Q2 2024 Arthur J. Gallagher & Co Earnings Call

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Operator: Good afternoon, and welcome to Arthur J. Gallagher and Company's second quarter 2024 earnings conference call. Please note that participants have been placed on listen-only mode.

Speaker Change: Good afternoon and welcome to Arthur J. Galley Run Company's second quarter 2024 earnings conference call.

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

Operator: 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. Certain 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 law. The company does not assume any obligation to update information or forward-looking statements provided on this call. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially.

Speaker Change: Your lines will be open for questions following the presentation.

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

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 the information concerning forward-looking statements and risk factor 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: 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.

Operator: Please refer to the information concerning forward-looking statements and risk factor sections contained in the company's most recent 10-K, 10-Q, and 8-K filings for more details on such risks and uncertainties. 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 Company. Mr. Gallagher, you may begin. Thank you very much. Good afternoon.

Speaker Change: It is now my pleasure to introduce J. Patrick Gallagher, Jr., Chairman and CEO of Arthur J. Gallagher Company.

Patrick M. Gallagher: Thank you for joining us for our second quarter 24 earnings call. On the call for you today is Doug Howell, our CFO, other members of the management team, and the heads of our operating business divisions. We had an excellent second quarter.

Speaker Change: Mr. Gallagher, you may begin.

Speaker Change: Thank you very much. Good afternoon. Thank you for joining us for our second quarter 24 earnings call. On the call for you today is Doug Howell, our CFO , other members of the management team, and the heads of our operating business divisions.

Patrick M. Gallagher: For our combined brokerage and risk management segments, we posted 14% growth in revenue, 7.7% organic growth, and 8.1% if you include interest income. We also completed 12 new mergers totaling $72 million in estimated annualized revenue. Reported Net Earnings Margin Expansion of 35 Basis Points Adjusted EBITDAG Margin Expansion of 102 Basis Points to 31.4% Gap earnings per share of $1.70, up 15% year over year, and adjusted earnings per share of $2.68, up 19% year over year.

Speaker Change: We had an excellent second quarter.

Speaker Change: For our combined brokerage and risk management segments, we posted 14% growth in revenue, 7.7% organic growth, and 8.1% if you include interest income.

Speaker Change: We also completed 12 new mergers totaling $72 million of estimated annualized revenue.

Speaker Change: Reported Net Earnings Margin Expansion of 35 Basis Points Adjusted EBITDAG Margin Expansion of 102 Basis Points to 31.4%

Speaker Change: Gap earnings per share of $1.70 up 15% year-over-year and adjust earnings per share of $2.68 up 19% year-over-year. Another great quarter by the team and right in line with the expectations we provided at our June IR day.

Patrick M. Gallagher: Another great quarter by the team and right in line with the expectations we provided at our June IR day. Moving to results on a segment basis, starting with the brokerage segment, reported revenue growth was 14%. Organic growth was 7.7% at the midpoint of guidance and above 8% if you include interest income. Adjusted EBITDAG Margin Expansion was 98 basis points at the upper end of our June IRD expectation. Let me give you some insights behind our brokerage segment organically. And just to level the playing field, the following figures do not include interest income.

Speaker Change: Moving to results on a segment basis, starting with the brokerage segment.

Speaker Change: Reported revenue growth was 14%. Organic growth was 7.7% at the midpoint of guidance and above 8% if you include interest income. Adjusted EBITDA margin expansion was 98 basis points at the upper end of our June IRD expectations.

Speaker Change: Let me give you some insights behind our Brokerage Segment Organic.

Speaker Change: And just to level set, the following figures do not include interest income.

Patrick M. Gallagher: Within our PC retail operations, we delivered 6% in the US and Canada, 7% in the UK, Australia, and New Zealand. Our global employee benefit brokerage and consulting business posted an organic growth of about 3%. That would have been 5% without the timing impact from some lumpy life case sales. Shifting to our Reinsurance Wholesale and Specialty Businesses, overall organic at 12%. This includes Gallagher Re at 13%, UK Specialty at 10%, and US Wholesale at 11%.

Speaker Change: Within our PC retail operations, we delivered 6% in the U.S. and Canada, 7% in the U.K., Australia, and New Zealand.

Speaker Change: Our Global Employee Benefit Brokerage and Consulting business posted organic of about 3%. That would have been 5% without the timing impact from some lumpy life case sales.

Speaker Change: Shifting to our reinsurance wholesale and specialty businesses, overall organic of 12%, this includes Gallagher Re at 13%, UK Specialty at 10%, and U.S. Wholesale at 11%.

Patrick M. Gallagher: Excellent growth, whether retail, wholesale, or reinsured. Next, let me provide some thoughts on the PC insurance pricing environment, starting with the primary insurance marketplace. Global second quarter renewal premiums, which include both rate and exposure changes, were up about 5%, so no change from what we discussed four weeks ago at our June investor meeting. Renewal premium increases continue to be broad-based across all of our major geographies and most product lines.

Speaker Change: Excellent 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 marketplace.

Patrick M. Gallagher: For example, property was up 2% to 4%, general liability up 5% to 7%, umbrella and commercial auto up 8% to 10%, workers' comp up 1% to 3%, D&O down about 5%, cyber was flat, and personal lines up over 10%. So many lines are still seeing strong increases. Moving to the reinsurance market and mid-year renewal, property reinsurance renewal saw modest price declines concentrated at the top end of reinsurance towers due to increased capacity from both traditional reinsurers and the ILS market.

Speaker Change: Global second quarter renewal premiums, which include both rate and exposure changes, were up about 5%, so no change from what we discussed four weeks ago at our June investor meeting.

Speaker Change: Renewable premium increases continue to be broad-based up across all of our major geographies and most product lines.

Speaker Change: For example,

Speaker Change: Property was up 2-4%, general liability up 5-7%.

Speaker Change: Umbrella and Commercial Auto up 8-10%

Speaker Change: Workers' Comp up 1-3%, D&O down about 5%, Cyber was flat, and Personal Alliance up over 10%.

Speaker Change: So many lines are still seeing strong increases.

Speaker Change: Moving to the Reinsurance Market and Mid-Year Renewals.

Speaker Change: Property reinsurance renewal saw modest price declines concentrated at the top end of reinsurance towers due to the increased capacity from both traditional reinsurers and the ILS market.

Patrick M. Gallagher: Offsetting this was underlying exposure growth combined with increased demand, resulting in a flat year-over-year premium for reinsurers overall. U.S. Casualty Renewals Saw Terms and Conditions Tighten and Some Modest Pricing; Reinsurers continue to heavily scrutinize submissions given the industry's unfavorable prior year reserve development and their view of the current loss cost trend. In our view, insurance and reinsurance carriers continue to behave rashly, raising rates the most word is needed to generate an adequate underwriting profit by line, by industry, and by geography.

Speaker Change: Offsetting this was underlying exposure growth combined with increased demand, resulting in flat year-over-year premium for reinsurers overall.

Speaker Change: U.S. Casualty Renewal saw terms and conditions tighten and some modest price increases.

Speaker Change: Reinsurers continue to heavily scrutinize submissions given the industry's unfavorable prior year reserve development and reinsurers' view of the current loss cost trends.

Speaker Change: In our view, insurance and reinsurance carriers continue to behave rationally.

Speaker Change: Raising rates the most word is needed to generate an adequate underwriting profit by line, by industry, and by geography.

Patrick M. Gallagher: We continue to see this differentiation in our data between property and casualty lines; carriers believe property may be close to approaching price and exposure at, and thus, we are seeing property renewal premium increases moderating, but mostly within large accounts. Underlying that accounts with premiums around a million or greater are seeing renewal premiums flattish year over year. Yet on the other hand, in the small and mid-sized client space, where we are an industry leader, we're seeing increases of 7% for the second quarter.

Speaker Change: We continue to see this differentiation in our data between property and casualty lines.

Speaker Change: Carriers believe property may be close to approaching price and exposure adequacy.

Speaker Change: And thus we are seeing property renewal premium increases moderating but mostly within large accounts.

Speaker Change: Underlying that accounts with premiums around a million or greater are seeing renewal premiums flattish year over year. Yet on the other hand in the small and mid-sized client space where we are an industry leader we are seeing increases of 7% for the second quarter.

Patrick M. Gallagher: Shifting to casualty classes, we are seeing the greatest renewal premium increases and signs of these increases accelerating. In fact, global second quarter umbrella and commercial auto renewal premium increases are in the high single digits, and there is little differentiation by client size.

Speaker Change: Shifting to casualty classes, we are seeing the greatest renewal premium increases and signs of these increases advancing.

Speaker Change: In fact, Global's second quarter umbrella and commercial auto renewal premium increases are in the high single digits, and there is little differentiation by client size.

Patrick M. Gallagher: We have been highlighting worsening social inflation, medical expenses, and growing historical reserve concerns for quite some time, and thus, we continue to believe further rate increases are to come in cash. While renewal premium increases are the rational carrier response in the current environment, our clients have experienced multiple years of increased costs. Having a trusted advisor like Gallagher can help businesses navigate a complex insurance market by finding the best coverage for our clients while mitigating price increases.

Speaker Change: We have been highlighting worsening social inflation, medical expenses, and growing historical reserve concerns for quite some time. And thus we continue to believe further rate increases are to come in casually.

Speaker Change: While renewal premium increases are the rational carrier response in the current environment, our clients have experienced multiple years of increased costs.

Speaker Change: Having a trusted advisor like Gallagher can help businesses navigate a complex insurance market by finding the best coverage for our clients while mitigating price increases. And that's our job as brokers.

Patrick M. Gallagher: And that's our job as brokers. Moving to comments on our customers' business, During the second quarter, our daily indications continue to show positive midyear policy endorsements, audits, and cancellations, similar to last year's levels across most geographies. So activity remains solid, and we are not seeing signs of a global economic slowdown. Within the U.S., the labor market imbalance remains intact, with more open jobs than unemployed people looking

Speaker Change: Moving to comments on our customer's business activity.

Speaker Change: During the second quarter, our daily indications continue to show positive mid-year policy endorsements, audits, and cancellations similar with last year's levels across most geographies

Speaker Change: So activity remains solid and we are not seeing signs of global economic slowdown.

Speaker Change: Within the U.S., the labor market imbalance remains intact with more open jobs than unemployed people looking for work.

Patrick M. Gallagher: With continued wage growth and further medical cost inflation, employers remain focused on attracting and retaining talent while controlling costs. So I see solid demand for our services and advice in 24 and in 2025. Across the brokerage operations, I believe we continue to win market share due to our superior client value proposition, niche expertise, outstanding service, and our extensive data and analytics offerings. Frankly, the smaller local brokers that we are competing against about 90% of the time just can't match the value we provide.

Speaker Change: And with continued wage growth and further medical cost inflation, employers remain focused on attracting and retaining talent while controlling costs. So I see solid demand for our services and advice in 2024 and in 2025.

Speaker Change: Across the brokerage operations, I believe we continue to win market share due to our superior client value proposition, niche expertise, outstanding service, and our extensive data and analytics offerings.

Speaker Change: Frankly, the smaller local brokers that we are competing against about 90% of the time just can't match the value we provide, and that is leading to more net brokerage wins for Gallagher.

Patrick M. Gallagher: And that is leading to more net brokerage wins for Gallagher. So when we pull all this together, we continue to see full year 24 brokerage organic growth in the seven to 9% range. And that would be another outstanding performance.

Speaker Change: So when we pull all this together, we continue to see full year 24 brokerage organic in the 7-9% range, and that would be another outstanding year.

Patrick M. Gallagher: Moving on, to our risk management segment, Gallagher Best. Revenue growth was 13%, including organic growth of 7.7%. The adjusted EBITDAG margins were 20.6%, up 120 basis points versus last year and in line with our June IR Day expectations, continuing to benefit from New Business Wins and Outstanding Retention, www.douglashowhouse.com that would bring full year 24 organic to 9% and margins to approximately 20.5%, and that too would be an outstanding performance. Let me shift to mergers and acquisitions. We completed 12 new mergers during the second quarter, representing about $72 million of estimated annualized revenue.

Speaker Change: Moving on to our risk management segment, Gallagher Bassett. Revenue growth was 13%, including organic of 7.7%.

Speaker Change: Adjusted EBITDAG margins were 20.6% up 120 basis points versus last year and in line with our June IR day expectations.

Speaker Change: We continue to benefit from New Business Wins' outstanding retention.

Speaker Change: Increases in Customer Business Activity and Higher New Arising Claims.

