Q1 2024 Arthur J. Gallagher & Co Earnings Call

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Unknown Executive: Good afternoon, and welcome to Arthur J Gallagher & Co.'s first quarter 2024 earnings conference call. Please note that participants have been placed on a listen-only mode.

Speaker Change: Good afternoon, and welcome to Arthur J, Gallagher and Coast first quarter 2024 earnings Conference call.

Speaker Change: Participants have been placed on a listen only mode.

Unknown Executive: Your lines will be open for questions following the presentation. This call is being recorded. If you have any objections, you may disconnect at this time.

Speaker Change: Your lines will be opened for questions. Following the presentation.

Speaker Change: Today's call is being recorded if you have any objections you may disconnect at this time.

Unknown Executive: Some of the comments made during this conference call, including answers given in response to questions, may constitute forward-looking statements within the meaning of the securities laws. The company does not assume any obligation to update information or forward-looking statements provided during this call. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to the Information Concerning Forward-Looking Statements and Risk Factors sections contained in the company's most recent 10-K, 10-Q, and 8-K filings for more details on such risks and uncertainties.

Speaker Change: Some of the comments made during this conference call, including answers given in response to questions may constitute forward looking statements within the meaning of the securities laws.

Speaker Change: The company does not assume any obligation to update information or forward looking statements provided on this call.

Speaker Change: These forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially.

Speaker Change: Please refer to the information concerning forward looking statements and risk factors sections contained in the company's most recent 10-K 10-Q and 8-K filings for more details on such risks and uncertainties.

Unknown Executive: In addition, for reconciliations of the non-GAAP measures discussed on this call, as well as other information regarding these measures, please refer to the earnings release and other materials in the Investor Relations section of the company's website. It is now my pleasure to introduce J. Patrick Gallagher, Jr., Chairman and CEO of Arthur J. Gallagher & Co. Mr. Gallagher, you may begin. Thank you. Good afternoon.

Speaker Change: In addition for reconciliations of the non-GAAP measures discussed on this call as well as other information regarding these measures. Please refer to the earnings release and other materials in the Investor Relations section of the company's website.

Speaker Change: It is now my pleasure to introduce J, Patrick Gallagher Junior Chairman and CEO of Arthur J Gallagher <unk> co.

Speaker Change: Mr. Gallagher you may begin.

Patrick M. Gallagher: Thank you. Good afternoon.

Speaker Change: Good afternoon. Thank you for joining us for our first quarter 'twenty four earnings call on.

Patrick M. Gallagher: Thank you for joining us for our first quarter 24 earnings call. On the call for you today is Doug Howell, our CFO, and other members of the management team and the heads of our operating divisions. We had a great first quarter to begin 2024.

Speaker Change: On the call with me today is Doug Howell.

Douglas K. Howell: CFO and other members of the management team and the heads of our operating divisions.

Speaker Change: Have a great first quarter to begin 2024.

Patrick M. Gallagher: For our combined brokerage and risk management segments, we posted 20% growth in revenue, our 13th straight quarter of double-digit growth, 9.4% organic, merger and acquisition rollover revenues of approximately $250 million. We also completed 12 mergers, totaling nearly $70 million of estimated annualized revenue, reported a net earnings margin of 21.5%, adjusted EBITDAG margin of 37.8%, gap earnings per share of $3.10, and adjusted earnings per share of $3. So another terrific quarter by the team.

Speaker Change: For our combined brokerage and risk management segments, we posted 20% growth in revenue, our 13th straight quarter of double digit growth.

Speaker Change: Nine 4% organic Virgin acquisition rollover revenues of approximately $250 million. We also completed 12 mergers totaling nearly $70 million.

Speaker Change: Estimated annualized revenue reported net earnings margin of 21, 5% adjusted EBITDA margin of 37, 8% GAAP earnings per share of $3 10, such an adjusted earnings per share of $3 83 up 17% year over year.

Speaker Change: So another terrific quarter by the team.

Patrick M. Gallagher: Moving to results on a segment basis, starting with the brokerage segment, revenue growth of 21%. Organic growth was 8.9% and about 10% if you include interest income. Adjusted EBITDAC was up 18% year-over-year.

Speaker Change: Moving to results on a segment basis, starting with the brokerage segment reported revenue growth of 21% organic growth was eight 9% at about 10%. If you include interest income.

Speaker Change: Adjusted EBIT was up 18% year over year.

Patrick M. Gallagher: And we posted an adjusted EBITDAC margin of 39.9%, a bit better than our March IR day expectations. Let me give some insights into our brokerage segment organically. And just to level the playing field, the following figures do not include interest income.

Speaker Change: We posted adjusted EBITDAX margin of 39, 9% a bit better than our March IR day expectations.

Speaker Change: Let me give some insights behind our brokerage segment organic and just to level set the following figures do not include interest income or.

Patrick M. Gallagher: Our global retail brokerage operations posted 7% organic growth. Within our PC operations, we delivered 7% in the United States, 6% in the UK, 2% in Canada, and 8% in Australia and New Zealand. And our global employee benefit brokerage and consulting business posted organic growth of about 8%, including some large life case sales that were completed in late March. Shifting to our reinsurance, wholesale, and specialty businesses, overall organic growth of 13%. This includes Gallagher Re at 13%, U.K. Specialty at 10%, and U.S. Wholesale at 13%.

Speaker Change: Our global retail brokerage operations posted 7% organic.

Speaker Change: Our PC operations, we delivered 7% in the United States, 6% in the UK, 2% in Canada, and 8% in Australia, and New Zealand.

Speaker Change: And our global employee benefit brokerage and consulting businesses posted organic of about 8%, including some large life case sales that were completed in late March.

Speaker Change: Shifting to our reinsurance wholesale specialty businesses overall organic of 13%. This includes Gallagher re at 13% UK, especially at 10% in U S wholesale at 13%.

Patrick M. Gallagher: Fantastic growth, whether retail, wholesale, or reinsurance. Next, let me provide some thoughts on the PC insurance pricing environment. Starting with the primary insurance market. Global first quarter renewal premiums, which include both rates and exposure changes, were up about 7%. Renewal premium increases continue to be broad-based across all of our major geographies and most product lines. For example, property was up nearly 10%, and umbrella up 9%.

Speaker Change: Tastic growth, whether retail wholesale or reinsurance.

Speaker Change: Next let me provide some thoughts on the PC insurance pricing environment, starting with the primary insurance market.

Speaker Change: Global first quarter renewal premiums, which include both rate and exposure changes were up about 7%.

Speaker Change: Renewal premium increases continued to be broad based across all of our major geographies and most product lines. For example property was up nearly 10% umbrella up 9% general liability up 7% workers' comp of 2% package up 8% and personal.

Patrick M. Gallagher: General Liability up 7%, Workers' Comp up 2%, Package up 8%, and Personal Lines up 13%. So many lines are seeing sizable increases. However, there are two exceptions within professional lines.

Speaker Change: <unk> was up 13%. So many lines are seeing sizable increases there are two exceptions within professional lines first you know where renewal premiums are down about 5% and second cyber where renewal premiums are flattish.

Patrick M. Gallagher: First, you know, where renewal premiums are down about 5%, and second, cyber, where renewal premiums are flatting. These two lines appear close to reaching a pricing bottom but combined represent around 5% of our PC business globally. So overall, our clients continue to see insurance costs increase, but our job as brokers is to mitigate these increases and deliver comprehensive insurance programs that align with their risk appetite and fit their budget. Moving to the reinsurance market, first quarter dynamics were dominated by the January one renewal season, where we saw stable pricing and increased demand for property cat cover. Reinsurers continued to exercise discipline and met the increased client demand with sufficient capacity.

Speaker Change: Two lines of pure close to reaching a pricing bottom, but combined represent around 5% of our PC business globally.

Speaker Change: So overall, our clients continue to see insurance costs increase.

Speaker Change: Our job as brokers as to mitigate these increases and deliver comprehensive insurance programs that align with their risk appetite and fit their budget.

Speaker Change: Moving to the reinsurance market.

Speaker Change: First quarter dynamics were dominated by the January one renewal season, where we saw stable pricing and increased demand for property cat cover reinsurers.

Speaker Change: Reinsurance continued to exercise discipline and met the increased client demand was sufficient capacity.

Patrick M. Gallagher: Importantly, the team was able to secure many new business wins while retaining most of our existing clients. During April renewals, reinsurance carriers maintained their discipline, and with increased demand and stable pricing, we saw more coverage being purchased. 2012 University of Georgia College of Agricultural and Environmental Sciences UGA Extension Office of Communications and Creative Services. The Casualty Treaty Market saw stable pricing overall; however, carriers able to differentiate themselves through good management of prior year reserves were able to secure better reinsurance placements. Specialty Class Renewals were a bit more complex with some changes in terms and conditions. However, many clients were able to secure modestly lower prices.

Speaker Change: Importantly, the team was able to secure many new business wins, while retaining most of our existing clients.

Speaker Change: During April renewals reinsurance carriers maintain their disciplined and with increased demand and stable pricing, we saw more coverage being purchased.

Speaker Change: Within property more capacity was available at the top end of programs and the quoting a new renewal process was disciplined and predictable.

Speaker Change: The casualty treaty markets are stable pricing overall, however carriers able to differentiate themselves through good management of prior year reserves were able to secure better reinsurance placements specialty class renewals were a bit more complex with some changes in terms and conditions. However, many clients were able to secure.

Speaker Change: Honestly lower pricing.

Patrick M. Gallagher: With that said, the tragedy in Baltimore may cause reinsurance carriers to raise rates more frequently throughout the rest of the year. Those interested in more detailed commentary on January or April renewals can find our first view market reports on our website. In our view, insurance and reinsurance carriers continue to behave rationally. Carriers know where they need rates, by line, by industry, and by geography. We are seeing this differentiation in our data.

Speaker Change: That said the tragedy in Baltimore may cause reinsurance carriers more pricing resolve throughout the rest of the year.

Speaker Change: Those interested in more detailed commentary on January or April renewals can find our first view market reports on our website.

Speaker Change: Yeah.

Speaker Change: In our view insurance and reinsurance carriers continue to behave rationally there is nowhere they need rate by line by industry and by geography. We are seeing this differentiation in our data premiums are increasing the most where it's needed to generate an acceptable underwriting profit. Great example of this is primary casualty.

Patrick M. Gallagher: Premiums are increasing the most where it's needed to generate an acceptable underwriting profit. A great example of this is primary casualty, where we are seeing renewal premiums moving higher. Global First Quarter Umbrella and General Liability Renewal Premium increases are in the high single digits, including 9% increases in U.S. retail. A.M. Best recently maintained its negative outlook on the U.S. general liability insurance market due to worsening social inflation, medical expenses, and litigation financing.

Speaker Change: We are seeing renewal premiums moving higher.

Speaker Change: Global first quarter umbrella and general liability renewal premium increases are in the high single digits, including 9% increases in U S retail.

Speaker Change: A M. Best recently maintained its negative outlook on the U S general liability insurance market due to worsening social inflation medical expenses and litigation financing we've been highlighting these dynamics for a while along with hearing concerns around historical reserves, which leads us to believe further rate increases are to come in.

Patrick M. Gallagher: We've been highlighting these dynamics for a while, along with hearing concerns around historical reserves, which leads us to believe further rate increases are to come in cash flow. On the other end of the spectrum, we have property.

Speaker Change: Casually.

Speaker Change: At the other end of the spectrum, we have property insurance and reinsurance carriers believe theyre getting closer to price and exposure adequacy, we are seeing property renewal premium increases moderating.

