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Brown & Brown Inc (NYSE:BRO)
Q2 2020 Earnings Call
Jul 28, 2020, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to the Brown & Brown, Inc. Second Quarter Earnings Call. [Operator Instructions] Please note that certain information discussed during this call, including information contained in the slide presentation posted in connection with this call and including answers given in response to your questions may relate to future results and events or otherwise be forward-looking in nature. Such statements reflect our current views with respect to future events, including those relating to the Company's anticipated financial results for the second quarter and are intended to fall within the Safe Harbor provisions of the securities laws. Actual results or events in the future are [Phonetic] 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 factors include the Company's determination as it finalizes its financial results for the second 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 qualified and those risks and uncertainties identified from time-to-time in the Company's reports filed with the Securities and Exchange Commission. Additional discussion of these and other factors affecting the Company's business and prospects, as well as additional information regarding forward-looking statements is contained in the slide presentation posted in connection with this call and in the Company's filings with the Securities and Exchange Commission.

We disclaim any intention 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 measures to the most comparable GAAP financial measure can be found in the Company's earnings press release or in the 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 begin.

J. Powell Brown -- President and Chief Executive Officer

Thank you, Anita, and good morning, everyone, and thank you for joining us for our second quarter 2020 earnings call. Over the last four months we've successfully transitioned over 10,000 teammates to a remote work environment and have commenced a stage return to the workplace for our businesses. We will remain focused on the safety of our teammates, their families, our customers and trading partners. I wanted to mention that I did contract COVID-19 a number of weeks ago. While I felt a little sluggish at times that did not prevent me from making phone calls and engaging with people virtually. I'm feeling fine now and I have received my negative test results yesterday.

As it relates to the economy, we believe a full return of the economy to pre-COVID-19 levels is going to be slow and sporadic. Therefore, we as a society cannot lose our focus and determination to do our best to contain the coronavirus. This is possible through the efforts of all our front-line workers and each of us taking our own personal responsibility to help contain further spread. Our teammates continue to do an outstanding job of focusing on our customers and providing them with creative and innovative risk management solutions.

During the quarter, we continue to host regular COVID-19 response calls for customers and prospects with the goal of helping other companies share best practices and successfully manage through these difficult times. In addition, our COVID-19 Relief Center has been well received, and we -- and we will continue to find creative ways to help everyone get back to the new normal. Like last quarter, I continue to be humbled by the determination, dedication and the commitment of our teammates to our customers.

Now, let's transition the result -- to the results of the quarter. I'm on Slide 3. For the second quarter, we delivered $599 million of revenue growing 4.1% in total and 50 basis points organically. I will get into more detail in a few minutes about the performance of each of our segments. Our EBITDAC margin was 29.5%, which is up 20 basis points over the second quarter of 2019. Our net income per share for the second quarter was $0.34, increasing 3% on an as reported basis and 6.3% on an adjusted basis as compared to the prior year when excluding the change in acquisition earn-out payables. During the quarter, we completed another three acquisitions with annual revenues of approximately $46 million in revenue with the largest being Loan Protector Insurance Services. We'd like to extend a warm welcome to all of our new teammates that joined during the quarter. In summary, we're pleased with our performance for the quarter given the headwinds. I'd like to thank all of our teammates for doing their best to retain our customers and win new business. They're all doing an excellent job. Later in the presentation, Andy will further discuss our financial results in more detail.

I'm now on Slide 4. During the second quarter, we started to see the financial effects of the pandemic with certain industries significantly slowing down, including hospitality, restaurants and entertainment, resulting in corresponding reductions in exposure units. Conversely, other industries, such as healthcare and construction were resilient, and in some cases continue to expand. For the quarter, we -- we expected there would be significant decline in payrolls and consequently, our employee benefits and workers' compensation lines of business would be the most impacted. However, what occurred is that our employee benefits business grew during the quarter due to new business and many employers furloughed employees rather than reducing their workforce.

On the other hand, our workers' compensation lines of business declined faster than we anticipated. As a solutions provider, we worked with many customers during the quarter to manage their cost. This included collaborating with carriers to provide mid-term premium adjustments for certain coverages that are impacted by changes in sales or payrolls. While there has already been a significant impact on many businesses, it's unknown what the full effect will be over the coming quarters. A lot depends on how much additional funding is provided at the federal or state level for businesses and individuals. We'll talk more about our views on outlook later in the presentation.

From a rate perspective, we continue to see upward movement for most lines of coverage as carriers further tightened underwriting standards and reduced their participation in certain lines of coverage, geographies, industries or limits. These increases were generally above what we experienced for the first quarter and continued the trend from the past few quarters. Ultimately, the amount of rate increase was driven by the loss experience for a given account or the class of business for the carrier. During the quarter, we did see a slowing in the rate of decline for workers' compensation rates being down 1% to 5%. Premium rates for the -- for accounts in the admitted markets generally increased 2% to 7%, excluding commercial auto, which continued to increase 5% to 10% or more. From an E&S perspective, coastal property rates increased 15% to 25%, general property rates increased 5% to 10%, professional liability rates increased 10% to 20%, and cyber rates were up 10% to 20%. Based on what we experienced in the second quarter, we expect rate increases will remain fairly consistent for the remainder of the year.

Regarding the M&A landscape, I thought things would slow down a bit for a while, however, we were still able to close three transactions with an estimated annual revenues of $46 million and have already completed a few deals in July. The biggest questions for buyers and sellers remains how to project the financial implications of the pandemic and therefore how to appropriately value businesses. With this uncertainty, the percentage of money paid at closing might decrease somewhat, but it does not appear valuations will materially change at this point.

I'm now on Slide 5. Let's talk about the performance of our four segments. Our Retail segment's organic revenue declined 2.6% for the second quarter. This quarter we recorded a reduction in organic revenues of approximately $8 million for general liability policies resulting from the economic disruption associated with COVID-19. This adjustment represents an impact to organic revenue growth of over 250 basis points for the quarter. We also experienced rate increases for most lines and good retention. While we experienced a decline in new business as it was harder to engage with prospects, we still had a number of great wins and are pleased with our results for Q2.

Our National Programs segment grew an impressive 15.5% organically, delivering another strong quarter. Once again, the organic revenue growth was one of the highest we've ever delivered. Our growth was driven by continued strong performance from many of our programs, including our lender place, our commercial and residential earthquake and wind programs just to name a few. This growth was driven by new business, good retention and rate increases. Some of our programs did experience headwinds during the quarter, such as our sports and entertainment and workers' compensation programs. In early May, we completed the acquisition of Loan Protector as I said earlier. We're pleased with this acquisition and the solutions we'll be able to deliver to our customers over the coming months and into the future. Overall, it was a great quarter for National Programs. Our Wholesale Brokerage segment organic revenue growth was slightly positive for the quarter. Our performance was impacted by lower new business and retention driven by the impact of the pandemic and the continued reduction in appetite for carriers for certain lines of coverage, industries and geographies, primarily in the binding authority space.