Speaker Change: Looking forward, we see organic in the next two quarters around 7% and margins around 20.5%. That would bring full year 24 organic to 9% and margins to approximately 20.5%, and that too would be an outstanding year.

Speaker Change: Let me shift to mergers and acquisitions. We completed 12 new mergers during the second quarter, representing about $72 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 very strong. We have around 60 term sheets being signed and prepared, representing around $550 million of annualized revenue. Good firms always have a choice, and we will be very excited if they choose to join Gallagher.

Speaker Change: 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.

Speaker Change: Looking ahead, our pipeline remains very strong. We have around 60 term sheets being signed and prepared, representing around $550 million of annualized revenue.

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

Patrick M. Gallagher: Let me conclude with some comments regarding our bedrock culture. Last month, we reflected on the 40th anniversary of becoming a public company. My Uncle Bob Gallagher, Chairman and CEO at the time, knew above all we must maintain our unique culture of teamwork, integrity, and client service. Those values are captured in the 25 tenets of the Gallagher Way.

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

Speaker Change: Last month, we reflected on the 40th anniversary of becoming a public company.

Speaker Change: My Uncle Bob Gallagher, Chairman and CEO at the time, knew above all we must maintain our unique culture of teamwork, integrity, and client service.

Speaker Change: Those values are captured in the 25 tenets of the Gallagher Way.

Patrick M. Gallagher: Thanks to all of our global colleagues that live and breathe the Gallagher way day in and day out. Our culture is stronger and more vibrant than ever. And it's our culture that continues to differentiate us as a firm and helped to drive an average annual total shareholder return of more than 16% over the past 40 years. That, Gallagher. Okay, I'll stop now and turn it over to Doug.

Speaker Change: Thanks to all of our global colleagues that live and breathe the Gallagher Way, day in and day out.

Speaker Change: Our culture is stronger and more vibrant than ever, and it's our culture that continues to differentiate us as a firm and helped to drive an average annual total shareholder return of more than 16% over the past 40 years.

Speaker Change: that

Speaker Change: is the Gallagher way.

Douglas K. Howell: Thanks, Pat. And hello, everyone. Today, I'll start with our earnings release. I'll comment on second quarter organic growth and margins by segment. The punchline is that we came in right in line with our June IR day commentary.

Douglas K. Howell: Okay, I'll stop now and turn it over to Doug. Doug? Thanks, Pat, and hello, everyone. Today I'll start with our earnings release. I'll comment on second quarter organic growth and margins by segment. Punch line is we came in right in line with our June IR day commentary.

Douglas K. Howell: I'll also update you on how we are seeing organic growth and margins shape up for the second half of the year. Then I'll shift to the CFO commentary document that we post on our IR website, and I'll walk through the typical modeling helpers that we provide.

Douglas K. Howell: I'll also update you on how we are seeing organic growth and margins shape up for the second half of the year. Then I'll shift to the CFO commentary document that we post on our IR website, and I'll walk through the typical modeling helpers that we provide.

Douglas K. Howell: And I'll conclude my prepared remarks with a few comments on cash, M&A, and capital management. Okay, let's flip to page three of the earnings release for the headline brokerage segment second quarter organic growth of 7.7%. Again, that's right in line with our June IR day, where we forecasted a range of seven and a half to 8%. Notably, we would have been above 8% if a few large live sales had not shifted from the second quarter to later in the year. We will signal this possible timing for our June IR day. So again, no new news here.

Douglas K. Howell: And I'll conclude my prepared remarks with a few comments on cash, M&A, and capital management.

Speaker Change: Okay, let's flip to page three of the earnings release.

Speaker Change: Headline Brokerage Segment Second Quarter Organic Growth of 7.7%. Again, that's right in line with our June IR day where we forecasted a range of 7.5% to 8%.

Speaker Change: Notably, we would have been above 8% if a few large live sales had not shifted from second quarter to later in the year. We signaled this possible timing on our June IR day, so again, no new news here.

Douglas K. Howell: Recall that we also foreshadowed in late June a small headwind from contingents that adversely impacted all inorganic by about 25 bases. And finally, just a reminder that we don't include interest income in our organic growth. If we did, that would have pushed organic higher by about 40 basis points. Additionally, we believe the investments that we have made in people, sales tools, niche experts, and data and analytics are leading to strong new business production and favorable client retention across.

Speaker Change: Recall that we also foreshadowed in late June a small headwind from contingents that adversely impacted all inorganic by about 25 basis points.

Speaker Change: And finally, just a reminder that we don't include an interest income in our organic. If we did, that would have pushed organic higher by about 40 basis points.

Speaker Change: We believe the investments that we have made in people, sales tools, niche experts, and data and analytics are leading to strong new business production and favorable client retention across the globe.

Speaker Change: Additionally, the insurance market backdrop remains supportive of growth.

Douglas K. Howell: Pat said renewal premium changes were 5% in the quarter. However, July's renewal premium change thus far is above the second quarter. And with an active hurricane season predicted and the noise around US casualty reserves growing louder and again this quarter, it's not unreasonable to expect mid single-digit or greater renewal premium changes in the second half of 24. So our organic investments, combined with insurance market conditions, continue to support our 2024 full year brokerage segment organic outlook. We're still seeing inflation in that seven to 9% range.

Speaker Change: Pat said renewal premium changes 5% in a quarter.

Pat: However, July's renewal premium change thus far is above second quarter.

Speaker Change: And, with an active hurricane season predicted and noise around U.S. casualty reserves growing louder again this quarter, it's not unreasonable to expect mid-single-digit or greater renewal premium changes in the second half of 2024.

Speaker Change: So our organic investments, combined with the insurance market conditions, continues to support our 2024 full-year brokerage segment organic outlook. We are still seeing it in that 7 to 9 percent range.

Douglas K. Howell: So now flip to page 5 of the earnings release for the brokerage segment adjusted EBITDAC table. Second quarter adjusted EBITDAC margin was 33.1%, up 98 basis points over last year and at the upper end of our June IR day expectations. Now, let me walk you through a bridge from last year.

Speaker Change: So now flip to page 5 of the earnings release to the brokerage segment adjusted EBITDAC table. Second quarter adjusted EBITDAC margin was 33.1%. Up 98 basis points over last year and at the upper end of our June IR day expectations. Let me walk you through a bridge from last year.

Douglas K. Howell: First, if you pull out last year's second quarter, you'd see we reported an adjusted EBITDAC margin of 32.1% back then. Second, you need to adjust for current period FX rates, which had a very limited impact on margin this quarter. So 2023 adjusted FX margin was also 32.1%. Third, organic and interest gave us nearly 110 basis points of margin expansion this quarter. And then the impact of M&A and divestiture is used to calculate about 10 basis points of margin.

Speaker Change: First, if you pull out last year, 2023 second quarter, you'd see we reported, back then, adjusted EBITDAC margin of 32.1%.

Speaker Change: Second, you need to adjust for current period FX rates, which had a very limited impact on margin this quarter. So, 2023 adjusted FX margin was also 32.1%.

Speaker Change: Third, organic and interest gave us nearly 110 basis points of margin expansion this quarter, and then the impact of M&A and divestiture has used about 10 basis points of margin.

Douglas K. Howell: That gets you to second quarter 2024 margins of 33.1%. And therefore, that nearly 100 basis points of brokerage margin expansion. That's really, really great work by them. As we look ahead to the second half of 24, we are still expecting margin expansion in the 90-100 basis points range, so the 3rd and 4th quarters will look a lot like the 2nd quarter. Recall 1st quarter 24 still had the roll-in impact of the buck acquisition, so the math for full year 24 will show about 60 basis points of full year expansion, but that would be about 80 basis points full year without the buck, which feels about right assuming we post organic in the 7-9% range.

Speaker Change: That gets you to second quarter 2024 margins of 33.1% and therefore that nearly 100 basis points of brokerage margin expansion. That's really, really great work by the team.

Speaker Change: As we look ahead to the second half of 24, we are still expecting margin expansion in the 90 to 100 basis points range, so 3rd and 4th quarter will look a lot like 2nd quarter.

Speaker Change: Recall, first quarter 24 still had the roll-in impact of the buck acquisition, so the math for full year 24 will show about 60 basis points of full year expansion, but that would be about 80 basis points full year without buck, which feels about right, assuming we post organic in the 7-9% range.

Douglas K. Howell: Let's move now to the Risk Management segment and the Organic and EBITDA tables on pages 5 and 6 of the Earnings. Another excellent quarter. We saw solid new business, fantastic retention, and growing claim counts. We posted organic growth of 7.7% and margins at 20.6%. Both were right in line with our June IR Day outlook.

Speaker Change: Let's move now to the Risk Management segment and the Organic and EBITDA tables on pages 5 and 6 of the earnings release.

Speaker Change: Another excellent quarter. We saw solid new business, fantastic retention, and growing claim counts. We posted organic at 7.7% and margins at 20.6%. Both were right in line with our June IR day outlook.

Douglas K. Howell: Looking forward, as Pat said, we see organic growth in each of the next two quarters around 7% and margins around 20 and a half percent. If we were to post that, we would finish the year with organic growth of 9% and margins of approximately 20.5%. That also would be great work by the. Turning to page 6 of the earnings release in the Corporate Segment Shortcut Table, adjusted second quarter numbers came in just better than the favorable end of our June IRD expectations, and all that was due to some favorable tax items within the corporate expense line. All right, now let's move to the CFO commentary document. Starting on page three, I have a few comments.

Speaker Change: Looking forward, as Pat said, we see Organic in each of the next two quarters around 7% and margins around 20.5%. If we were to post that, we would finish the year with Organic of 9% and margins of approximately 20.5%. That also would be great work by the team.

Speaker Change: Turning to page six of the earnings release in the corporate segment shortcut table, adjusted second quarter numbers came in just a better than the favorable end of our June IR day expectations. All that was due to some favorable tax items within the corporate expense line.

Speaker Change: Alright, now let's move to the CFO commentary document, starting on page 3, a few comments.

Douglas K. Howell: First, foreign exchange. The dollar has weakened over the past month, so please make sure you incorporate these updated revenue and EPS impacts from FX in your models for the brokerage and risk management sectors. Second, brokerage segment or amortization expense. Recall, while this impacts reported gap results, we adjust it out so it doesn't impact adjusted non-gap earnings. This line can also be a bit noisy from time to time.

Speaker Change: First, foreign exchange. The dollar has weakened over the past month, so please make sure you incorporate these updated revenue and EPS impacts from FX in your models for the brokerage and risk management segments.

Speaker Change: Second, brokerage segment or amortization expense.

Speaker Change: Recall, while this impacts reported GAAP results, we adjust it out so it doesn't impact adjusted non-GAAP earnings.

Douglas K. Howell: Late this quarter, we received updated third-party M&A valuation estimates on a third or, excuse me, on a few recent acquisitions and also made some balance sheet adjustments at the end of the quarter. You'll see that in footnote two at the bottom of the page. Looking forward, we expect amortization expense of about one hundred and fifty million dollars per quarter. Again, all of that is adjusted out, but it does cause some noise in the reported gap results.

Speaker Change: This line can also be a bit noisy from time to time.

Speaker Change: Late this quarter, we received updated third-party M&A valuation estimates on a few recent acquisitions and also made some balance sheet adjustments at the end of the quarter. You'll see that in footnote 2 at the bottom of the page.

Speaker Change: Looking forward, we expect amortization expense of about $155 million per quarter. Again, all of that is adjusted out, but it does cause some noise in the reported GAAP results.

Douglas K. Howell: Next, the Risk Management Amortization and Depreciation line. Here too, we received updated M&A valuation estimates for a recent acquisition, which is also described in footnote 5. The net impact and non-GAAP results are about a penny to EPS this quarter.

Speaker Change: Next, the Risk Management Amortization and Depreciation line. Here too, we received updated M&A valuation estimates for a recent acquisition, which is also described in footnote 5.

Douglas K. Howell: Going forward, we're now expecting a lower level of depreciation and amortization as a result of that M&A valuation report. Turning to the corporate segment on page 4, there was no change to our outlook for the 3rd and 4th quarter. Flipping to page 5, our tax credit carry forwards, it shows about $800 million at June 30th.

Speaker Change: The net impact of non-GAAP results is about a penny to EPS this quarter. Going forward, we're now expecting a lower level of depreciation and amortization as a result of that M&A valuation report.

Speaker Change: Turning to the corporate segment on page 4, no change to our outlook for the 3rd and 4th quarter.

