October 28, 2019, by and among the Company and the other persons
and entities party thereto (incorporated herein by reference to Exhibit 10.3 of the registrant’s Current
Report on Form 8-K filed with the Securities and Exchange Commission on October 31, 2019).
10.21
Consent and Defense Agreement, dated as of May 8, 2023, by and between the Company and BIGH, LLC (f/
k/a Baldwin Insurance Group Holdings, LLC) (incorporated herein by reference to Exhibit 10.1 to the
registrant's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 9,
2023).
10.22*
Stockholders Agreement, dated as of October 30, 2024, by and among the Company and the Holders (as
defined therein)
10.23
Registration Rights Agreement, dated as of October 28, 2019, by and among the Company and the other
persons and entities party thereto (incorporated herein by reference to Exhibit 10.2 of the registrant’s
Current Report on Form 8-K filed with the Securities and Exchange Commission on October 31, 2019).
10.24
Tax Receivable Agreement, dated as of October 28, 2019, by and among the Company, Baldwin Holdings
and each of the other persons and entities party thereto (incorporated herein by reference to Exhibit
10.1 of the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission
on October 31, 2019).
Exhibit No.
Description of Exhibit
118
10.25
Amended and Restated Credit Agreement, dated as of May 24, 2024, by and among Baldwin Holdings, the
Guarantors party thereto, the several Lenders party thereto and JPMorgan Chase Bank, N.A., as
administrative agent (incorporated herein by reference to Annex 1 of Exhibit 10.1 of the registrant’s
Current Report on Form 8-K filed with the Securities and Exchange Commission on May 29, 2024).
10.26*
Amendment No. 1 to Amended and Restated Credit Agreement, dated as of December 4, 2024, by and
among Baldwin Holdings, the Guarantors party thereto, the several Lenders party thereto and JPMorgan
Chase Bank, N.A., as administrative agent
10.27*
Amendment No. 2 to Amended and Restated Credit Agreement, dated as of January 10, 2025, by and
among Baldwin Holdings, the Guarantors party thereto, the several Lenders party thereto and JPMorgan
Chase Bank, N.A., as administrative agent
19*
Statement of Policy Concerning Trading in Company Securities
21*
List of Subsidiaries of The Baldwin Insurance Group, Inc.
23.1*
Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm
31.1*
Certification of the Registrant’s Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange
Act of 1934
31.2*
Certification of the Registrant’s Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange
Act of 1934
32**
Certification of the Registrant’s Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
97*
The Baldwin Insurance Group, Inc. Clawback Policy
101.INS*
Inline XBRL Instance Document - the Instance document does not appear in the Interactive Data file
because XBRL tags are embedded within the Inline XBRL document
101.SCH*
Inline XBRL Taxonomy Extension Schema Document
101.CAL*
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
Exhibit No.
Description of Exhibit
__________
*
Filed herewith
** Furnished herewith and as such are deemed not “filed” for purposes of Section 18 of the Exchange Act, nor shall they
be deemed incorporated by reference in any filing under the Securities Act, except as shall be expressly set forth by
specific reference in such filing.
†
Management contract or compensatory plan or arrangement.
ITEM 16. FORM 10-K SUMMARY
None.
119
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
THE BALDWIN INSURANCE GROUP, INC.