The organic revenue for our Services segment decreased 15.4% for the quarter. The main drivers of our decline were Social Security Advocacy businesses, driven by lower claims volume, a terminated customer contract in one of our claims processing businesses, lower claims for many of our businesses related to the pandemic and related weather-related claims as compared to the prior year. As we've seen in the past, our Services segment can have more volatility in its revenues depending on the volume and timing of claims activity. Based on what we're seeing now, we expect organic revenues for the Services segment to decline 5% to 10% in the second half of the year as compared to the second half of the prior year. Overall, it was a good quarter, and we'd like to thank all of our teammates who delivered innovative solutions in this very challenging environment.

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

R. Andrew Watts -- Executive Vice President, Chief Financial Officer and Treasurer

Thank you, Powell. Good morning, everybody. I'm over on Slide number 6. Consistent with previous quarters, we'll discuss our GAAP results, certain non-GAAP financial highlights and then our adjusted results excluding the impact of the change in acquisition earn-out payables. For the second quarter, we delivered total revenue growth of $23.6 million or 4.1% and organic revenue growth of 50 basis points. Our EBITDAC increased by 4.8% growing faster than revenues as we were able to manage our expenses in relation to lower organic revenues and offset the headwinds associated with increased non-cash stock-based compensation cost of approximately $10 million, lower guaranteed supplemental commissions or GSCs, and the results from one of our acquisitions from the third quarter of 2019 that recognizes substantially all of its revenue in the first quarter of each year.

We're pleased with the expansion of the EBITDAC margin as it demonstrates the power of our operating model and the focus of our leaders to manage their cost. A quick comment regarding our employee compensation and benefits and other operating expenses as a percentage of revenue. The employee compensation and benefit ratio increased as compared to the prior year driven by higher non-cash stock-based compensation cost and an increase in the value of deferred compensation liabilities driven by changes in market values with this increase offset within other operating expenses.

The ratio of other operating expenses decreased due to proactively managing our variable expenses and to a lesser extent, the benefit from the aforementioned change in deferred compensation costs. Our income before income tax increased by 4.8%, growing in line with EBITDAC. While we had incremental amortization and depreciation from recent acquisitions, our interest expense declined due to lower rates. Our net income increased by $4.2 million or 4.5%, and our diluted net income per share increased by 3% to $0.34. Our effective tax rate for the second quarter was 25.2% compared to 25% in the second quarter of 2019.

The effective tax rate for the quarter was impacted by a one-time state tax refund, as well as the change in the market valuation of our company-owned life insurance related to our deferred compensation plan. Our weighted average number of shares were substantially flat compared to the prior year, and our dividends per share increased $0.085 or 6.3% compared to the second quarter of 2019.

We're over on Slide number 7. This slide presents our results after removing the change in estimated acquisition earn-out payables for both years. We believe this presentation provides a more comparable year-on-year basis. During the second quarter of 2020, we had minimal changes in our earn-out liabilities. Isolating the change in acquisition earn-outs in both years, our income before income taxes grew $9.3 million or 7.7%. Our net income on an adjusted basis increased by $6.8 million or 7.5%, and our adjusted diluted net income per share was $0.34, increasing 6.3%. All of these increased faster than total revenue growth of 4.1%. Overall, it was a really good quarter.

Over to Slide number 8. This slide presents the key components of our revenue performance. For the quarter, our total commissions and fees increased by 4.4%. Our contingent commissions and GSCs decreased by $1.7 million as compared to the second quarter of last year. This decrease was driven by a one-time GSC in the second quarter of 2019, but was partially offset by qualifying for incremental contingent commissions within our National Programs segment and a positive adjustment related to finalization of the estimates we recorded in 2019. Our organic revenue which isolate the net impact of M&A activity increased by 50 basis points for the second quarter.

Over to Slide number 9. Our Retail segment delivered total revenue growth of 60 basis points primarily driven by acquisition activity and higher profit-sharing contingent commissions, which were substantially offset by decline in organic revenue growth of 2.6%, driven primarily by the impact of COVID-19. In accordance with ASC 606, we lowered our estimates for the revenues we expect to earn from existing general liability and other policies, where the premiums are subject to modification based on changes in exposure units, such as the revenue of the insured. Our revenue estimates were revised after assessing the projected impact of the pandemic, which resulted in a reduction of organic revenue by approximately $8 million and organic revenue growth by over 250 basis points for the quarter.

Our EBITDAC margin for the quarter decreased by 150 basis points and EBITDAC declined 5.1% due to the profit impact of the $8 million negative revenue adjustment, the impact of the aforementioned prior year acquisition, decreased organic revenue, higher non-cash stock-based compensation and intercompany IT cost. All of these items offset material cost savings achieved in response to the pandemic. Our income before income tax margin decreased 240 basis points and grew slower than total revenues due to higher acquisition amortization expense and an increase in acquisition earn-outs.

We're over on to Slide number 10. Our National Programs segment increased total revenues by $22.9 million or 17.4% and organic revenue by 15.5%. The increase in total revenue was driven by strong organic growth, new acquisitions and an increase in profit-sharing contingent commissions, which were partially offset by decreased GSCs. The organic growth was driven by many programs due to good retention, new business and rate increases and was partially offset by certain programs impacted by COVID-19. EBITDAC increased by 22.7%, and our margin increased by 180 basis points due to strong organic growth and increased contingent commissions, the continued leveraging of our expense base, as well as decreased variable cost, but was partially offset by lower GSCs. It was another great quarter for our National Programs segment growing EBITDAC substantially faster than total revenues. Income before income taxes increased $8.1 million or 20.1%, increasing the margin by 70 basis points. This was driven by EBITDAC margin expansion, which was partially offset by higher acquisition earn-outs and intercompany interest expense.

Over to Slide number 11. Our Wholesale Brokerage segment delivered total revenue growth of 9.5% and organic growth of 10 basis points. Total revenues grew faster than organic revenue due to new acquisitions and higher contingent commissions. EBITDAC grew by 9.1% and the margin was substantially flat as compared to the prior year due to lower organic growth, higher intercompany IT expenses and increased non-cash stock-based compensation. We were able to offset these headwinds with higher contingent commissions and the delivery of reduced variable expenses. Our income before income taxes grew by 7.9%, and the margin decreased by 40 basis points due primarily to higher intercompany interest expense.

Over to Slide number 12. Total revenues and organic revenues for our Services segment declined 15.4%, driven by the items that Powell mentioned earlier. For the quarter, income before income taxes decreased 31.2%, and our margin decreased by 340 basis points. EBITDAC declined by 25.2%, and the margin declined by 280 basis points, driven by the mix of profitability associated with lower organic revenue and higher intercompany IT expenses. These were partially offset by reducing certain variable expenses.

