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Brown & Brown (NYSE:BRO)
Q4 2018 Earnings Conference Call
Jan. 29, 2019 8:00 a.m. ET

Contents:

Prepared Remarks:

Operator

Good morning, and welcome to the Brown & Brown, Inc. fourth-quarter earnings call. Today's call is being recorded. Please note that certain information discussed during this call, including information contained in the slide presentation posted in connection with this call and including the answer given in response to your questions, may relate to future results and events; otherwise, be forward looking in nature.

Such statements reflect our current views with respect to future events, including those relating to the company's anticipated financial results for the fourth quarter, and are intended to fall within the safe harbor provisions of the securities laws. Actual results or events in the future are subject to a number of risks and uncertainties and may differ materially from those currently anticipated or desired or referenced in any forward-looking statements made as a result of a number of factors such as -- such factors include the company's determination as it finalizes its financial results for fourth quarter, that its financial results differ from the current preliminary unaudited numbers set forth in the press release issued yesterday, other factors that the company may not have currently identified or quantified in those release issued yesterday, other factors that the company may not have currently identified or quantified, and those risks and uncertainties identified from the -- time to time in the company's reports filed with the Securities and Exchange Commission. Additional discussions of these and other factors affecting the company's business and prospects as well as additional information regarding forward-looking statements is contained in the slide presentation posted in connection with this call and the company's filings with the Securities and Exchange Commission. We disclaim any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

In addition, there are certain non-GAAP financial measures used in this conference call. A reconciliation of any non-GAAP financial measure to the most comparable GAAP financial measure can be found in the company's earnings press release or in investor presentation for this call on the company's website at www.bbinsurance.com by clicking on investor relations and then calendar of events. With that said, I will now turn the call over to Powell Brown, president and chief executive officer. You may now begin.

Powell Brown -- President and Chief Executive Officer

Thank you, Bryce. Good morning, everyone, and thank you for joining us for our fourth-quarter 2018 earnings call. Before we get into the performance of the quarter, we'd like to welcome all of our new teammates that joined us this quarter from recent acquisitions. We definitely had a busy quarter, adding almost 800 new teammates and acquiring five businesses with approximately $227 million of annualized revenue.

The largest deal we completed in the quarter and in our history was the Hays Companies, and it closed effective November 15. We're excited about the additional talent and capability that these acquisitions bring to our customers and to our team. I'm now on Slide 4. Now let's get into the results for the fourth quarter.

We delivered $508 million -- $508.7 million of revenue, growing 7.3% in total. Excluding the impact of the New Revenue Standard, our total revenues for the quarter grew 8.6%. Our organic revenues decreased by 2.1% for the fourth quarter, which were driven by the significant claims processing revenue we recognized in Q4 of 2017 associated with hurricane Harvey and Irma. Isolating this impact, our organic revenue growth would have been over 3%.

I'll get into more detail in a few minutes about the organic growth for each segment. Our EBITDAC margin was 28.1%, which is down 210 basis points versus 2017. It was primarily impacted by the claims revenue recognized in the fourth quarter of '17 and the New Revenue Standard in '18. Andy will discuss the detailed movements of our margins later.

Our net income per share for the fourth quarter was $0.26 versus $0.66 in the fourth quarter of '17. Remember that our EPS for the fourth quarter and the full year of '17 was impacted by the one-time benefit of $0.43 associated with tax reform. On an-adjusted basis, which excludes the one-time tax benefit, the change in acquisition earnout and the New Revenue Standard, our earnings per share was $0.27, which is an increase of 12.5% as compared to 2017. I'm now on Slide 5.

We're pleased with our full year performance as we surpassed $2 billion in total revenues for the first time. This is a significant milestone for Brown & Brown. It was seven short years ago that we crossed the billion dollar threshold. A lot of positive changes and improvements in our company since then.

This is a result of all the efforts of our outstanding team of almost 10,000. For the year, we grew total revenues over 7% and experienced organic revenue growth of 2.4%. Please remember, Q4 '18 was negatively impacted by a significant amount of claims revenue recorded in Q4 of '17. Isolating the year-on-year variance in claims activity, we would have grown organically approximately 4% for the full year.

Our EBITDAC margin was 30.6% and our net income per share for the full-year '18 decreased to $1.22 from $1.40 in '17, almost entirely driven by one-time tax adjustment I mentioned earlier and the non-recurring claims processing revenue. On an adjusted basis, which excludes the one-time tax benefit, the change in acquisition earnout and the new revenue standard, net income per share increased by 23% to $1.18. For the full year, we closed 23 transactions with approximately $323 million of annualized revenue, by far our largest year ever for acquisition activity. In regards to acquisitions, 2018 was one of those years that everything seemed to worked out for the Brown & Brown team.

We're really pleased they completed at least one acquisition in each of our four segments last year, another first for our company. Lastly, we'd like to extend a huge thank you to all of our teammates that supported our acquisition activity. It was a busy year, and our success would not have been possible without their significant efforts. In 2018, we grew the top and bottom line nicely.

We added talented teammates, increased our capabilities to serve our customers, invested in technology and continued to invest in our teammates. Our performance is a direct result of the incredible effort and dedication that our team strives to achieve each day for our customers. Later in the presentation, Andy will discuss our financial results in more detail. On Slide 6, the economy during the fourth quarter continued to expand with exposure units increasing across most industries and geographies as our customers continued to invest in our businesses.

We're seeing a lot of construction going on around the country, and there's a general shortage of qualified labor for many industries. Rates for most lines remain generally flat. The exceptions continue to be commercial automobile, which is up 3% to 7% or more depending upon the loss experience, and almost all employee benefits accounts continue to experience rate increases. Workers' compensation continues to be down in the 1% to 3% range in many states across the country.

Coastal property rates for the quarter remained generally flat with some downward pressure on the best accounts and upward pressure on those with poor loss experience. We made a lot of progress this past year and are pleased with the investments in our core commercial program as well as our technology investments related to both core infrastructure and innovation. I'm now on Slide 7. Let's talk about the performance of our four segments.

The retail segment delivered solid organic growth of 3.5% in Q4, with most lines of business growing through solid new business activity. During the quarter, we completed five acquisitions and realized approximately $44 million of year-on-year revenue growth from acquisitions. For the year, we delivered 3% organic revenue growth, which represents continued incremental improvement over prior years'. As we've discussed before, while it's good to look at the quarters, we believe the real measure is the full year results and 2018 was another year of improvement.

Over the past four years, we are pleased with the continual improvement from 1.4% organic revenue growth in '15, then increasing to 1.9% in '16, then 2.9% in '17 and 3% for '18. Our national programs segment decreased 14% organically. This was driven by approximately a $20 million decrease in claims processing revenues as compared to the fourth quarter of '17. Isolating this change, our national programs segment would have delivered positive organic revenue growth of just over 1%.

A number of our programs performed well, most notably our earthquake and all risk programs. But we had some experiencing changes in carrier risk appetite that resulted in decreased performance year over year. For the full year, our organic revenue was about 1% negative, which was impacted by lower year-over-year claims processing revenues. Isolating this change, we would have delivered positive organic growth of over 4%.