Date: February 25, 2025
By:
/s/ Trevor L. Baldwin
Trevor L. Baldwin
Chief Executive Officer
120
Pursuant to requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Lowry Baldwin
Chairman of the Board of Directors
February 25, 2025
Lowry Baldwin
/s/ Trevor L. Baldwin
Chief Executive Officer and Director
February 25, 2025
Trevor L. Baldwin
(Principal Executive Officer)
/s/ Bradford L. Hale
Chief Financial Officer
February 25, 2025
Bradford L. Hale
(Principal Financial Officer)
/s/ Corbyn Lichon
Chief Accounting Officer
February 25, 2025
Corbyn Lichon
(Principal Accounting Officer)
/s/ Jay Cohen
Director
February 25, 2025
Jay Cohen
/s/ Joseph J. Kadow
Director
February 25, 2025
Joseph J. Kadow
/s/ Barbara Matas
Director
February 25, 2025
Barbara Matas
/s/ Sathish Muthukrishnan
Director
February 25, 2025
Sathish Muthukrishnan
/s/ Sunita Parasuraman
Director
February 25, 2025
Sunita Parasuraman
/s/ Ellyn Shook
Director
February 25, 2025
Ellyn Shook
/s/ Chris Sullivan
Director
February 25, 2025
Chris Sullivan
/s/ Myron Williams
Director
February 25, 2025
Myron Williams
121
APPENDIX
NON-GAAP FINANCIAL MEASURES
Adjusted EBITDA, adjusted EBITDA margin, organic revenue, organic revenue growth, adjusted net income, adjusted
diluted earnings per share (“EPS”), pro forma revenue, pro forma adjusted EBITDA, pro forma adjusted EBITDA margin and
adjusted net cash provided by operating activities (“adjusted free cash flow”) are not measures of financial performance
under GAAP and should not be considered substitutes for GAAP measures, including commissions and fees (for organic
revenue and organic revenue growth), revenues (for pro forma revenue), net income (loss) (for adjusted EBITDA, adjusted
EBITDA margin, pro forma adjusted EBITDA and pro forma adjusted EBITDA margin), net income (loss) attributable to
Baldwin (for adjusted net income), diluted earnings (loss) per share (for adjusted diluted EPS) or net cash provided by
(used in) operating activities (for adjusted free cash flow), which we consider to be the most directly comparable GAAP
measures. These non-GAAP financial measures have limitations as analytical tools, and when assessing our operating
performance, you should not consider these non-GAAP financial measures in isolation or as substitutes for commissions
and fees, revenues, net income (loss), net income (loss) attributable to Baldwin, diluted earnings (loss) per share, net cash
provided by (used in) operating activities or other consolidated income statement data prepared in accordance with GAAP.
Other companies in our industry may define or calculate these non-GAAP financial measures differently than we do, and
accordingly, these measures may not be comparable to similarly titled measures used by other companies.
We define adjusted EBITDA as net income (loss) before interest, taxes, depreciation, amortization, change in fair value of
contingent consideration and certain items of income and expense, including share-based compensation expense,
transaction-related partnership and integration expenses, severance, and certain non-recurring items, including those
related to raising capital. We believe that adjusted EBITDA is an appropriate measure of operating performance because it
eliminates the impact of income and expenses that do not relate to business performance, and that the presentation of
this measure enhances an investor’s understanding of our financial performance.
Adjusted EBITDA margin is adjusted EBITDA divided by total revenues. Adjusted EBITDA margin is a key metric used by
management and our board of directors to assess our financial performance. We believe that adjusted EBITDA margin is
an appropriate measure of operating performance because it eliminates the impact of income and expenses that do not
relate to business performance, and that the presentation of this measure enhances an investor’s understanding of our
financial performance. We believe that adjusted EBITDA margin is helpful in measuring profitability of operations on a
consolidated level.
Adjusted EBITDA and adjusted EBITDA margin have important limitations as analytical tools. For example, adjusted EBITDA
and adjusted EBITDA margin:
•
do not reflect any cash capital expenditure requirements for the assets being depreciated and amortized that
may have to be replaced in the future;
•
do not reflect changes in, or cash requirements for, our working capital needs;
•
do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our
ongoing operations;
•
do not reflect the interest expense or the cash requirements necessary to service interest or principal payments
on our debt;
•
do not reflect share-based compensation expense and other non-cash charges; and
•
exclude certain tax payments that may represent a reduction in cash available to us.
We calculate organic revenue based on commissions and fees for the relevant period by excluding (i) the first twelve
months of commissions and fees generated from new partners and (ii) commissions and fees from divestitures. Organic
revenue growth is the change in organic revenue period-to-period, with prior period results adjusted to (i) include
commissions and fees that were excluded from organic revenue in the prior period because the relevant partners had not
yet reached the twelve-month owned mark, but which have reached the twelve-month owned mark in the current period,
and (ii) exclude commissions and fees related to divestitures from organic revenue. For example, revenues from a partner
acquired on June 1, 2023 are excluded from organic revenue for 2023. However, after June 1, 2024, results from June 1,
2023 to December 31, 2023 for such partners are compared to results from June 1, 2024 to December 31, 2024 for
purposes of calculating organic revenue growth in 2024. Organic revenue growth is a key metric used by management and
our board of directors to assess our financial performance. We believe that organic revenue and organic revenue growth
are appropriate measures of operating performance as they allow investors to measure, analyze and compare growth in a
meaningful and consistent manner.