Few comments regarding outlook and liquidity and cash conversion for the quarter. First on outlook. We mentioned earlier that contingent and non-cash stock compensation for the second quarter increased as compared to the prior year. As of now, we are not expecting material differences for either of these items for the second half of the year versus the same period last year. As it relates to liquidity and cash conversion, early in the second quarter, we borrowed $250 million on our revolving line of credit to pay for the Loan Protector acquisition and to have additional liquidity in case the premium payment moratoriums impacted our cash receipts.

Based on our financial performance, we repaid $150 million on the revolver before the end of the quarter. You will also see our cash flow from operations as a percentage of revenue increased to levels higher than normal. This was primarily due to the CARES Act allowing companies to pay their first quarter federal taxes in July. We expect our cash flow from operations as a percentage of revenues for the third quarter will decrease from historical conversion levels due to making this payment of approximately $50 million. At the end of the quarter, we remain in a strong financial and liquidity position.

With that, let me turn it back over to Powell.

J. Powell Brown -- President and Chief Executive Officer

Thanks, Andy for a good report. Lastly, I started with comments about our teammates and their families and I want to close with the same focus. We are a team of 10,000 plus dedicated and hardworking individuals who are driven to serve our customers. We cannot deliver great solutions and grow our business if we don't have our team at full strength. Therefore, our focus is always on the safety and health of our teammates. We previously provided guidance that our revenues could be up slightly to down low to mid single-digits for the year. Based on the continued uncertainty of the recovery, we believe our full-year organic growth could be slightly positive to slightly negative. However, there are still a lot of questions regarding how and when the economy will recover. We believe it's going to be slow and sporadic and we might see -- might not see a recovery to pre-pandemic levels until 2022.

The big questions right now are will employment levels continue to increase, will consumers continue to increase their spending, how much additional stimulus will be needed and provided. Regarding rates, we think most rates will continue to increase in the second half of the year. We continue to talk with a lot of acquisition candidates and have a really good pipeline. Through the end of the second quarter, we closed 10 transactions with estimated annual revenues of $85 million. We've also closed a few deals already in July and are hopeful, we'll close more over the remainder of the year, but we expect the marketplace will remain highly competitive.

The main questions will be around financial forecasts and valuations. In these times, customers need innovative and creative risk management solutions. We believe our teammates and capabilities are well positioned to be great partners for our customers. At Brown & Brown, we're committed to delivering as many innovative solutions as possible for the benefit of our customers and teammates. We look forward to a success -- a successful second half of 2020.

And with that, let me turn it back over to Anita for the Q&A session.

Questions and Answers:

Operator

Thank you, sir. [Operator Instructions] We'll take our first question from Mike Zaremski from Credit Suisse. Please go ahead.

Michael Zaremski -- Credit Suisse -- Analyst

Hey, good morning, and Powell, we're all happy to hear you've recovered. First question, in terms of the $8 million adjustment, it sounds like you described it as -- it sounded kind of similar to an audit premium adjustment. It sounds like it's something that could recur to the extent your clients remain -- some clients remain under pressure or was this kind of you look through the entire book and hopefully, it was kind of a one and done? I'm just trying to better understand how to think about that adjustment?

R. Andrew Watts -- Executive Vice President, Chief Financial Officer and Treasurer

Hi, good morning, Mike, it's Andy here. Yeah, you're correct. What we tried to do for this quarter after working with customers and our carrier partners and seeing that the carriers were receptive in a number of cases to doing mid-term premium adjustments, which we would traditionally see at the end of audits for those GL policies. What we tried to do is for all of the outstanding policies that were out there, we looked at consumer spend and try to come up with a estimate as to what we thought revenues could be down in general across the outstanding policies that we have. So hopefully, we've captured that well, all depends on kind of how the next few quarters play out for us, we may need to adjust that up and down, but that's kind of our best estimate right now.

Michael Zaremski -- Credit Suisse -- Analyst

Okay, that's helpful. And thinking about, Powell, you -- thank you for giving us an update on kind of clearly a lot of uncertainty on organic in the back half of the year, year-to-date, organic has been fairly healthy, fairly resilient. Would you say -- some of your peers have talked about pulling the expense levers, you guys have as well this quarter, would you say that if the back half starts looking like it could be mildly negative. Are there -- are these expense levers you cited on the call, can those continue to help in terms of the margin impact?

J. Powell Brown -- President and Chief Executive Officer

Well, let's talk about that for just a moment. So again, there are certain costs that are fixed in our structure and there's going to be certain variable costs. And in those operating expenses, a variable cost would be travel, T&E, just use that as a fairly easy one. And so we have a lot of teammates that travel a lot to see customers under normal circumstances. So obviously, if a customer says we want you to come, we ask our customers, but we go. So we have people that are flying to see customers now, but it's just not as frequently. And so I don't want to leave you with some impression that we have some lever yet to pull or something. It's not like that. It's basically, each office is running their business the best way they see fit to serve the customers that we serve there.

And as a result, our T&E as well -- and some other variable expenses are down because of this operating environment. Those could go up if in fact the economy started to open up and grow more, and the coronavirus situation was a little healthier, not like it looks right now or conversely, we could stay in this current environment, and I would anticipate that our -- those variable operating expenses would also be down in future quarters in the current environment. It's more speculate -- it's predicated on what happens going forward. Hello?

Michael Zaremski -- Credit Suisse -- Analyst

Sorry, one last follow-up to your answer. T&E, is that any -- any way we can estimate what percentage of your expense base T&E is just we can kind of get a feel for how much that's moving up and down given the benefits it's having on everyone's minds?

J. Powell Brown -- President and Chief Executive Officer

Yes, sorry, sorry, Mike, we don't disclose that.

Michael Zaremski -- Credit Suisse -- Analyst

Okay, no problem. Thank you for the answers.

Operator

Thank you. And now we'll take our next question from Elyse Greenspan from Wells Fargo. Please go ahead.

Elyse Greenspan -- Wells Fargo -- Analyst

Hi, thanks. Good morning. And Powell, I would just echo Mike's comments last year, you're feeling a lot better. My first question goes to the organic, updated organic guide. I think when we spoke last quarter you and most of your peers that pointed there, there being a lag, so the third quarter could conceptually be worse than the second quarter. I just was -- wanted to get an updated thought there, and maybe you might in that question, I just wanted to exclude [Phonetic] the $8 million adjustment or whatever you think kind of we should think about the third quarter just in terms of the lag and if the impact could be more negative?

J. Powell Brown -- President and Chief Executive Officer

Hi, Elyse, actually when we made those comments in the Q1 call, we believe that Q3 would be the toughest quarter. And again, you're not going to like this because it's not with enough certainty because no one, no, no firm will be able to give you what you want, it's going to be speculation. But we with the adjustment in Q2, as Andy said earlier for the $8 million, we believe that, that is our best estimate of the impact on future policies that we can see right at this moment. So again, remember, there are things at play that are very hard to anticipate and this is not an excuse, this is an observation and you might say like what, OK.