Patrick M. Gallagher: 2012 University of Georgia College of Agricultural and Environmental Sciences U.S. Department of Agricultural and Environmental Sciences. With that said, first quarter insurance renewal premiums were still pushing double digits. As we look out for the remainder of the year, increased frequency or severity of catastrophes could again move the market in 2024. And while capacity was very challenging to come by during 22 and 23, we are now finding that when clients are looking to add coverage or limits, carriers are more than willing to provide additional cover. Notably, we are not seeing a change in the underwriting standards from our carrier partners.

Speaker Change: With that said first quarter insurance renewal premiums were still pushing double digits as we look out for the remainder of the year increased frequency or severity of catastrophes could again move the market in 'twenty four.

Speaker Change: And while capacity was very challenging to come by during 'twenty, two and 'twenty. Three we're now finding win finding when clients are looking to add coverage or limits carriers are more than willing to provide additional cover notably we are not seeing a change in the underwriting standards from our carrier partners.

Patrick M. Gallagher: While continued premium increases seem rational to our carrier partners, our clients have experienced multiple years of increased costs. Having a trusted advisor like Gallagher to help businesses navigate a complex insurance market by finding the best coverage for our clients while mitigating prices is what we do.

Speaker Change: While continued premium increases seem rational to our carrier partners. Our clients have experienced multiple years of increased costs, having a trusted advisor like Gallagher to help businesses navigate a complex insurance market by finding the best coverage for our clients, while mitigating price increases that's what we do.

Patrick M. Gallagher: Moving to our customer's business activity, overall, it continues to be solid. During the first quarter, our daily indications showed positive mid-year policy endorsements and audits ahead of last year's levels across most geographies. Hence, we are not seeing signs of a broad global economic slowdown.

Speaker Change: Moving to our customers' business activity.

Speaker Change: Overall it continues to be solid during the first quarter. Our daily indications showed positive mid year policy endorsements and audits ahead of last year's levels across most geographies. So we are not seeing signs of a broad global economic slowdown.

Patrick M. Gallagher: Within the U.S., the labor market remains tight, non-farm payrolls continue to increase, and more people are re-entering the workforce. Yet, there continues to be nearly 9 million job openings. Wage increases have persisted at the same time medical cost trends are rising. With these dynamics, employers are focused on a total reward strategy to help them achieve their human capital goals. While reining in costs. That's why I believe our benefits businesses will have terrific opportunities in 24.

Speaker Change: Within the U S. The labor market remains tight non farm payrolls continue to increase and more people are reentering. The workforce yet there continues to be nearly 9 million job openings wage increases or persisted at the same time medical cost trends are rising with these dynamics and employers are focused on total reward.

Speaker Change: Our strategy to help them achieve their human capital goals, while reining in costs. That's why I believe our benefits businesses will have a terrific opportunities in 'twenty four.

Patrick M. Gallagher: Overall, we continue to win new brokerage clients while retaining our existing customers. In fact, our new business production has been on an upward trend in recent quarters, and our retention is holding. We believe this is a direct reflection of our client value proposition, Core 360 and Gallagher Better Works, our niche experts, service, and our data and analytics. Don't forget, we're competing with someone smaller than us 90% of the time.

Speaker Change: Overall, we continue to win new brokerage clients, while retaining our existing customers in fact, our new business production has been on an upward trend in recent quarters and our retention is holding we believe this is a direct reflection of our client value proposition Cora <unk> hundred 60, and Gallagher better works our niche experts.

Speaker Change: Service and our data and analytics don't forget.

Speaker Change: <unk> was somewhat smaller than us 90% of the time. These local brokers just can't match the value we provide so putting it all together we continue to see full year 'twenty four brokerage organic in the 7% to 9% range and that would be another outstanding year.

Patrick M. Gallagher: Moving on to our risk management segment, Gallagher-Bass, revenue growth was 19%, including organic growth of 13.3% and rollover revenues of $14 million. Adjusted EBITDAC margins were 20.6%, up 140 basis points versus last year and a bit better than our March IR day expectations. Our results continue to reflect solid new business, outstanding retention, continued increases in new and arising claims across both workers' comp and liability, and resilient customer business activity. Looking forward, we continue to see 24 full-year organic growth in the 9-11% range, as our larger 23 new business wins have been fully onboarded, and we now expect a full-year margin of approximately 20.5%. That would also be another outstanding, Shifting to mergers and acquisitions. We had an active first quarter, completing 12 new mergers, representing about $70 million of estimated annualized revenue.

Speaker Change: Moving on to our risk management segment Gallagher Bassett.

Speaker Change: Revenue growth was 19%, including organic of 13, 3% enrolled.

Speaker Change: $14 million adjusted EBITDA margins were 26% up 140 basis points versus last year, and a bit better than our March IR day expectations.

Speaker Change: Our results continue to reflect solid new business outstanding retention continued increases in new arising claims across both workers comp and liability and resilient customer business activity.

Speaker Change: Looking forward, we continue to see 24 full year organic in the 9% to 11% range as our larger 23, new business wins in pit fully on boarded and we now expect full year margin of approximately 25% that would also be another outstanding year.

Speaker Change: Okay.

Speaker Change: Shifting to mergers and acquisitions we.

Speaker Change: We had an active first quarter, completing 212, new mergers representing about $70 million of estimated annualized revenue.

Patrick M. Gallagher: I'd like to thank all of our new partners for joining us and extend a very warm welcome to our growing Gallagher family of professionals. Looking ahead, our pipeline remains strong. We have around 50 term sheets signed or being prepared, representing around $350 million of annualized revenue.

Speaker Change: I'd like to thank all of our new partners for joining us and I extend a very warm welcome to our growing Gallagher family of professionals. Looking ahead. Our pipeline remains strong we have around 50 term sheets signed or being prepared representing around $350 million of annualized revenue.

Patrick M. Gallagher: Good firms always have a choice and will be very excited if they choose to join Gallagher. Let me conclude with some comments regarding our bedrock culture. It's a culture that has remained constant through the decades of incredible growth. This is largely due to the 25 tenants of Gallagher Way, which is entering its fifth decade next month. It is deeply rooted in the values of integrity, ethics, and trust which have been guiding us since 1927.

Speaker Change: Good firms always have a choice and we will be very excited if they choose to join Gallagher.

Speaker Change: Let me conclude with some comments regarding our bedrock culture.

Speaker Change: As a culture that has remained constant through the decades of incredible growth.

Speaker Change: This is largely due to the 25 tenants of the Gallagher way, which is entering its fifth decade next month it.

Speaker Change: It is deeply rooted in the values of integrity ethics, and trust, which had been guiding us since 1927 or.

Patrick M. Gallagher: Our culture is not just a differentiator; it's a competitive advantage. It attracts the right talent to our organization and the best merger partners and enables us to build enduring relationships. What makes me particularly proud is that I witness our culture in action every day as our employees demonstrate their commitment to our clients.

Speaker Change: Our culture is not just a differentiator it is a competitive advantage. It attracts the right talent to our organization and the best merger partners and enables us to build enduring relationships.

Speaker Change: What makes me, particularly proud is that I witnessed our culture in action every day as our employees demonstrate their commitment to our clients and that is the Gallagher way, Okay, I'll stop now and turn it over to Doug Doug.

Patrick M. Gallagher: And that is the Gallagher way. Okay, I'll stop now and turn it over to Doug. Doug.

Douglas K. Howell: Thanks, Pat, and hello everyone. Today, I'll walk you through our earnings release. I'll comment on first quarter organic growth and margins by segment, including how we are seeing full year organic growth and margins in each of the next three quarters. Then I'll provide some typical comments on the modeling helpers we provide in the CFO commentary document that we post on our website, and I'll conclude my prepared remarks with a few comments on cash, M&A, and capital management.

Douglas K. Howell: Thanks, Pat and Hello, everyone. Today, I'll walk you through our earnings release I'll comment on first quarter organic growth and margins by segment, including how we are seeing full year organic growth and margins in each of the next three quarters.

Douglas K. Howell: I'll provide kind of typical comment on the modeling helpers, we provide in the CFO commentary document that we posted on our website and I'll conclude my prepared remarks with a few comments on cash M&A and capital management.

Douglas K. Howell: Okay, let's flip to page 2 of the earnings report, headline first quarter brokerage organic growth of 8.9 percent. That's a bit better than our March IR day expectation of eight to eight and a half percent, and remember we excluded interest income, including such, we would have shown about ten percent organic growth. Looking ahead, we continue to see strong new business production and favorable client retention. Combining that with further rate increases, a resilient economic backdrop, and sticky inflation, our 2024 brokerage organic outlook is unchanged.

Douglas K. Howell: Okay, let's flip to page two of the earnings release headline first quarter brokerage organic growth of eight 9%.

Douglas K. Howell: Better than our March IR day expectation of eight to eight 5% and remember we exclude interest income, including Sachin, we would've shown about 10% organic growth.

Douglas K. Howell: Looking ahead, we continue to see strong new business production and favorable client retention.

Douglas K. Howell: Combine that with further rate increases are resilient economic backdrop, and sticky inflation. Our 2024 brokerage organic outlook is unchanged. We are still seeing full year organic growth in that 7% to 9% range.

Douglas K. Howell: We are still seeing full year organic growth in that 7 to 9% range. Please refer to page 4 of the arranged release for the Brokerage Segment Adjusted EBITDA table. First quarter adjusted EBITDAC margin was 39.9%, a bit better than our March IR day expectation. The footnote on that page explains what we discussed in our January earnings call and again at our March IR day. There are 90 basis points of rolling impact from M&A, principally Buck, that naturally runs lower margins.

Patrick M. Gallagher: Jumping to page four of the earnings release to the brokerage segment adjusted EBITDA table first quarter adjusted EBITDA margin was 39, 9% a bit better than our March our IR day expectations.

Douglas K. Howell: Foot note on that page explains what we discussed in our January earnings call and again at our March IR day. There is 90 basis points of rolling impact from M&A, principally Buck that naturally runs lower margins. So on the surface. It is showing 30 basis points lower underlying margins actually.

Douglas K. Howell: So on the surface, it is showing 30 basis points lower. Again, that improvement is a little better than what we forecasted in March. Let me walk you through a bridge from last... First, if you were to pull out last year's 2023 first quarter, you would see, as we reported back then, an adjusted EBITDAC margin of 40.4%. Second, when we update that margin using current period FX rates, it gets you to an FX adjusted margin of about 40.2%.

Douglas K. Howell: At 60 basis points again that improvement is a little better than what we forecasted in March let me walk you through a bridge from last year.

Douglas K. Howell: First if you were to pull out last year as 2023 first quarter you would see we reported back then adjusted EBITDA margin of 44%.

Douglas K. Howell: Second when we update update that margin using current period FX rate gets you to an FX adjusted margin of about 42% and we've done that here. So you can see that in the 2023 column in this table.

Douglas K. Howell: And we've done that here. So you can see it in the 2023 column in this table. Third, deduct that the 90 basis point role in impact. Again, that's all due to the role in math. And let's just be clear, these are not businesses with margins that are going back. So that gets you to 39.3%. Compare that to the 39.9% we showed today, and that gives you the underlying 60 basis points of margin expansion.

Douglas K. Howell: <unk> deduct that the 90 basis point rolling impact again, that's all due to their role in math and just to be clear. These are not businesses with margins that are going backwards.