Speaker Change: Flipping to page 5 to our tax credit carry-forwards, it shows about $800 million at June 30th. While this benefit won't show up in the P&L, it does benefit our cash flow by about $150 to $180 million a year, which helps us fund future M&A.

Douglas K. Howell: While this benefit won't show up in the P&L, it does improve our cash flow by about $150 to $180 million a year, which helps us fund future M&A. Turning now to page six, the investment income table. This modeling helper breaks down the components of investment income, premium finance revenues, book gains, and equity investments in third-party brokers.

Douglas K. Howell: And as a reminder, none of these items are included in our organic growth computations that we present on pages three and five of our earnings. The punchline here is that not much has changed from what we provided at our June IR. We are still embedding two 25 basis point rate cuts in the second half of 2024, and we have updated our estimates in this table for current FX. When you shift down on that page to the rollover revenue table, second quarter, 24th column, the subtotal shows $128 million and $142 million before divestment.

Speaker Change: Turning now to page 6, the Investment Income Table.

Speaker Change: We call this modeling help or breaks down the components of investment income, premium finance revenues, book gains, and equity investments in third party brokers.

Speaker Change: And as a reminder, none of these items are included in our organic growth computations that we present on pages 3 and 5 of our earnings release.

Speaker Change: The punchline here is not much has changed from what we provided at our June IR day. We are still embedding two 25 basis point rate cuts in the second half of 24, and we have updated our estimates in this table for current FX rates.

Speaker Change: When you shift down on that page to the rollover revenue table, second quarter, 24th column, the subtotal shows $128 million and $142 million before divestitures.

Douglas K. Howell: The $142 million was better than our IR day outlook due to a few acquisitions performing very well during June. Looking forward, the pinkish columns to the right include estimated revenues for M&A closed through yesterday. So just a reminder, you'll need to make a pick for future M&A. Moving down on that page, you'll see risk management segment rollover revenues have been updated for early third quarter acquisitions. For the next two quarters, we expect to earn approximately $20 million and $15 million, respectively.

Speaker Change: The $142 million was better than our IR day outlook due to a few acquisitions performing very well during June .

Speaker Change: Looking forward, the pinkish columns to the right include estimated revenues for M&A closed through yesterday. So just a reminder, you'll need to make a pick for future M&A.

Speaker Change: Moving down on that page, you'll see risk management segment rollover revenues have been updated for early third quarter acquisition. For the next two quarters, we expect approximately $120 million and $15 million respectively.

Douglas K. Howell: Please make sure to reflect these additional revenues in your model. Moving now to cash, capital management, and M&A funding. Available cash on hand at June 30 was approaching $700 million.

Speaker Change: Please make sure to reflect these additional revenues in your models.

Speaker Change: Moving now to cash, capital management, and M&A funding. Available cash on hand at June 30 was approaching $700 million.

Douglas K. Howell: When combined with our expected free cash flow in the second half of 24, which is typically stronger than the first half, we are well positioned for a pipeline of M&A opportunities. In total, we continue to estimate we could have $3.5 billion to fund M&A opportunities during 24 and another $4 billion in 25, all while maintaining a solid investment grade debt rating. And remember, if we don't spend it all, it opens the door to share repurchases as well.

Speaker Change: When combined with our expected free cash flow in the second half of 24, which is typically stronger than first half, we are well positioned for a pipeline of M&A opportunities.

Speaker Change: In total, we continue to estimate we could have $3.5 billion to fund M&A opportunities during 2024 and another $4 billion in 2025, all while maintaining a solid investment-grade debt rating.

Speaker Change: And remember, if we don't spend it all, it opens the door for share repurchases as well.

Douglas K. Howell: Okay, another excellent quarter and a fantastic first half of the year. Looking ahead, we can see continued strong organic growth due to net new business wins, a large and growing M&A pipeline, and many opportunities for productivity improvements. Add that to a winning culture, and I too believe we are very well positioned to deliver another terrific year here in 24. Thanks. Thanks for all the hard work by the team and back to you, Pat.

Speaker Change: Okay, another excellent quarter and fantastic first half of the year.

Speaker Change: We see continued strong organic growth due to net new business wins. A large and growing M&A pipeline.

Pat: and many opportunities for productivity improvements. Add that to a winning culture and I too believe we are very well positioned to deliver another terrific year here in 24. Thanks to all the hard work by the team and back to you, Pat.

Patrick M. Gallagher: Thanks, Doug. Operator, do you want to open it up for questions, please? Yes. Thank you. We will now be conducting the question and answer session. If you have a question, please pick up your handset and press star 1 on your telephone at this time. If you're on a speakerphone, please disable that function prior to pressing star 1 to ensure optimum sound quality.

Pat: Thanks Doug. Operator, do you want to open up for questions please?

Pat: For sure.

Operator: You may remove yourself from the queue at any point by pressing star 2. Again, that's star 1 for questions. Our first question is from Elyse Greenspan with Wells Fargo. Hi, thanks. Good evening.

Speaker Change: Thank you. We will now be conducting a question and answer session. 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 1 for questions.

Elyse Beth Greenspan: My first question is on wholesale organic growth. You guys said it came in at 11% in the quarter, but I believe the IR day guide was seven to nine. And I think, you know, that reflected this, the slowdown; you expected an open brokerage, I think, on the property side. So what changed relative to that guidance and how the results came in in the quarter? We had a terrific finish to the end of June. Submissions were up 31% during June. There is clearly a continued use of wholesalers.

Speaker Change: Our first question is coming from Elyse Greenspan with Wells Fargo. Please proceed with your question.

Elyse Beth Greenspan: Hi, thanks. Good evening. My first question is on the wholesale organic growth.

Elyse Beth Greenspan: You guys said it came in at 11% in the quarter. I believe the IR day guide was seven to nine. And I think that reflected the slowdown you expected in open brokerage, I think on the property side. So what changed relative to that guidance and how the results came in in the quarter?

Speaker Change: We had a terrific finish to the end of June . Submissions were up 31% during June .

Speaker Change: There is clearly a continued use of wholesalers, we're not seeing really any significant shift back to the primary market and the submissions were up and so are guidances up.

Patrick M. Gallagher: We're not really seeing any significant shift back to the primary market, and submissions were up, and so our guidance. Okay.

Patrick M. Gallagher: And then you, at your IRA day, you also said, you know, when we think about next year, you know, that it feels a lot like 2024. You know, I think the assumption, right, is perhaps something still within the range of seven to nine percent organic in brokerage. Assuming, I'm assuming that still remains the case, if you could confirm that, it's, you know, obviously been a few weeks.

Speaker Change: Okay, and then...

Speaker Change: You, at your IRA day, you also had said, you know, when we think about next year, you know, that it feels a lot like 2024, you know, I think the assumption, right, is perhaps something

Speaker Change: Still within the range of 7-9% organic in brokerage.

Patrick M. Gallagher: And then if that's the case next year, if this year's margin expansion was 80 basis points without the buck and M&A noise, would that be the rule of thumb in terms of margin expansion for next year if you're in the seven to nine percent organic growth range? Well, yeah, let's reaffirm that we see next year. You know, it could be very similar to this year.

Speaker Change: Assuming I'm assuming that still remains the case if you could confirm that it's you know Obviously been a few weeks and then if that's the case next year if this year is margin expansion was 80 basis points

Speaker Change: Without the Buck and M&A noise, would that be the rule of thumb in terms of margin expansion for next year if you're in the 7-9% organic growth range?

Patrick M. Gallagher: Let's see what happens with hurricane season, casualty rates, interest rates, the election. So there are some unknowns that are happening. But we still think that next year feels a lot like where this year will come in. When it comes to margin expansion, let us work on that a little bit during our budget season. We'll start that before our September IR day.

Speaker Change: Well, yeah, let's reaffirm that we see next year, you know, it could be very similar to this year. Let's see what happens with hurricane season, casualty rates, interest rates, the election. So there's some unknowns that are happening, but we still think that next year feels a lot like where this year will come in. When it comes to margin expansion,

Speaker Change: Let us work on that a little bit during our budget season. We'll start that before our September IR day. We should have a good idea in October . But there's nothing systemic out there that would cause us to believe.

Patrick M. Gallagher: We should have a good idea in October, but there's nothing systemic out there that would cause us to believe that in a seven to nine percent, you know, organic environment, you could see margins up in that 75 to 100 basis point range. Okay, thanks. And then my last one: you guys said you have three and a half billion to fund M&A this year. How much did you spend in the first half of the year and, given the pipeline that you guys see, you know, does it feel like there might be some buyback this year or is it still kind of TBD? So I think we've spent around $700 million thus far this year.

Speaker Change: that in a 7-9% organic environment, you could see margins up in that 75-100 basis point range.

Speaker Change: Okay, thanks. And then my last one, you guys said you have three and a half billion to fund M&A this year. How much did you spend in the first half of the year?

Speaker Change: Given the pipeline that you guys see, you know, does it feel like there might be some buyback this year or is it still kind of TBD?

Speaker Change: So I think we've spent around $700 million thus far this year, we have some commitments out there. Do I see us having some buybacks? You know, maybe, you know, we do have the large earn out payable that's due right after the first of the year, also, that's generally, we don't include that in that number, we kind of anticipate that. But that.

Patrick M. Gallagher: We have some commitments out there. Do I see us having some buybacks? You know, maybe.

Patrick M. Gallagher: You know, we do have the large earn-out payable that's due right after the first of the year also. But generally, we don't include that in that number. We kind of anticipate that, but you know, we'll see. I just got off the phone an hour ago with one of our M&A bird dogs here in the U.S., and he's really starting to feel upward pressure on opportunities for M&A. There are some that are sitting there thinking that we'll see what happens in the November election if it goes Republican.

Speaker Change: Yeah, we'll see. I just got off the phone an hour ago with one of our M&A bird dogs here in the U.S., and he's really starting to feel upward pressure on opportunities for M&A.

Speaker Change: There are some that are sitting there thinking that we'll see what happens with the November election if it goes Republican, there's a lot of proposals to drop the capital gains rate maybe down to 15%, so you might have people that try to push that into January . If the Democrats win, then there might be a push to get things sold before the end of the year. So we're sitting very similar to where we were before an election three and a half years ago and where we were seven and a half years ago. There is a lot of uncertainty on M&A flow that revolves around the presidential election. So I think we've got a great shot of using it all, and if not, we'll take a look at what happens.

Patrick M. Gallagher: There are a lot of proposals to drop the capital gains rate maybe down to 15 percent. So you might have people that try to push that into January. If the Democrats win, then there might be a push to get things sold before the end of the year. So we're sitting very similar to where we were before the election three and a half years ago and where we were, you know, seven and a half years ago.

Patrick M. Gallagher: There is a lot of uncertainty about M&A flow that revolves around the presidential election, so I think we've got a great shot of using it all. And if not, we'll take a look at what happens with share repurchase. Thank you. Our next question is from Mike Zaremski with BMO Capital Markets. Please receive your question. Hey, thanks for the afternoon.

Speaker Change: on share repurchases.

Speaker Change: Thank you.

Speaker Change: Thank you.

Speaker Change: Our next question is from Mike Zaremski with BMO Capital Markets. Please receive your question.

Michael David Zaremski: I hope this question makes sense. But, um, on the PNC pricing environment, you always give commentary on renewal premium changes, and you kind of give it overall and, you know, by product line. And so the RPC rate has deconsolidated more recently to around five. How is that interchanging with your organic growth?

Michael David Zaremski: Hey, thanks for afternoon. Um, I hope this question makes sense, but um, on the

Patrick M. Gallagher: Why is there a bigger, you know, why is there a bigger delta now when you're organic in RPC versus what we saw early this year and last year? All right, so this is a great thing, and maybe we haven't talked about it directly for quite a few quarters. But you always have to think about the opt-in, opt-out of the buyer's behavior. When prices are going up, buyers opt out of coverage, which might mean they increase a deductible, lower a limit, or just don't buy certain coverages.

Michael David Zaremski: How is that interchanging with your organic growth? Why is there a bigger, you know, why is there a bigger Delta now?

Speaker Change: when you're organic in RPC versus.

Patrick M. Gallagher: As prices start to moderate or slower amounts of increases, they tend to opt back in, they reduce their deductibles, they raise their limits, and maybe they buy coverage that they said they just couldn't afford before. So if you go all the way back into our investor materials, there is always a delta between rates and exposure and and what our organic growth is. And so, you know, that's why in periods when you see property is up, you know, 12%, we're not growing our property lines by 12%; they're growing 7, 8, 9% is actually our revenue. So you always have to remember the opt-in, opt-out impact.