First of all, solvency of a customer, are they going to be solvent in the next quarter or not, we hope so, but I'm saying there are going to be firms that are going to struggle even more, and it's -- that's number one. Number two, the impact of rate increases on the purchase of insurance. So there is a point at which some people cannot pay or they have to dramatically change their program. There are certain things that are mandated by law. There are certain people -- certain things that are nice to have or you'd rather transfer that risk to other people, that's number two. Number three, I'm very interested as all of us are and what is the next round of stimulus going to be and how is that going to impact consumer behavior.

And then the other thing that you have to keep in the back of your mind is by the way, just take a look at, for example, Portland, and the businesses in the area that affected Downtown that are unable to operate. So you got to put all that into sort of a mixture and mix it up. And so we're -- and by the way, the final thing that I didn't say would be the ability to get to new prospects. So some people are willing for us to come out there, some people want to see us virtually, some people are just got their hands so full that they just want to renew with who they've got. If it's with us that might be good, but we may see a -- in the future, our new business continue to wane a little bit, don't know. I would tell you what -- and this doesn't translate to the numbers, but I'm going to just say that so everybody knows, I couldn't be happier with the way that our team is responding under what I would call a very difficult situation.

Elyse Greenspan -- Wells Fargo -- Analyst

That's helpful. Powell, just to sum up some of those comments, do you think that's the reason, right, you guys are obviously narrowing that side, right, and so the organic -- the organic short -- slowdown is going to be significantly better than what you were thinking could have been a worst-case three months ago. And so would you say that that's a combination of better price, also with the impact of the economy holding up better from some of the stimulus money and then perhaps exposure is also just in general, not declining as much as you would have expected?

J. Powell Brown -- President and Chief Executive Officer

Well, I actually -- there is a couple of parts to that story. Number one, we -- as you know we tried, I mean, we don't historically give guidance on organic growth and these are very unusual circumstances, so we've tried to give the best -- our best snapshot that we can. That again takes into consideration that there are lots of variables that many of which we don't have control over. And the final thing that I think is that Merit's discussion is this. I know that some of you all have tried to draw a parallel between the first quarter performance in retail or the business and the second quarter. And I want to make sure that we clarify something because I think it's very important that is definitely like comparing an apple to an orange.

So I don't think that you can compare the performance, whether it'd be our business or anybody else's business, the performance of a business unit, let's just say, our retail in Q2 to the performance in Q1 and draw some dramatic conclusion because what you got to understand is, our business is a reflection of what we've said, the middle and upper middle market economy in the United States, and our mix of business, our customer base may be impacted differently than others, don't know that. But what I'm saying is, is if the economy has just kept on banging along in Q2 or Q3 like it was in Q1, I think that our organic growth numbers as an example would have been dramatically higher in our other business segments.

So I just want to make sure we're clear on that and we're trying to give the best estimate, and I know it frustrates you, Elyse because -- and it frustrates us, Andy and I and everybody else on the team. But we were very pleased with the second quarter. As I've said, both our financial results, but more importantly, the attitude internally how we're working with our customers, our teammates, this is a much different environment than anybody's operated in, and I think that we're doing remarkably well under the circumstances.

Elyse Greenspan -- Wells Fargo -- Analyst

That's helpful, Powell. And then my last question maybe goes back to one of Mike's questions. So you guys mentioned reduced variable expenses several times in the prepared remarks and then in the responsive question, and it sounds like a good chunk of that is from T&E like lower T&E costs, which you guys are not quantifying. Just -- am I understanding that correctly or was -- was there perhaps some other expenses that you're pointing down as well. I'm just trying to get a sense of kind of the go forward impact at least for the balance of the year on margin from some of your initiatives on the expense side?

R. Andrew Watts -- Executive Vice President, Chief Financial Officer and Treasurer

Hey, good morning, Elyse. It's Andy here. Yeah, there was more than just T&E inside of there. So everything from professional services over time, etc. So those are kind of any of our variable costs all of our leaders looked at in order to adjust them accordingly.

J. Powell Brown -- President and Chief Executive Officer

I just use that as an example, Elyse. It was not -- it was not the only, it was just one that came first to mind.

Elyse Greenspan -- Wells Fargo -- Analyst

Okay.

R. Andrew Watts -- Executive Vice President, Chief Financial Officer and Treasurer

So that's why we're trying to give, yeah, that's why we're trying to give you some additional color regarding the movement between employee benefits and compensation and other operating costs because of what the offsets between the deferred compensation costs that are in the two different categories.

Elyse Greenspan -- Wells Fargo -- Analyst

Okay. So if you guys maybe don't want to quantify like the full impact if you think about going forward with the other operating expense as a percent of revenue, right, you were saying was growing in Q2. Is that a good way to think about on that ratio for the balance of the year?

R. Andrew Watts -- Executive Vice President, Chief Financial Officer and Treasurer

No, don't use that low of a ratio because again, it's artificially low because of the deferred comp item. So again, you've got a credit sitting down in other operating and then an expense of the employee benefits, that what Powell is talking about earlier, what we would expect is if the economy continues to start -- continues to open up, we would expect that variable costs will start to go up over time. Will they jump back to where they were in the first quarter of this year or 2019, probably not. It will probably slowly increase because a lot depends on can we go see customers and how that works out, but we would expect to see some growth in that area over the back end of the year.

Elyse Greenspan -- Wells Fargo -- Analyst

Okay, thank you for the color.

R. Andrew Watts -- Executive Vice President, Chief Financial Officer and Treasurer

Yeah. And then, Elyse, did you -- just want to make sure that you understood the reason for the change in the guidance on the third quarter that -- because of the piece that we just didn't understand in Q1 is what mid-term adjustments could be. We had just no idea at that stage. I think we got better visibility in the second quarter. We originally thought we might see more of that in kind of the third and fourth quarter. The $8 million adjustment that we recorded in the second quarter, hopefully, is our best estimate, that should take some pressure off of the third and fourth quarter and maybe a little bit into the first quarter of next year.

Elyse Greenspan -- Wells Fargo -- Analyst

Okay, that's helpful. Appreciate the color. Thanks, Andy.

R. Andrew Watts -- Executive Vice President, Chief Financial Officer and Treasurer

Yeah, thank you.

Operator

Thank you. And now we'll take our next question from Phil Stefano from Deutsche Bank. Please go ahead.

Phil Stefano -- Deutsche Bank -- Analyst

Yeah, thank you. And just echoing everyone's comments that the health seems to be coming back to Brown & Brown, that's great to hear. I just wanted to continue your question on the expense actions. It feels like variable costs has been addressed and I don't need to dig into that. But going back to the first quarter earnings call, it felt like some of the non-variable expenses would be handled or at least strategically thought about in the regions. Are you getting any commentary from the regions about actions they might be taking or how they might be thinking about the business differently that, that would impact the non-variable expenses?