So it's a good year for national programs segment. Our wholesale brokerage segment delivered organic revenue growth of 3.4% for the quarter, driven by expansion in all lines of business. This is down versus prior quarter's -- the prior quarter of last year, which is consistent with the past three years where we had lower organic growth in the fourth quarter due to the amount of new and renewal business in the quarter. For the full year, we're very pleased with the organic growth of 5.7% for our wholesale brokerage segment.

Our services segment organic revenue decreased by 3.3% for the quarter, driven by claims processing revenues recorded in Q4 of '17 as a result of Hurricane Harvey and Irma. Isolating these claims, revenues in the services segment experienced strong organic revenue growth of approximately 7% for the quarter, driven by new business. Isolating the decreases in claims processing revenues, our full year organic revenue growth will be approximately 6%. When we look back on the year, we're pleased with the performance and the acquisition activity of our four segments.

Now let me turn it over to Andy, who will discuss our financial performance in more detail.

Andy Watts -- Executive Vice President and Chief Financial Officer

Thank you, Powell. Good morning, everybody. Consistent with previous quarters, we're going to discuss our GAAP results and then our adjusted results, excluding the impacts of acquisition earnouts, the impact of the New Revenue Standard and the impact of the fourth-quarter 2017 revaluation of our deferred-tax liabilities that Powell mentioned earlier. As a reminder, we have excluded the impact of the New Revenue Standard for calculation of organic growth in order provide a better comparison to 2017.

Moving over on Slide No. 8. This presents our GAAP and certain non-GAAP financial highlights. For the fourth quarter, we delivered total revenue growth of 7.3% and with organic revenues declining 2.1%.

The decrease in organic revenue is a result of the claims processing revenues recorded in the fourth quarter of 2017. Isolating these revenues, our organic revenue growth would have exceeded 3%. Our income before income tax decreased by 5.3% and our EBITDAC declined by 10 basis points, both of which were negatively impacted this quarter by the New Revenue Standard and the claims processing revenue that we realized in the fourth quarter of 2017. Our net income declined by $114 million or 60.8% to $73.5 million, and our diluted net income per share decreased by $0.40 or 60.6% to $0.26 versus $0.66 in the fourth quarter of 2017.

The one-time deferred-tax benefit recorded in the fourth quarter of 2017 was $120 million or $0.43 of earnings per share. During our third-quarter earnings call, we estimated the impact of the new revenue standard for the fourth quarter of 2018 to negatively impact revenues by $3 million to $7 million and the pre-tax income impact to be in the range of 0 to negative $5 million. For the quarter, the actual revenue impact was a negative $6 million and the pre-tax impact was a negative $4.5 million. Net income and diluted net income per share were impacted by the one-time benefit of tax reform recorded in the fourth quarter 2017 and the lower claims processing activity.

Our weighted average number of shares outstanding decreased approximately 930,000 as compared to the fourth-quarter 2017. This was driven primarily by the share repurchases we initiated in the fourth quarter of 2017 and we completed in the first quarter of 2018. During the fourth quarter of 2018, we also initiated a $100 million accelerated share repurchase program. This is expected to offset the dilution associated with the Hays acquisition.

As we discussed before, we still intend to repurchase shares periodically in 2019 to manage the share creep associated with our equity plans. Our goal is to generally keep our share count flat. Lastly, our dividends per share increased by $0.08 or 6.7% compared to 2017. Moving over to Slide No.

9. This slide presents our results after removing the change in estimated acquisition earnouts payables for both years, the one-time tax revaluation adjustment recorded in the fourth quarter of 2017 and the impact of the new revenue standard in 2018. This approach provides a more comparable basis. For the quarter, our revenues increased by 8.6%, income before income tax decreased by 1.4% and EBITDAC increased by 3.1%.

The lower EBITDAC growth rate was primarily due to the claims processing revenues in 2017 and increased non-cash stock compensation cost in 2018. In a few slides, we'll talk more about the components of our margin change year over year. The lower growth rate for income before income taxes was driven by incremental interest and amortization associated with the acquisitions we completed during the year. Our net income grew by 14.9% and diluted net income per share was $0.27, growing by 14.9%.

Both of these metrics benefited from our lower federal income tax rate, which was 27% for the fourth quarter as compared to 37.3% for the fourth quarter of 2017. Moving over to Slide No. 10. This slide presents the key components of our revenue performance.

For the quarter, our total commissions and fees increased by 7.3% as compared to 2017. Our contingent commissions increased $9.1 million as compared to 2017, which was driven almost entirely by the adoption of the new revenue standard. As a reminder, we now recognize contingent commissions throughout the year upon the effective dates of the underlying policies rather than when received per our previous treatment. Guaranteed supplemental commissions were down $800,000 year over year and were not impacted by the adoption of the new revenue standard.

Our core commissions and fees increased by $26 million or 5.6%. When we isolate the impact of the new revenue standard and the net impact of M&A activity, our organic revenue growth declined 2.1%. As noted earlier, this growth rate was materially impacted by lower claims processing revenues of approximately $24.5 million. Isolating this revenue, our organic growth rate would have been approximately 3%.

We move over to Slide No. 11 to provide some additional insight in the components of our EBITDAC margin. We've included a walk-through of our quarterly EBITDAC margin from 2017 to 2018 and highlighted the main drivers. The acquisition of Hays negatively impacted our margin by about 10 basis points for the quarter, and this is in line with our expectations.

Keep in mind this only represents 45 days of operations with the acquisition effective November 15. Later in the presentation, we'll provide additional information regarding the quarterly numbers for Hays in 2019. During the quarter, we realized about a 30-basis-point impact to our margins as non-cash stock compensation costs have increased due to continued incremental financial performance and higher retention of teammates. The new revenue standard negatively impacted our margin for the quarter by 50 basis points.

Other reflects the significant year-over-year decrease in claims processing revenue, which more than accounts for the margin decline year over year. We also had some one-time items, the most significant being performance-based bonuses for certain businesses. On the following slide, we presented the results of our business segments on an as-reported basis as well as excluding the impact of the new revenue standard. We've included a reconciliation by segment in the appendix.

Let's go ahead and start with retail, which is on Slide 12. For the fourth quarter, our retail segment delivered total revenue growth of $39 million or 17%. When excluding the negative impact of the new revenue standard of $12 million, total revenues increased by $51 million or 22.3%, and we delivered 3.5% organic revenue growth. Total revenues benefited primarily from the acquisitions we completed over the past 12 months that contributed $44 million of incremental revenue.

Overall, it was a good quarter for our retail segment. When excluding the $6 million impact of the new revenue standard, our EBITDAC for the quarter grew by $13 million and our margin declined by 40 basis points. This decline was driven by increased inter-company allocations for technology as well as our investment to upgrade our agency management systems and, as we mentioned earlier, increased non-cash stock-based compensation costs as our equity plans are performing higher than expected, resulting in incremental cost. These two items more than offset the underlying margin expansion from leveraging our revenues during the quarter.