Speaker Change: What we saw early this year and last year.

Speaker Change: Alright, so great thing and maybe we haven't talked about it directly for quite a few quarters, but you always have to think about the opt-in, opt-out of the buyer's behavior.

Speaker Change: When prices are going up, buyers opt out of coverages, which might mean they increase a deductible, lower a limit, or just don't buy certain coverages.

Speaker Change: as prices

Speaker Change: start to moderate or slower amounts of increases, they tend to opt back in. They reduce their deductibles. They raise their limits.

Speaker Change: and maybe they buy coverages that they said we just couldn't afford before. So if you go all the way back into our investor materials, there is always a delta between rate and exposure and what our organic growth is.

Speaker Change: And so, you know, that's why in periods when you see property is up, you know, 12%, we're not growing our property lines by 12%, they're growing...

Speaker Change: 7, 8, 9% is actually our revenue. So you always have to remember the opt-in, opt-out.

Patrick M. Gallagher: Then the other thing, too, is you got the dynamic of large accounts versus mid-market and small accounts that can influence that. So we're giving you a feel for what's going on in the market, but the behavior of our actual customers can vary depending on, you know, rational, you know, buying behavior, prices go down, I buy more; prices go up, I buy a, As Doug said, let me hit on that as well Mike, let's not forget what our job is, so Doug hit right on it, when rate and exposure looks like it's up Our job is to mitigate that. And we start right with that premise.

Speaker Change: Impact. Then the other thing too is you got the dynamic of large accounts versus mid-market and small accounts that can influence that. So we're giving you a feel of what's going on in the market, but the behavior of our actual customers can vary depending on

Speaker Change: You know, by rational, you know, buying behavior, prices go down, I buy more. Prices go up, I buy less.

Michael David Zaremski: As Doug said, let me hit on that as well Mike, let's not forget what our job is, so Doug hit right on it. When rate and exposure looks like it's up 12% and you say well how come you're not seeing that right in your renewal book?

Patrick M. Gallagher: Like, wait a minute, here's where we see the market coming. A good broker gets out in front of this with their clients for months. Here's what we see in the market. Here's what's coming. What are we going to do about it? Let's take retentions up. Remember, you dropped cover before; now it's time to add it.

Speaker Change: Our job is to mitigate that. And we start right with that premise. Like, wait a minute, here's where we see the market coming. A good broker gets out in front of this with their clients months. Here's what we see in the market. Here's what's coming. What are we going to do about it? Let's take retentions up. Remember, you dropped cover before. Now it's time to add it.

Patrick M. Gallagher: So there's a lot of moving parts between those two numbers. Got it. Now, obviously, it's great you guys disclosed that. And so I guess just wanted to put a final question, Unknown Speaker: So is it fair to say that, you know, you're doing a good job for your clients and, on a year over year basis, it's putting a little bit of, I guess, pressure on your organic growth year over year and separately related? Yeah. Right. You do start to wonder, is there, do clients have the same amount of flexibility as they do in other lines that would cause the RPC disconnect to continue?

Speaker Change: So there's a lot of moving parts between those two numbers.

Speaker Change: Got it. Now, obviously, it's great you guys disclosed it. And so I guess just wanted to put a final

Speaker Change: Is it fair to say that you're doing a good job for your clients on a year-over-year basis? It's putting a little bit of...

Speaker Change: I guess.

Speaker Change: Pressure on your organic year-over-year and and separately related

Speaker Change: Do clients have the same amount of flexibility as they do in other lines that would cause the RPC disconnect to continue?

Patrick M. Gallagher: Yeah, definitely. Absolutely. Number one.

Patrick M. Gallagher: Yes. But if you throw me the softball, are we doing a good job for our clients? The answer is going to be best in the business. And we think these numbers show that, and we think the growth numbers show it. Absolutely. And yes, you'll continue to see always see some. Change between what's being reported as growth in units of exposure and premium rates based on what we do. And the tools in our toolbox are unbelievable. So do you want to look at a captive elephant?

Speaker Change: Yeah, definitely, absolutely. Number one, yes, if you throw me the softball, are we doing a good job for our clients, the answer is going to be best in the business, and we think these numbers show that, and we think the growth numbers show it. Absolutely. And yes, you'll continue to see always some

Speaker Change: change between what's being reported as growth in units of exposure and premium rates based on what we do. And the tools in our toolbox are unbelievable. So do you want to look at a captive? Would you like to take your attention up? It's not just do you buy insurance or don't

Patrick M. Gallagher: Would you like to take your retention up? It's not just whether you buy insurance or don't. Let's start with the things that maybe are the last things you should insure and the first things you'll self-insure.

Speaker Change: Let's start with the things that maybe are the last things you should insure and the first things you'll self-insure. There's a lot of that work going on with our people every single day. By the way, that appetite for risk.

Patrick M. Gallagher: There's a lot of that work going on with our people every single day. By the way, that appetite for risk is very individual. It's not prescriptive. You can't take a book.

Speaker Change: is very individual. It's not prescriptive. You can't take a book, there's no AI that says, oh, an auto dealer has this much appetite for risk based on the number of cars in the lot. That's not how it works.

Patrick M. Gallagher: There's no AI that says, oh, an auto dealer has this much appetite for risk based on the number of cars in the lot. It's not how it works. So that's where our profession comes in and deals with those people, and then our advice is critical. It's not just, well, you know, I'm pretty bold here, but I think a million-dollar retention makes a lot of sense. We think it looks better this way, and that's where we get paid.

Speaker Change: So that's where our profession comes in and deal with those people and then our advice is critical It's not just well, you know, I'm pretty bold here. I think a million dollar retention makes a lot of sense. Wait, wait, wait We think it looks better this way and that's we get paid to do

Patrick M. Gallagher: Okay, that's helpful. Lastly, pivoting to reinsurance, to the extent you have an opinion, one of the three largest reinsurers today put out some data kind of showing that reinsurance demand, and you guys have done a great job, not only taking market share, but kind of being able to keep your organic high because of that demand increased like mid-teens-ish this year. And if we kind of think about what's going on in personal lines, you know, there's a lot of inflation.

Speaker Change: Okay, that's helpful. This is lastly pivoting to reinsurance to the extent you have a view, you know, one of the three largest reinsurers today.

Speaker Change: Put out some data kind of showing that reinsurance demand and you guys have done a great job, you know, you know

Speaker Change: Not only taking market share, but kind of being able to keep your organic high because of that demand Increased like mid teens ish this year and if we kind of think about what's going on in personal lines

Patrick M. Gallagher: So just curious, would you expect demand for reinsurance, I don't know if you think all the way into 25 yet, but to remain at kind of pretty high levels relative to history and relative to this year? It'll go up. Yes, I do.

Speaker Change: You know, there's a lot of inflation. So just curious, would you expect kind of demand for reinsurance? I don't know if you think all the way into 25 yet, but to remain at kind of pretty high levels relative to historical and relative to this year? It'll go up.

Patrick M. Gallagher: For a lot of reasons. I think that you're going to see the opportunity to buy more at prices that look more reasonable. And there have been cutbacks in the purchase of certain. The other thing is that these nuclear verdicts are real.

Speaker Change: Yes, I do. For a lot of reasons. I think that you're going to see the opportunity to buy more at prices that look more reasonable.

Speaker Change: and there have been cutbacks in the purchase of certain the other thing is that these nuclear these nuclear verdicts are real and people are seeing that they're going you know

Patrick M. Gallagher: And people are seeing that, and they're going, you know. It doesn't cost as much to buy on the high end, the top of the tower, as it does down where there's a lot more activity. And I still want to be sitting here when some goofball jury comes up with a billion-dollar award.

Speaker Change: It doesn't cost as much to buy on the high end, the top of the tower, as it does down where there's a lot more activity. And I still want to be sitting here when some goofball jury comes up with a billion dollar award.

Patrick M. Gallagher: Got it. So come up as a seaside resort to maybe more demand. Okay. Thank you very much. Our next question is from the line of Gregory Peters with Raymond James. Hey, good afternoon, everyone.

Speaker Change: Scott, if you'll come in on the casualty side too, maybe more demand. Okay, thank you very much.

Speaker Change: Our next question is from the line of Gregory Peters with Raymond James. Please proceed with your question.

Gregory Peters: Hey, good afternoon everyone.

Gregory Peters: Thank you. I guess for my first question... Junior Investor Day spoke about net new business, and clearly your results reflect that. I was wondering if you could.

Gregory Peters: I guess, for my first question,

Speaker Change: You know, during your investor day, you spoke about net new business wins, and clearly your results reflect that. I was wondering if you could...

Patrick M. Gallagher: Give us some more color on how the quarter shaped up, and how we should think about your net new business in the second quarter versus, say, the net new business. Well, it's going to take me a minute to dig it out, but I can tell you that, year to date, we've actually expanded the spread between new and lost by a full point. I think that's probably the best way to look at it. The absolute numbers are kind of irrelevant.

Speaker Change: Give us some more color on how the quarter shaped up and how we should think about You know your net new business in the second quarter versus say the net new business wins in the second quarter last year Some additional metrics around that

Speaker Change: Well, it's going to take me a minute to dig it out, but I can tell you that June , year to date, we've actually expanded the spread between new and lost by a full point.

Speaker Change: I think that's probably the best way to look at it. The absolute numbers are kind of irrelevant.

Patrick M. Gallagher: Our non-recurring is also coming back before. Some of the non-recurring revenues might have been putting just a slight drag on organic, but now they're actually in line with just our recurring business. So you're seeing an expansion of our spread between new and lost. How do we see that going forward? You know, Greg, it gets more and more complicated.

Speaker Change: Our non-recurring is also coming back before. Some of the non-recurring revenues might have been putting just a slight drag on organic, but now they're actually being, you know, in line with just our recurring business.

Speaker Change: So, you're seeing an expansion of our spread between new and lost. How do we see that going forward?

Patrick M. Gallagher: I actually think our team will do a better job showing our wares and our capabilities in a more of a stable rate environment versus kind of some of the chaotic rate environment that we've been seeing over the last few years. We spent so much money on resources in the last five years, but three of those were consumed with COVID.

Speaker Change: Greg, it gets more and more complicated. I actually think our team will do a better job showing our wares and our capabilities in a more of a stable rate environment versus kind of some of the chaotic rate environment that we've been seeing over the last few years. We've developed, we've spent so much money on resources in the last five years. Three of those were consumed with COVID. Two of those have been consumed with some chaotic market behavior, put our guys on a field with kind of calm rate environment, a client that's not trying to just save their business and rebuilding it after COVID.

Patrick M. Gallagher: Two of those have been consumed with some chaotic market behavior. Put our guys on a field with a kind of calm rate environment, a client that's not trying to just save their business and rebuild it after COVID. I think you'd be amazed at the digital and data and analytics and expertise. And now bring our reinsurance folks into the picture, stack them up with our wholesalers. I got to tell you, it is a compelling offer at the point of sale that I would think would absolutely deliver better net new business, you know, more new, less loss as our clients really see the capabilities that we have built over the last five years. Arguably, maybe we've spent a billion dollars on capabilities over the last seven years, something like that.

Speaker Change: I think you'd be amazed at the digital and data and analytics and expertise and now bring our reinsurance folks into bear, stack them up with our wholesalers.

Speaker Change: I've got to tell you, it is a compelling offer at the point of sale that I would think that would absolutely deliver better, net new business, more new, less loss, as our clients really see the capabilities that we have built over the last four, five, six years.

Speaker Change: Unknown Speaker 5 years. Arguably, maybe we've spent a billion dollars in capabilities over the last seven years, something like that. So that's going to come out at the point of sale and give us a little calm in the market. And I think you're going to see our new business continue to go up.

Patrick M. Gallagher: So that's going to come out at the point of sale and give us a little calm in the market. And I think you're going to see our new business continue to go up. Thank you. Thank you.

Patrick M. Gallagher: You know, one of the things you've also talked extensively about in the past, The Offshore Centers of Excellence, maximizing those for their potential to create more opportunities in offshoring to help drive, Well, this is Pat, Greg. Let me take the operational side of that, and I'll throw the ball to Doug for the numbers and kind of discussion there. But everywhere I look, I see opportunity and unbelievable benefits from using our Centers of Excellence. You know, we started out checking policies 20 years ago with 12 people. We now have 12,000 people supporting over 400 services in 100 countries. It is unbelievable the level of professionalism that they help us attain.