We define adjusted net income as net income (loss) attributable to Baldwin adjusted for depreciation, amortization,
change in fair value of contingent consideration and certain items of income and expense, including share-based
compensation expense, transaction-related partnership and integration expenses, severance, and certain non-recurring
costs that, in the opinion of management, significantly affect the period-over-period assessment of operating results, and
the related tax effect of those adjustments. We believe that adjusted net income is an appropriate measure of operating
performance because it eliminates the impact of income and expenses that do not relate to business performance.
Adjusted diluted EPS measures our per share earnings excluding certain expenses as discussed above and assuming all
shares of Class B common stock were exchanged for Class A common stock on a one-for-one basis. Adjusted diluted EPS is
calculated as adjusted net income divided by adjusted diluted weighted-average shares outstanding. We believe adjusted
diluted EPS is useful to investors because it enables them to better evaluate per share operating performance across
reporting periods.
For the years ended December 31, 2019 through 2022, pro forma revenue reflects GAAP revenues plus revenue from
partnerships in the unowned periods, and pro forma net income (loss) reflects GAAP net income (loss) plus net income or
loss from partnerships in the unowned periods, eliminating the effects of financing, depreciation and amortization.
For the years ended December 31, 2023 and 2024, pro forma revenue reflects GAAP revenues less revenue derived from
business divestitures that occurred during 2024, and pro forma net income (loss) reflects GAAP net income (loss) less net
income or loss derived from business divestitures that occurred during 2024, including the gain on divestitures.
We define pro forma adjusted EBITDA as pro forma net income (loss) before interest, taxes, depreciation, amortization,
change in fair value of contingent consideration and certain items of income and expense, including share-based
compensation expense, transaction-related partnership and integration expenses, severance, and certain non-recurring
costs, including those related to raising capital. For the years ended December 31, 2023 and 2024, pro forma adjusted
EBITDA accounts for these items after removing the effect of divestitures. We believe that pro forma adjusted EBITDA is an
appropriate measure of operating performance because it eliminates the impact of income and expenses that do not
relate to ongoing business performance, and that the presentation of this measure enhances an investor’s understanding
of our financial performance.
Pro forma adjusted EBITDA margin is pro forma adjusted EBITDA divided by pro forma revenue. Pro forma adjusted
EBITDA margin is a key metric used by management and our board of directors to assess our ongoing business
performance. We believe that pro forma adjusted EBITDA margin is an appropriate measure of operating performance
because it eliminates the impact of income and expenses that do not relate to ongoing business performance, and that
the presentation of this measure enhances an investor’s understanding of our financial performance. We believe that pro
forma adjusted EBITDA margin is helpful in measuring profitability of operations on a consolidated level.
We calculate adjusted free cash flow because we hold fiduciary cash designated for our insurance company partners on
behalf of our clients and incur substantial earnout liabilities in conjunction with our partnership strategy. Adjusted free
cash flow is calculated as net cash provided by (used in) operating activities excluding the impact of: (i) the change in
premiums, commissions and fees receivable, net; (ii) the change in accounts payable, accrued expenses and other current
liabilities; (iii) the payment of contingent earnout consideration in excess of purchase price accrual; and (iv) the payment of
colleague earnout incentives. We believe that adjusted free cash flow is an important measure of our ability to generate
cash from our business operations.
ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN
The following table reconciles adjusted EBITDA and adjusted EBITDA margin to net loss, which we consider to be the most
directly comparable GAAP financial measure:
For the Years Ended December 31,
(in thousands, except percentages)
2024
2023
2022
2021
2020
2019
Revenues
$ 1,389,037
$ 1,218,555
$ 980,720
$ 567,290
$ 240,919
$ 137,841
Net loss
$ (41,081)
$ (164,019)
$ (76,748)
$ (58,120)
$ (29,885)
$ (22,454)
Adjustments to net loss:
Interest expense, net
123,644
119,465
71,072
26,899
7,857
10,640
Amortization expense
102,730
92,704
81,738
48,720
19,038
10,007
Share-based compensation
65,503
56,222
47,389
19,193
7,744
4,561
Colleague earnout incentives
41,917
8,020
—
—
—
—
Gain on divestitures
(38,953)
—
—
—
—
—
Loss on extinguishment and
modification of debt
15,113
—
—
—
—
6,732
Transaction-related partnership
and integration expenses
10,501
20,728
34,588
19,182
13,851
2,204
Income and other taxes
(1)
7,184
1,285
715
19
(5)
17
Depreciation expense
6,194
5,698
4,620
2,788
1,129
542
Severance
5,756
18,514
1,255
871
89
329
Change in fair value of contingent
consideration
(4,949)
61,083
32,307
45,196
20,516
10,829
(Gain) loss on interest rate caps
244
1,670
(26,220)
123
—
—
Capital related expenses
—
—
—
—
1,087
4,739
Other
(2)
18,682
28,834
25,774
8,038
2,535
375
Adjusted EBITDA
$ 312,485
$ 250,204
$ 196,490
$ 112,909
$
43,956
$
28,521
Net loss margin
(3) %
(13) %
(8) %
(10) %
(12) %
(16) %
Adjusted EBITDA margin
22 %
21 %
20 %
20 %
18 %
21 %
__________
(1)
Other taxes in 2024 include the Tax Receivable Agreement expense and other operating tax expense, such as state taxes, under
GAAP.
(2)
Other addbacks to adjusted EBITDA include certain income and expenses that are considered to be non-recurring or non-
operational, including certain recruiting costs, professional fees, litigation costs and bonuses. In 2022 and 2021, these addbacks also
included certain expenses related to remediation efforts.
ORGANIC REVENUE AND ORGANIC REVENUE GROWTH
The following table reconciles organic revenue and organic revenue growth to commissions and fees, which we consider
to be the most directly comparable GAAP financial measure:
For the Years Ended December 31,
(in thousands, except percentages)
2024
2023
2022
2021
2020
2019
Commissions and fees
$ 1,377,116
$ 1,211,828
$ 980,720
$ 567,290
$ 240,919
$ 137,841
Partnership commissions and fees
(1)
—
(44,696)
(280,660)
(272,272)
(81,250)
(50,163)
Organic revenue
$ 1,377,116
$ 1,167,132
$ 700,060
$ 295,018
$ 159,669
$ 87,678
Organic revenue growth
(2)
$ 196,922
$ 187,213
$ 132,610
$
54,004
$ 21,780
$
7,780
Organic revenue growth %
(2)
17 %
19 %
23 %
22 %
16 %
10 %
__________
(1)
Includes the first twelve months of such commissions and fees generated from newly acquired partners.
(2)
Organic revenue for the year ended December 31, 2023 used to calculate organic revenue growth for the year ended December 31,
2024 was $1.18 billion, which is adjusted to exclude commissions and fees from divestitures that occurred during 2024.