The growth in income before income taxes was impacted by higher inter-company interest expense and amortization for acquisitions we completed during the year. Moving over to Slide No. 13. For the quarter, revenues for our national programs segment decreased by 12.5% and organic revenues declined by 14%.

The revenue decline was due to significantly lower year-over-year claims processing activity of approximately $20 million as well as a $2 million impact from the new revenue standard. These items more than offset other organic growth and revenues from acquisitions. Without this decrease in claims activity, organic revenues would have been slightly over 1%. Income before income taxes declined by 38.8%, primarily due to the lower claims processing revenues, the new revenue standard, and was partially offset by lower inter-company interest expense.

EBITDAC, excluding the new revenue standard, decreased $15.7 million or 27%, primarily due to the lower claims processing revenues, the finalization of year-end bonuses calculations associated with the performance of certain programs and incremental non-cash-based compensation cost. Over to Slide No. 14. The impact of the new revenue standard on the Wholesale segment was about $1 million for both revenues and EBITDAC.

Excluding the impact of the new revenue standard, the wholesale brokerage segment delivered total revenue growth of 3.7% and organic revenue growth of 3.4%. Our EBITDAC margin, excluding the new revenue standard, decreased 190 basis points for the quarter. The decrease was impacted by lower contingent commissions, higher inter-company technology allocations and increased non-cash stock-based compensation costs. Our income before income tax margin, excluding the new revenue standard, decreased by 60 basis points, impacted by the same factors contributing to the EBITDAC margin change but benefiting from lower acquisition earn-out liability expense and inter-company interest expense.

The services segment delivered 19% total revenue growth, and excluding a $6 million impact for the new revenue standard, total revenues grew 5.3%, primarily driven by an acquisition we completed in the third quarter of 2018. Our organic revenue declined 3.3%, driven by lower year-over-year weather-related claims processing activity. This decline was about $4.5 million, and if claims volumes were consistent year on year, organic revenue growth would have been about 7% as most businesses continued to grow. For the quarter, our EBITDAC, excluding the new revenue standard, increased 6.8% and margins expanded by 30 basis points due to leveraging our higher revenue growth.

The lower growth for income before income taxes was driven by inter-company interest charges for the acquisition in the third quarter. On Slide No. 16, we presented our GAAP results for the full-year 2018 and 2017. For 2018, we delivered $2,014,000,000 of revenues, growing 7%, and earnings per share of $1.22.

For the year, we also decreased our total outstanding shares by approximately 2 million. Over to Slide No. 17. Due to all the moving parts and difficulty with comparability, we presented on this slide certain GAAP and non-GAAP financial highlights.

For the full-year 2018, we adjusted for the impact of the change in acquisition earnout payables and the new revenue standard. For the full-year 2017, we adjusted for the impact of the change in acquisition earnout payables, the legal settlement we had in the first quarter and the one-time impact of the tax reform we realized in the fourth quarter. Since these are non-cash or non-recurring and can increase or decrease by year, we believe it's helpful to evaluate the business excluding them. For the year, our total revenues grew 7.2% or $134 million and our organic revenues grew 2.4%.

Isolating the year-over-year decrease in claims processing revenues of $24.5 million, our organic revenue growth would have been approximately 4% or $70 million, which is a really good year for Brown & Brown. Our EBITDAC grew by 2.1% and was impacted primarily by the 2017 claims processing revenue, our investment in the core commercial program as well as additional non-cash stock compensation expense. Income before income taxes grew by 2% due to higher interest and amortization related to the acquisitions we completed this year. Our net income grew by 22% and earnings per share increased by $0.22 or 23% to $1.18 as compared to 2017 with -- benefiting from the lower federal tax rate.

Our effective tax rate for 2018 was 25.6%, decreasing from 38% in 2017. Over to Slide No. 18. This slides presents the quarterly and full-year impact of the new revenue standard.

In connection with implementation of the new revenue standard, we now record certain of our revenues in the services segment on a gross basis. For the full-year 2018, the total impact of this change was an increase to core commissions and fees of $10 million and other operating expense of $10 million. As a reminder, in the third quarter, we recorded an $8 million non-recurring adjustment to revenue and income within the national programs segment. Isolating the one-time impact, our full-year income before income tax benefit would have been approximately $8 million to $9 million.

Please take both these items into consideration in your modeling for 2019. Moving over to Slide No. 19. We'd like to provide some additional information regarding the anticipated annual performance for Hays.

We continue to believe that Hays will deliver $210 million to $220 million of annual revenues, $47 million to $53 million of EBITDAC and diluted net income per share of $0.02 to $0.03 for 2019. The chart shows our current view of the estimated quarterly phasing and incorporates the impact of the new revenue standard. Similar to what we expect -- or what we expected for the remainder of Brown & Brown, Hays will have a significant shift of revenues and profit into the first quarter due to the high percentage of employee benefits business. Please take this quarterly phasing into account when you build your models for '19.

We've got some closing comments regarding outlook on a few items. Let's see. The first one, keep in mind our previous comments about our lender-placed business within national programs segment as we're anticipating material headwinds due to the continued improving economy and bank consolidations that are impacting our customers. We expect continued pressure into 2019 and believe this business could decline anywhere from $2 million to $4 million in 2019.

This is in addition to the $8 million one-time new revenue standard just -- we called out in the third quarter of 2018. We're expecting revenues to be under pressure within our services segment due to lower claims for our social security advocacy business resulting from the completion of advocacy work on a book of business. We realized about $8 million to $9 million of revenue in 2018 that we do not expect to recur in 2019. Due to the fact that the retail segment had the most impact of the new revenue standard, we want to remind everyone that our organic revenues may fluctuate by quarter.

Therefore, we would anticipate the first quarter of 2019 to be lower than the average for the full year and then higher in the second quarter versus the average for the full year. As we discussed over the past two quarters, our stock compensation cost has been increasing as a result of higher performance of certain grants. We expect this trend to continue into 2019 and anticipate non-cash stock compensation cost could increase $3 million to $5 million. Interest expense should be in the range of $66 million to $68 million for 2019, and amortization should be in the range of $100 million to $102 million for 2019.

Both estimated interest expense and amortization are excluding any additional acquisitions or borrowings that may occur in 2019, so you'll need to make your own assumptions regarding these items. We expect our effective tax rate to be in the range of 26% to 27% for the full-year 2019 as a result of various state tax law changes and the geographic mix of our acquisitions completed throughout the year. Let me turn it now -- I'll turn it back over to Powell for closing comments.

Powell Brown -- President and Chief Executive Officer

Thank you, Andy. Great report. I wanted to make a clarification. The dividend increased to $0.08 and an increase of 6.7%.

And I know you know that. In closing, we have really good momentum across the company and feel great about our business. I want to thank, first and foremost, our 10,000 teammates for all their contributions in 2018 to help grow our company and serve our customers and also for everything they'll do in 2019. We remain optimistic about the economy, but, as I mentioned earlier, I think there's a reasonable possibility the economy may slow down in the second half of '19 or in early '20.