J. Powell Brown -- President and Chief Executive Officer

Yeah. The short answer is our leaders are looking at the businesses in the best way they see fit to run the business long-term. So I want to clarify something because I think it's very important. I know that when people talk about things like levers and variable and fixed costs and are there things that you can pull in the field that will impact, we don't think about that, that's like a way that big companies think in my opinion. And so the short answer is, we think about what is the best thing to do for our company, our customers and our teammates for the long-term. And so there are lots of companies that are laying people off and/or furloughing and all of that. And they have all the reasons and we're not commenting because their businesses are under intense pressure, we understand that.

But up to this point, if we've had somebody depart the team that's been performance-related. It's not a wide impact across a number of teammates. And so we think about it because although this is going to impact the business in the near to intermediate term, we will come out of this difficult operating environment having learned a lot of things as evidenced by going to a remote work environment in a seven working days and how we've done that and interfacing with customers in different ways via video and etc. But no, I want to make sure that you understand that there is not some like hidden agenda out in the field that we're going to do to clip off some big number. I think that, that under the circumstances, I think that our margins and our growth were quite good in Q2 and we're very pleased with that.

R. Andrew Watts -- Executive Vice President, Chief Financial Officer and Treasurer

Yeah, Phil, I mean, what we were trying to hopefully convey at the first quarter and just give everybody additional insight, how do we run our company? And we talked about on the first call -- first quarter, we don't put out mandates. It's just not our operating culture. We rely upon the leaders of our businesses to know how to adjust their costs. And, if you look at the second quarter, it demonstrates exactly how it works. It worked perfectly. They did an outstanding job of managing all of their variable cost and the needs of their customers up and down. And so we're very, very pleased with how well everybody did inside of the team, and we think it works very well inside of Brown & Brown, might be -- need to be differently in other companies. But it's part of the reason why we have the great margins and we've had them for so many years because of how we run the organization.

Phil Stefano -- Deutsche Bank -- Analyst

Yeah, that's -- it's a fair point. Look, the growth particularly in Programs was much stronger than at least I was expecting. And just focusing on that segment, I guess, I was hoping you could help me understand the makeup of that portfolio and how it might be positioned to be -- have stronger growth in economic downturns, I mean, what are the negative correlations versus the broader market there? I know lender place is something that's been highlighted in the past couple of quarters as a particularly strong business. Maybe the proportionality of things that run countercyclical that, that we might be able to think about the growth continuing in this segment?

J. Powell Brown -- President and Chief Executive Officer

Okay. So let's just use two big comments just broadly, what about wind coverage and quake coverage. So you heard me say in the -- in the prepared comments that E&S property in some instances, coastal property is up 15%, 20%, 25%, OK. So if you have a program that provides wind cover, it could be habitational, it could be other than habitational, it could be frame, it could be good construction, a mix of all of the above, they're seeing rate increases.

So capacity constraints create a very unusual tension in a period like this. So unlike 2008 to 2011, you had the economy going down and you had rates going down. We would tell you as we said in Q1, the rates are going up now and the economy is going down. So you have this unique dynamic. And so whether it be there could be some seasonality in some instances about when some accounts come up for renewal, I'll just make something up, I'm not, I mean, not make it up, but give you an example, that's not a program-specific, we have programs in this area, but let's just think about public entities for a moment.

Public entities usually date on 7/1, 9/1, 10/1, those are big dates for public entities, and 6/30. So they may renew school board on 6/30 or 7/1, whether you're in Texas or you're in Oklahoma, you're in Florida or New York or Washington. And so that same school board obviously, I mean, if it renews in June and they have this huge quake exposure hypothetically wherever they are, then that's going to be in the month of June with this big exposure as opposed to in July, you may not have any large school boards or you might not have any large companies that are seeking, I mean, we have a lot of large companies that are seeking quake coverage and wind coverage. But I want to acknowledge something here that I think is an important nuance.

All of you have seen and/or read and heard about additional capacity that is allegedly coming into the marketplace. And you hear about management teams that are forming new start-up risk bearers be it insurance or reinsurance or both. What -- is that a good thing or a bad thing for us? We believe it's a good thing because it gives us more capacity to serve our customer base. Having said that, you might think of it as saying, OK, that could be a governor, potentially, we haven't seen this yet. The governor on the upward pressure on rates because that new capacity comes in and now competes against some of these large standard carriers in America or overseas that want X rate and they're not able to get X, they're able to get half of X because there is this new capacity that comes online, that has not happened yet. I want to make sure everybody knows that, but there is a lot of activity out there and a lot of discussion. That capacity could be plugged in to our Programs businesses in certain areas. And if in fact that case were to occur, that may moderate the rate increases.

Conversely, if in fact capacity in some instance dried up, dried up and that's a extreme example, it's not going to do that, but dried up to a extent, where you could only continue to write your renewals, and your renewals would go up on rate alone and you didn't have additional capacity to write new business that would also impact the organic growth. So I'd say this, we're very pleased with the organic growth of National Programs. We do not want you to think that the growth this quarter is what we think is going to be next quarter. We are more -- we have a moderated view on that. We think the outlook is very good for the business and we're very pleased with how it's going and a lot of it will be impacted by the actions or inactions of existing capital providers and then the entrance of new capital providers.

Phil Stefano -- Deutsche Bank -- Analyst

Got it. Thanks so much.

J. Powell Brown -- President and Chief Executive Officer

You're welcome.

Operator

Thank you. And now we'll take our next question from Greg Peters from Raymond James. Please go ahead.

Greg Peters -- Raymond James -- Analyst

Hi, good morning. Can we circle back to your comments around M&A. Have you seen any continuing lack of involvement in the private equity side or is the private equity side back up and running in full steam? And then also can you speak to any potential benefit or fallout year-to-date from the Aon, Willis Towers Watson proposal?

J. Powell Brown -- President and Chief Executive Officer

Okay. Private equity is going full steam. So I would tell you, Greg, the analogy we would use is think about somebody that's driving on the highway about 85 miles an hour and you come into this initial COVID environment and they take their foot off the gas, that does not mean they put the break on, it means they take their foot off the gas. So for a period of, let's say, two months or maybe three months, you go from 85 miles an hour to 65 miles an hour and now they put the pedal back to the floor and they're going back up toward 85. So very active environment continuing in the acquisition space.

Again, as it relates to the proposed merger of the two firms, we don't really speculate on that. I mean, there are people that we hear about and talk to and things about that, that seem to be interested in exploring other opportunities, but we're not going to really speculate on all of that and we wish them the best. And however that all works out at a complex complicated deal, and we're going to just keep on trying to write new business and get the best people we can on our team. So I don't really want to speculate too much about that.