ADJUSTED NET INCOME AND ADJUSTED DILUTED EPS
The following table reconciles adjusted net income to net loss attributable to Baldwin and reconciles adjusted diluted EPS
to diluted loss per share, which we consider to be the most directly comparable GAAP financial measures:
For the Years Ended December 31,
(in thousands, except per share data)
2024
2023
2022
2021
2020
2019
Net loss attributable to Baldwin
$
(24,518) $
(90,141) $
(41,772) $
(30,646) $
(15,696) $
(8,650)
Net loss attributable to
noncontrolling interests
(16,563)
(73,878)
(34,976)
(27,474)
(14,189)
(13,804)
Amortization expense
102,730
92,704
81,738
48,720
19,038
10,007
Share-based compensation
65,503
56,222
47,389
19,193
7,744
4,561
Colleague earnout incentives
41,917
8,020
—
—
—
—
Gain on divestitures
(38,953)
—
—
—
—
—
Loss on extinguishment and
modification of debt
15,113
—
—
—
—
6,732
Transaction-related partnership and
integration expenses
10,501
20,728
34,588
19,182
13,851
2,204
Income tax expense
6,537
—
—
—
—
—
Depreciation
6,194
5,698
4,620
2,788
1,129
542
Amortization of deferred financing
costs
5,841
5,129
5,120
3,506
1,002
1,312
Severance
5,756
18,514
1,255
871
89
329
Change in fair value of contingent
consideration
(4,949)
61,083
32,307
45,196
20,516
10,829
(Gain) loss on interest rate caps, net
of cash settlements
2,544
12,588
(24,012)
123
—
—
Capital related expenses
—
—
—
—
1,087
4,739
Other
(1)
18,682
28,834
25,774
8,038
2,535
375
Adjusted pre-tax income
196,335
145,501
132,031
89,497
37,106
19,176
Adjusted income taxes
(2)
19,437
14,405
13,071
8,860
3,673
1,898
Adjusted net income
$ 176,898
$ 131,096 $ 118,960 $
80,637 $
33,433 $
17,278
Weighted-average shares of Class A
common stock outstanding - diluted
63,455
60,135
56,825
47,588
27,176
17,917
Dilutive weighted-average shares of
Class A common stock
3,598
3,874
3,526
1,982
571
330
Exchange of Class B common
stock
(3)
50,896
53,132
55,450
51,811
45,147
43,194
Adjusted diluted weighted-average
shares outstanding
117,949
117,141
115,801
101,381
72,894
61,441
Diluted loss per share
$
(0.39) $
(1.50) $
(0.74) $
(0.64) $
(0.58) $
(0.48)
Effect of exchange of Class B
common stock and net loss
attributable to noncontrolling
interests per share
0.04
0.10
0.08
0.07
0.17
0.11
Other adjustments to loss per
share
2.01
2.64
1.80
1.46
0.92
0.68
Adjusted income taxes per share
(0.16)
(0.12)
(0.11)
(0.09)
(0.05)
(0.03)
Adjusted diluted EPS
$
1.50
$
1.12 $
1.03 $
0.80 $
0.46 $
0.28
___________
(1)
Other addbacks to adjusted net income include certain income and expenses that are considered to be non-recurring or non-
operational, including certain recruiting costs, professional fees, litigation costs and bonuses. In 2022 and 2021, these addbacks also
included certain expenses related to remediation efforts.
(2)
Represents corporate income taxes at assumed effective tax rate of 9.9% applied to adjusted pre-tax income.
(3)
Assumes the full exchange of Class B common stock for Class A common stock pursuant to the Third Amended and Restated Limited
Liability Company Agreement of the Company, as amended.
PRO FORMA REVENUE
The following table reconciles pro forma revenue and pro forma revenue growth to revenues, which we consider to be the
most directly comparable GAAP financial measure:
For the Years Ended December 31,
(in thousands, except percentages)
2024
2023
2022
2021
2020
2019
Revenues
$ 1,389,037
$ 1,218,555
$ 980,720
$ 567,290
$ 240,919
$
137,841
Revenue for partnerships in the
unowned period
(1)
—
—
33,768
152,030
185,330
14,769
Less revenue from divestitures
(2)
(6,260)
(35,161)
—
—
—
—
Pro forma revenue
$ 1,382,777
$ 1,183,394
$ 1,014,488
$ 719,320
$ 426,249
$
152,610
Pro forma revenue growth
$ 199,383
$ 168,906
$ 295,168
$ 293,071
$ 273,639
Pro forma revenue growth %
17 %
17 %
41 %
69 %
179 %
___________
(1)
The adjustments for the year ended December 31, 2022 reflect revenues for Westwood Insurance Agency, Venture Captive
Management, LLC and National Health Plans & Benefits Agency, LLC as if the Company had acquired the partners on January 1, 2022.
