The Baldwin Insurance Group's Q3 2025: Contradictions Emerge on IAS Organic Growth, Rate Headwinds, RPC Impact, Recovery Outlook, and Reinsurance Costs

Date of Call: November 4, 2025

Financials Results

• Revenue: $365.4M total revenue in Q3; organic revenue growth 5% (YTD organic 9%)
• EPS: GAAP diluted loss per share $0.27; adjusted diluted EPS $0.31 per fully diluted share (YTD adjusted diluted EPS up 11% YOY)
• Operating Margin: Adjusted EBITDA margin 19.8%, down ~170 bps YOY (21.5% prior-year period)

Guidance:

• Q4 revenue expected $345M–$355M with mid-single-digit organic growth
• Q4 adjusted EBITDA $68M–$73M and adjusted diluted EPS $0.28–$0.32
• Preliminary 2026: revenue $1.66B–$1.70B, organic growth high-single-digits (back-half weighted), adjusted EBITDA $380M–$400M, adjusted diluted EPS $1.95–$2.10
• Expect double-digit operating free cash flow growth in 2026
• Nominal M&A assumed in 2026 guide; share buybacks (up to $200M) contemplated once net leverage comfortably <4x

Business Commentary:

* Revenue and Sales Velocity: - The Baldwin Insurance Group reported organic revenue growth of 5% for Q3 2025, bringing year-to-date organic revenue growth to 9%. - Sales velocity remained high at 20% in Q3, highlighting strong new business generation and client retention.

• Insurance Advisory Solutions (IAS) Performance:
• The IAS segment reported flat organic revenue growth year-over-year, with 4% organic growth when accounting for procedural changes.

• Despite headwinds from renewal premium changes and rate fluctuations, the segment's sales velocity and new business momentum were strong, with a historic backlog of won but unbooked new business.

• Underwriting Capacity & Technology Solutions (UCTS) Growth:

• UCTS achieved 16% organic revenue growth, driven by multifamily and commercial umbrella portfolios.

• The growth was supported by strong underwriting discipline and expansion into new builder homeowners insurance programs.

• Catalyst Program and Workforce Transformation:

• Baldwin launched the 3B30 Catalyst program, aiming to invest in automation and business process optimization, with a projected cumulative transformation charge of $40 million.
• This initiative aims to enhance client and colleague experience, elevate workforce impact, and unlock new growth opportunities.

Sentiment Analysis:

Overall Tone: Positive

• Management repeatedly described results as "strong" and "pleased"; highlighted 20% sales velocity, historic backlog and 3B30 transformation targeting $40M annualized savings; provided upward-looking 2026 guide (revenue $1.66B–$1.7B, high-single organic) and reiterated path to <4x leverage and opportunistic $200M buyback authorization.

Q&A:

• Question from Charles Peters (Raymond James): So I think I'd like to start with the results in the IAS segment. You called out a couple of things in your commentary, the flat organic. I think you said excluding the revenue recognition change, I think you said organic was up 4%. And then you talked about the sales velocity being up really strong. And I guess what I'm trying to get at is I'm trying to reconcile what we hear from you quarter after quarter, which is really strong sales velocity and success in the sales velocity and trying to reconcile that with what we're seeing with the IAS organic numbers. And maybe that's -- maybe that the revenue recognition change is going to what is the deciding factor here and what changes next year. I'm not sure, but I thought I'd just give you an opportunity to talk more about that.
  Response: Core takeaway: IAS underlying momentum is strong (20% sales velocity, historic backlog); reported flat organic is driven by a $7M accounting timing headwind and a -5.7% renewal premium/exposure headwind that should abate over coming quarters, making IAS effectively double-digit growth when adjusted.

• Question from Charles Peters (Raymond James): Just a clarification on the procedural change. Is that -- so it's a headwind, a couple of quarters of headwind. Is there going to be -- once we anniversary it, is there going to be like 4 quarters of an unusual benefit and then we go back to some normalized rate?
  Response: Yes — the procedural change defers revenue (timing only); once anniversary passes, the deferred revenue reverses and produces multiquarter benefit before normalizing.

• Question from Charles Peters (Raymond James): The second question -- I guess it's technically the third, but the second question I had was on the organic revenue results in the Underwriting Capacity & Technology Solutions business because that's been really very consistent and strong -- recorded strong results. And I'm just curious about what kind of competition you're seeing in that marketplace. And I guess the genesis behind that would be earlier today, Progressive had its quarterly call, and they talked about renters insurance as being an area of focus for them. And so it just triggered, hey, how are you -- it doesn't show up in your numbers, but how are you seeing competitive pressures in your [UCTS] business?
  Response: Core takeaway: UCTS is differentiated via embedded distribution and proprietary tech; their renters product is sold embedded (not competing with traditional mass-market carriers), giving them a durable right-to-win and moat.