Douglas K. Howell: So that gets you to 39, 3% compare that to the 39, 9%. We showed today and that gives you the underlying 16 basis points of margin expansion that is really great work by the team.

Douglas K. Howell: That is really great work by them. As we look ahead to the following three quarters of 24, it is looking like we could expand margins in the 90 to 100 basis point range in each of the next three quarters. Let me give you some flavor on that.

Douglas K. Howell: As we look ahead to the following three quarters of 'twenty four it is looking like we could expand margins in the 90 to 100 basis point range in each of the next three quarters, Let me give you some flavor on that.

Douglas K. Howell: First, as Pat said, Buck passed its one-year anniversary, so that roll-in noise is behind it. Second, as discussed on our March IR day, the carryover impact of raises given in 2023 is comparatively lessened over the next three quarters. And third, the reality is we are typically posting margins higher than most of our M&A targets. While that slightly impacts what we report as margin expansion, we will do these mergers all day, any day. These are great businesses with terrific talent, and when we combine, we are better together.

Douglas K. Howell: First as Pat said, but passed its one year anniversary so that rolling noise is behind us.

Douglas K. Howell: As discussed at our March.

Douglas K. Howell: Our day, the carryover impact of raises given in 2023 is comparatively lessor over the next three quarters and third the reality is we're typically posting margins higher than most of our M&A targets, while that slightly impacts what we report as margin expansion. We will do these mergers all day any day. These are.

Douglas K. Howell: Great businesses with terrific talent and when we combine we are better together.

Douglas K. Howell: So to repeat, expansion in that 90-100 basis points range at each of the next three quarters would get you to about 60 basis points of full year margin expansion. That assumes we would post organic growth in that 7% to 9% range, and it still is allowing us to continue to make substantial investments in data, analytics, sales tools, digital services, and arming our sales and service folks with the best resources in the business.

Douglas K. Howell: Our repeat expansion in that 90 to 100 basis points range at each of the next three quarters. What gets you to about 16 basis points full year margin expansion.

Douglas K. Howell: It assumes that we would post organic in that 7% to 9% range and it still is allowing us to continue to make substantial investments in data analytics sales to tools digital service and arming our sales and service folks where the best resources in the business.

Douglas K. Howell: Okay, let's move to the risk management segment and organic and EBITDAC tables on pages four and five. Another fantastic quarter benefiting from new business wins and excellent client retention. 13.3% organic growth and margins at 20.6%. Looking forward, we are now lapping growth associated with our large new business wins from 23.

Douglas K. Howell: Okay, let's move to the risk management segment, and organic and EBITDA tables on pages, four and five another fantastic quarter benefiting from new business wins and excellent client retention.

Douglas K. Howell: 3% organic growth and margins at 26%.

Douglas K. Howell: Looking forward, we are now lapping growth associated with our large new business wins from 'twenty, three and so we see quarterly organic for the rest of <unk> 24 in the 8% to 9% range.

Douglas K. Howell: And so we see quarterly organic growth for the rest of 24 in the 8 to 9% range. As for margins, the team has done a great job posting margins above 20% this quarter, and we believe we can hold that for the remainder of the year. That also is a bit better than our March IR day outlook.

Douglas K. Howell: As for margins the team has done a great job posting margins about 20% this quarter and we believe we can hold that for the remainder of the year that also is a bit better than our March aisle.

Douglas K. Howell: March IR day outlook.

Douglas K. Howell: Turning to page six of the earnings release from the corporate segment shortcut table adjusted first quarter numbers came in better than the favorable end of our March IR day expectations due to lower due to lower acquisition costs and some favorable tax items, primarily associated with stock based compensation and that's shown in the corporate line.

Douglas K. Howell: Turning to page 6 of the earnings release in the corporate segment shortcut table, adjusted first quarter numbers came in better than the favorable end of our March IR day expectations due to lower acquisition costs and some favorable tax items primarily associated with stock-based compensation, and that's shown in the corporate line. Now, let's move to the CFO commentary document that we post on our website. Not much changes at all on pages 3 or 4, other than a few tweaks to a few numbers, such as FX, non-cash items, etc. Just do a double check with your models using these numbers.

Douglas K. Howell: So now let's move to the CFO commentary document that we posted on our website not much changes at all on pages, three or four oven other than a few tweaks to a few numbers such as FX noncash items et cetera, just to double check with your models using these numbers.

Douglas K. Howell: H five updates our tax credit carryforwards. It shows about $820 million available at March 31, and that we would be that we are benefiting our cash flows about $150 million to $180 million a year.

Douglas K. Howell: Page 5 updates our tax credit carry forwards. It shows about $820 million available on March 31st and that we would be benefiting from our cash flows by about $150 to $180 million. www.youtube.com or www.youtube.com or www.youtube.com. Turning to page six, the top table. Recall, we introduced this modeling helper in January; it breaks down the components of investment income, premium finance revenues, book gains, and equity investments in third-party brokers. Not much has changed from what we provided in March, but we are still embedding two 25 basis point rate cuts in the second half of 24, and we've also updated for current FX rates.

Douglas K. Howell: Doesn't flow through our P&L, but still a nice annual cash flow benefit that helped us fund future M&A.

Douglas K. Howell: Okay.

Douglas K. Howell: Turning to page six the top table recall, we introduced this modeling helper in January it breaks down the components of investment income premium finance revenues book gains and equity investments in third party brokers not much has changed from what we provided in March.

Douglas K. Howell: Not that we are still embedding 225 basis point rate cuts in the second half of 'twenty four and we've also updated for current FX rates.

Douglas K. Howell: The lower table on page six as rollover revenues Blue column sub total total of about $228 million is very close to the $224 million. We provided at our March IR day, and remember the pinkish columns. Only include estimated revenues for M&A through that we've closed through yesterday, so just to remind.

Douglas K. Howell: You'll need to make a pick for future M&A.

Douglas K. Howell: Also a little housekeeping when you read a note three on that page, you'll see we had an estimate change related to some historical acquisitions that causes the gross up of revenues and expenses.

Douglas K. Howell: The lower table on page 6 is rollover revenues. The blue column subtotal of about $228 million is very close to the $224 million we provided on our March IR day. And remember, the pinkish columns only include estimated revenues for M&A that we closed through yesterday. So just a reminder, you'll need to make a pick for future M&A. Also, a little housekeeping; when you read note 3 on that page, you'll see we had an estimate change related to some historical acquisitions that causes a gross up of revenues and expenses. It nets to close to nothing, but it does flow through the P&L. We've adjusted these out so there's no impact on organic adjusted net earnings or adjusted EBIT Act or adjusted EPS.

Douglas K. Howell: To close to nothing but it does flow through the P&L. We've adjusted these out so there's no impact to organic adjusted net earnings adjusted EBITDA or adjusted EPS.

Douglas K. Howell: Moving to cash capital management, and M&A funding available cash on hand at March 31st was around $1 billion, which includes a portion of the proceeds from our February debt offering.

Douglas K. Howell: The $1 billion in the bank and expected strong future cash flows we are still estimating we have total capacity in 24 of about three and a half a billion dollars to fund M&A without issuing stock nor we're having to borrow much of anymore.

Douglas K. Howell: As for 2025, it looks like we can fund over 4 billion of M&A with free cash and debt.

Douglas K. Howell: Moving to cash, capital management, and M&A funding. Available cash on hand at March 31st was around $1 billion, which included a portion of the proceeds from our February debt offering. So with a billion in the bank and expected strong future cash flows, we are still estimating we have total capacity in 24 of about $3.5 billion to fund M&A without issuing stock nor having to borrow much, if any more. As for 2025, it looks like we could fund over $4 billion of M&A with free cash and debt.

Douglas K. Howell: All of the asphalt maintaining a solid investment grade rating.

Speaker Change: Okay, another terrific quarter and start to the year. Looking ahead, we see continued strong organic growth a growing pipeline of M&A further opportunities for productivity improvements and a culture that makes it hard to be I believe we are very well positioned to deliver another fantastic year here in 'twenty four back to you Pat.

Pat: Thank you Doug operator, I think we're ready for some questions.

Speaker Change: Okay.

Speaker Change: Thank you the call is now open for questions.

Speaker Change: You have a question. Please pickup your handset impressed star one on your telephone at this time.

Douglas K. Howell: On a speaker phone please disable that function prior to pressing star one to ensure optimal sound quality.

Douglas K. Howell: All this while maintaining a solid investment grade rating. Okay, another terrific quarter and start to the year. Looking ahead, we see continued strong organic growth, a growing pipeline of M&A, further opportunities for productivity improvements, and a culture that makes us hard to beat. I believe we are very well positioned to deliver another fantastic year here in 24. Back to you, Pat.

Pat: You may remove yourself from the queue at any point by pressing star two.

Pat: Again, Thats star one for question.

Speaker Change: First question comes from the line of Elyse Greenspan with Wells Fargo. Please proceed with your question.

Pat: Hi, Thanks, Good evening My first question.

Speaker Change: <unk>.

Pat: Brokerage segment, so organic as you guys said right.

Pat: A bit better than what you expected in March.

Patrick M. Gallagher: Thank you, Doug. Operator, I think we're ready for some questions.

Pat: So close to the top and the full year guided range right that you guys are maintaining that outlook could you just give us a sense of do you expect growth.

Unknown Executive: Thank you. The call is now open to questions. If you have a question, please pick up your handset and press star 1 on your telephone at this time. If you are on a speakerphone, please disable that function prior to pressing star 1 to ensure optimum sound quality. You may remove yourself from the queue at any point by pressing star 2. Again, that's star one for questions. Our first question comes from the line of Elyse Greenspan with Wells Fargo. Please proceed with your question.

Speaker Change: Well over the balance of the year is there some level of conservatism I mean Pat.

Speaker Change: You seem positive on the pricing environment.

Elyse Beth Greenspan: No a little bit like GDP numbers today come out I'm, just trying to think about how you put that all together and how you would think growth will trend within brokerage over the next three quarters.

Pat: I'm going to let Doug do the numbers, but yeah, I mean, I think you're reading me right Lisa I'm bullish on the environment we're in.

Elyse Beth Greenspan: Thanks. Good evening.

Elyse Beth Greenspan: My first question is on the brokerage segment. So organic, as you guys said, right, a bit better than what you expected in March. So close to the top end of the full year guided range, right, that you guys are maintaining that outlook. Can you just give us a sense of whether you expect growth, you know, to slow over the balance of the year? Is there some level of conservatism?

Elyse Beth Greenspan: Not seeing a downturn in terms of R. R class. They are employing more people, we're seeing robust client activity at Gallagher Bassett, that's a very good bellwether foots, what's going on in the economy.

Pat: Interest rates are up.

Speaker Change: The market hates inflation, but it is good for brokers and high interest rates are you know help us as well in terms of the growth in revenues and head count and all the rest of it. So the fundamental business environment is really really good for us as far as the numbers still go ahead, yeah listen we don't see much difference in each corner going forward, we think we'll be in that 70.

Elyse Beth Greenspan: I mean, Pat, you seemed positive about the pricing environment. You know, we saw a little bit of GDP numbers today come out. I'm just trying to think about how you put that all together and how you would think growth would trend within brokerage over the next three quarters.

Pat: The 9% range leaves, we do have a large first quarter and it is heavily weighted to reinsurance. So you would naturally expect us if we're going to be in that range that maybe the first quarter is a touch above the next three quarters, but I wouldn't say, it's anything meaningful and so we are in that 7% to 9% range. Each of the next three quarters, which would bring us into <unk>.