Culler: Excellent color, thank you. You know one of the things you've also talked expansively about in the past is the Offshore Centers of Excellence.

Speaker Change: And, you know, this kind of dovetails with the opportunities for margin expansion.

Speaker Change: Is it your sense for Arthur J Gallagher that you sort of maximized those opportunities or do you see...

Speaker Change: Do you see further potential for more opportunities in offshoring to help drive some origin improvement?

Speaker Change: This is Pat Grigg. Let me take the operational side of that and I'll throw the ball to Doug for the numbers and kind of discussion there, but everywhere I look I see opportunity and unbelievable benefits.

Douglas K. Howell: from Using Our Centers of Excellence.

Douglas K. Howell: You know, we started off checking policies 20 years ago with 12 people. We now have 12,000 people supporting over 400 services in 100 countries.

Speaker Change: It is unbelievable the level of professionalism that they help us attain.

Patrick M. Gallagher: And that is a differentiator at the point of sale. It's a differentiator when we're recruiting. It's a differentiator in everything we do. And I don't see any sense in that slowing down or not being something that continues to expand. It's not just about replacing heads, by any means.

Douglas K. Howell: And that is a differentiator at the point of sale, it's a differentiator when we're recruiting, it's a differentiator in everything we do, and I don't see any sense of that slowing down or not being something that continues to expand. It's not just about replacing heads by any means.

Patrick M. Gallagher: It's about having the people that should be doing things doing them and freeing up those that should be doing other things, giving them the time to do that, which I do think feeds into retention and new business. So I think our centers of excellence are a unique product offering. Back to Doug's point about all the things we've invested in, I think they're a very beneficial add to our sales list of things we provide, Gallagher.

Douglas K. Howell: It's about having the people that should be doing things doing them and freeing up those that should be doing other things, giving them the time to do that, which I do think feeds into retention and new business.

Douglas K. Howell: So, I think our Centers of Excellence are a unique product offering, back to Doug's point about all the things we've invested in.

Douglas K. Howell: I think they're a very beneficial add to our sales list of things we provide at Gallagher. And as we grow through acquisitions alone,

Patrick M. Gallagher: And as we grow through acquisitions alone... Every one of those people join us, and we immediately start plugging them into this resource, which is another one of the reasons they join us. So to me, it's a very differentiating thing that we do. I think our team there is absolutely spectacular.

Speaker Change: Every one of those people join us, and we immediately start plugging them into this resource, which is another one of the reasons they join us.

Speaker Change: So to me, it's a very differentiating thing that we do. I think our team there is absolutely spectacular.

Patrick M. Gallagher: I think if you talk about the growth path of our offshore centers of excellence, I think you should remember, they work only for us. They're an integral part of our team. There isn't a "they" or "we," there are just us.

Speaker Change: I'll let Doug address the numbers. Yeah, I think if you talk about the growth path of our offshore centers of excellence, I think, remember, they work only for us. They're an integral part of our team. There isn't a they or we, there are us.

Patrick M. Gallagher: If you look at some of our outlook, if we're going to be $20 billion in revenue, there'll be almost 30,000 folks there, so the growth path of our India and other areas service centers will grow faster than the headcount in our other areas. But more importantly, as we've been on this nearly 20-year journey now to standardize and make our operations consistent, it really is going to allow us to deploy AI in that environment. AI is terrific when you have consistency of information and repeatable behaviors and processes, and we have that, and we've spent nearly 20 years doing this.

Douglas K. Howell: If you look at some of our outlook, if we're going to be $20 billion of revenue,

Douglas K. Howell: There'll be almost 30,000 folks there, so the growth path of our India and other area service centers will grow faster than the headcount in our other areas. But more importantly on this, as we've been on this nearly 20-year journey now to standardize

Douglas K. Howell: Make our operations consistent. It really is going to allow us to deploy AI into that environment.

Douglas K. Howell: AI is terrific when you have consistency of information and repeatable behaviors and processes. And we have that, and we've spent nearly 20 years doing this. We have a jump, I believe, compared to most.

Patrick M. Gallagher: We have a jump, I believe, compared to most, by almost a decade. And I think that some of the tests that we're using with AI now will make our folks there better, will make a different type of job for our folks in the centers better, it'll make our sales folks better, and our service folks better. And I can speak, and I've got 57% of my entire global finance, worldwide finance team operating out of there, and I can see it going to 80%. So it is going to be a service and sales differentiator for us because of the hard work we've put in for the last 15 years. Thanks for the call.

Douglas K. Howell: by almost a decade. And I think that some of the tests that we're using with AI now will make our folks there better, will make the different type of job for our folks in the centers better. It'll make our sales folks better, our service folks better. And I can speak, you know, I've got 57% of my entire global finance, worldwide finance team operating out of there, and I can see it going to 80%. So it is going to be a service and sales differentiator for us, because of the hard work we've put in for the last 15 years.

Gregory Peters: Just a point of clarification, and I probably should know this number, but I don't remember. On the capital management side, you said, well, listen, if we can't do the deals, you get through your earn out, you might consider share repurchase. When's the last time you guys were active in share repurchase? So, let's see, it probably was, uh, maybe in 2000 and when was Brexit? Uh, 2000 and, is that? 7 or 8 years ago, whatever Brexit was.

Speaker Change: Thanks for the color. Just a point of clarification, and I probably should know this number, Doug.

Speaker Change: I don't remember on the capital management side, you said, well, listen, if we can't do the deals, you get through your earn out, you might consider share repurchase. When's the last time you guys were active in share repurchase?

Douglas K. Howell: So, let's see, it probably was maybe in 2000 and, when was Brexit, 2000 and,

Speaker Change: Exactly.

Patrick M. Gallagher: Okay. All right. Thanks for the answer.

Speaker Change: 7 or 8 years ago, whatever Brexit was.

Speaker Change: Okay. All right. Thanks for the answers. Thanks, Greg.

David Kenneth Motemaden: Thanks, Greg. Our next questions are from the line of David Motemaden with Evercore. Hey, thanks. Good evening.

Speaker Change: Our next questions are from the line of David Motemaden with Evercore, just see their questions.

David Kenneth Motemaden: I just had a question I was hoping to get a little bit more color on the July RPC acceleration that you mentioned, Doug. Maybe just a little bit around the lines. Is that property moderation kind of pausing? Or is it a casualty acceleration?

David Kenneth Motemaden: Hey, thanks. Good evening. I just had a question. I was hoping to get a little bit more color on the July RPC acceleration that you mentioned, Doug.

David Kenneth Motemaden: Maybe just a little bit around the lines. Is it property moderation kind of pausing or is it casualty acceleration? What is, you know, what's going on there?

Douglas K. Howell: What is it, you know, what's going on? Well, actually, a little bit of both. We actually saw property, and actually, property is a pretty heavy quarter for us here in the second quarter. If you think it's about a third of our business, I think, in the second quarter, it might comprise 50% of our mix. So property in July, we did see a slight tick up. I'm talking a point or so, but I'm not talking about it's five or eight points.

Douglas K. Howell: Well, actually a little bit of both. We actually saw a property. And actually, property is a pretty heavy quarter for us here in the second quarter. If you think it's about a third of our business, I think here in the second quarter, it might comprise

Douglas K. Howell: 50% of our mix. So property in July , we did see a slight tick up, I'm talking a point or so I'm not talking about it's five or eight points, it's a point to two. Casualty rates are showing some, I wouldn't say acceleration, we use the word advancement, in terms of where they are, because I, but they're steady. We'll see what happens with the with pricing here in the second half of the year coming out of the carriers. So I would expect that to advance more. So not a jump up.

Douglas K. Howell: It's a point to two. Casualty rates are showing some, I wouldn't say acceleration; we use the word advancement in terms of where they are, but they're steady. We'll see what happens with pricing here in the second half of the year coming out of the carriers. So I would expect that to advance more. So not a jump up.

Douglas K. Howell: But certainly, you know, again, our dailies, they come out overnight. I looked at it, you know, last night, and we're seeing a tick up on both property and on casualty.

David Kenneth Motemaden: But certainly, again, our dailies come out overnight, I looked at it last night, and we're seeing a tick up on both property and cash. Got it. Thanks. And there was a line in the press release on the adjusted comp ratio that caught my eye, just where you noted savings related to headcount controls. That's the first time I've seen that.

Speaker Change: Got it. Thanks. And there was a line in the press release on the adjusted comp ratio that caught my eye, just where you noted savings related to headcount controls. That's the first time I've seen that.

David Kenneth Motemaden: I'm just wondering, is that to do with the offshore centers, or is this more of a concerted effort to show some margin expansion as we think about this year and into next year? You know, I think that the answer is this. First of all, if you look at what we did during COVID, we actually took out quite a few folks.

Speaker Change: You know, I can't remember how long.

Speaker Change: I'm just wondering, is that as, I guess, is that to do with something to do with the offshore centers, or is this more of a concerted effort to show some margin expansion, you know, as we think about, you know, this year and into next year?

Douglas K. Howell: And we've been hiring back since then as our business has grown into that. We haven't stopped hiring by any means, so it's not an indication of anything.

Speaker Change: You know, I think that the answer is this. First of all, if you look at what we did during COVID, we actually took out quite a few folks and we've been hiring back since then as our business has grown into that.

Speaker Change: We haven't...

Speaker Change: Stopped hiring by any means so it's not an indication everything. I think the teams just are seeing that of their of their Workload models that were probably okay staffed in the environment that we are right now

Douglas K. Howell: I think the teams just are seeing that their workload models were probably okay staffed in the environment that we are right now. So I would read that into it, but nothing, nothing systemic, but just maybe that we've hired back into the capacity that we need in 23. Got it.

Speaker Change: So, I would read that into it, but nothing systemic, but just maybe that we've hired back into the capacity that we need in 23.

Unknown Executive: Okay, that's helpful, and then maybe just sneaking one more in, just on the contingent commission accruals that you guys had made the true-up to this quarter.

David Kenneth Motemaden: Okay, that's helpful. And then maybe just sneaking one more in, just on the contingent commission accruals that you guys had made true up to this quarter. I guess, you know, we have seen a lot of noise this quarter on casualty reserves, particularly in the more recent years. I'm wondering how you feel about the potential for more of those uh reserve adjustments to come through and how that might impact the continued, All right.

Speaker Change: Got it. Okay, that's helpful. And then maybe just sneaking one more in just on the contingent commission accruals that you guys had made the true up to this quarter. I guess, you know, we have seen a lot of noise this quarter on casualty reserves.

Unknown Executive: I guess, you know, we have seen a lot of noise this quarter on casualty reserves, particularly on the more recent years. I'm wondering, you know, how you feel about the potential for more of those reserve adjustments to come through and how that might impact the contingents?

Speaker Change: particularly on the more recent years. I'm wondering, you know, how you feel about the potential for more of those reserve adjustments to come through and how that might impact the contingents.

David Kenneth Motemaden: First of all, on the supplementals, we've done pretty well year to date. Contingents, we did have some development that happened. We're probably not accruing as, I don't want to use the word bullish, but I will for a second, as we were, as maybe we could. Casually, we're cautious on that.

Unknown Executive: All right, first of all, and on that supplemental, we've done pretty well year-to-date contingents. We did have some development that happened. Well, probably not accruing as, as I don't want to use the word much, but I will, for the second, and as we were, is maybe we could.

Speaker Change: All right, first of all, on the supplementals, we've done pretty well year to date contingents, we did have some development that that happens, we're probably not accruing as

Speaker Change #100: I don't want to use the word bullish, but I will for a second, as we were, as maybe we could.

Douglas K. Howell: Some of our programs and some of our binding operations, you've got to be a little careful on performance-related compensation there, but I don't see a systemic shift in how we believe that our total compensation is going to happen. Maybe some bumps a little bit per quarter, but we're talking a couple of $3 million on a $130 million number year to date, so it's pretty small. Yep, understood, fair. Thank you. Thanks, David. Our next question is from the line of Mark Hughes with True Security. Yeah, thank you. Good afternoon.

Thomas Gallagher: Jasmine, we're cautious on it. You know, some of our programs and some of our binding operations got to be a little careful on performance-related compensation there, but I don't see a systemic shift in how we believe that our total compensation is going to happen. And maybe some bumps a little bit per quarter, but we're talking about a couple of three million bucks, and I'm $130 million number a year today, so it's pretty small.