And it's something that we watch very closely, and we'll keep you posted if and when we see that. We talked about premium rates earlier in the call and would say we don't expect any material changes in premium rates in '19. There's still a lot of capital out there that will keep pressure on rates, and we just don't see them moving up. We feel really good about our acquisition activity in 2018, as we talked about.

And today, as I usually say, our pipeline is good. It's been that way for the past few years, and we're actively talking with a lot of people. We remain disciplined in our approach. As you've heard me say before, when and why someone sells is different for each party, but we're always out talking to people.

And when that time comes, we would like to be considered, particularly if there's a cultural fit. As we've said in the past, one of the most important things we can do is invest in our teammates. We're proud to announce that we're setting aside $25 million to help fund an education program for our teammates and their dependents. The interest income from this money will be used to fund tuition reimbursements, student loan repayments and scholarships for dependents of teammates.

This new program will commence this year, in 2019, and it's something we expect to continue going forward. We believe this program will be a great benefit and motivator for our teammates. Our goal is to continue to grow the top line and the bottom line and do this in a disciplined manner. In 2019, we expect to generate over $500 million in cash, again something we're very proud of.

Our capital deployment philosophy is invest this money into acquisitions, return it to our shareholders, pay down our debt and invest where appropriate in our businesses. We will do this prudently with the objective of driving long-term shareholder value. With that, let me turn it back over to Bryce to start the Q&A session. 

Questions and Answers:

Operator

[Operator instructions] And we'll take our first question from Elyse Greenspan with Wells Fargo. Please go ahead.

Elyse Greenspan -- Wells Fargo Securities -- Analyst

Hi, good morning. My first question, going back to some of your outlook-ey comments. You, Andy, pointed to organic growth in the first quarter due to rev rec being lower than the full-year number. My assumption was because rev rec went in place in '18, it wouldn't impact comparison.

So just a little confused there. And then was that a comment with the first quarter growth being lower than the full year? Was that just specific to retail? Or was that a consolidated company comment?

Andy Watts -- Executive Vice President and Chief Financial Officer

Hi, good morning, Elyse. Yes, good question. The -- let me take the last one and I'll come back to the first. The comment was associated with just retail.

And as we look out to 2019 and just the implementation of rev rec, there's probably going to be some noise between the first and second quarter. So that's why our comment was, whatever you anticipate the full-year organic to be, the average in the first quarter will be a little bit lower and will be higher in the second quarter. So it's just kind of a waiting.

Elyse Greenspan -- Wells Fargo Securities -- Analyst

OK. And then in terms of retail, sticking there for a minute, you guys saw a little bit of a nice uplift in the fourth quarter sequentially from the third quarter. I know last quarter, you had said new business was a little bit lighter, Powell, and I believe you kind of thought it would just be a one-quarter situation. Can you just comment about new business and retention trends within your retail segment that you saw in the fourth quarter?

Powell Brown -- President and Chief Executive Officer

Sure. Well, remember, Elyse, as we've talked about, we don't think -- we don't look as much at quarterly results, we look at the yearly results overall as a kind of a barometer to success. And so we had a good quarter in Q4. We always like to write more new business, but we wrote a good amount of new business and we've done a nice job in retaining our clients as well.

But we're very pleased with the 3.5% organic growth for the quarter. And as I said, I -- as I referred back to the prior four years, I just look at the trend, 1.4%, 1.8%, 2.9%, 3%. That's how I look at it.

Elyse Greenspan -- Wells Fargo Securities -- Analyst

OK. Thank you. And then one just -- one last question on margins. When we bring together some of your comments about some of the headwinds you're expecting in some of your business, and then it does look like retail should show stronger growth.

But what I guess I'm wondering about is, can you talk us through the five items that you might call out when you -- we talk to the margin build for 2019? Obviously, Hays will be a drag in -- as you gave us numbers. Can you kind of talk to the other buckets as we think about the consolidated margin we should expect in 2019?

Andy Watts -- Executive Vice President and Chief Financial Officer

Yes. So Elyse, coming back to some of the comments we made, so yes, you're correct. On Hays in the guidance that we've given, so make sure you incorporate that. Keep in mind our comment about the $8 million adjustment that we recorded in the third quarter of '18.

Again, that will not recur, so that will be an impact. And then think about also the guidance that we've given on services. And then also, keep in mind the stock comps. So those are the primary ones, OK? No other items.

Elyse Greenspan -- Wells Fargo Securities -- Analyst

OK. And then one just last quick question. Was there a couple million of flood-related revenue in the fourth quarter of '18? Or to kind of -- I guess $22 million in programs last -- $20 million was the delta. Was there about $2 million that came through this year?

Andy Watts -- Executive Vice President and Chief Financial Officer

Yes, it was -- yes, about $1.5 million, $2 million. Not a lot. It was really small.

Elyse Greenspan -- Wells Fargo Securities -- Analyst

OK. Thank you very much.

Andy Watts -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

[Operator instructions] We'll take our next question from Kai Pan. Please go ahead.

Kai Pan -- Morgan Stanley -- Analyst

Thank you and good morning. I would like to follow up those questions Elyse has asked. First, on the organic growth. So you have seen like sequential year-over-year improvements in the retail segment.

Your overall organic growth for the company is 4% in 2018. So what we see, so better than 4% in 2019? Or the other factors like in the national programs or service would sort of like a -- would weigh down that a bit in 2019?

Powell Brown -- President and Chief Executive Officer

Good morning, Kai. Thanks for the question. As you know, we've talked -- we don't give organic growth guidance. We have always said in our business, both the overall business and even in retail, that we believe it's a low to mid-single-digit organic growth business in a steady-state economy.

So the answer is, we have some positive things going and we're going to have some headwinds, too, and it's going to all work out in the end. But we're not going to give you -- we're not going to say like some others this is what our organic growth is going to be for the year, OK?

Andy Watts -- Executive Vice President and Chief Financial Officer

Kai, what we would suggest on this one is, definitely do your projections by segment. Don't use kind of just a blanket percentage because you'd -- more than likely, you would end up getting a very different answer because the performance in each of them will be different in '19 based upon the guidance that we've given.

Kai Pan -- Morgan Stanley -- Analyst

OK. And thank you for that. And then a follow-up on the margin question. I want to drill on EBITDA into details.

So you have -- Hays' headwind, I estimate, is probably about 70 basis points because they add 10% revenue to your overall and their margin is about 7 points lower than yours. And the -- I just want to make sure my math is correct.

Andy Watts -- Executive Vice President and Chief Financial Officer

Yes. The guidance that we gave back on the third quarter, as we said, would be around 100 basis points. So somewhere in that range depending upon if we're on the higher or lower end of the guidance that we've given.

Kai Pan -- Morgan Stanley -- Analyst

OK. And then the comp expense, non-stock comp. They had been a drag actually in 2018 as well. So is 2019 there will be further drag or the drag will be actually less? So it will be incrementally a positive factor for your margin overall?