Greg Peters -- Raymond James -- Analyst

That's fair. Can you, I mean, you brought it up, can you talk about how your producer retention has held up through the first six months relative to historical standards?

J. Powell Brown -- President and Chief Executive Officer

Yeah, I -- sure. And the answer is, I think it has held up exceptionally well. I think that our producer retention and our overall teammate retention has been really, really good.

Greg Peters -- Raymond James -- Analyst

Okay, fair enough. Maybe Andy, you can circle back to the comments on profit-sharing and guaranteed supplementals. Can you review the puts -- the puts and takes on the results year-to-date and how we should be thinking about that again for the full-year, I know you commented in your prepared remarks, but if you can go back through that it would be helpful?

R. Andrew Watts -- Executive Vice President, Chief Financial Officer and Treasurer

Sure, yeah, no problem, Greg, good morning. So let's just go through and look at them combined. So for the first quarter, we were up year-over-year about $8.8 million, second quarter, we were down about $1.7 million, $1.8 million, and that was primarily due to the one-time GSC that we got in the second quarter of last year. The comments that we made in there is at least for the first half of the year, those either represented new GSCs or contingents that we qualified for or adjustments to finalize the estimates that we recorded in 2019.

And again, if you recall, with the new ASC, we have to record our contingents throughout the year based upon written policies to the best that, that we can, then when we receive the cash in the first and second quarter, we have to do our final true-ups. So that's the combination of all of those which will really drive the upside. We don't anticipate that for the second half of the year as we mentioned earlier. So as of right now, we think that contingent GSCs will look fairly similar in the second half of this year as to what they did in the second half of last year, barring something new pops up that we just don't know about.

Greg Peters -- Raymond James -- Analyst

Right, thanks. And then the final piece, I know we've been watching the struggles with your Services segment for several quarters now. It's kind of feels like this could be a trough year in terms of organic and just total revenue for that business. Is that -- is that the right sort of sense that you guys have about that business or is there something structurally going on there that might lead to a further revenue shrinkage as we think beyond this year?

J. Powell Brown -- President and Chief Executive Officer

I think your -- I think your first assessment was correct. I think we look at it as a trough year, that's -- that is, we don't believe there's anything structurally wrong with the business or anything like that. There's just a combination of things, as we outlined in my comments and in Andy's comments that have alluded to that. So we kind of work our way through it, and it'll be better in the future.

R. Andrew Watts -- Executive Vice President, Chief Financial Officer and Treasurer

Yeah, Greg, the piece that's always one of the unknowns inside of that and we've been talking about for a few quarters is around Social Security Advocacy business. We are -- we're definitely impacted at times what happens at social security administration and the federal government. So it depends on how quickly they are processing and claims on there and the amount of resources they put. So that does adjust things up and down over time and we've seen that over a number of years. So that's just kind of one of those wildcards. We just don't know about it until it kind of starts coming along, so we have to watch that and then see what happens with general property claims that are out there. Those again just move back and forth based on weather-related.

Greg Peters -- Raymond James -- Analyst

Got it. Thanks for the answers. And Powell, stay away from the nightclubs and the beaches in the third and fourth quarter, OK?

J. Powell Brown -- President and Chief Executive Officer

Thanks a lot. Actually, as you know, Greg, I have 10 weeks of immunity.

Operator

Thank you. And now we'll take our next question from Yaron Kinar from Goldman Sachs. Please go ahead.

Yaron Kinar -- Goldman Sachs -- Analyst

Hi, good morning, everybody. Just a couple more on the $8 million of revenue adjustment for COVID. So first, I guess, I think you said like $10.5 million on workers' comp and employee benefits, last quarter, you got $8 million on GL. Are there any other lines that you could see such adjustments take hold?

R. Andrew Watts -- Executive Vice President, Chief Financial Officer and Treasurer

Good morning, Yaron. As of right now, no, we don't see any other lines that we've not captured at this stage, if other facts seem to pop up, we'll have to address those. What we tried to do is for the outstanding policies in Q1 and again, the outstanding policies in Q2 is, we tried to incorporate those into our adjustments. So that's kind of at least the best estimate right now, all the kind of -- we just need to see how things continue to play out. One of the challenges we had going into the second quarter was how to estimate because we had that lag effect on reporting.

So we really didn't start getting real good reporting for some of the monthly on employee benefits or work comp until May and June. So we've only got a couple of months down. So we're going to continue to monitor and see what things look like and then we'll also start to see some of the renewals in the third quarter and that will start to give us an idea also of what return auto premiums look like and how well we did estimating that for the $8 million.

Yaron Kinar -- Goldman Sachs -- Analyst

Okay. And so far the workers' comp and employee benefits estimates are holding well?

R. Andrew Watts -- Executive Vice President, Chief Financial Officer and Treasurer

Sorry, one more time, you're hard to hear.

Yaron Kinar -- Goldman Sachs -- Analyst

Sorry about that. The workers' comp and employee benefits estimates was the ones that you had addressed last quarter, are those still holding well as of now?

R. Andrew Watts -- Executive Vice President, Chief Financial Officer and Treasurer

Yes, they are, they are. The mix is different, but in full, yes.

Yaron Kinar -- Goldman Sachs -- Analyst

Okay. And can you say what the earnings impact was from those $8 million this quarter?

R. Andrew Watts -- Executive Vice President, Chief Financial Officer and Treasurer

Sorry, you're -- again, you're hard to hear on, Yaron, you're breaking up a little bit. What was -- can you repeat, please?

Yaron Kinar -- Goldman Sachs -- Analyst

I was asking if you could say what the earnings impact was from the $8 million this quarter?

R. Andrew Watts -- Executive Vice President, Chief Financial Officer and Treasurer

Oh, it's quite high on there.

Yaron Kinar -- Goldman Sachs -- Analyst

Okay. And then one other question, how many of your customers, specifically in Retail and Wholesale, have taken actions or chosen to cut programs in order to cut insurance costs as opposed to the carrier coming in and saying we're lowering them?

J. Powell Brown -- President and Chief Executive Officer

Yeah, I think what I would say is, I want to clarify, I don't -- I'm not aware of, well, maybe I should back up. There's two segments. Let's think about small business first. So we have small business in both Retail and Wholesale, and that's a scenario where we have people that call and say we're done. We just -- here's the keys like we are -- they're out of business. So we've had a lot of that in small business areas, but those are small accounts, OK. In larger accounts, what you might find is the cost goes up substantially and therefore they buy less of the coverage, but that doesn't mean they don't buy the coverage.