• Question from Charles Lederer (BMO Capital Markets): Quick one on your preliminary outlook for 2026 organic of high single digits. What are you, if anything, embedding for the attorney-in-fact fees and BRIE and also the embedded mortgage channel revenue?
  Response: Core takeaway: They modeled nominal attorney‑in‑fact impact and modest (not heroic) embedded mortgage contribution — embedded is expected to grow but not materially affect 2026 guide.

• Question from Charles Lederer (BMO Capital Markets): If I take out the pull forward that you guys called out last quarter and then take out some of the headwinds this quarter from the accounting change and then presumably, the pull forward was taken out of this quarter... I mean, is that just sales velocity? Because sales velocity was a little slower. So I'm trying to kind of connect the dots. Maybe it's just business mix. I don't know if there's any color you can add.
  Response: Core takeaway: The apparent acceleration is driven by mix and improving momentum; reported metrics are muted by RPC headwinds and accounting timing, but sales velocity remains robust at 20%.

• Question from Elyse Greenspan (Wells Fargo): I guess I have a follow-up trying to parse together some of just the commentary on IAS and specific to the guide, right? I think you guys said organic mid-single digits, right, I think, in the fourth quarter. What are you assuming for IAS? And then within the guidance next year for high single-digit organic, I think you said that's back half heavy. So do you expect to start like in the low single digits and pick up? And then also, what does that imply, I guess, for IAS embedded within the guide next year as well? And then within the guidance for next year, what are you assuming for M&A? And I know, obviously, it depends upon when they are -- when the deals close, but what's embedded within next year's guidance for any level of M&A? And then the savings that you guys outlined like $3 million to $5 million next year, right, I think $10 million to $15 million in '27. Is the expectation that those will all fall to the bottom line and help margin? Or is there some level of reinvestment being contemplated as well?
  Response: Core takeaway: Company-level only guidance — Q4 mid-single digits, 2026 high-single (back-half weighted); segment-level not provided; nominal M&A baked into 2026; catalyst savings figures are net of reinvestment.

• Question from Pablo Singzon (JPMorgan): So maybe first one for Trevor. I know you spoke about employee benefits early on this year. I was a bit surprised by your uptick. I think you had mentioned something like an 800 bps headwind there versus about 300 bps in P&C. Is there anything unique about the employers you place insurance for? Maybe they work in industries that are more economic sensitive? And just given the weakness in the labor market that's being widely reported on today, what gives you confidence that you'll see a recovery in IAS OG next year?
  Response: Core takeaway: No unique client skew beyond a West Coast/tech tilt; recovery expectation is driven by rising health care cost trends that will lift premiums and demand for advisory services, not by a stronger labor market.

• Question from Pablo Singzon (JPMorgan): Second question is just on the PBE and the ramp-up in attorney-in-fact fees, right? I guess the question there is holding premium volumes constant... How many years will it take you to sort of get back to your previous state, assuming premium volumes are the same?
  Response: Core takeaway: Expect 2–2.5 years from 05/01/2026 for full run-rate recovery; AIF is equity‑method accounted (affects EBITDA, not revenue).

• Question from Andrew Andersen (Jefferies): Sorry, maybe some more questions on the reciprocal. I think in response to an earlier question, you said you were anticipating a nominal benefit from the reciprocal in organic. I guess, is there -- is any part of this going into organic? If you could just maybe parse that out a bit? And when we're talking about this turning into a tailwind, it sounds like it could take 2 years to fully flip over... It feels like maybe you're past the peak of the headwind, but there still is a headwind persisting until we get to the end of 2 years. Is that the right way of thinking about it?
  Response: Core takeaway: Reciprocal yields no organic revenue benefit (AIF equity earnings only); the commission step-down headwind ends 04/30/2026 and AIF fees will ramp as premiums renew into the reciprocal, with meaningful build over ~2 years.

• Question from Brian Meredith (UBS): Two questions. First, curious your assumptions as far as how much you're going to be able to renew in the reciprocal in your guidance? And what is it looking like so far? And second, on capital management: given where your stock is trading, why wouldn't you use some free cash flow now to buy back stock rather than wait to be comfortably under 4x?
  Response: Core takeaway (renewals): Renewal performance is slightly better than assumptions with lower-than-expected cancellations so far. Core takeaway (buybacks): Board will authorize opportunistic buybacks (up to $200M) only once leverage is comfortably below 4x; buybacks are secondary to organic reinvestment and M&A.