Andy Watts -- Executive Vice President and Chief Financial Officer

Yes, so the guidance that we gave on it is it will be an incremental expense year over year of another $3 million to $5 million in '19.

Kai Pan -- Morgan Stanley -- Analyst

OK. And then the last items on the -- on margin side. Were you're getting -- I was assuming the IT investment area had core programs is -- will be accretive in 2019. Would that be like significant that more than offset this IT factor we mentioned earlier?

Andy Watts -- Executive Vice President and Chief Financial Officer

No, it wouldn't. I think those programs, as we mentioned during the commentary, is -- they are progressing along in accordance with plan. If you go back to our previous decks that we've talked about, they are progressing along. But no, they would not be enough to offset the other items.

Kai Pan -- Morgan Stanley -- Analyst

OK. Great. Well thank you so much.

Andy Watts -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

We'll take our next question from Greg Peters with Raymond James. Please go ahead.

Greg Peters -- Raymond James -- Analyst

Hi, good morning. I wanted to touch base on a couple of the -- I guess, you can call them legacy initiatives considering it's been over a year now specifically around the 5 for 5 and the tech spend. I'm -- with retail accelerating growth, as you pointed out, Powell, do you feel like the 5 for 5 has started to have an impact there? Or do you expect it to yield better results from '19 to '20? And I know you don't give organic growth. And then -- and same comments around the tech spend.

And then with Hays -- just with Hays coming onboard, will there be incremental dilution from 5 for 5 or tech spend as it relates to the integration of Hays?

Powell Brown -- President and Chief Executive Officer

OK. So the first thing you're asking about, Greg, we call the producer incentive plan. And the producer incentive plan is working in line with exactly what we thought it was going to do. So we're pleased with the results.

And every year, we look at how it's operated, and we've been very pleased since inception with its results. So I -- we think that's a positive going forward. You talked about the tech spend, and I think the tech spend, it's -- an important point to make is, we don't believe that there's going to be an additional -- or additional moneys in the tech spend that we're aware of or that are known. And what I mean by that is, as you know, there are certain states that are imposing cyber security and/or cyber guidelines, which may, in fact, actually increase that spend at sometime in the future that we're not aware of to be in compliance.

So as you know, you've heard us talk and others probably talk about the New York -- the DFS regulations and compliance in New York if you do business -- any of your businesses do work in New York State, as an example. But as it relates to Hays, the short answer is, relative to the incentive plan and/or the tech spend, we believe that their expenses anticipated are actually reflected in the guidance that we gave last year and we just reiterated.

Greg Peters -- Raymond James -- Analyst

Great. Thank you for that color. I know you, in your opening comments or your prepared remarks, talked about the M&A pipeline. Given what's happened in the markets, I suppose, in the last half of 2018, and with the tax law change, I'm wondering if you've seen any sort of change in the appetite from private equity on M&A in your space or if you've seen any impact on multiples as you consider -- as you've -- as you look across your pipeline.

Powell Brown -- President and Chief Executive Officer

Yes. First of all, I think it's as competitive as it's ever been. So that's not -- that hasn't changed. The last count -- and it seems like there's always somebody new considering getting in, but there's somewhere between 28 and 30 private equity-backed firms.

And typically, what we see when we're involved in these transactions, and this is not new, Greg, is usually, there are a group of firms that are involved on a pretty constant and consistent basis, and you can many times throw a blanket over kind of the group of the offers there, and then it comes down to cultural fit and how that might work. Having said that, periodically in those instances, you have one outlier, and that outlier might be a new private equity firm coming in or them buying into a new part of the country or they do something that just doesn't seem to make sense to us and/or the rest of the group seemingly based on the offers that are given. But I think the most important thing is cultural fit. And we always talk about that, but there's a lot of firms that -- the thing that I would say that's a little -- continues to amaze me is at the end of the day, private equity can give an offer within like 30 minutes and just throw it out on the table.

And that's not the way we operate. And we think a lot about the cultural fit and the talent and the people. And there are a lot of talented firms out there that wouldn't fit culturally with us and we wouldn't fit with them. And so we want to know that up front.

And so we spend a lot of time on vetting that process more than anything else. And then ultimately, if there's a cultural fit, we usually think that we have a pretty good shot at doing the transaction. But it amazes me when you're just putting things together kind of with baling wire and chewing gum that they just -- that they put offers out there with boom, boom, boom. So it's very interesting.

It's just different from an operator standpoint to a financial consolidator. That's what I would say.

Greg Peters -- Raymond James -- Analyst

OK, that's entertaining commentary. Thank you. I was just looking at the cover of your press release. And on the cover -- and I know there's different accounting basis, but it does point out that your commission and fees were in excess of $2 billion for 2018.

And I distinctly remember years ago when you launched and rolled out the $2 billion target. What's your new target? And what's -- and have you established that yet?

Powell Brown -- President and Chief Executive Officer

Well, the answer to the question is we have, but it's a secret. And so we will roll that out probably at the end of the Q1 because we are galvanizing all of our teammates around that theme. But what I would say is this. If you remember, Greg, and I appreciate the offer, when we were $1 billion in revenue and we said we were going to be $2 billion, everybody said the following: How long is it going to take you to get there? And what's the margin? And I -- we basically said if we wanted to be $2 billion or to double over night, we could have done that in the last month, the last six months or the last year.

But culturally, that wouldn't have made sense. And more importantly, it wouldn't have made sense for our teammates, of which our teammates own 30% of the company. So what I would tell you is this. When we double again as a company, it's not the number of years that takes, it's the quality of the people.

It's the quality of the people that we add. And so interestingly enough, from a shareholder standpoint, we believe that that applies to all shareholders, not just teammates. That just is an interesting, unique fact that you know that we happen to be large owners of the company, which I believe is something that investors would find interesting. There's alignment.

Greg Peters -- Raymond James -- Analyst

Great. Thanks for the answers.

Powell Brown -- President and Chief Executive Officer

Thanks, Greg.

Operator

Our next question comes from Yaron Kinar with Goldman Sachs. Please go ahead.

Yaron Kinar -- Goldman Sachs -- Analyst

Good morning, everybody. Powell, you ended the scripted comments with a couple of headwinds that you noted for 2019, namely possibly economic slowdown and -- or maybe not a headwind but rates not necessarily being a positive trend. At the same time, you were also quite optimistic about opportunities for all four segments in '19. So can you maybe talk about the opportunity set a little more?

Powell Brown -- President and Chief Executive Officer

Sure. So remember, I feel -- we feel the best about our company today that we ever have in terms of the capabilities, our teammates, the way we work collaboratively across the organization to the benefit of our customers. So I -- that's just category. I mean, I feel really -- and we feel really good about that.

I think that there's going to be continue some interesting opportunities that will be presented to us. I'm not foreshadowing something. Everybody -- I get a kick out of -- Yaron, they say, well, when are you going to do your next big deal? Or what are you doing with the money on the balance sheet? Or what are you doing... And the answer is, we're going to invest it wisely.