The adjustments for the year ended December 31, 2021 reflect revenues for LeaseTrack Services LLC/Effective Coverage LLC, Riley
Financial, Inc. (operating as “Medicare Help Now”), Tim Altman, Inc. (operating as “Only Medicare Solutions”), Seniors’ Insurance
Services of Washington, Inc., Mid-Continent Companies, Ltd., RogersGray Inc., EBSME, LLC, FounderShield LLC, The Capital Group,
LLC, River Oak Risk, LLC, White Hill Plaza, Inc., Jacobson, Goldfarb & Scott, Inc, Wood Guttman & Bogart Insurance Brokers,
Construction Risk Partners, LLC, Brush Creek, LLC and Arcana Insurance Services, LP as if the Company had acquired the partners on
January 1, 2021. The adjustments for the year ended December 31, 2020 reflect revenues for AgencyRM LLC, VibrantUSA Inc.,
Insurance Risk Partners, LLC, Southern Protective Group, LLC, Pendulum, LLC, Rosenthal Bros., Inc., Trinity Benefit Advisors, Inc./Russ
Blakely & Associates, LLC, Fletcher Financial Group, Inc., Medicare Insurance Advisors, Inc., Insgroup, Inc., Armfield, Harrison &
Thomas, Inc., Westward Insurance Services, Inc., Burnham Benefits Insurance Services, Inc. and Tanner, Ballew & Maloof, Inc. as if the
Company had acquired the partners on January 1, 2020. The adjustments for the year ended December 31, 2019 reflect revenues for
Lykes Insurance, Inc., Millennial Specialty Insurance LLC, Fiduciary Partners Retirement Group, Inc. and Foundation Insurance of
Florida, LLC, as well as two asset acquisitions for the unowned period, as if the Company had acquired the partners on January 1,
2019. This unaudited pro forma information should not be relied upon as being indicative of the historical results that would have
been obtained if the acquisitions had occurred on that date, nor the results that may be obtained in the future.
(2)
For the years ended December 31, 2024 and 2023, the adjustments exclude revenue from 2024 divestitures as if the divestitures had
occurred on January 1, 2024 and January 1, 2023, respectively.
PRO FORMA ADJUSTED EBITDA AND PRO FORMA ADJUSTED EBITDA MARGIN
The following table reconciles pro forma adjusted EBITDA and pro forma adjusted EBITDA margin to net loss, which we
consider to be the most directly comparable GAAP financial measure:
For the Years Ended December 31,
(in thousands, except percentages)
2024
2023
2022
2021
2020
2019
Pro forma revenue
$ 1,382,777
$ 1,183,394
$ 1,014,488
$ 719,320
$ 426,249
$ 152,610
Net loss
(41,081)
(164,019)
(76,748)
(58,120)
(29,885)
(22,454)
Net income (loss) for partnerships
in the unowned period
(1)
—
—
(2,069)
29,078
25,205
(472)
Less net income from
divestitures
(2)
(39,264)
(3,616)
—
—
—
—
Pro forma net loss
(80,345)
(167,635)
(78,817)
(29,042)
(4,680)
(22,926)
Adjustments to pro forma net loss:
Interest expense, net
123,644
119,465
72,789
39,852
22,290
14,768
Amortization expense
102,730
90,800
88,537
68,805
43,965
11,866
Share-based compensation
65,503
56,222
47,389
19,193
7,744
4,561
Colleague earnout incentives
41,917
8,020
—
—
—
—
Loss on extinguishment and
modification of debt
15,113
—
—
—
—
6,732
Transaction-related partnership
and integration expenses
9,451
20,728
34,588
19,182
13,851
2,204
Income and other taxes
7,184
1,285
715
19
(5)
17
Depreciation expense
6,194
5,653
4,620
2,788
2,474
542
Severance
5,729
18,262
1,255
871
89
329
Change in fair value of contingent
consideration
(4,949)
61,061
32,307
45,196
20,516
10,829
(Gain) loss on interest rate caps
244
1,670
(26,220)
123
—
—
Capital related expenses
—
—
—
—
1,087
4,739
Other
18,473
28,464
25,774
8,038
2,535
375
Pro forma adjusted EBITDA
$ 310,888
$ 243,995
$ 202,937
$ 175,025
$ 109,866
$
34,036
Net loss margin
(3) %
(13) %
(8) %
(10) %
(12) %
(16) %
Pro forma adjusted EBITDA margin
22 %
21 %
20 %
24 %
26 %
22 %
___________
(1)
The adjustments for the year ended December 31, 2022 reflect net income (loss) for Westwood Insurance Agency, Venture Captive
Management, LLC and National Health Plans & Benefits Agency, LLC as if the Company had acquired the partners on January 1, 2022.