Patrick M. Gallagher: Well, I'm going to let Doug do the numbers. But yeah, I mean, I think you're reading me right.

Patrick M. Gallagher: At least I'm bullish on the environment. We are not seeing a downturn in terms of our clients. They're employing more people. We're seeing robust client activity at Gallagher Bassett.

Speaker Change: Range for the full year, so really nothing different than what we've talked about last couple of times, we've been with you.

Patrick M. Gallagher: That's a very good bellwether of what's going on in the economy. Interest rates are up. You know, the market hates inflation, but it's good for brokers. And high interest rates, you know, help us as well in terms of the growth in revenues and headcount and all the rest of it. So the fundamental business environment is really, really good for us. As far as the numbers are concerned, Doug, go ahead.

Doug: Thanks, and then the second one is on margin right. So a little bit like you said Q1 was a little bit better than the March guide on no. But you previously had said right 100 basis points can be outbid quarters now, it's 90 to 100 and the <unk>.

Patrick M. Gallagher: Your guide seems unchanged is it just you know maybe Q1 was a little bit better so now you're taking.

Douglas K. Howell: Yeah, listen, we don't see much difference in each quarter going forward. We think we'll be in that seven to nine percent range. At least we do have a large first quarter, and it is heavily weighted to reinsurance. So you would naturally expect us to, if we're going to be in that range, that maybe the first quarter is a touch above the next three quarters, but I wouldn't say it's anything meaningful. And so we're in that seven to nine percent range each of the next three quarters, which would bring us in that range for the full year. So really, nothing different than what we've talked about the last couple times we've been with you.

Speaker Change: Taking some of that to invest internally I know, it's a little nitpicky, because it's still 90 to 100, but just trying to kind of square.

Douglas K. Howell: Updated our corner of margin view with what you told us in March.

Speaker Change: Well listen I think that the CFO commentary document is kind of sad 90 to 100, I think consistently if I set 100% at the last IR day I may have said towards the Hunter 100 basis points.

Douglas K. Howell: So I think our guidance field talks about the same.

Speaker Change: Okay, and then one last one on.

Speaker Change: The FTC right is looking to potentially remove non competes.

Elyse Beth Greenspan: Thanks. And then the second one is on the margin, right? So a little bit, like you said, Q1 was a little bit better than the March guide. No, but you previously had said, right, 100 basis points in the ALC recorders. Now it's 90 to 100, and the full-year guide seems unchanged. It's just, you know, maybe Q1 was a little bit better. So now you're, you know, taking some of that to invest internally. I know it's a little nitpicky because it's still 90 to 100, but just trying to kind of square the updated quarterly margin view with what you told us in March.

Speaker Change: From I guess my question is two pronged from both the ability I guess to bring folks into Gallagher.

Speaker Change: Also considering.

Speaker Change: Potential to lose talent other players how do you think.

Speaker Change: Could impact the company.

Speaker Change: Okay.

Elyse Beth Greenspan: It does actually go through.

Speaker Change: Well, let me let me comment on that one first of all I think everybody saw that the U S chamber.

Speaker Change: <unk> filed a lawsuit in Texas Thats challenging this and were supportive of the chambers efforts.

Elyse Beth Greenspan: We think it's an overreach by the executive branch, but having said that.

Speaker Change: If the new rules actually hold up.

Douglas K. Howell: Well listen, I think that the CFO commentary document has kind of said 90 to 100, I think, consistently. If I had said 100% at the last IR day, I may have said towards 100 basis points. So I think our guidance feels to us about the same.

Elyse Beth Greenspan: And noncompete agreements as part of a sale of a business and so we see.

Speaker Change: That rules, having little impact really on our M&A strategy. That's when it first came out that was kind of my concern.

Speaker Change: Our agreements with our production staff do not contain noncompete provisions.

Speaker Change: Rather we use non solutions solicitation clauses and that Theres, a thought I know, there's a finite difference there, but those cover clients and employees.

Elyse Beth Greenspan: Okay, then one last one on the FTC, right? It's looking to potentially remove non-competes from, you know, from, you know. My question is two-pronged, from both the ability, I guess, to bring folks into Gallagher as a poll and also considering, you know, the potential to lose talent, other players, how do you think this could impact the company if, you know, what it does actually go through? Well, let me let me comment on that one. First of all, I think

Speaker Change: And from our first look we think those are going to remain enforceable, having said all of that.

Speaker Change: We want people, who want to work here the reason.

Speaker Change: Why culture is so important.

Elyse Beth Greenspan: This is a great place to work.

Elyse Beth Greenspan: And we attract highly motivated salespeople and entrepreneurs that are passionate about.

Speaker Change: So what they do.

Speaker Change: They want to leverage their expertise and capabilities and we give them that.

Elyse Beth Greenspan: The data and analytics in the centers of excellence to work with we arm them with.

Patrick M. Gallagher: Well, let me comment on that one. First of all...

Elyse Beth Greenspan: Way better.

Speaker Change: Arguments that they get from being part of a local competitor.

Patrick M. Gallagher: I think everybody saw that the U.S. Chamber of Commerce filed a lawsuit in Texas that's challenging, and we're supportive of the Chamber's efforts. We think it's an overreach by the executive branch. But having said that, if the new rules actually hold up, there's a cut out for non-compete agreements as part of a sale of a business. And so we see that the new rules are having little impact, really, on our M&A strategy. And that's why when it first came out, that was kind of my concern.

Speaker Change: We're a great place to work.

Patrick M. Gallagher: While I don't agree with the FTC.

Patrick M. Gallagher: Do agree with the chamber's position, we're supportive of that for our business I think it's a non issue.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Mike Zaremski with BMO capital markets. Please proceed with your question.

Patrick M. Gallagher: Okay.

Thanks, Good afternoon.

Patrick M. Gallagher: Just as a quick follow up on the.

Patrick M. Gallagher: FTC question.

Patrick Gallagher: One of them.

Douglas K. Howell: Top 10 brokers is on record saying that.

Speaker Change: Theyre, California margins are a bit lower.

Patrick M. Gallagher: Our agreements with our production staff do not contain non-competition clauses. We use non-solicitation clauses, and there's a fine line difference there, but those cover clients and employees. And from our first look, we think those are going to remain enforceable. Having said all that... We want people to want to work. This is why culture is so important.

Patrick M. Gallagher: Then the rest of it.

Patrick M. Gallagher: The rest of the regions did a little bit higher turnover, which might be due to kelly not having.

Patrick M. Gallagher: Non solicit and compete just curious this is <unk>.

Patrick M. Gallagher: Have you ever slice and dice, your California margins and are they a little bit lower than the rest of the company.

Patrick M. Gallagher: This is a great place to work. And we attract highly motivated salespeople and entrepreneurs that are passionate about, Way better equipment than they get from being part of a local competitor. We're a great place to work. So while I don't agree with the FTC, and I do agree with the Chamber's position, we're supportive of that, for our business, I think it's a non-issue.

Patrick M. Gallagher: My son dies every margin by every possible measure you can think of <unk> and no.

Patrick M. Gallagher: No they're not of the Lora, we've been trading in California.

Patrick M. Gallagher: We love the state were big Big there and our people are working there.

Patrick M. Gallagher: Okay.

Speaker Change: That's clear.

Speaker Change: Switching gears to.

Speaker Change: The M&A.

Patrick M. Gallagher: You guys and I've asked this in the past, but I'll, just keep asking because the big numbers. So Doug you said four.

Michael David Zaremski: Our next question comes from the line of Mike Zaremski with BMO Capital Markets. Please proceed with your question.

Michael David Zaremski: $4 billion of capacity for next year and how that is.

Michael David Zaremski: Thanks. Good afternoon.

Speaker Change: <unk>.

Michael David Zaremski: Just as a quick follow-up on the FTC question, one of the top 10 brokers is on record saying that their California margins are a bit lower than the rest of their regions due to a little bit higher turnover, which, you know, might be due to Cali not having non-solicit and non-compete laws. Just curious, have you ever sliced and diced your California margins? And are they a little bit lower than the rest of the company?

Michael David Zaremski: Big numbers, three and a half this year for next year.

Speaker Change: This implies it looks like the top 100 list of brokers I know Thats. Just you asked there's lots of overseas stuff, but just should we be thinking you guys.

Michael David Zaremski: Do some chunkier.

Michael David Zaremski: Size deals.

Michael David Zaremski: At this time progress is to be able to kind of fully deploy cash and debt.

Michael David Zaremski: <unk>.

Michael David Zaremski: Hi, This is Pat I think it's fair to say that when opportunity presents itself. We're not afraid I mean 10 years ago, we stepped up and bought west farmers.

Unknown Executive: Please see the complete disclaimer at https://sites.google.com itself.

Michael David Zaremski: [inaudible] That's clear. Switching gears to, The M&A, you guys, and I've asked this in the past, but I'll just keep asking, because these are big numbers. So Doug, you said, you know, 4 billion in capacity for next year. Now that's clear, but you know, these are just big numbers, you know, three and a half this year, four next year. Does this imply, if you look at like the top 100 list of brokers, I know that's just the US, there's lots of overseas stuff, but just, should we be thinking, you guys, do something chunkier?

Unknown Executive: Australia for $1 billion that was the biggest play we'd ever made.

Doug: In fact, it's a financing for this worked out incredibly well I think our purchase of Willis was somewhere around the order of the world.

Michael David Zaremski: This REIT was somewhere on the order of $4 billion in the last year, we spent.

Doug: A good bit as well so we're not afraid to look at Chunkier deals.

Michael David Zaremski: You hit on it there's 100 top 129900 in the United States alone that are smaller than that.

Doug: That's where our activities based most of the time.

Michael David Zaremski: Yes, I think Mike. This is Doug I think we have a chassis now that we can bring on a lot of smaller acquisitions. They are nice family owned businesses that realize that they can be better together with us.

Patrick M. Gallagher: Mike, this is Pat. I think it's fair to say that when opportunity presents itself, we're not afraid. I mean, ten years ago, we stepped up and bought Wesfarmers out of Australia for a billion dollars. It was the biggest play we'd ever made. And had in fact, it's a financing for that's worked out incredibly well. I think our purchase of Willis was somewhere on the order of Willis-Ree was somewhere on the order of $4 billion. And last year, we spent, https://www.youtube.com.uk That's where our activity is based in Austin.

Patrick M. Gallagher: That are you know our M&A.

Patrick M. Gallagher: Integration process is pretty smooth.

Patrick M. Gallagher: A very refined 700 deals over the last 20 years, So we've got that down and I think more and more.

Patrick M. Gallagher: No.

Patrick M. Gallagher: Smaller local brokers are realizing they can they can get the resources from us overnight that they've been wanting to have for maybe 20 years. So I think we have an advantage right now that.

Patrick M. Gallagher: I think that we have a chassis now that we can bring on a lot of smaller acquisitions, you know, nice family-owned businesses that realize that they can be better together with us. I think that our M&A integration process is pretty smooth, very refined 700 deals over the last 20 years. So we've got that down. And I think more and more, you know, www.youtube.com.uk A family-owned broker now sees that they get to join us. This is their forever home.

Patrick M. Gallagher: Our family owned broker now sees that they get to join US. This is their forever home. They don't have to sell into a different model that maybe won't flip them or sell them to a different owner or a break them apart in order to get value. They see that what's being talked about capabilities, just real inside of us and sometimes.

Patrick M. Gallagher: When they go to another.

Speaker Change: A quarter for them, they're saying, what they're going to do versus what they have done. So I think that we have the opportunity to increase the volume of that nice tuck in deals that are that we see out there and I think that our story is getting stronger and stronger every day and a higher interest rate.