And when the right opportunity comes along, we're going to make that investment. Case in point with the investments we made last year. But I just think that from a standpoint of -- I just think that we're well-positioned to continue to steadily grow our business, to improve the margin profile. And we just need to be mindful of those things.

I mean, once again, I am not an economist by profession. I do have an economics degree from the University of Florida. I will tell you that there a lot of things that I look at that may not directly impact the U.S. economy, but, by God, they're going to surely indirectly impact the U.S.

economy. And so there are all kinds of things that sit out there that a lot of people, maybe they don't think about it and maybe they wont impact ours, but that's part of my job, is to think about things that could potentially impact our business and foreshadow those. I think it's pretty clear that if you talk to many CEOs in the United States, there's a feeling that sometime in the latter half of the year or early part of next year, we may have a slowdown economically. There also happens to be a lot of questions around transitions with Brexit, Angela Merkel, Italy, China and the rest.

And so trade wars and how that impacts our customers and their businesses and things like that. So I think it's kind of a balance. And I'm an optimist, but I'm a realist. And I think that's reflected in our company.

We are optimists and we are realists. And so we go in with very positive feelings about 2019, but we just try to make sure that you're aware that these are the things we're thinking about.

Yaron Kinar -- Goldman Sachs -- Analyst

OK. And then just a question on the IT initiatives. So I thought IT was supposed to -- the IT investments were supposed to start weaning a little bit in the fourth quarter and was supposed to be a lift to margins. And I think they were still a little bit of a drag.

So is that because you identified additional opportunities? Or is that because the initiatives are just taking a bit longer than you initially expected?

Andy Watts -- Executive Vice President and Chief Financial Officer

Yes. Good morning, Yaron. No, nothing really unusual for the fourth quarter. Everything is still right in line with what we're expecting.

So it's progressing along course.

Yaron Kinar -- Goldman Sachs -- Analyst

OK.

Andy Watts -- Executive Vice President and Chief Financial Officer

Yes.

Yaron Kinar -- Goldman Sachs -- Analyst

And then finally, with the wholesale business. It sounds like the organic slowdown was more a matter of timing than anything else. Is that a fair way to think about it?

Powell Brown -- President and Chief Executive Officer

I think it's fair. It's kind of interesting because I went back and looked real closely at their performance over last several years, and they've had -- one fourth quarter, they'll have a really good fourth quarter, relatively speaking, and then they might have a slight down quarter year over year over year if you go back to '15. So you have up, down, up, down, up down. I don't want you to read something into one-quarter performance in wholesale.

That's a business that's had the most steady organic growth in our system over the last six years. And so I look at it and say they just didn't grow as much in Q4. But remember, they grew 7.7% in Q3. They grew 5.3% in two and they grew 6.1% in one.

So there's a 5.7% over the entire year. I'm -- I feel real comfortable about Tony Strianese and his team.

Yaron Kinar -- Goldman Sachs -- Analyst

OK. Got it. Well thanks for the answers and good luck on the year ahead.

Powell Brown -- President and Chief Executive Officer

Thank you.

Andy Watts -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

Our next question comes from Mike Zaremski with Crédit Suisse. Please go ahead.

Mike Zaremski -- Credit Suisse -- Analyst

Hey, good morning. Just one question. And Powell, in the -- you mentioned the tight labor market in your prepared remarks. Obviously, compensation is your largest expense.

Is that having or expecting to have an impact on your margins going forward? And I guess I asked because I thought the comp plan you guys had implemented in previous years was going to be a tailwind in 2019, and it sounds like, unless I'm mixing apples and oranges, that that's not going to be the case based on your prepared remarks.

Powell Brown -- President and Chief Executive Officer

Well, let's make sure we're clear. The producer incentive plan impacts a small group, relatively speaking, of people in the overall company. So that's in our retail segment, and it impacts a group of people that are on commission only. And so having said that -- in a certain segment of the business.

Having said that, there's impacts across the entire organization in terms of wage pressure. Here's the way we look at it. At the end of the day, we're trying to attract, retain, reward and develop the most talented people that fit culturally with our organization. And having said that, we periodically come across people who we feel, and I tell our teammates this, we can't -- it would be a mistake not to hire them.

If they're not in the budget, then you just figure it out. And so I think that it's just like anything else. It's not purely linear, Mike. And that's the reason I say that, because I think -- we think of it about one person at a time.

And so if that impacts all of a sudden 35 offices, then it may have a -- it may drive our S&R up slightly that quarter or the next two quarters. But then they start making such a positive impact on the organization in helping us either retain our existing clients or write new clients. So I don't want to give you the impression that it's not a tailwind. I think that the producer incentive plan is working very well.

We're very pleased with it. But I just want to remind you it impacts a relatively small number of people of the 10,000 total teammates. So we're always mindful of wage pressure, but that means we need to grow the company, both organically and through acquisition.

Mike Zaremski -- Credit Suisse -- Analyst

Got it. All the best in 2019. Thanks.

Powell Brown -- President and Chief Executive Officer

Thank you.

Operator

Our next question comes from Mark Hughes with SunTrust. Please go ahead.

Mark Hughes -- SunTrust Robinson Humphrey -- Analyst

Yes, thank you. Good morning. Just thinking about it my own way, the -- I think the original plan was that technology spending and the producer incentive payouts would begin to taper in 2019 and, therefore, be margin accretive. I think you've said you were performing along with the original plan.

So is that a fair look at it, that the expenses should taper and therefore would be positive for margins?

Andy Watts -- Executive Vice President and Chief Financial Officer

Yes. So good morning Mark, It's Andy here. So think about those two in two different ways, OK? It is on the IT side, yes, you were correct, from a spend and thinking about it as a percentage of revenue, OK? So that is correct. On the retail incentive program, it's actually not about the expense.

If you'll recall back when we talked about the program, is the goal there was to drive incremental organic revenue, which, therefore, compounds over time. So the expense remains relatively constant. We're just growing off of a larger base. So what that really means is -- and that's why we said in our previous comments you would see some margin expansion out in '19.

That's how the plan works and is designed.

Mark Hughes -- SunTrust Robinson Humphrey -- Analyst

Right. And then the stock comp, the stock comp is only up $3 million to $5 million. Presumably, if you had any sort of organic growth, that likewise would be margin accretive if the expense is relatively fixed or up fractionally and your revenue grows faster. Based on what we assume, then that would also be margin accretive?

Andy Watts -- Executive Vice President and Chief Financial Officer

If total revenues grow faster than the increased stock comp, you're correct, yes, that would be a margin. So the guidance that we gave on it was $3 million to $5 million. And if you look at the cash flow statement, you can see that we had about $33 million, $33.5 million of stock comp in 2018.

Mark Hughes -- SunTrust Robinson Humphrey -- Analyst

And then finally, with the employee benefits, you said that rates were up. How much do you participate in those higher rates? At this point, with your mix of business with Hays, how much do higher rates act as a tailwind for your revenue?