Let me give you a perfect example. Let's say, you're on your company is a large manufacturer and you have a $25 million umbrella and that $25 million, you manufacture, let's just say something like baby cribs and children's, infant clothing, something like that. And your $25 million umbrella was, just for sake of this discussion, $1 million in premium. And the carrier that put the $25 million up comes back to you through your broker and says, we're going to quote $10 million of coverage for $1 million of premium. So then your broker goes out and get the other $15 [Phonetic] million, and let's say that's $800,000 or something. So your limit for $25 million just went up to $1.8 million [Phonetic] or $2.5 million [Phonetic] or whatever the number is, but your primary $10 million was the same price as the $25 million the year before. You may say, hey, I can only buy $10 million of coverage, that's what I'm talking about in larger customers. They're not saying, we're not going to buy an umbrella, that's not what they're saying, but what they're saying is, there are certain extreme examples.

If you're in the transportation business, let's say you have a 1,000 long-haul trucks, your excess liability premium is gone through the roof, multiples of times. And so if you bought $80 million of limits before, you might have been only able to buy $40 million now because the price is so high. So it's not -- we haven't seen in the small accounts area, we see people going out of business. In the middle market accounts area, we see people mostly renewing, but there's some mashing of the teeth. In the large accounts, particularly in tougher classes of business, we may see a lower excess limits purchase because the rate increases are so substantial.

Yaron Kinar -- Goldman Sachs -- Analyst

Got it, understood. Thank you for the color. And Powell, I hope that you and your teammates and families all stay healthy.

J. Powell Brown -- President and Chief Executive Officer

Thank you very much.

Operator

Thank you. And now we'll take our next question from Mark Hughes from SunTrust. Please go ahead.

Mark Hughes -- SunTrust -- Analyst

Yeah, thank you. Thank you. On the wholesale, the -- I think you said the binding authority was a little slower this quarter. What are the prospects for that to pick back up, and is this the new normal or should we go back to more mid-single-digit growth?

J. Powell Brown -- President and Chief Executive Officer

Yeah, Mark, I'll tell you what you've got in Wholesale, it's interesting, you've got two segments in that business as you know, the brokerage, so that's transactional brokerage and then you have binding authority. The binding authority is primarily smaller premium accounts, not small, but smaller. So think of accounts that are primarily $25,000 in premium and under, it could be higher than that, but let's say, $25,000 [Phonetic] and under, and then transactional, large transactional wholesale would be bigger accounts or layered property or an umbrella or something like that. I think what you've got is in our business, the binding authority is being impacted and it's hard to estimate the full impact, because as I said in the previous question, a lot of that business is impacted by the business prospects.

So let me give you an example. April and May, binding authority new business was way down because the economy was closed and the whole deal -- and in June when it opened up or again -- I mean, the number of new businesses we wrote was significantly more than the prior two months, but now it's going back the other direction. And so I kind of think that the binding authority business is going to be under pressure in the near-to-intermediate term, so let's say, the rest of the year.

Brokerage is -- there's an opportunity for it to grow nicely, but you got to remember that there's also an enormous amount of pressure in some instances where some of that business might go from the non-admitted market to the admitted market in certain instances. You don't normally think of that, but there are certain instances where that's happening. So I would moderate the growth expectations in the second half of the year for that, just because there's a lot of uncertainty around how that part of the market responds. Normally, I'd say no, I think it's great and it's going, but I just think that there's some headwinds there.

Mark Hughes -- SunTrust -- Analyst

Understood. And then a quick follow-up. Interest expense, Andy, is this a good run rate absent some of the bigger use of capital?

R. Andrew Watts -- Executive Vice President, Chief Financial Officer and Treasurer

Yeah, second quarter is probably a good run rate presuming that rates stay where they are, Mark, and we don't have any incremental borrowings for acquisitions.

Mark Hughes -- SunTrust -- Analyst

Thank you.

J. Powell Brown -- President and Chief Executive Officer

Hey Mark, I want to clarify something that I think is important and it's a very timely example. One of the areas that we write a lot of binding authority business, an example would be personal lines in California. And as you know, California has been burning and there's all kinds of things over the last couple of years. So a number of carriers have basically just said, we're not going to write personal lines coverage in the state of California in Brush Zones, which is non-admitted areas.

And so what that does is, there's a lot of disruption in that market. You might find some of that in Florida in certain pockets, where carriers have already gotten hit or exceeded their capacity and so they're backing off. So again, it's -- it is -- there are forces that are a little different, doesn't mean that we don't -- we just got to work through it. But it's just kind of interesting where you have all of a sudden a place like California, which is the sixth largest economy in the world and a big personal lines market if they're choking on it, and so a lot of it's going to the state plan.

Mark Hughes -- SunTrust -- Analyst

Thank you, understood.

Operator

Thank you. And now we'll take our next question from Meyer Shields from KW -- KBW. Please go ahead.

Meyer Shields -- KBW -- Analyst

Thanks. Good morning. Powell, I hope [Phonetic] you're doing well. If I understand your comments correctly, it sounds like there's more revenue pressure on the small accounts, whether that's in Retail or in Wholesale, and obviously, overall margins are surviving that. But does that market shift itself have any margin implications or does that mix shift have any margin implications?

J. Powell Brown -- President and Chief Executive Officer

Well, I think we like small business and it's been a nice part of our business. And so remember, as a part of the whole, it's a smaller segment, but it does have a positive impact on our margins or a negative impact.

Meyer Shields -- KBW -- Analyst

So negative impact when it goes away?

J. Powell Brown -- President and Chief Executive Officer

I'm sorry. Could you repeat that, you were unclear?

Meyer Shields -- KBW -- Analyst

I'm sorry. So when you think that it has a positive or negative impact, you're saying that having less small account business is all else equal is positive or negative for margins, I just -- I'm not sure I understood?

J. Powell Brown -- President and Chief Executive Officer

Yes. The answer is, the fact that you have less small business is a negative.

Meyer Shields -- KBW -- Analyst

Okay, so that makes the quarter's results even more impressive. So that's good to hear. On the first quarter call, I think you'd anticipated less new business and higher retentions. And I'm just wondering what happened in -- and maybe we just talked about this, in Wholesale segment, we talked about less -- lower retention as a consequence of COVID. Is that a small business component?

J. Powell Brown -- President and Chief Executive Officer

That's some of it, but it's not exclusively that. I mean, remember, think about it, a retention rate in Retail, as you've heard us say before and in office, overall, might be 92% to 95% overall revenue retention. In a Wholesale business, depending on if it's binding authority or brokerage, it's 15 points less than that, maybe more. So there's a lot of churn in that book. And so if you're either not able to replace it i.e., more new business, there's impact there or if you lose a couple of accounts, and if those accounts were big, that puts pressure on it.

So I'll give you an example. Think about any industry that would be dramatically impacted in this period of time, I'll pick one for you, car rental, OK. So how many cars have you rented in the last four months, let's say not very many compared to the normal that you might rent. And so if that's the case, you can have customers, I just use that as an example, the customer might be a restaurant or a bar, it might be an entertainment environment, think about if it's a -- it's got a -- it's some sort of -- I was going to say like a fair or something like that, where usually it's based on receipts, which translates the number of people and you could say, OK, $10 to get in or whatever the number it is, well, guess what? What they said, now their receipts are one-tenth [Phonetic] of that.