Patrick M. Gallagher: They don't have to sell into a different model that maybe will flip them or sell them to a different owner or break them apart in order to get value. They see that what's being talked about about the capabilities is real inside of us. And sometimes when they go to another quarter for them, they're saying what they're going to do versus what they have done. So I think that we have the opportunity to increase the volume of the nice tuck-in deals that we see out there.

Patrick M. Gallagher: It does not help others reinvest into their business, we can reinvest so much into our business day in and day out their new ideas for tools and capabilities and the others just can't say that they haven't done it I don't think they're going to do it in a higher interest rate. So I think the volume of our tuck in deals.

Patrick M. Gallagher: And I think that our story is getting stronger and stronger every day. A higher interest rate does not help others reinvest in their business. We reinvest so much into our business. Day in and day out, there are new ideas for tools and capabilities. And others just can't say that they haven't done it.

Patrick M. Gallagher: Increase what we spent $3 5 billion this year and 4 billion next year.

Speaker Change: Yeah, maybe we will see I think we've got a good shot at it.

Speaker Change: Okay. Thanks, I'll get back in the queue.

Speaker Change: Thanks, Mike.

Speaker Change: Okay.

Patrick M. Gallagher: Our next question comes from the line of David <unk> with Evercore ISI. Please proceed with your question.

Patrick M. Gallagher: I don't think they're going to do it at a higher interest rate. So I think the volume of our tuck-in deals will increase when we spend three and a half billion this year and 4 billion next year. Yeah, maybe we'll see. I think we've got a good shot.

David: Hi, Thanks, good morning.

Speaker Change: Alright, alright. Good afternoon, she has had a long day.

David: I don't know maybe I thought you were in Asia. That's okay, yeah, Yeah, I actually don't even know where I am.

Michael David Zaremski: Thanks; I'll get back in the queue.

David Kenneth Motemaden: Our next question comes from David Motemaden with Evercore ISI. Please proceed with your question.

Patrick M. Gallagher: But.

Speaker Change: Pat I wanted to just talk about your comments you made on the property insurance side and on clients looking to add.

David Kenneth Motemaden: Hi, thanks. Good morning. All right. Sorry. Good afternoon. Geez. Long day. Yeah, yeah, I actually don't even know where I am. But, but Pat, I wanted to just talk about your comments you made on the property insurance side and on clients looking to add incremental coverage or limits and and just how I can think about that as a potential offset to some of the moderation in property insurance pricing that you were talking about as well. Just help me think about both of those factors and, you know, sort of how to think about that moderation and the impact that could have on your organic growth in the future.

David: Incremental coverage or limits and just how I can think about that as a potential offset to some of the moderation in.

David: Property insurance pricing.

David Kenneth Motemaden: That you.

David: You were talking about as well just help me think about the.

David Kenneth Motemaden: Both of those factors.

David Kenneth Motemaden: Sort of how to think about that moderation.

Pat: The impact that could have on your organic growth in the future well first of all I think that when you look at that those were in this section of the prepared remarks, it has to do with reinsurance.

David Kenneth Motemaden: Been a lot of demand the last number of years for cat covers and what have you that frankly were hard to meet and that's why we talk about the fact it was more orderly. This one one we were able to complete what people wanted more or less.

Patrick M. Gallagher: Well, first of all, I think when you look at that, that was in the section of the prepared remarks that had to do with reinsurance, and there's been a lot of demand in the last number of years for cat covers and what have you that, frankly, were hard to meet. And that's why we talk about the fact that this one was more orderly, and we were able to complete what people wanted, more or less.

Patrick M. Gallagher: But there has been an appetite for more cover there.

Patrick M. Gallagher: Buyers and sellers have walked away from but I think as we start to see pricing <unk>.

Patrick M. Gallagher: Stabilize become more predictable.

Patrick M. Gallagher: That allows us to flow into their rating structure et cetera.

Patrick M. Gallagher: There is a demand for more demand for more cover on their part and we're meeting that demand and I think that is offsetting some of the potential now.

Patrick M. Gallagher: But there has been an appetite for more cover there that buyers and sellers have walked away from. But I think as we start to see pricing stabilize, become more predictable, that that allows it to flow into their rating structure, etc. There's a demand for more; there's a demand for more cover on their part, and we're meeting that demand. And I think that is offsetting some of the potential. Now, remember, we didn't we didn't see property rates come down, http://TheBusinessProfessor.com moderated.

Patrick M. Gallagher: Now remember we didn't we didn't see property rates come down.

Patrick M. Gallagher: This quarter, what we're saying is that the increase.

Patrick M. Gallagher: Moderate so you know I think that theres kind of on the retail side, if you're a retail buyer and remember most of our book of business is the commercial middle market don't get me wrong, we do a lot of risk management business, but these tuck in acquisitions and the like that we're doing are clearly middle market players. Most people don't have a lot of choice there.

Patrick M. Gallagher: Buying full cover at higher prices and if that moderates a bit it's good for the client.

Patrick M. Gallagher: So, you know, I think that you're kind of on the retail side if you're a retail buyer, and remember, most of our book of businesses, the commercial middle market, don't get me wrong, we do a lot of risk management business. But these acquisitions and the like that we're doing are clearly middle market players. Most people don't have a lot of choice; they're buying full cover at higher prices. And if that moderates a bit, it's good for the client.

Speaker Change: Yes interestingly.

Patrick M. Gallagher: David We are we're seeing a rate increases.

Patrick M. Gallagher: The exposure unit increases in the middle and smaller market greater than we did in <unk>.

Patrick M. Gallagher: Larger account size, whereas let's say you go back a year or so ago. It might have been just the opposite so we're starting to see if you're talking about some some rate moderation in the increase.

David Kenneth Motemaden: Interestingly, David, we're seeing rate increases and exposure unit increases in the middle and smaller market greater than we did in the larger account size, whereas let's say you go back a year or so ago, it might have been just the opposite. It's starting to pick up a little bit in the middle and small market space. The second thing to remember is that if the rate moderates, our customers are very good about opting out of coverage or as much coverage as rates go up and then opting back in for coverage to buy more when rates are coming down.

Patrick M. Gallagher: It's starting to pick up a little bit in the middle and small market space.

David Kenneth Motemaden: Second thing is remember if the rate moderates our customers are very good about.

David Kenneth Motemaden: And out of coverage or as much coverage as rates go up and then opting back in for coverage to buy more when rates are coming down. So we've never captured the full increase in there.

David Kenneth Motemaden: The rate and we won't suffer the entire give back if rates moderate a little bit. So there's that opt in opt out we haven't really talked about that much in the last five years or so, but we're seeing customers opt back in to buy more coverage. If there's some moderation in the increase of the rates also on the <unk>.

David Kenneth Motemaden: So we've never captured the full increase in the rate, and we won't suffer the entire give-back if rates moderate a little bit. So there's that opt-in, opt-out. We haven't really talked about that much in the last five years or so, but we're seeing customers opt back in to buy more coverage if there's some moderation in the increase in the rate. Also, on property.

David Kenneth Motemaden: Pretty side back to that David you've got.

David Kenneth Motemaden: Many years, where zero interest rates not the last coupled with zero interest rates left the schedule is pretty much untouched.

David Kenneth Motemaden: You do have underwriters now being much more disciplined around the values and that's pushing values up.

Patrick M. Gallagher: Also on the property side, back to that David you've got Many years were zero interest rates, not the last couple, but zero interest rates left the schedules pretty much untouched. So you do have underwriters now being much more disciplined around the values. And that's pushing values up. So we've got the benefit of more values being insured in the property business, and my prepared remarks basically pointed out that property values were up nearly 10%. So we're not seeing rates drop, https://www.youtube.com.au. Now, having said that...

Patrick M. Gallagher: So we've got the benefit of more value is being insured in the property business in my prepared remarks, basically pointed out the property was up nearly 10% this quarter. So we're not seeing rates dropping.

Patrick M. Gallagher: Seeing rates go up and property at a little less viciously now having said that.

Patrick M. Gallagher: The wind blows this fall.

Patrick M. Gallagher: One month away from the start of the Hurricane season, I'm, just telling you all bets are off.

Patrick M. Gallagher: I don't know what's going to happen.

Patrick M. Gallagher: So for our clients sake, I hope that we have a benign season.

Speaker Change: No. Thanks for that and Yeah, I do I was yes.

Patrick M. Gallagher: Referring also and you guys answered it just the primary market.

David Kenneth Motemaden: If the wind blows this fall, you know, we're one month away from the start of a hurricane. I'm just telling you, all bets are off. I don't know what's going to happen. So, for our clients' sake, I hope that we have a good night.

David Kenneth Motemaden: The moderation there it is interesting to hear more about sort of that opt in.

David Kenneth Motemaden: Which I have not.

Speaker Change: Thought about so that is helpful to hear about that so thanks for that.

David Kenneth Motemaden: No, thanks for that. And yeah, I do, you know, I was referring also to the primary market, and you guys answered it, just the primary market. We, you know, the moderation there, it is interesting to hear more about sort of that opt-in, which I have not thought about, so that is helpful to hear about that. And then if I could just add one more question.

David Kenneth Motemaden: And then if I could just add one more just one more question. So it sounds like there were some large life sales that came through towards the end of March.

David Kenneth Motemaden: It was that.

David Kenneth Motemaden: Pull forward from from future quarters or.

David Kenneth Motemaden: I guess sort of outlook on the pipeline of the life sales.

Speaker Change: Yes, how that how youre thinking about that throughout the rest of the year.

David Kenneth Motemaden: So it sounds like there were some large life sales that came through towards the end of March. Was that a pull forward from future quarters or, you know, I guess, sort of an outlook on the pipeline of life sales and just, you know, how you're thinking about that throughout the rest of the year?

David Kenneth Motemaden: And it's probably more of the if you remember in December we had some push out of the fourth quarter. So I would say it might be more catch up than it is paul pointing from the future and we're talking about 5 million Bucks.

David Kenneth Motemaden: On a $3 billion revenue quarter. So it was.

David Kenneth Motemaden: Please see the complete disclaimer at https://sites.google.com or at www.google.com. We love the business, but it's not, it doesn't make it big. Got it. So that was in your sort of Outlook range.

Speaker Change: Not meaningful in any of our numbers.

David Kenneth Motemaden: Different lots of business, but if that doesn't make a big difference in any of our numbers.

David Kenneth Motemaden: Got it so that was in your sort of outlook range that you gave in in March. So the upside this quarter was not just solely from the from the lifestyle.

David Kenneth Motemaden: Got it. So that was in your sort of outlook range that you gave in March. So the upside this quarter was not just solely from the life sale.

Speaker Change: That's right.

Speaker Change: Perfect. Thank you.

Speaker Change: Thanks, Dan.

David Kenneth Motemaden: Yeah.

David Kenneth Motemaden: Our next question comes from the line of Mark Hughes with <unk> Securities. Please proceed with your question.

David Kenneth Motemaden: Perfect. Thank you. Thank you, David. Our next question...

Speaker Change: Yes. Thank you good afternoon, Hi, Mark.

Speaker Change: Hello, and did you give the breakout for open brokerage person.

Mark Douglas Hughes: Our next question comes from the line of Mark Hughes with Truett Security. Please proceed with your question. Yeah, thank you.

Mark Douglas Hughes: Good afternoon. Hi Mark. Hello Pat, did you do it?

Mark Douglas Hughes: Or binding business within the wholesale.