Speaker Change #100: Casually, we're cautious on it, you know, some of our programs and some of our, our

Speaker Change #100: Binding operations, you've got to be a little careful on performance related compensation there, but I don't see a systemic shift in how we believe that our total compensation is going to happen.

Speaker Change #100: a little bit per quarter, but we're talking a couple of three million bucks on a $130 million number a year today, so it's pretty small.

Unknown Executive: Yep, understood. Fair. Thank you.

Unknown Executive: Thanks, David.

Speaker Change #101: Yep, understood, fair, thank you.

Unknown Executive: My next question is in the line of Mark. Use with true security. Please just use your questions.

David Kenneth Motemaden: Thanks, David.

Speaker Change #102: Our next question is from the line of Mark Hughes with Truist Securities. Please receive your questions.

Mark Douglas Hughes: On the risk management business, maybe we've gotten used to the elevated growth for quite an extended period of time, the 7% in the next couple of quarters. Could you maybe just talk about the growth environment there relative to what it might have been in prior years and what your expectations are? Is this a little bit of a lull, or is this a good number? All right. So first of all, let's make sure you ask about the history. I think in 22, we posted about 12% annual organic growth. 23, it was, excuse me, 21 was 22, it was 12%. 22 is about 13%.

Unknown Executive: Yeah, thank you.

Mark Hughes: Good afternoon. And one of the risk management businesses that maybe we've motivated growth for quite an extended period of time, the 7% the next couple of quarters. Could you maybe just talk about the growth environment there relative to what it might have been in prior years, and what your expectation is? This a little bit of a loan, or is this a good number? All right, so first of all, let's make sure you ask about the history. Is that I think in 22, we posted about 12% annual organic growth; 23, it was, excuse me, 21, it was 22, it was 12%, 22 is about 13%, and last year is pushing 16%.

Mark Douglas Hughes: Yeah, thank you. Good afternoon.

Speaker Change #104: On the risk management business, maybe we've gotten used to the elevated growth for quite an extended period of time.

Speaker Change #104: Q&A

Douglas K. Howell: And last year is pushing 16%. This year, if we get 9%, we did talk about a couple very large winds that we had that started in mid-23. What we're seeing in our book of business right now is actually reassuring, not that we need reassuring, because we are a great near double-digit grower and have been for a very long time, is that we're starting to see more and more opportunities in that $2 million to $10 million type customer a year. If you look at the amount of new business sales that are happening relative to, let's say, five years Now, we're double the size too.

Speaker Change #105: Alright, so first of all, let's make sure you ask about the history, is that I think in 22, we posted about 12% annual organic growth, 23...

Speaker Change #105: It was, excuse me, 21 was 22, it was 12%, 22 is about 13% and last year it was pushing 16%. This year if we get 9%

Mark Douglas Hughes: This year, if we get 9%, we did talk about a couple very large wins that we had that instructed in mid-23. What we're seeing in our book of business right now is actually reassuring, not that we need reassurances, is a great near double-digit grower and has been for a very long time. Yes, we're starting to see more and more opportunities in that 2 million to 10 million dollar type customer a year. If you look at the amount of new business sales that are happening, relative to let's say five years ago, it's nearly doubled. Now we're double to size too, but their carriers are beginning to understand that we offer a highly customizable solution. Self-insureds are seen that our outcomes are better.

Speaker Change #106: We did talk about a couple very large wins that we had that incepted in mid-23. What we're seeing in our book of business right now is actually reassuring, not that we need reassurance. This is a great near double-digit grower and has been for a very long time.

Speaker Change #107: is, we're starting to see more and more, uh...

Speaker Change #107: Opportunities in that 2 million to 10 million dollar type customer a year. If you look at the amount of new business sales that are happening relative to let's say five years ago, it's nearly doubled. Now, you know, we're double the size too, but their carriers are beginning to understand that we offer a highly customizable solution.

Douglas K. Howell: But their carriers are beginning to understand that we offer a highly customizable solution, and self-insureds are seeing that our outcomes are better. So I think that there's a market awakening that when we pay, you know, nearly 12 or $13 billion, primarily workers' comp and general liability claims, that would be one of the top 567 companies in the US as measured by total claims paid. So the expertise, customizable services, are becoming more and more known in the industry.

Speaker Change #107: Self-insureds are seeing that our outcomes are better.

Mark Hughes: So I think that there's a market awakening that we, you know, when we pay, you know, a nearly 12 or 13 billion dollars primarily work as common general liability claims, that would be one of the, you know, top 5, 6, 7 tiers in the US as measured by total claims pay. So the expertise, customizable services is becoming more and more known in the industry, so we're getting many more trips to the play. Maybe a couple of fewer home runs, but I think we're going to see a lot of doubles and triples out there, so I wouldn't call it a law, because we're going to do 9% this year. But we did have two years of some pretty big wins in there, but we wrote all the big ones.

Speaker Change #107: So, I think that there's a market awakening that we, you know, when we pay.

Speaker Change #107: you know in nearly 12 or 13 billion dollars primarily workers comp and general liability claims

Speaker Change #107: That would be one of the top 5, 6, 7 carriers in the U.S. as measured by total claims paid. So the expertise, customizable services is becoming more and more known in the industry. So we're getting many more trips to the plate.

Douglas K. Howell: So we're getting many more trips to the plate. Maybe a couple fewer home runs, but I think we're going to see a lot of doubles and triples out there. So I wouldn't call it a lull because we're going to do 9% this year. But we did have two years of some pretty big wins in there. But we rode all the big ones.

Speaker Change #108: Maybe a couple fewer home runs, but I think we're gonna see a lot of doubles and triples.

Speaker Change #108: I wouldn't call it a lull because we're going to do 9% this year, but we did have two years of some pretty big wins in there, but we rode all the big ones.

Douglas K. Howell: That's not true. But elephant hunting is a lot more difficult, and lumpier than the stuff we're seeing now. Yeah, understood. And then there any way to break out within the wholesale, the open brokerage versus the MGA and binding? Yeah, listen, I think that right now open brokerage is, you know, maybe in that 11 to 13% range. And I think that that binding and programs might be in the low mid, mid singles digits, something like that.

Mark Hughes: That's not true, but the elephant hunting is a lot more difficult, more lumpy than the stuff we're seeing now.

Speaker Change #109: That's not true, but the elephant hunting is a lot more difficult, more lumpy than the stuff we're seeing now.

Mark Hughes: Yeah, understood. And then the, anyway, to break out the, within the wholesale, the open brokerage versus the MGA and binding. Yeah, listen, I think that right now, open brokerage is, you know, maybe in that 11% to 13% range. And I think that that binding and programs might be in the low mid, middle, single, did just something like that.

Speaker Change #110: Yeah understood and then the any way to break out the within the wholesale the open brokerage versus the MGA and binding?

Speaker Change #111: Yeah listen I think that right now open brokerage is you know maybe in that 11 to 13 percent range and I think that that that binding and programs might be in the low mid mid singles digits something like that. You know Mark what I'm most

Douglas K. Howell: You know, Mark, what I'm most impressed with and pleased with is the fact that you're seeing that open brokerage number keep moving in nice double digits. My experience with these types of markets, especially with property, is that the first line you kind of see submissions slow down, you know, people sort of stay where they are. There is a, our submission count is up substantially for the quarter, for the month, for the year. However, we are not seeing business flow back to the primary.

Mark Hughes: You know, Mark, what I'm most, which I'm most impressed with and pleased with is the fact that you're seeing that open brokerage and number of people. And in, in nice double digits, my experience with these types of markets, especially with property, is that really first line, it kind of sees submissions slow down. You know, people sort of stay where they are. There's our submission count is up substantially for the quarter, for the month, for the year. We are not seeing business flow back to the primaries. So the, I think, changed that we've seen that we're excess of surplus is becoming much more of the norm.

Speaker Change #111: Which I'm most impressed with and pleased with is the fact that you're seeing that open brokerage number keep moving.

Mark Douglas Hughes: and in nice double digits. My experience with these types of markets, especially with property.

Speaker Change #112: Is that the first line you kind of see submissions slow down, you know, people sort of stay where they are. There is a, our submission count is up substantially for the quarter, for the month, for the year. We are not seeing business flow back to the primaries.

Douglas K. Howell: So the, I think change that we've seen where excess and surplus is becoming much more of a norm, and where people want to, you know, check out what a wholesaler can do, and then we earn that business; we're not losing. So submission counts are up. Tension rates are up.

Mark Douglas Hughes: So.

Speaker Change #113: The, I think, change that we've seen that where excess and surplus is becoming much more the norm and where people want to, you know, check out what a wholesaler can do and then we earn that business, we're not losing it.

Mark Hughes: And where people want it, you know, check out what a wholesale or can do, and then we burn that business; we're not losing it. So submission counts are up, retention rates are up, new businesses up, and that's pretty exciting.

Speaker Change #113: So submission counts are up, retention rates are up, new business is up, and that's pretty exciting.

Douglas K. Howell: New business is up, and that's pretty exciting. Great. I appreciate it.

Unknown Executive: Great, appreciate it. Thank you.

Robert Cox: Thank you. Thank you. Our next question is from the line of Rob Cox with Goldman Sachs to see if there are any questions. Hey, thanks.

Speaker Change #113: Great. Appreciate it. Thank you.

Rob Cox: Our next question is from the line of Rob Cox with Goldman Sachs. Please just see you here question.

Speaker Change #115: Thank you. Our next question is from the line of Rob Cox with Goldman Sachs. Pleased to see you with your question.

Rob Cox: Hey, thanks. Yeah, just a question going back on the, the opt-in opt-out dynamics. Just, just curious, does that flow through net new business, and that's what kind of driving the one-point higher. You said junior to date of net new business, or is that, is that something out entirely? Yeah, I think some of that flow is back well. So, for instance, a good example of that is a lot of our public and any clients. And as you know, we're very, very sizable in the public and any sector. They just work out the budget. And if the primary premiums are rising, they're taking bigger retention, they're dropping limits, and they don't, they're not necessarily comfortable with that.

Robert Cox: Yeah, just a question going back on the Op-Ed, opt-out dynamics. Just curious, does that flow through net new business? And that's kind of driving the one point higher you said June year to date of net new business, or is that something else entirely? Yeah, I think some of that flows back. Well, so, for instance, a good example of that is a lot of our public entity clients, which, as you know, are very, very sizable in the public entity sector. They just forgot about the budget. And if the primary premiums are rising, they're taking bigger retentions, they're dropping limits, and they're not necessarily comfortable.

Robert Cox: Hey, thanks. Yeah, just a question going back on the...

Speaker Change #116: The opt-in, opt-out dynamics.

Robert Cox: Just curious, does that...

Speaker Change #117: Flow through net new business and that's what's kind of driving the one point higher. You said June year to date of net new business or is that is that something else entirely?

Speaker Change #118: Yeah, I think some of that flows back. Well, so for instance, a good example of that is a lot of our public entity clients, and as you know, are very, very sizable in the public entity sector.

Speaker Change #119: They just work off a budget, and if the primary premiums are rising, they're taking bigger retentions, they're dropping limits, and they're not necessarily comfortable with that.

Patrick M. Gallagher: So when the opportunity to buy those back up comes up, and they add an extra layer, they expand their coverage, oftentimes we will call that new business. And at the same time, we're facing renewal reductions on the stuff that stays with us. But it is a factor of what's available and what their budget restraints are. Yeah, I think it's a little tough for us if they write a new cover and it goes through another...

Rob Cox: So when the opportunity to buy those back up comes up, and they add an extra layer, they expand their coverage. Oftentimes, we will call that new business. And at the same time, we're facing the renewal reductions on the one I just thought this day is with us. But it is; it is a factor of what's available, what their budget restraints are.

Speaker Change #119: So when the opportunity to buy those back up comes up, and they add an extra layer, they expand their coverage, oftentimes we will call that new business.

Speaker Change #119: At the same time, we're facing the renewal reductions on the stuff that stays with us.

Speaker Change #119: But it is a factor of what's available and what their budget restraints are. Yeah, I think it's a little tough for us if they write a new cover and it goes through a different... If an existing client writes a new cover that goes through our wholesale business, that would be new business.

Rob Cox: Yeah, I think it's a little tough for us if they write a new cover, and it goes through a different, if they have an existing client writes a new cover that goes through our wholesale business, that would be new business. If it's a change in premium level or, like a slightly lower deductible or slightly higher retention, that would go as a renewal change; it's a little tough sometimes to split that apart. But so part of it goes through new business, probably. If I were in a gas, maybe twenty percent, twenty-five percent goes through new business, and seventy-five percent would go through the renewal premium change.