So the rate that there's compression in the existing book. So remember, let's not lose sight of the fact that in Retail we call this out, but just in general, compression in hospitality, restaurants, entertainment, we talked about sports, think about whether it's professional sports or Little League Soccer, all of that's impacted. So you have -- we may renew the account, but the account is all of a sudden 30% of what it was. So there's inherent compression in certain segments of the book, not by the way, Meyer, it's not exclusive to Wholesale. We have that in Programs. We have that in Services. We have that in Retail, very important distinction.

Meyer Shields -- KBW -- Analyst

No, that was very helpful. Thank you very much.

J. Powell Brown -- President and Chief Executive Officer

Yeah.

Operator

Thank you. We have a follow-up question from Michael Phillips from Morgan Stanley. Please go ahead.

Michael Phillips -- Morgan Stanley -- Analyst

Hey, thanks. Actually, first question, two quick ones. I appreciate setting me in. Powell, you mentioned a big theme here is a number of those other accounts that you simply can't pay. Have you seen any examples or any pressure for -- from any outside parties to issue any kind of rate relief or rebates that we've seen on the personal line stuff or could you think about commercial line as well?

J. Powell Brown -- President and Chief Executive Officer

The answer to the question is, we've seen some things on the health side, where there have been some actions taken by some insurers around the country more regionally. And I'm not aware off the top of my head of commercial, and yet I say that and I know of several large carriers that we -- that our trading partners who have been more than willing to adjust prices mid-term maybe more so than others. And so that gives rate relief right there.

So they might not have said like a personal lines auto policy, we're going to give you a 15% [Phonetic] reduction in your premium. What they basically said is, hey, do you have 100 trucks on the road and right now you're only driving, let's say 20 of them, we're going to give you, you can adjust your exposure units down or your payrolls down or whatever. So it's going to give them the benefit of not being charged for the trucks that are sitting in a warehouse. So it's the same thing, but it's not a rate cut. It's an adjustment in exposures. And then there are some carriers that are not willing to do that. I mean, we've seen every scenario, I mean, boy, have we seen them.

Michael Phillips -- Morgan Stanley -- Analyst

Okay. I can imagine. I guess, last one then on the M&A side. You mentioned private equity still running full steam, there is still opportunities out there. Can you make any comments on what you're seeing in terms of the valuation level and what's being held up there today relative to recent prior -- relative to recent prior quarters?

J. Powell Brown -- President and Chief Executive Officer

Yeah, I mean, I would tell you that the acquisition prices, the multiples that are being paid, and remember, I'm always one that likes to say a multiple of what, if you have a seller saying to somebody what they got versus the buyer, I want to know what is the real EBITDA is, the sustainable ongoing EBITDA, not jacked up, modified dramatically EBITDA. So, I would tell you that our sense of it is, the multiples being paid today are very similar to what they were being paid in the first quarter and maybe even in the last quarter of last year. So the multiples are not necessarily that different, Michael, it's just how to get comfortable with the impact of the pandemic on the earnings, that's really important.

Michael Phillips -- Morgan Stanley -- Analyst

Okay, now that makes sense. Thanks for your time. Appreciate the answers. Stay healthy.

J. Powell Brown -- President and Chief Executive Officer

Yeah, absolutely, absolutely.

R. Andrew Watts -- Executive Vice President, Chief Financial Officer and Treasurer

Okay.

Operator

Thank you.

J. Powell Brown -- President and Chief Executive Officer

Hey, Anita, its about 17 past the top of the hour, unless there's -- we'll take one last question in the queue and then we'll go ahead and wrap it up for today, OK?

Operator

Thank you, sir. This is our last question actually from Elyse Greenspan. It's a follow-up question. She is from Wells Fargo. Please go ahead, ma'am.

Elyse Greenspan -- Wells Fargo -- Analyst

Thanks. Thanks for keeping me back in the queue. My follow up, I was just trying to pry the comments throughout the call back to the guide on, and I do recognize you guys have kind of checked not necessarily normally given an organic guide. But as we think about kind of the slightly positive or slightly negative for the year, a couple of questions there. In the best case, right, the slightly positive, can you see yourself on an overall basis, this overall guide [Phonetic] thing positive for the next two quarters? And my second question, Powell, maybe you want to answer them together, it's following on the -- you pointed out that $8 million adjustment this quarter could help the last two quarters. Do you see the Q3 or the Q4 better as you think about the next two quarters of the year?

J. Powell Brown -- President and Chief Executive Officer

Great. So the answer to the question, again, with the unknown of how the economy is impacted by the number of spikes in the COVID, the cases confirmed and all the resulting issues, could our growth be positive? Of course, it could be. It could also be negative. I'm not trying to be diverting the comments. Could it be positive? Yes, it could be positive. There's a lot of variables. And like I said, if a bunch of insureds, all of a sudden had their exposure units all go down 20% between now and the end of the year, the idea of growing out of that even with a good amount of new business might be hard. So I don't know, Elyse, that's the first thing.

As it relates to the adjustment that Andy referenced, and I think this is a kind of an important -- this is a non-GAAP answer, OK. So but it's GAAP -- based on GAAP principles. The adjustment that Andy and the team has made not only in Q1, but in Q2, those adjustments were the best estimate at the time of what we could see in the business. So the reason I bring that up is, we could get into Q3, and there's some very possibly another adjustment. We don't know. But we know that right now the way we looked at the business, we have made the best judgment on the business as we see it today, and I think that's an important distinction. So I just mentioned it for what it's worth. I hope that helps. I know it's frustrating because again, I -- it frustrates me too, but it is what it is.

Elyse Greenspan -- Wells Fargo -- Analyst

Okay, that's very helpful, Powell. Thank you.

Operator

Thank you. We have no further questions at this time.

J. Powell Brown -- President and Chief Executive Officer

Okay. Thank you all very much for your time today. We look forward to talking to you in Q3. Please be well and be safe. I will tell you that I got it and you don't want it. But -- and I have a number of people that I know that have gotten it or come through it. So it seems like it's touching almost everybody. So be well and be safe. And we look forward to talking to you next quarter. Thank you.

Operator

[Operator Closing Remarks]

Duration: 81 minutes

Call participants:

J. Powell Brown -- President and Chief Executive Officer

R. Andrew Watts -- Executive Vice President, Chief Financial Officer and Treasurer

Michael Zaremski -- Credit Suisse -- Analyst

Elyse Greenspan -- Wells Fargo -- Analyst

Phil Stefano -- Deutsche Bank -- Analyst

Greg Peters -- Raymond James -- Analyst

Yaron Kinar -- Goldman Sachs -- Analyst

Mark Hughes -- SunTrust -- Analyst

Meyer Shields -- KBW -- Analyst

Michael Phillips -- Morgan Stanley -- Analyst

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