Mark Douglas Hughes: I did not.

Mark Douglas Hughes: We did about 16% open brokerage this quarter. And then that was the binding. I think it's been running mid single digits is that. All right, I'll cut to the point.

Mark Douglas Hughes: We've got about 16% open brokerage.

Mark Douglas Hughes: Quarter.

Mark Douglas Hughes: And then there was the binding I think it's been running mid single digits does that.

Speaker Change: I don't know.

Mark Douglas Hughes: Point.

Mark Douglas Hughes: Higher than that. So, so more like, more like, I kind of love it.

Mark Douglas Hughes: Higher than that so more like more like kind of all of it.

Mark Douglas Hughes: Okay. And then anything on the workers comp side, or waiting for signs of life there in terms of frequencies, severity, and pricing? Is it more of the same? Or do we have some reason to think differently? It could be inflected. Oh, I think that's really interesting, Mark. You know, in my career, that line has been and is still pretty darn cyclical, and that is just fine. Flat as a pancake. You might see two here, three there, and um... Really just kind of flat.

Mark Douglas Hughes: Okay.

Mark Douglas Hughes: And then anything on the workers comp side.

Mark Douglas Hughes: Waiting for signs of life, there in terms of the frequency severity pricing.

Mark Douglas Hughes: Is it more of the same or do we have some reason to think.

Speaker Change: It could be.

Mark Douglas Hughes: In selecting.

Mark: I think thats really interesting.

Mark Douglas Hughes: In my career that that mine has been.

Mark Douglas Hughes: At times pretty darn cyclical and it is just as flat as a package.

Mark Douglas Hughes: It's just gone along.

Mark Douglas Hughes:

Mark Douglas Hughes: You might see two here three there and.

Mark Douglas Hughes: It's really just kind of flat.

Speaker Change: Yeah, yeah. Thank.

Katie Sackets: Our next question comes from the line of Katie Sackets with Autonomous Research. Please proceed with your question.

Speaker Change: Thank you very much.

Katie Sakys: Thanks Mark.

Katie Sackets: Okay.

Katie Sakys: Your next question comes from the line of Katy sockets with Autonomous Research. Please proceed with your question.

Katie Sackets: Hey, thanks. Good afternoon. First, I just kind of wanted to touch on the margin expansion guidance for the full year. If organic revenue growth were to come in, you know, this is an investment opportunity that you guys would kind of like to see some progress made on.

Katie Sakys: Hi, Thanks, Good afternoon first.

Katie Sakys: First of all just kind of wanted to touch on the.

Katie Sakys: Margin expansion guidance for the full year.

Katie Sakys: Organic revenue growth were to come in.

Katie Sakys: Higher than the current guide whether that comes from the wind blowing and property rates are accelerating your for something else.

Katie Sakys: How much of that.

Douglas K. Howell: Well, listen, I don't think that our investment opportunities would be rolled out fast enough in order to spend more going into if we had a pop-up in organic growth and, you know, starting in August if the wind blows or something like that. So I don't think we would have the ability even to ramp up on some of the, you know, some big investment opportunities to offset that additional organic growth.

Katie Sakys: Do you guys kind of envision leading to the bottom line.

Douglas K. Howell: Could we expect to see greater margin expansion or are there other areas.

Douglas K. Howell: Investment opportunity.

Douglas K. Howell: Guys are kind of like to see some progress.

Douglas K. Howell: Well listen I don't think that our investment opportunities would be rolled out fast enough in order to spend more going into if we had a pop up in organic growth.

Douglas K. Howell: Starting in August the wind blows or something like that so I don't think we would have.

Douglas K. Howell: I'm trying to do some mental math here. If we were up another, you know, quarter of a point in organic, it might produce another, you know, in a quarter to $10 or $15 million if we had it for a half a year or something like that, if I do my math right. You know, so I don't think it would probably naturally improve the margins a little bit.

Douglas K. Howell: The ability to ramp up on some of the some big investment opportunities too to offset that additional organic growth, but I'm trying to do some mental math here, if we were up another quarter.

Douglas K. Howell: Quarter of a point in organic it might produce another arrow in a quarter or 210 or $15 million. If we had them for half a year or something like that if I'm doing my math right.

Douglas K. Howell: So I don't think it would probably naturally improve the margins a little bit.

Douglas K. Howell: I want to make sure we go back and clarify the question within wholesale, all right? When you combine buying and programs, 11%. The programs are really more running around 2% to 3%, and open brokerages in that 16% range. So just to make sure that I answered one question, Pat answered a combined question. And just to break those three out, 16%, over 10%, and low single digits on the program side.

Speaker Change: I want to make sure we go back and clarify the question within the wholesale I. When you combine programs, 11% programs are running more running around.

Douglas K. Howell: 2% to 3% and open brokerage isn't that 16% range. So just to make sure that.

Douglas K. Howell: I answered one question Pat answered a combined question and just to break those three out 16, yeah yeah.

Douglas K. Howell: Over 10% in the low single digits on the program side.

Katie Sackets: Thanks, that's a helpful clarification. Maybe as a quick follow-up, in terms of, you know, benefits from headcount controls and client-related expenses, are those anything that you expect to persist as the year goes on? Or are those more specific to OneQ in particular?

Katie Sackets: Thanks, that's helpful clarification, maybe as a quick follow up.

Katie Sackets:

Katie Sackets: Benefits from headcount controls and client related expenses there.

Katie Sackets: I mean that you expect to persist as the year goes on or are those more specific Q1 in particular.

Douglas K. Howell: Well, listen, I think the team does a really nice job of looking...

Speaker Change: Oh listen I think that the team does a really nice job of working down our headcount controls.

Douglas K. Howell: Well, listen, I think the team does a really nice job of looking at our headcount controls. We have work models that show how many people we need to have, how many we have, and how many we need to hire in July, August, and September.

Douglas K. Howell: We have we have.

Douglas K. Howell: Work models that show how many people we need to have how many do we have yes do we need to hire in July August and September we can kind of forecast that our retention has been very good I got to say that when you look at it our retention is better today than it was let's say in 18 and 19. So I think we've done a really nice job of taking care of our employee.

Douglas K. Howell: We can kind of forecast that. Our retention's been very good. I gotta say that when you look at it, our retention is better today than it was, let's say, in 18 and 19, so I think we've done a really nice job of taking care of our employees throughout this inflation period, so we're not seeing significant terminations here. So overall, I think our work planning models and our ability to kind of forecast retention have helped us not have to push and pull on the joystick there to see how many more we need to bring on, how many we need to take off. So it's pretty steady right now.

Douglas K. Howell: Throughout this.

Douglas K. Howell: Inflation period, so we're not seeing significant.

Douglas K. Howell: Terminations here. So overall I think our work work planning models and our ability to kind of forecast our retention has helped us.

Douglas K. Howell: Not have to.

Douglas K. Howell: Push and pull on that.

Douglas K. Howell: You know on the joist deck, there to see how many more we need to bring on how many of them.

Douglas K. Howell: Take off so it's pretty steady right now.

Yaron Joseph Kinar: Thank you. Our next question comes from the line of Yaron Kinar with Jeffries. Please proceed with your question.

Yaron Joseph Kinar: Got it thank you.

Yaron Joseph Kinar: Okay.

Yaron Joseph Kinar: Yeah.

Yaron Joseph Kinar: Thank you. Our next question comes from the line of Euro Qunar with Jefferies. Please proceed with your question.

Yaron Joseph Kinar: Thanks. Good afternoon. I have no idea where I am, but I'm pretty sure it's afternoon.

Yaron Joseph Kinar: Thanks, Good afternoon.

Yaron Joseph Kinar: I have no idea, where I am but I'm pretty sure it's afternoon.

Yaron Joseph Kinar: So I just wanted to touch on.

Yaron Joseph Kinar: So I just want to touch on a couple of market questions if I could. I think in your prepared remarks you were talking about general liability and retail being up like 9%. If I go back to the investor meeting from a month or so ago, I think you were talking about maybe seeing liability lines moving up to the 9%, 10% range over the course of a year or two. So are we talking apples to apples here, or are you surprised by the magnitude of improvement that you're seeing in liability lines right now?

Speaker Change: I just wanted to touch on a couple of market questions. If I if I could.

Yaron Joseph Kinar: I think in the prepared remarks, you were talking about general liability and retail being up like 9%. If I go back to the Investor meeting from like a month or so ago. I think you were talking about maybe seeing liability lines moving up too.

Yaron Joseph Kinar: The 9% to 10% range over a course of a year or two.

Yaron Joseph Kinar: So are you or are we talking apples to apples here or are you surprised by the magnitude of improvement that youre seeing in <unk>.

Yaron Joseph Kinar: Liability lines right now.

Patrick M. Gallagher: Let me go back to my prepared remarks. We've seen Umbrella up 9% in the quarter, which is kind of in line with what we were talking about in March. GL-7. And that's where I think we probably have to look at our carriers and say, are there going to be some reserve challenges going forward? The seven seems, you know, pretty stable, maybe there'll be a push up a bit and package, which is of course, property and liability together at eight, we're not comp really not much, 2%. I think that feels like it's going to be there for the year. I think you could, you know, take our March discussions and kind of update them six weeks later for those numbers.

Yaron Joseph Kinar: I think let me let me go back to my prepared remarks, we've seen umbrella in the quarter up 9%, which is kind of in line with what we were talking about March.

Patrick M. Gallagher: All seven.

Patrick M. Gallagher: And that's where I think probably we've got.

Patrick M. Gallagher: So look at our carriers and say are there going to be some reserve challenges going forward as the southern seems.

Patrick M. Gallagher: It seems pretty stable, maybe there'll be a push up a bit and package, which is of course property and liability together.

Patrick M. Gallagher: Really not much 2% I think that feels like it's going to be there for the year.

Patrick M. Gallagher: I think you could take our March discussions and kind of update on six weeks later for those numbers.

Patrick M. Gallagher: Okay, there is a tone of concern that seems to be louder today in our interactions with carriers and clients around casualty rates. So I would say that what we were chatting about in January and February seems to be louder today; the concerns seem to be a little bit louder today. And so I think that, and we're just, I don't know if I have enough data yet to say absolutely that there was a tone shift in March in our data compared to what we were seeing in January and February.

Patrick M. Gallagher: Okay.

Patrick M. Gallagher: Tone.

Patrick M. Gallagher: Concerning that seems to be louder.

Patrick M. Gallagher: And our interactions with carriers and with clients around casualty rate.

Patrick M. Gallagher: So there I would say that what we were chatting about January and February seems to be louder today or the concerns can be it can be a little bit louder today, and so I think that and we're just I don't know if I have it now.

Patrick M. Gallagher: Data yet.

Patrick M. Gallagher: Say, absolutely that there was a tone shift in March and our data compared to what we were seeing in January and February but when you look at some some isolated situations you boil that down with what we all read when you combine that with what we hear in meetings with the carriers.

Patrick M. Gallagher: But when you look at some isolated situations, you boil that down to what we all read. When you combine that with what we hear in meetings with the carriers, we feel that casualty rates are probably more likely to be going up again in the next three quarters, each of the next three quarters, than we would see going down by any means. So there is a tone shift there. I just can't quite see it 100% in our data yet, but it seems like it's coming.

Patrick M. Gallagher: We feel that casualty rates probably are more.

Patrick M. Gallagher: We're likely to be going up again in the next three quarters each of the next three quarters and we would see.

Patrick M. Gallagher: Yeah going down by any means so there is a tone shift there I just can't quite see it.