Patrick M. Gallagher: If an existing client writes a new cover that goes through a wholesale business, that would be new business. If it's a change in premium level or like a slightly lower deductible or slightly higher retention, that would go as a renewal change.

Speaker Change #119: If it's a change in premium level or like a slightly lower deductible or slightly higher retention, that would go as renewal change.

Douglas K. Howell: It's a little tough sometimes to split that apart, but part of it goes through new business. Probably, if I were going to guess, maybe 20%, 25% goes through new business, and 75% would go through the renewal premium change. Okay, thanks. Thanks for walking us through the nuances there. And then just on the revenue indications from the audit endorsements and cancellations, those are remaining positive. Curious if the rate of change on those is either accelerating or is that decelerating?

Speaker Change #120: It's a little tough sometimes to split that apart, but so part of it goes through new business, probably, if I were going to guess, maybe 20%, 25% goes through new business and 75% would go through the renewal premium change.

Rob Cox: Okay, thanks for walking us through the nuances there, and then just on the revenue indication from the audit endorsement and cancellation, those are remaining positive. Just curious if the rate of change on those is either accelerating or is that decelerating at this point. Great question, so on the surface, we're about the same as they were last year, second quarter. But what happened last year, second quarter, we actually had quite a bit of endorsements that came out of the mini banking crisis.

Speaker Change #121: Okay, thanks for walking us through the nuances there. And then just on the revenue indications from the audits, endorsements, and cancellations, those are remaining positive.

Speaker Change #124: Just curious if the rate of change on those is either accelerating or is that decelerating at this point?

Douglas K. Howell: All right, great question. So on the surface, we're about the same as they were last year, second quarter. But what happened last year, second quarter, we actually had quite a bit of endorsements that came out of the mini banking crisis; you were seeing a lot of banks increasing their DNOs in April of 20, March, April of 23. We didn't have that repeat this year, probably a good thing.

Speaker Change #122: All right. Great question. So on the surface, we're about the same as they were last year, second quarter. But what happened last year, second quarter, we actually had quite a bit of...

Robert Cox: You were seeing a lot of banks increasing the D&Os in April of March April of 23. We didn't have that repeat this year, probably a good thing. We're not having that crisis, but interestingly, flat year over year, carve that out that's still up pretty nice.

Speaker Change #123: Endorsements that came out of the mini-banking crisis. You were seeing a lot of banks increasing their DNOs in March, April of 23. We didn't have that repeat this year, probably a good thing, we're not having that crisis. But interestingly,

Speaker Change #123: Flat, year-over-year, carve that out, that's still up pretty nice.

Unknown Executive: Yeah, thank you. Thanks, Rob.

Speaker Change #123: Yeah.

Mike Work: The next question is from the line of Mike work, but city, please see what their question. Thanks, guys. I was wondering if you could update us on the progress with your integrated approach, where you're going to market with multiple businesses at a time. Thank you, talk to that leveraging programs, or insurance, and Gallagher Bassett together. Hi, so yeah, there's some good program development going on that combines those three together. Then also you're having the introductions that happen across the units. I think our introductions to our reinsurance folks coming out of our carry relations folks to the carriers is working very well.

Speaker Change #125: Thank you.

Douglas K. Howell: We're not having that crisis. But interestingly, flat year over year, carve that out, that's still up pretty nice. Thank you. Thanks, Rob. The next question is from the line of Mike Ward with Citi. Thanks, guys. Um, I was wondering if you could update us on the progress with your integrated approach, where you're going to market with multiple business businesses at a time. Then you talked about leveraging programs, reinsurance, and Gallagher Bassett together. Alright, so yeah, there's some good program development going on that combines those three together. Then also, you're having the introductions that happen across the units.

Robert Cox: Thanks, Rob.

Speaker Change #126: The next question is from the line of Mike Ward with Citi. Please receive your questions.

Michael Augustus Ward: Thanks, guys. I was wondering if you could update us on the progress with your integrated approach, where you're going to market with multiple businesses at a time. I think you talked about leveraging programs, reinsurance, and Gallagher Bassett together.

Michael Augustus Ward: I think our introductions to our reinsurance folks coming out of our carrier relations folks to the carriers are working very well. We're seeing some nice wins on that. Getting our program folks integrally involved with the reinsurers to create the capital, find the fronting markets, it's going very well, at least from the CFO's chair. Yeah, Mike, I think when we talked about that, we weren't talking about taking just individual accounts and saying the way we want to do this is all together now at XYZ Manufacturing Company. What we're talking about is what Doug was hitting on.

Speaker Change #129: Alright, so yeah, there's some good program development going on that combines those three together. Then also you're having the introductions that happen across the units. I think our introductions to our reinsurance folks coming out of our carrier relations folks to the carriers is working very well. We're seeing some nice wins on that.

Mike Work: We're seeing some nice wins on that. Getting our program folks and it's interagely involved with the reinsurance, create the capital, find the front team markets, it's going very well, at least from the CFO's chair.

Michael Augustus Ward: Get our program folks integrally involved with the re-insurers to create the capital. Find the fronting markets. It's going very well, at least from the CFO's chair. Yeah, Mike, I think when we talked about that, we weren't talking about taking just individual accounts.

Mike Work: Yeah, Mike, I think when we talked about that, we weren't talking about taking just individual accounts and saying the way we want to do this is all together now on the XYZ Manufacturing Company. What we're talking about is what Doug was hitting on. We're now meeting with insurance companies by regularly, and we're saying, let's talk about the broad base of our relationship. And at that table, our reinsurance people, our benefits people, our service people on the claim side, as well as the property casualty production and marketing folks. That is working extremely well for us, and naturally we're talking about now at the same time.

Mike: and saying the way we want to do this is all together now on the XYZ Manufacturing Company. What we're talking about is what Doug was hitting on.

Patrick M. Gallagher: We're now meeting with insurance companies quite regularly, and we're saying, let's talk about the broad basis of our relationship. And at that table are our reinsurance people, our benefits people, our service people on the claim side, as well as the property casualty production and marketing folks. That is working extremely well for us, and that's really what Doug is talking about. Now, at the same time, in RPS, looking across a broad base of programs, we are looking at those and saying, okay, we've got about 250 programs in the company. Where are we not? A doing the reinsurance be doing the claims, and what should we be doing to make sure that our retailers are using those programs as well?

Speaker Change #128: We're now meeting with insurance companies quite regularly and we're saying let's talk about the broad base of our relationship and at that table are our reinsurance people, our benefits people, our service people on the claim side, as well as the the property casualty production and marketing folks.

Speaker Change #128: That is working extremely well for us, and that's really what Doug is talking about. Now, at the same time, in RPS, looking across a broad base of programs, we are looking at those saying, okay, we've got about 250 programs in the company, where are we not?

Mike Work: In our PS, we're going to cross a broad base of programs. We are looking at those saying, okay, we've got about 250 programs in the company. Where are we not? Are you doing the reinsurance, be doing the claims, and what should we be doing to make sure that our retailers are using those programs as well? So it's kind of a mixed bag, and it's not like we just take XYZ account to the market and say, now it's all or nothing, or to the client and say it's all or nothing. I hope that I hope that color gives you a little bit of reference to what we were talking about the last time around as well.

Patrick M. Gallagher: So it's kind of a mixed bag. And it's not like we just take XYZ account to the market and say now it's all or nothing, or to the client and say it's all or nothing. I hope that color gives you a little bit of a reference to what we were talking about the last time around as well. Yeah, no, it's helpful.

Speaker Change #131: A, doing the reinsurance, B, doing the claims, and what should we be doing to make sure that our retailers are using those programs as well. So it's kind of a mixed bag, and it's not like we just take XYZ account to the market and say now it's all or nothing, or to the client and say it's all or nothing.

Speaker Change #131: I hope that color gives you a little bit of reference to what we were talking about the last time around as well.

Michael Augustus Ward: Thank you. And then, and then the second question was just on the political election scenario type, type theme. I'm curious if you have any other kind of tax credit generation prospects in the pipeline, and, and any, I guess, political risk to those in the near term that we see. Well, most of our tax credits are already in the bank, so I think we feel pretty comfortable about that.

Unknown Executive: Yeah, another helpful. Thank you.

Unknown Executive: And then second question was just on the the political election scenario type theme. Curious, if you have any other kind of tax credit generation prospects in the pipeline and any, I guess, political risk to those in the near term that we see. Well, most of our tax credits are already in the bank, so I think we feel pretty comfortable about that. What are we working on? I think that with 45 queue that really was was passed under the previous above all above the line inflation reduction act. It's made the tax credit market much more common, much more defined, broader.

Speaker Change #132: Yeah, no, it's helpful. Thank you.

Speaker Change #133: And then, and then second question was just on the, the political election scenario type, type theme. I'm curious if you have any other kind of tax credit generation prospects.

Speaker Change #134: In the pipeline and and any any I guess political risk to those and you know in the near term that we see.

Michael Augustus Ward: What are we working on? I think that 45Q, which was really passed under the previous all-above-the-line Inflation Reduction Act, has made the tax credit market much more common, much more defined, and broader. But we're pretty well suited for tax credits for the next four to five years. I don't think we need to plunge into new tax credit projects right now, because we just generate the credits, and they sit on the shelf for four or five years.

Speaker Change #135: Well, most of our tax credits are already in the bank, so I think we feel pretty comfortable about that. What are we working on? I think that with 45Q that really was passed under the previous all-above-the-line Inflation Reduction Act, it's made the tax credit market more competitive.

Speaker Change #135: Much more common, much more defined, broader, but we're pretty well suited for tax credits for the next four to five years.

Unknown Executive: But we're pretty well suited for tax credits for the next four to five years. I'm not; we don't think we need to plunge into new tax credits projects right now because we just generate the credits, and they set on the shelf for five years. The teams working on it and there's some exciting things that are happening out there across all forms of clean energy that are exciting. But I don't see us doing something big in the next year and a half. Let's burn through these credits first, and then we'll see about what we can do.

Speaker Change #135: I'm not we don't think we need to plunge in to new tax credit projects right now because we just generate the credits and they sit on the shelf for four or five years.

Douglas K. Howell: The team's working on it, and there are some exciting things that are happening out there across all forms of clean energy that are exciting, but I don't see us doing anything big in the next year and a half. Let's burn through these credits first, and then we'll see about what we can do. And by that time, there will be a robust market out there for tax credits. You can get insurance on it now, much more to insure the credits, so that's a good change in the law.

Unknown Executive: And by that time they'll be a robust market out there for tax credits. You can get insurance on it now that much more to ensure the credits. So that's that's a good change in the law. Right now, I think the law is pretty well suited for us to do something in a few years. And probably not have to do it with a lot of capital investment. ready there.

Speaker Change #135: Out there for tax credits, you can get insurance on it now that much more to insure the credit. So that's a good change in the law. Right now I think the law is pretty well suited for us to do something in a few years and probably not have to do it with a lot of capital investment into it either.

Michael Augustus Ward: Okay, um, maybe if I'm thinking about it, right, that this dynamic should help bolster you in terms of, I don't know, having, you know, extra leverage in the M&A scenario, if rates are cut, that should help sort of bolster your competitive edge, I would think. And do you have any sort of update on the PE interest in the market? Well, listen, not to belabor the PE update. Like I said, I just got off the phone with our bird dog.

Unknown Executive: Okay, so maybe if I'm thinking about it right, that this dynamic should help bolster you in terms of, I don't know, having extra leverage in the M&A scenario. If rates are caught, that should help bolster your competitive edge, I would think, and do you have interest in the market? Well, it's not to belabor the P.E.

Speaker Change #136: Okay, so maybe if I'm thinking about it right, that...

Speaker Change #137: This dynamic should help bolster you.

Speaker Change #138: In terms of

Speaker Change #139: I don't know having a you know extra

Speaker Change #139: Leverage in the M&A

Speaker Change #139: you know scenario if rates are cut.

Speaker Change #139: [inaudible]

Unknown Executive: update, you know, I said I just got up to the phone with our bird dog and I got to tell you, it might so box up is that I had during the Iard day about the, the, the new, what I call less in transparent equity structures that P.E. are now doing in order to buy nice family owned brokers. I think they're starting to be more and more of, you know, the current's been pulled back on that and, you know, I think that sellers are really looking at, they don't have the same equity, and Gallagher you got one equity, owners, employees, you know, people that sell into the business and you who feel on this call own the same equity across the board.