• Question from Thomas Mcjoynt-Griffith (Keefe, Bruyette, & Woods): When you give us that $40 million annualized run rate savings from the expense program, what expense line denominator should we reference to get to a result of thinking about Baldwin's automation efforts are going to take out x percent of expenses out of the business? And when you first introduced it a year ago, it was 3B30 in 5. Is there a timeline for that program still? And is it still the same?
  Response: Core takeaway: The $40M run‑rate savings are largely from workforce transformation (automation/restructuring); the 3B30 timeline is unchanged.

Contradiction Point 1

IAS Organic Growth Projections

It involves differing expectations for organic growth in the Insurance Advisory Solutions (IAS) segment, which is a key performance metric for the company.

What is your expected IAS organic growth for this quarter and 2026 based on the guidance? - Elyse Greenspan (Wells Fargo Securities, LLC, Research Division)

2025Q3: We expect mid-single-digit growth for Q4 across the business and high single digits for 2026, driven by the lapse of headwinds but with RPC headwinds persisting in the first half. - [Trevor Baldwin](CEO)

What drove the 10% organic growth in the Insurance Advisory Solutions segment, which exceeded expectations? - Thomas Patrick McJoynt-Griffith (Keefe, Bruyette, & Woods, Inc., Research Division)

2025Q2: We are raising our full year 2025 IAS organic growth guidance to 10% to 11% from 6% to 7%. - [Trevor Baldwin](CEO)

Contradiction Point 2

Rate and Exposure Headwinds

It involves differing assessments of the impact and duration of rate and exposure headwinds on the company's financial performance.

Could you clarify the IAS segment results, specifically the flat organic growth and the accounting change impact? - Charles Peters (Raymond James & Associates, Inc., Research Division)

2025Q3: Rate and exposure headwinds are expected to improve incrementally in the coming quarters before normalizing into a tailwind. - [Trevor Baldwin](CEO)

Can you explain the drivers of the 10% organic growth in the Insurance Advisory Solutions segment, which exceeded expectations? - Thomas Patrick McJoynt-Griffith (Keefe, Bruyette, & Woods, Inc., Research Division)

2025Q2: In the property book in particular, we're seeing a bifurcation. We're seeing admitted properties really in the low mid-single-digit rate trends. And large complex properties, but primarily admitted properties and complex properties, we're seeing significant rate reductions. - [Trevor Baldwin](CEO)

Contradiction Point 3

IAS Renewal Premium Change (RPC) Impact

It highlights differing expectations regarding the impact of renewal premium changes on IAS organic growth, which could influence investor expectations and strategic planning.

Can you discuss the IAS segment's results, specifically about the flat organic growth and the impact of the accounting change? - Charles Peters (Raymond James & Associates, Inc., Research Division)

2025Q3: The renewal premium change was a 5.7% headwind, reflecting a low point and expected floor going forward. - [Trevor Baldwin](CEO & Non-Independent Director)

What are the project-based headwinds affecting the IAS business and when is recovery expected? - Greg Peters (Raymond James)

2025Q1: The project-based headwinds in IAS were driven by a negative 5% renewal premium change in property renewals and flat renewal premium change in the benefits business. - [Trevor Baldwin](CEO)

Contradiction Point 4

IAS Recovery Outlook

It involves differing expectations for recovery in IAS organic growth, which are critical for investors and strategic planning.

Why do you expect a recovery in IAS OG next year, given your employer base's economic sensitivity? - Pablo Singzon (JPMorgan Chase & Co, Research Division)

2025Q3: Despite these headwinds, there's strong momentum in IAS, with a 20% sales velocity and large backlog of new business. - [Trevor Baldwin](CEO & Non-Independent Director)

Can you elaborate on the project-based headwinds affecting the IAS business and when recovery is expected? - Greg Peters (Raymond James)

2025Q1: Expectations are for continued momentum, stabilizing rate and exposure impacts, and industry-leading growth. - [Trevor Baldwin](CEO)

Contradiction Point 5

Reinsurance Cost Impact

It highlights the uncertainty and potential impact of reinsurance costs on the company's financial performance, which could affect investor expectations and strategic decision-making.

Can you explain the flat organic growth and impact of the accounting procedural change in the IAS segment? - Charles Peters (Raymond James & Associates, Inc., Research Division)

2025Q3: Rate and exposure headwinds are expected to improve incrementally in the coming quarters before normalizing into a tailwind. - [Trevor Baldwin](CEO & Non-Independent Director)

Will reinsurance cost changes create headwinds in H1 of next year, and can these costs be passed to policyholders? - Gregory Peters (Raymond James)

2024Q4: It's possible for costs to be passed along to policyholders in the E&S market, but it is a hypothetical scenario. - [Trevor Baldwin](CEO & Non-Independent Director)