Powell Brown -- President and Chief Executive Officer

Limited. And the reason is the amount of self-funded business and/or, in many states, the smaller markets, smaller market, depending on a state, defined as under 50 lives or under 100 lives, the companies in many states have moved the way you're paid on them from a commission where, as you know, Mark, if the premiums go up, you will get more income to a per head, per month. So the only way you get additional commissions would be if you add another head or another bellybutton. And it's what they use, the term.

So the answer is limited.

Mark Hughes -- SunTrust Robinson Humphrey -- Analyst

Thank you.

Operator

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

Josh Shanker -- Deutsche Bank -- Analyst

Thank you for taking my question. I just want to walk through the $22 million versus the $2 million of hurricane servicing revenues. Is the margin on those the same? Or do you get -- is there economies of scale benefit in a quarter like 4Q '17? And what is that margin?

Andy Watts -- Executive Vice President and Chief Financial Officer

So we -- what we said on previous calls is the margin on storm claim-related activity is higher than our average. We have not said exactly what the margin is.

Josh Shanker -- Deutsche Bank -- Analyst

And is there any reason why? I mean, that would be really useful for us for making a year-over-year comparison given the exceptional circumstances a year ago.

Andy Watts -- Executive Vice President and Chief Financial Officer

Yes. I guess similar to -- we don't give exact margins on any individual business underlying.

Josh Shanker -- Deutsche Bank -- Analyst

OK. And you -- so then, can we just understand, if there are economies of scale, if you can do $22 million in storm margins, does it -- in storm revenues, does that have a higher margins in a quarter where you only do $2 million? Or is it the same generally regardless of the situation?

Andy Watts -- Executive Vice President and Chief Financial Officer

Yes, the margins go up a little bit, but it does scale on a -- it's the magnitude.

Josh Shanker -- Deutsche Bank -- Analyst

OK. And...

Andy Watts -- Executive Vice President and Chief Financial Officer

And so you're not going to see it. You're just not going to see a margin movement on a couple million dollars of flood claim activity.

Josh Shanker -- Deutsche Bank -- Analyst

OK. And then if we look at -- you're getting larger -- you've had a very strong first half year in terms of growth. And now as far as the back half of the year, as you get larger, is there a seasonal move that more renewals are happening, I guess, due to the employee benefits or whatnot in the first half of the year? Or is that -- is the first half of '18 going to be a headwind than the first half of '19?

Andy Watts -- Executive Vice President and Chief Financial Officer

Yes. So Josh, definitely, look at how the quarterly numbers have fallen now because the impact of the new revenue standard has absolutely moved revenue and margin around by quarter without a doubt. And if you remember back, we had -- the margins on some of the different businesses were different by quarters. Some of that had leveled out.

So we definitely look at it by quarter now.

Josh Shanker -- Deutsche Bank -- Analyst

So the first -- I guess the first half year was like up 5.4% on an apples-to-apples basis with post ASC 606 retrofitted for 2015, I guess. Is that a tough comp, I guess, is what I'm asking?

Andy Watts -- Executive Vice President and Chief Financial Officer

Yes. Go back. If you look at -- so here's probably the way to think about it. Look at the rev rec slide that we included inside there.

So if you go back to -- and if you look at Slide 18, so we moved $27 million of revenue into the first quarter, and then $14 million into -- on the income before income tax. It about offsets in the second quarter.

Josh Shanker -- Deutsche Bank -- Analyst

But I guess -- I mean, I may have to go through it. I feel I'm looking at apples-to-apples. There's no headwind coming from having a strong first half 2018. That's an extra headwind in 2019?

Andy Watts -- Executive Vice President and Chief Financial Officer

Yes, the only piece in there is -- again, when you're modeling it, just keep in mind that we were making our core commercial program. We had not made the lap on it in the first half of 2018. So remember, that program, we started that up in July of 2017, OK?

Josh Shanker -- Deutsche Bank -- Analyst

OK. That's...

Andy Watts -- Executive Vice President and Chief Financial Officer

Yes.

Josh Shanker -- Deutsche Bank -- Analyst

OK. Thank you very much. Good luck.

Andy Watts -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

We'll take our next question from Meyer Shields with KBW. Please go ahead.

Meyer Shields -- Keefe, Bruyette & Woods, Inc. -- Analyst

Great. Thanks. Two quick questions on Hays, if I can. One, do the revenue numbers on Slide 19 anticipate supplemental and contingent commissions that are roughly equivalent to legacy Brown & Brown?

Andy Watts -- Executive Vice President and Chief Financial Officer

Yes, it does include contingent commissions and GSCs. And yes, they're in a similar percentage ratio.

Meyer Shields -- Keefe, Bruyette & Woods, Inc. -- Analyst

OK, perfect. And is there any reason that the inclusion or integration of Hays would slow like we see Brown & Brown organic growth? Or that should not be impacted at all?

Powell Brown -- President and Chief Executive Officer

We don't think it's going to slow Brown & Brown legacy organic growth.

Meyer Shields -- Keefe, Bruyette & Woods, Inc. -- Analyst

OK, excellent. And one follow-up question, just to make sure I understand it. Powell, you talked about the potential for an economic slowdown in the back half of '19. Would that impact revenue on a real-time basis? Or do you expect there to be a lag between when, I don't know, GDP growth slows when you actually see commission volumes reflect that?

Powell Brown -- President and Chief Executive Officer

I think it depends on how the clients manage their exposure units. And what I mean by that is there are some customers which will adjust their insurance exposure units, particularly on larger accounts right when they see that change. And sometimes, they won't. And so they're -- inherently, I would say that there would be slight lag.

But you could see other people adjusting it. But, I mean, like I said, I don't think this will be the case, but if there was a severe rapid downturn, then could people adjust their exposure units being their payrolls or their number of vehicles on the road or whatever the case may be? Could they adjust them midyear? And the answer is they could.

Meyer Shields -- Keefe, Bruyette & Woods, Inc. -- Analyst

OK, that's very helpful. And then last question with regards to the revenue headwind guidance in lender-placed insurance and social security advocacy. Is there any seasonality to that? Or should we just assume that's spread out over the year?

Powell Brown -- President and Chief Executive Officer

I think you should assume it's spread out over the year.

Meyer Shields -- Keefe, Bruyette & Woods, Inc. -- Analyst

OK. Fantastic. Thank you so much.

Operator

We'll take our next question from Robert Glasspiegel with Janney. Please go ahead.

Bob Glasspiegel -- Janney Montgomery Scott -- Analyst

Good morning Brown & Brown. The -- I'm going to follow-up Meyer's question on the Hays with more on the margin side. This quarter, OK, so was $0.01 negative, you said, inclusive of any restructuring charges and deal closing charges. And I was wondering if you could spike out what your onetimers were in Q4.

Andy Watts -- Executive Vice President and Chief Financial Officer

Yes, the -- No, they were minimal for the fourth quarter, for the 45 days.

Bob Glasspiegel -- Janney Montgomery Scott -- Analyst

OK. So there's no deal restructuring, there's no banking fees or anything else that's getting expense then flowing through the numbers as of yet?