The adjustments for the year ended December 31, 2021 reflect net income (loss) for LeaseTrack Services LLC/Effective Coverage LLC,
Riley Financial, Inc. (operating as “Medicare Help Now”), Tim Altman, Inc. (operating as “Only Medicare Solutions”), Seniors’ Insurance
Services of Washington, Inc., Mid-Continent Companies, Ltd., RogersGray Inc., EBSME, LLC, FounderShield LLC, The Capital Group,
LLC, River Oak Risk, LLC, White Hill Plaza, Inc., Jacobson, Goldfarb & Scott, Inc, Wood Guttman & Bogart Insurance Brokers,
Construction Risk Partners, LLC, Brush Creek, LLC and Arcana Insurance Services, LP as if the Company had acquired the partners on
January 1, 2021. The adjustments for the year ended December 31, 2020 reflect net income (loss) for AgencyRM LLC, VibrantUSA Inc.,
Insurance Risk Partners, LLC, Southern Protective Group, LLC, Pendulum, LLC, Rosenthal Bros., Inc., Trinity Benefit Advisors, Inc./Russ
Blakely & Associates, LLC, Fletcher Financial Group, Inc., Medicare Insurance Advisors, Inc., Insgroup, Inc., Armfield, Harrison &
Thomas, Inc., Westward Insurance Services, Inc., Burnham Benefits Insurance Services, Inc. and Tanner, Ballew & Maloof, Inc. as if the
Company had acquired the partners on January 1, 2020. The adjustments for the year ended December 31, 2019 reflect net income
(loss) for Lykes Insurance, Inc., Millennial Specialty Insurance LLC, Fiduciary Partners Retirement Group, Inc. and Foundation
Insurance of Florida, LLC, as well as two asset acquisitions for the unowned period, as if the Company had acquired the partners on
January 1, 2019. This unaudited pro forma information should not be relied upon as being indicative of the historical results that
would have been obtained if the acquisitions had occurred on that date, nor the results that may be obtained in the future.
(2)
For the years ended December 31, 2024 and 2023, the adjustments exclude net income from 2024 divestitures, including the gain on
divestitures, as if the divestitures had occurred on January 1, 2024 and January 1, 2023, respectively.
ADJUSTED NET CASH PROVIDED BY OPERATING ACTIVITIES (“ADJUSTED FREE CASH FLOW”)
The following table reconciles adjusted free cash flow to net cash provided by (used in) operating activities, which we
consider to be the most directly comparable GAAP financial measure:
For the Years Ended December 31,
(in thousands)
2024
2023
2022
2021
2020
2019
Net cash provided by (used in)
operating activities
$
102,151 $
44,644
$
(2,462) $
40,129 $
36,817 $
12,014
Adjustments to net cash provided by
(used in) operating activities:
Change in premiums, commissions
and fees receivable, net
73,762
132,269
183,006
64,501
6,828
6,000
Change in accounts payable,
accrued expenses and other
current liabilities
(1)
(81,561)
(132,655)
(173,362)
(55,188)
(27,348)
(9,000)
Payment of contingent earnout
consideration in excess of purchase
price accrual
23,395
24,326
49,926
4,825
1,727
8
Payment of colleague earnout
incentives
17,112
—
—
—
—
—
Adjusted free cash flow
$
134,859 $
68,584
$
57,108 $
54,267 $
18,024 $
9,022
___________
(1)
Change in accounts payable, accrued expenses and other current liabilities for the year ended December 31, 2023 has been recast to
conform to current year presentation, which excludes the effect of the change in colleague earnout incentives.