Patrick M. Gallagher: 100% in our data yet, but it seems like its economy.

Yaron Joseph Kinar: That makes sense. I appreciate the color.

Speaker Change: Okay makes sense I appreciate the color.

Patrick M. Gallagher: And then, and I apologize if you've already addressed this and I missed it, but there's, we saw the stamping office data come out in March around ENS flows and rates, and it seemed like it was a little bit of a surprise and then disappointment. How much of that do you think is noise? Are you seeing that slow down in your wholesale business, or is that real and sorry, or is that just noise and you're kind of looking past that and still seeing a very strong ENS market? That is noise. Our ENS business

Speaker Change: And then and I apologize if you've already addressed this and I missed it.

Patrick M. Gallagher: Yeah.

Patrick M. Gallagher: We saw the stamping office data come out in March.

Patrick M. Gallagher: Around E&S.

Patrick M. Gallagher: Flows in REIT and it seemed like it was a little bit of a.

Patrick M. Gallagher: Surprise and disappointment.

Patrick M. Gallagher: How much of that do you think because noise or are you seeing that slowdown in your wholesale.

Patrick M. Gallagher: Business or is that real.

Patrick M. Gallagher: Or is that just noise in.

Patrick M. Gallagher: Youre kind of looking past that and still see a very strong E&S market.

Patrick M. Gallagher: That as noise, our E&S business is on fire.

Patrick M. Gallagher: That is noise. Our E&S business is on fire. We are seeing submissions come in. We're renewing our businesses. I don't have any caution on that.

Patrick M. Gallagher: As we are seeing submissions come in we're renewing our businesses.

Patrick M. Gallagher: I don't have any caution on that.

Meyer Shields: Our next question comes in the line of Meyer Shields with KBW. Please proceed with your question.

Meyer Shields: Thank you.

Meyer Shields: Thanks.

Meyer Shields: Our next question comes from the line of Meyer Shields with <unk>. Please proceed with your question.

Meyer Shields: Great, thanks. I was hoping to start on the reinsurance side because I think you talked about 13% organic growth. And is there any way of breaking that down between maybe the increasing limits that are being purchased versus market share wins versus price?

Meyer Shields: Yeah.

Meyer Shields: Great. Thanks, I was hoping to start on the reinsurance side, because I think you're talking about 13% organic growth and is there any way of breaking that down between maybe the increasing.

Meyer Shields: Limits that are being purchased versus market share wins versus pricing.

Douglas K. Howell: I don't have the actual stats on that, but listen, I will tell you this, we had a terrific new business quarter, our teams that are working together, I think we're starting to see some nice wins when working with our retailers on that. So when you go down, we were hearing a lot of great stories about teams getting settled in. You know, when we look back and see it and try to measure our success in doing that, that merger, our teams are working together, we're selling more new business, and our retention seems to be pretty darn good on that.

Speaker Change: I don't have the actual stats on that.

Douglas K. Howell: Listen I will tell you. This that we had a terrific new business quarter. Our teams that are working together I think we're starting to see some nice wins.

Douglas K. Howell: And with our retailers on that so when you go down that we were hearing a lot of great stories about teams subtle then yeah. When we look back and see it and try to measure our success in doing that that merger. Our teams are working together and we're selling more new business or retention seems to be pretty darn good on that.

Douglas K. Howell: And I think the fact is, customers are buying some more cover, while you're seeing a little price stability, maybe. So we're checking the box on everything that we've considered to be this to be a successful merger.

Douglas K. Howell: And I think the fact is customers are buying some more cover why youre seeing a little price stability, maybe so oh.

Douglas K. Howell: We're checking the box on everything that we've considered to be this to be a successful merger.

Meyer Shields: Okay, that's helpful. And second question, and clearly, I guess, the premise is we're not seeing any successful pressure on the part of carriers to reduce commission percentages as we update us on efforts that are being made, even if they're not successful.

Speaker Change: Okay. That's helpful.

Meyer Shields: And second question clearly I guess the premise is we're not seeing any.

Meyer Shields: Successful pressure on the part of carriers to reduce commission percentages.

Meyer Shields: Update us on efforts that are being made even if they're not successful.

Patrick M. Gallagher: No, I think that our partners are being very reasonable. We're not having a lot of head-butting on that subject at all.

Patrick M. Gallagher: No I think that our partners, who are being very reasonable.

Patrick M. Gallagher: We're not we're not having a lot of head voting on that subject at all.

Meyer Shields: Okay, perfect. That's what I need to know. Thank you. Thanks, Jaron.

Speaker Change: Okay perfect that's what I thought thank you.

Meyer Shields: Thanks, Jim, for Mark.

Meyer Shields: Omar.

Meyer Shields: Yeah.

Robert Cox: Our next question comes from the line of Rob Cox with Goldman Sachs. Please proceed with your question.

Meyer Shields: Our next question comes from the line of Rob Cox with Goldman Sachs. Please proceed with your question.

Robert Cox: So I think in March at the investor day, you guys were pretty optimistic about the potential for reacceleration and RPC in the remainder of 2024 due to higher exposure to property business and less workers comp, and the potential for casualty pricing increases. Is that still the case, or is the property rate environment with a little deceleration in the rate of increase? Have you changed your view a little bit?

Speaker Change: Hey, thanks.

Robert Cox: So I think.

Robert Cox: March.

Robert Cox: Investor Day, you guys were pretty optimistic on the potential for Reacceleration in RPC and the remainder of 2024 due to higher exposure to property business and less workers comp.

Robert Cox: And the potential for casualty pricing increases is that still the case or is the property rate environment and a little deceleration in the rate of increase.

Robert Cox: And as you change your view a little bit.

Patrick M. Gallagher: No, I think our view is unchanged.

Robert Cox: Our view is unchanged.

Robert Cox: We're very bullish. OK.

Patrick M. Gallagher: We're very bullish okay.

Robert Cox: Okay, got it. And then maybe a similar question in some ways, but if we strip out reinsurance, is the touch lower organic guide for the remainder of the year the same, or do you think x-reinsurance what would you say for the trend of organic growth x-reinsurance?

Robert Cox: Okay got it and then maybe.

Robert Cox: Sort of a similar question in some ways, but if we strip out reinsurance.

Robert Cox: Is the touch lower organic guide for the remainder of the year.

Robert Cox: The same or do you think ex reinsurance.

Robert Cox: What would you say.

Robert Cox: For the trend.

Douglas K. Howell: Well, yeah, I think just because reinsurance is a little more skewed seasonalally to the first quarter did help us, let's say, get from 8 to 8.9% this quarter, right? We do have some pretty good April 1 renewals coming in, so we'll see that in the second quarter. So I think we'll get the benefit of reinsurance a little bit in the second quarter, even though it's not as big percentage-wise as the total amount of our revenues.

Robert Cox: Trend of organic growth ex reinsurance.

Douglas K. Howell: Yeah, I think just because reinsurance a little more skewed seasonally to the first quarter.

Douglas K. Howell: It did help us, let's say get from eight to eight 9% this quarter right.

Douglas K. Howell: Some pretty good April one renewals coming in so we will see that in the second quarter. So I think we will get the benefit of reinsurance a little bit in the second quarter, even though it's not as big percentage wise is a total amount of our revenues and then the third and fourth quarter, we'll see what happens we'll see.

Douglas K. Howell: And then in the third and fourth quarters, we'll see what happens. We'll see what happens with the wind. Hopefully, there's not a shake anywhere else in the world. But right now, that's why I say I feel pretty comfortable with each quarter in that 7 to 9% range because reinsurance did help, but it wasn't like it moved us from 6% to 9%. It moved us up 75 basis points, or something like that, this quarter.

Douglas K. Howell: We'll see what happens with the win you know hopefully theres not a shake anywhere else in the world and but right now that's why I say I feel pretty comfortable each quarter in that 7% to 9% range.

Douglas K. Howell: Because reinsurance did help.

Douglas K. Howell: But it wasn't like it moved up from 6% to 9% it moved us up 75 basis points something like that this quarter.

Robert Cox: Got it. And if I could sneak one more in, on the brokerage segment, could you remind us how much you're reinvesting in the business annually and what you're spending it on?

Speaker Change: Got it and if I could sneak one more in.

Robert Cox: In the brokerage segment could you remind us how much you're reinvesting in the business.

Douglas K. Howell: Well, it's a laundry list. I mean, first you start with our people.

Speaker Change: And what you're spending it on.

Douglas K. Howell: Well, it's a laundry list I mean first you start with our people I think that our training our development our internship program I think bringing on.

Douglas K. Howell: I think that our training, our development, our internship program is bringing on more producers. We are seeing lots of interest in joining Gallagher from experienced producers out there. I think they see that the organization has a lot to offer them. Then the next thing you look at is technology. We're spending a ton of time on technology that both enables us to sell more, right, and enables us to service better. Those numbers are probably, the projects on the sheet could be $75 million, something like that.

Douglas K. Howell: More producers, we we are seeing lots of interest in joining Gallagher.

Douglas K. Howell: By experienced producers out there I think they see that the organization has a lot to offer for them.

Douglas K. Howell: Then the next thing he looked at his technology, we're spending a ton of technology that enables us to sell more right enables us to service them better.

Douglas K. Howell: Those numbers are probably the projects on this thing could be 75 million bucks or something like that.

Douglas K. Howell: When I look at this year's budget, some of that's capital, some of that's operating expenses. We'll look back and see that we were spending about $75 million a year on cyber today. If you go back five years ago, we were spending about $15 million on that. So the fact that we're investing in infrastructure improvement, cyber, and other infrastructure improvements Then you get down into the data and analytics. We are hiring more and more people. But every day, they help us slice and dice our data, look at industry statistics, and bring better delivery of that data through a digital platform to our customers.

Douglas K. Howell: When I look at this year's budget some of that is capital some of that operating expense right.

Douglas K. Howell: When I look back and were spending about $75 million a year on cyber today you can go back five years ago, we were spending about $15 million on that so the fact that we're investing in infrastructure improvements.

Douglas K. Howell: Cyber and other infrastructure structure improvement.

Douglas K. Howell: Then you get down into the data and analytics, we are hiring more and more people.

Douglas K. Howell: But every day that help us slice and dice, our data look at industry statistics and bring up a better delivery of that data through a digital platform to our customers. My guess is were spending $30 million a year on that was that hurts.

Douglas K. Howell: My guess is we're spending $30 million a year on those efforts. And then you look at AI. Now there are starting to be a lot of AI projects inside of the company that are starting to deliver some yield. And so we're spending $5 million a year kind of on AI-related activities out there. So you add all that up and get to $200 to $300 million pretty quickly. And what we think we're doing to make a better franchise going forward.

Douglas K. Howell: And then you look at I know theyre starting to be a lot of projects inside of the company that are starting to deliver some yield.

Douglas K. Howell: And so we're spending 5 million Bucks a year kind of on it.

Douglas K. Howell: Related activities out there. So you add all that up and get the $200 million to $300 million pretty quickly.

Douglas K. Howell: We're doing it to make a better franchise going forward.

Patrick M. Gallagher: I'd like to emphasize with Doug, I've got a lot of listeners on this call, and I'd like to emphasize where Doug started. Most of that spend is, in one way or another, directly related to making our service offering to our clients better, and we happen to know, for instance, that our digital offering... From small accounts through the risk management accounts, connectivity, things like Gallagher Go, or even a middle market client can see what their policies are, what's going on with their buildings, etc., etc., is being incredibly well received. And we're rolling things out like that literally every quarter.