Andy Watts -- Executive Vice President and Chief Financial Officer

No, nothing of materiality, OK? We didn't have a banker on our side.

Bob Glasspiegel -- Janney Montgomery Scott -- Analyst

And is there any seasonality as we think about margins for you? You gave us $0.03 accretion to Q1. So it looks like they have a heavier revenue contribution in Q1 than the rest of the year. And it's -- I assume it's mainly retail or wholesale that the revenues are going to flow to?

Powell Brown -- President and Chief Executive Officer

It's retail business. And remember, they have a very large employee benefits portion of their business, which is why from a rev rec standpoint, that's moved into Q1.

Robert Glasspiegel -- Janney Montgomery Scott -- Analyst

And one last -- go ahead.

Andy Watts -- Executive Vice President and Chief Financial Officer

Yes, just -- Bob, just make sure you look back to Slide No. 19 on Hays because the phasing by quarter is really important.

Bob Glasspiegel -- Janney Montgomery Scott -- Analyst

OK, we'll do that. And the restructuring charges, are you going to spike those out or we're just going to have to sort of guess it then? And your $0.02 to -- your -- I think it was $0.02 to $0.03 of accretion. Is that inclusive of restructuring or exclusive?

Andy Watts -- Executive Vice President and Chief Financial Officer

That is inclusive of integration cost. So again, we don't have restructuring costs. We've got integration. And what we said in our previous comments is, they're more heavily weighted to the out years.

We're really just trying to get all of our teams together and figure out all of the moving parts. And -- but we're not -- and again, similar to our previous discussion, the objective of this transaction was not to drive costs out, right? The objective...

Bob Glasspiegel -- Janney Montgomery Scott -- Analyst

You're not -- go ahead, sir.

Andy Watts -- Executive Vice President and Chief Financial Officer

Was -- hold on a second. Was to drive the top line and grow the business. We will get some costs out, but it is not a cost play.

Bob Glasspiegel -- Janney Montgomery Scott -- Analyst

I understood that. Those -- you're not going to be integrating up as is just day one they're like, right, autonomous?

Powell Brown -- President and Chief Executive Officer

We'll integrate the applicable offices at the right time when it's right for the business, but we're not driving out a plan that kind of crash everybody together, Bob. That's not the goal. Again, we're trying to keep all the momentum on the top line moving forward.

Bob Glasspiegel -- Janney Montgomery Scott -- Analyst

Good luck in 2019.

Powell Brown -- President and Chief Executive Officer

OK. Thank you.

Operator

And we'll take our next question from Adam Klauber with William Blair. please go ahead.

Adam Klauber -- William Blair & Company -- Analyst

Good morning. Thanks guys. In the wholesale business, from what I hear, the market's a bit more dynamic. You got a couple of big players, Lloyd's and Lexington pulling back.

Will that be -- how will that impact you? Will that be good for you? Will that be bad for you? Any thoughts on that?

Powell Brown -- President and Chief Executive Officer

Well, I think it depends on the -- how the rest of the market responds. And what I mean by that is if you have a big player in a segment, as you referenced, and they pull out or they double or triple or quadruple their pricing on that same exposure unit, depending on how quickly the market would come in and fill that void is going to impact if it's going to be that positive for us or not. I would tell you, based on everything that I'm hearing, that there's plenty of capacity in many other instances to fill that right now. So could there be a certain class that I'm not aware of? Absolutely, there could be.

But as a general statement, I believe there are other markets who are willing and want and willing to fill that gap.

Adam Klauber -- William Blair & Company -- Analyst

OK, thanks. And then as far as your retail business, before Hays, what was the growth in your producers in 2018?

Powell Brown -- President and Chief Executive Officer

You mean -- you're talking about the number?

Adam Klauber -- William Blair & Company -- Analyst

Yes.

Powell Brown -- President and Chief Executive Officer

Yes, we haven't talked about the production growth publicly, and we aren't going to do that in terms of how many we've added or how many we have left or whatever. But we're growing our business nicely and it's reflected in the organic growth, and we continue to always look for people that can help bring new customers in.

Adam Klauber -- William Blair & Company -- Analyst

OK. And then on the technology, you've been upgrading your agency management system. Does that give you more analytic capability? And could you give us some idea what you're doing in the analytics front?

Powell Brown -- President and Chief Executive Officer

Sure. Well, I mean, we have a way now to better look inside of our data and look at similar classes of business, whether it be in a state or in a region or across the country. And we are able to share information more easily, which enables our teammates, we believe, to bring better solutions to our customers. So as we continue to migrate everybody on to this new one agency management system, we think that that will only continue -- that capability will -- and be enhanced.

So we put the first things in place, and as we continue to migrate the rest of the offices onto that system, we know and -- that it will get even better.

Adam Klauber -- William Blair & Company -- Analyst

But -- OK. And how long will that migration take? Is That mainly in '19? Will that go into '20 also?

Powell Brown -- President and Chief Executive Officer

Right now, we're looking at another -- it's -- it would be between '19 and '20. And if you take -- if we didn't do another acquisition, which we're going to, so that's a little misleading. But if we didn't do another acquisition, the existing businesses that we have, it would take until the end of '20 to migrate everybody across.

Adam Klauber -- William Blair & Company -- Analyst

OK. And last question on Hays. Have you disclosed the retention pool for existing producers at Hays? And how is that thing accounted for in your financials?

Powell Brown -- President and Chief Executive Officer

So no, we haven't described that publicly. And Andy?

Andy Watts -- Executive Vice President and Chief Financial Officer

Yes. Yes, for anything that was post transaction, Adam, is that's being expensed through the P&L.

Adam Klauber -- William Blair & Company -- Analyst

OK. And I think that's in the pro formas you gave us?

Andy Watts -- Executive Vice President and Chief Financial Officer

Yes, it is.

Adam Klauber -- William Blair & Company -- Analyst

OK, great. Thanks for the answers guys.

Andy Watts -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

It appears there are no further questions. Mr. Brown, I'd like to turn the conference back to you for any additional or closing remarks.

Powell Brown -- President and Chief Executive Officer

Thank you, Bryce, and we appreciate everybody's time today. We wish you a great day, and we look forward to talking to you next quarter. Thank you, and good day.

Operator

[Operator signoff]

Duration: 75 minutes

Call Participants:

Powell Brown -- President and Chief Executive Officer

Andy Watts -- Executive Vice President and Chief Financial Officer

Elyse Greenspan -- Wells Fargo Securities -- Analyst

Kai Pan -- Morgan Stanley -- Analyst

Greg Peters -- Raymond James -- Analyst

Yaron Kinar -- Goldman Sachs -- Analyst

Mike Zaremski -- Credit Suisse -- Analyst

Mark Hughes -- SunTrust Robinson Humphrey -- Analyst

Josh Shanker -- Deutsche Bank -- Analyst

Meyer Shields -- Keefe, Bruyette & Woods, Inc. -- Analyst

Bob Glasspiegel -- Janney Montgomery Scott -- Analyst

Adam Klauber -- William Blair & Company -- Analyst

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