Speaker Change: I'd like to emphasize what Doug I've got a lot of listeners on this call I would like to emphasize what Doug started this.

Patrick M. Gallagher: Most of that spend is.

Patrick M. Gallagher: As in one way or another directly related either to making our service offering to our clients better and.

Patrick M. Gallagher: We happen to know for instance that our digital offerings.

Patrick M. Gallagher: From small accounts through the risk management accounts connectivity things like Gallagher go or even the middle market client can see what their policies are and what's going on with their billings et cetera, et cetera are being incredibly well received and we're rolling things out like that literally every quarter. So that spend and then you get into the data and analytics.

Patrick M. Gallagher: So that spend, and then you get into the data and analytics. And if you'd asked me five years ago, clients would really care that much about being able to tell them what people like you buy. Oh my god, they care. And then they want to know the rate structure, and they want to know why. And when I was selling insurance day-to-day, I'd tell them they had a good deal because Hartford quoted them, and so did CNA.

Patrick M. Gallagher: And if you'd asked me five years ago clients would really care that much about being able to tell them what people like you bye.

Patrick M. Gallagher: Oh My God.

Patrick M. Gallagher: Sure.

Patrick M. Gallagher: And then they want to know the rate structure and they want to know why and when I was started without selling insurance day to day I'd tell them. They had a good deal because hartford quota so to C&I by the cheaper one let's move up.

Patrick M. Gallagher: Buy the cheaper one, let's move on, or I'd have a reason why they should stay where they were, but I don't have the capability of saying, here's what's happening in the world market. It's incredible. And remember what we said in our prepared remarks, 90% of the time, our people go out, and they're fighting against somebody who's substantially smaller and doesn't have any of this, let alone two to three hundred million dollars to reinvest in more of it. I mean, it's just an incredible advantage. I appreciate the question.

Patrick M. Gallagher: I would have a reason why they should stay where they were but I know capability of saying, here's what's happening in the world market.

Patrick M. Gallagher: It's incredible.

Patrick M. Gallagher: Remember, what we said in our prepared remarks, 90% of the time, our people go out and.

Patrick M. Gallagher: They're fighting against somebody who was substantially smaller and doesn't have any of this let alone $2 million to $300 million to reinvest in more of it.

Patrick M. Gallagher: I mean, it's just it's an incredible advantage I appreciate the question.

Robert Cox: That's awesome, Kohler. Thank you.

Michael Augustus Ward: Our next question comes from the line of Mike Ward with Citi. Please proceed with your question.

Robert Cox: That's awesome color. Thank you.

Michael Augustus Ward: Our next question comes from the line of Mike Wood with Citi. Please proceed with your question.

Michael Augustus Ward: Thank you guys. Kind of a similar question, but specifically on reinsurance. Just curious where you guys are in terms of the innings of getting that business, you know, where you want it, where you want it to be.

Speaker Change: Thank you guys.

Michael Augustus Ward: Kind of a similar question, but specifically on reinsurance just curious.

Michael Augustus Ward: Where you guys are in terms of the innings of getting that business.

Michael Augustus Ward: Where you want it where you want it to be.

Patrick M. Gallagher: http://TheBusinessProfessor.com It's really where we had dreamed it would be.

Michael Augustus Ward: Where.

Speaker Change: It's it's really.

Patrick M. Gallagher: Where we had dreamed it would be the team is incredibly solid.

Patrick M. Gallagher: The team is incredibly solid. We're not having defections, we've got, and what's been fun about that is that there's a remarkable interest in having continued relationships and building relationships with the retail side of the house, which is what we predicted. We predicted when we did it that we would be not only getting data and analytics, but we'd be working together, and we've seen that impact on existing, for instance, pooled accounts that were the biggest and probably the longest running pooling broker in the country, especially in public sector business. It has been incredibly helpful, the dialogue back and forth.

Patrick M. Gallagher: Not having defections we've got.

Patrick M. Gallagher: It's what's been fun about that is that there is a remarkable interest in having continued relationships and building relationships with the retail side of the house, which is what we predicted.

Patrick M. Gallagher: We predicted we did it that we would be not only getting data and analytics, but we'd be working together and we've seen that impact on existing for instance pool accounts that were the biggest.

Patrick M. Gallagher: The longest running cooling broker in the country, especially in public sector business.

Patrick M. Gallagher: Incredibly helpful. The dialogue back and forth. That's just one example, but.

Patrick M. Gallagher: That's just one example. But in the business now, I think they really feel like they're part of the enterprise. They're not the new kids anymore. And you know, there's always a period when you come to school and you're the new kid. You're the new kid, right? Well, that's not it anymore. I mean, they're out, you see them in the hall, they recognize the retailers, they recognize me, Doug, whatever, and the opportunities to invest in data and analytics there, and the thirst for that from their clients. There are tremendous opportunities, and it's working out incredibly well.

Patrick M. Gallagher: And the business now I think.

Patrick M. Gallagher: Really feel like they're part of the enterprise, whether or not the new kids anymore.

Patrick M. Gallagher: There's always a period when you come to school and you were the new Kid, who the new Kid right.

Patrick M. Gallagher: Well, that's not it anymore I mean, there aren't you see them in the hall they recognize they recognize the retailers they recognize me, Doug or whatever and the opportunities to invest in data and analytics there.

Patrick M. Gallagher: The thirst for that from their clients.

Patrick M. Gallagher: Tremendous opportunities and it's working out incredibly well.

Michael Augustus Ward: Thanks. And then maybe just one last one on group benefits. Kind of curious if you can sort of discuss how the renewals have gone and how top line is trending from your perspective. And I guess what the tone is like among the customer base, in terms of, you know, the health of the economy, and then hiring and labor. Well, interestingly...

Speaker Change: Thanks, and then maybe just one last one on group benefits kind of curious if you can.

Michael Augustus Ward: Sort of discuss how.

Michael Augustus Ward: The renewals have gone and how top line is trending from your perspective and I guess.

Michael Augustus Ward:

Michael Augustus Ward: Whats the tone like among the customer base in terms of.

Patrick M. Gallagher: Well, interestingly, the tone from our clients is there's a large amount of concern. And we're sitting with clients that, in some instances, don't know why they have turnover. And we're able to get in and do some data analytics around what's going on with them, and you know where it's going on.

Michael Augustus Ward: Health of the economy, and then hiring and labor.

Patrick M. Gallagher: Well interesting like the tone from our clients.

Patrick M. Gallagher: There's a large amount of concern.

Patrick M. Gallagher: And we're sitting with clients.

Patrick M. Gallagher: In some instances don't know why they have turnover.

Patrick M. Gallagher: And we're able to get in and do some data and analytics around what's going on with them and.

Patrick M. Gallagher: So a very, very deep concern about wanting to hold on to their top. You also have an awful lot of people just trying to attract people to fill jobs, and there's a lot of concern on their part around cost. Medical inflation is real, and those costs get passed directly back to the employer. Then you've got the whole problem of inflation. You know, inflation is difficult. So I think what it's doing is it's making our professionals far more valuable than the local person that comes out and says, "There are four of us in the office, and we're really good at this, and let me show you a PPO, and maybe I can get another quote for your insurance." That's just not cutting it anymore.

Patrick M. Gallagher: What's going on there.

Patrick M. Gallagher: So a very a very deep concern about wanting to hold onto their top people.

Patrick M. Gallagher: We also have an awful lot of people just trying to attract people to fill jobs.

Patrick M. Gallagher: Pick stuff off of racks serve tables, whatever and that's and that's difficult so they're trying to differentiate themselves in that regard.

Patrick M. Gallagher: And Theres a lot of concern on their part around cost.

Patrick M. Gallagher: Inflation is real now those costs get passed directly back to the employer.

Patrick M. Gallagher: Then you've got the whole problem with inflation.

Patrick M. Gallagher: Inflation is difficult.

Patrick M. Gallagher: I think what it's doing is it's making our professionals far more valuable than the local person that comes out and says there's four of us in the office and we're really good at this and let me show you a P. P O and maybe I can get another quote for your insurance, that's just not cutting anymore.

Michael Augustus Ward: And that's not, I'm not talking about 5,000-like cases. The people that are employing 100, 150, 200 people need this kind of help. So it's a very good period for us, and it is a difficult time for employers. You know, where are they going to get the right people to fill the jobs, and then how do they hold on to them?

Patrick M. Gallagher: And that's not I'm not talking about 5000 life cases here.

Michael Augustus Ward: The people that are employing a 100 150 200 people they need this kind of all.

Michael Augustus Ward: So it's a very robust period for us it is a difficult time for employers.

Michael Augustus Ward: Where are they going to get the right people to fill the jobs and then how do they hold onto them.

Michael Augustus Ward: Thank you so much.

Michael David Zaremski: Thank you. And our last question is coming from Mike Zaremski with BMO Capital Markets. Please proceed with your question.

Michael Augustus Ward: Thank you so much.

Speaker Change: Thanks, Mike.

Michael David Zaremski: Thank you.

Michael David Zaremski: And our last question is coming from Mike <unk> with BMO capital markets. Please proceed with your question.

Michael David Zaremski: Great. Let's just follow up. You guys always give color on the umbrella. Lots of people do. Just curious, is there any way you can dimension, you know, what percentage of your business is umbrella?

Michael David Zaremski: Okay, Great just a quick follow up.

Michael David Zaremski: You guys always give color on umbrella lots of people do just just curious is there any way you can dimension what percentage of your businesses umbrella.

Michael David Zaremski: Well, I'll see if I can dig it out. Did you have a second piece of that?

Michael David Zaremski: I'll see if I can dig it out.

Michael David Zaremski: Do you have another question? We'll dig into that for a second.

Michael David Zaremski: A good piece of that you have another question Frank will dig on that for a second.

Michael David Zaremski: No, I, I, that was actually my only question.

Michael David Zaremski: No.

Michael David Zaremski: That was actually my only question.

Michael David Zaremski: So, let's see, at 23, I would say it makes up 6% of our business. Okay, thanks.

Michael David Zaremski: We're looking at here, so, let's say in 'twenty three I would say it makes up.

Michael David Zaremski: Okay, thanks. Thanks so much. Have a good evening.

Michael David Zaremski: 6% of our business.

Michael David Zaremski: Okay. Thanks, Thanks, so much have a good evening, thanks, Mike Thanks, Mike.

Patrick M. Gallagher: All right, well, I think that's it for questions. If I could just make a comment here, Thank you again for joining us this afternoon. And I would like to thank our 53,000 colleagues around the world for their efforts. Their hard work and dedication is evident when we report another fantastic quarter of growth and profitability. As I look ahead, I remain very bullish on our prospects and believe we are well positioned to deliver another excellent year of financial performance. We look forward to speaking with the investment community at our IR day. Thank you again for being with us. Have a nice evening.

Patrick M. Gallagher: Alright.

Patrick M. Gallagher: Three questions if I could just make a comment here. Thank you again for joining us this afternoon.

Patrick M. Gallagher: And I would like to thank our 53000 colleagues around the world for their efforts their hard work and dedication is evident when we reported another fantastic quarter of growth and profitability.

Patrick M. Gallagher: As I look ahead I remain very bullish on our prospects and believe we are well positioned to deliver another excellent year of financial performance. We look forward to speaking with the investment community at our IR day. Thank you again for being with US This evening have a nicely.

Unknown Executive: This does conclude today's conference call. You may disconnect your lines at this time.

Unknown Executive: This does conclude today's conference call you may disconnect your lines at this time.

Unknown Executive: [music].