Patrick M. Gallagher: And I got to tell you, my soapbox is that I talked during IR day about the new, what I call less than transparent equity structures that PEs are now doing in order to buy nice family-owned brokers. I think there's starting to be more and more of, you know, the curtain's been pulled back on that. And, you know, I think that sellers are really, owners, employees, people that sell into the business, and you on this call own the same equity across the board. That's not how it works now with the PE structures.

Speaker Change #140: Well it's not to belabor the PE update I did you know you said I just got off the phone with our bird dog and I got to tell you my soapbox is that I had during the IR day about the about the

Speaker Change #141: The new, what I call less than transparent equity structures that PEs are now doing in order to buy nice family-owned brokers, I think there's starting to be more and more of, you know, the curtain's been pulled back on that and, you know, I think that sellers are really looking at, they don't have the same equity.

Speaker Change #141: At Gallagher you got one equity.

Speaker Change #141: Owners

Speaker Change #141: employees.

Speaker Change #141: People that sell into the business and you, on this call, own the same equity across the board. That's not how it works now with the PE structures.

Unknown Executive: That's not how it works now with the P.E. structures. And all looks okay. Do the models on it look okay? What happens if everything goes up in a linear line, get a little bit of a down draft on that, and the people that give their, you know, their family's lifetime of work to the P.E. Firms get very little. And I'm telling you that is something that needs to be aware out there, and I think that, you know, when I talked to one of our, the bird dog today, he said, it's becoming more and more apparent to sellers, they're getting the last spot at the trough.

Patrick M. Gallagher: And it all looks okay, do the models on it, looks okay. But what happens if everything goes up in a linear line? Get a little bit of a down draft on that, and the people that give their families a lifetime of work get very little.

Speaker Change #141: And it all looks okay. Do the models on it. Looks okay what happens if everything goes up in a linear line. Get a little bit of a down draft on that and the people that give their, you know, their family's lifetime of work to the PE firms.

Patrick M. Gallagher: And I'm telling you, that is something that needs to be aware out there. And I think that, you know, when I talked to one of our bird dogs today, he said, it's becoming more and more apparent to sellers that they're getting the last spot at the trough. Yeah, let's let me take another side of that to my second quarter.

Speaker Change #141: Get very little. And I'm telling you, that is something that needs to be aware out there. And I think that, you know, when I talked to one of our bird dog today, he said, it's becoming more and more apparent to sellers, they're getting the last spot at the trough.

Unknown Executive: Now, let's let me take another side of that to like, second quarter, I believe it was Marsbury, put out a reporter out this partner. So we're 62 buyers of properties in the second quarter alone. There's a lot of private equity interests in our space. That's not stupid money. I do believe that the multiples of the risen that we've been paying for these properties because of that interest over the years. Having said that, I think the quarter was 20% down in actual transactions. So you've got maybe smarter money, maybe smaller amounts of money, but the transaction count is coming down.

Speaker Change #141: Let me take another side of that too, Mike. Second quarter, I believe it was Marsh-Berry put out a report of Optus Partners. There were 62 buyers.

Patrick M. Gallagher: I believe it was Marsh Berry put out a report office partners, there were 62 buyers of properties in the second quarter alone. There's a lot of private equity interest in our space. That's not stupid money.

Speaker Change #141: of properties in the second quarter alone.

Patrick M. Gallagher: I do believe that the multiples have risen that we've been paying for these properties because of that interest over the years. Having said that, I think the quarter was 20% down in actual transactions. So you've got maybe smarter money, maybe smaller amounts of money, but the transaction count is coming down. I think sellers, as Doug said, are getting a little bit more discerning. And I do think when you take a look at what's happened with some of the roll-ups who are now at a point where it's time to go public, and I won't mention any names, but you know who they are.

Speaker Change #141: There's a lot of private equity interest in our space.

Speaker Change #142: That's not stupid money. I do believe that the multiples have risen, that we've been paying for these properties because of that interest over the years. Having said that, I think the quarter was 20% down in actual transactions.

Speaker Change #142: So you've got maybe smarter money, maybe smaller amounts of money, but the transaction count is coming down. I think sellers, as Doug said, are getting a little bit more discerning.

Unknown Executive: I think sellers, as Doug said, are getting a little bit more discerning.

Unknown Executive: And I do think when you take a look at what's happened with some of the rollups who are now at a point where it's time to go public. And I won't mention any names. You know who they are. Well, let's see how that goes. It ain't an easy slog. And I think sellers are seeing that as well.

Speaker Change #143: And I do think when you take a look at what's happened with some of the roll-ups who are now at a point where it's time to go public, and I won't mention any names, you know who they are.

Patrick M. Gallagher: Well, let's see how that goes. It ain't an easy slot, and I think sellers are seeing that as well. And, by the way, it's pretty easy to join somebody that's going to change nothing about your shot.

Speaker Change #143: Well, let's see how that goes. It ain't an easy slog.

Unknown Executive: And by the way, it's pretty easy to join somebody that's going to change nothing in your shop until you want to go public. Better, I think, as Doug said, joins me that everybody from the family through you all as investors got the same stock. They'll one other common in this.

Speaker Change #143: And I think sellers are seeing that as well.

Speaker Change #143: And by the way, it's pretty easy to join somebody that's going to change nothing in your shop.

Patrick M. Gallagher: Until they want to go public, better, I think, as Doug said, to join the company that everybody from the family through you all as investors. You have the same stack. Now, one other comment. When we do an acquisition, we give the opportunity for everybody in that acquisition, from that point on, to participate in this equity. We've got an employee stock purchase plan, and we have an LTIP program for management and senior producers. We've got all kinds of ways for people to participate in our success and our growth. You sell to the P.E.

Speaker Change #143: Until they want to go public.

Speaker Change #143: Better, I think, as Doug said, to join the company, that everybody, from the family through you all as investors,

Thomas Gallagher: When we do an acquisition, we give the opportunity for everybody in that acquisition. From that point on, to participate in this equity. We've got an employee stock purchase plan. We have an L tip program for management and senior producers. We've got all kinds of ways for people to participate in our success in our growth. You sell to the PE people; the honors to great. Pete investors, hopefully do great, and that's it, baby.

Douglas K. Howell: You have the same stack. Now, one other comment on this.

Speaker Change #144: When we do an acquisition, we give the opportunity for everybody in that acquisition from that point on to participate in this equity.

Speaker Change #146: We've got an employee stock purchase plan, we have an LTIP program for management and senior producers. We've got all kinds of ways for people to participate in our success and our growth. You sell to the P.E. people, the owners do great.

Patrick M. Gallagher: People, the owners do great. PE investors, hopefully, do great. And that's it, baby.

Speaker Change #144: PE investors hopefully do great.

Patrick M. Gallagher: Well, I like our model. Awesome. Thank you guys. Our next question is from the line of Grace Carter with Bank of America. Please proceed with your questions. Hi, everyone. I wanted to start with the risk management guidance.

Unknown Executive: Well, I like our model.

Speaker Change #144: And that's it, baby.

Speaker Change #144: Well, I like our model.

Unknown Executive: Awesome. Thank you, Ash.

Speaker Change #145: Awesome. Thank you guys.

Grace Carter: Our next question to the line of Grace Carter. Thank you, America. This is you with your question. Hi everyone.

Speaker Change #147: Our next question is from the line of Grace Carter with Bank of America. Pleased to see you with your questions.

Grace Carter: I wanted to start on the risk management guidance. I think you all mentioned maybe around 9% for the year. I think that the prior guide was maybe 9 to 11. Could you go over maybe anything that's changed since we last spoke in June? I think that the degree of difference on a full year on, you know, listen, we're talking about a couple million dollars on the difference between the 9 and 10. So I wouldn't say that it's made five million dollars. So there's nothing; it's just, you know, we think that we've got better insight for the rest of the year.

Grace Carter: Hi everyone. I wanted to start on the risk management guidance. I think y'all mentioned maybe around 9% for the year. I think that the prior guide was maybe 9 to 11. Could you go over maybe anything that's changed since we last spoke in June ? Thanks.

Grace Carter: I think you all mentioned maybe around 9% for the year. I think that the prior guide was maybe 9 to 11. Could you go over maybe anything that's changed since we last spoke in June? Thank you. I think that the degree of difference on a full year on, you know, listen, we're talking about a couple million dollars on the difference between a nine and a 10. So I wouldn't say that it's, you know, it's $5 million.

Speaker Change #149: I think that the degree of difference on a full year on, you know, listen, we're talking about a couple million dollars on the difference between a nine and a ten. So I wouldn't say that it's, you know, it's five million dollars. So there's nothing. It's just, you know, we think that we've got better insight for the rest of the year. And so that range is coming maybe to the lower end of it than the upper end of it.

Grace Carter: And so that range is coming, maybe to the lower end of it than the upper end of it.

Grace Carter: Thank you.

Douglas K. Howell: So there's nothing wrong with that. It's just, you know, we think that we've got better insight for the rest of the year. And so that range is coming, maybe to the lower end of it than the upper end. Thank you. And also, on the brokerage organic growth guide, I think that you had mentioned at investor day that you were considering narrowing it maybe to 7.5 to 8.5. Just keeping it at a wider range of seven to nine. Does that just reflect uncertainty in the environment? Or has anything changed since then?

Grace Carter: And also on the brokerage organic growth guide, I think that you all had mentioned you're considering narrowing it maybe to 7.5 to 8.5 at the Investor Day. Just is keeping it at a wider range of 7 to 9. Does that just reflect uncertainty in the environment, or is anything changed since then, or am I just reading too much into it entirely? Maybe in the latter, I think, you know, we spent four weeks since we talked to you. We just finally got one more data point. That's the clothes of June.

Speaker Change #150: Thank you. And also on the Brokerage Organic Growth Guide, I think that y'all had mentioned you were considering narrowing it maybe to 7.5 to 8.5 at the Investor Day. Is keeping it at a wider range of 7 to 9, does that just reflect uncertainty in the environment, or has anything changed since then, or am I just reading too much into it entirely?

Grace Carter: Or am I just reading too much into it entirely? Maybe the latter. I think, you know, it's been four weeks since we talked to you. We just finally got one more data point. That's the close of June. So, you know, we'll talk to you again in September. And, you know, either way.

Douglas K. Howell: Listen, anywhere in that range, you know, look at that. That's seven to nine percent growth on top of nine percent last year, nine percent before that. And you go back in 2019, we grew six percent all in. You know, anywhere in that range is a terrific year.

Speaker Change #151: Maybe the latter. I think, you know, it's been four weeks since we talked to you. We just finally got one more data point. That's the close of June . So, you know, we'll talk to you again in September . And, you know, either way, anywhere in that range.

Grace Carter: So, you know, we'll talk to you again in September and, you know, either way. Does it anywhere in that range? You know, look at that. That's 7 to 9% growth on top of 9% last year, 9% before. And you go back in 2019, we grew 6% all that. You know, anywhere in that range is a horrific year.

Speaker Change #151: You know, look at that, that's 7-9% growth on top of 9% last year, 9% before, and you go back in 2019 we grew 6% all in, you know, anywhere in that range is a terrific year.

Douglas K. Howell: And if we can repeat it again next year, it's another trip. Cool, thank you. Thank you. Our last question will be on the line of Meyer Shields with KBW. I am pleased to see you with your question. Thanks. Two quick ones, I think. First, I was hoping, hopefully we won't need to know this, but give us a sense as to the Contingent Commission's exposure to hurricane season. No, it's very small, very small.

Grace Carter: And if we can repeat it again next year, it's another terrific year.

Speaker Change #151: And if we can repeat it again next year, it's another terrific year.

Grace Carter: Well, thank you.

Meyer Shields: Most of that American Exposed business, especially is in the excess and surplus business. Meyer, we're the largest excess and surplus broker, I think in the state. A lot of that is just stuff that's in the E&S markets, and none of those are subject to contingency.

Speaker Change #151: Cool, thank you.

Unknown Executive: Our last question, if you've been in line of my or she'll, it's okay, we'll be pleased to see you with your questions.

Speaker Change #152: Thank you. Our last question will be from the line of Meyer Shields with KBW. Pleased to see you with your question. Thanks. Two quick ones, I think. First, I was hoping, hopefully we won't need to know this, but give us a sense as to the contingent commission's exposure to hurricane season.

Douglas K. Howell: Okay, perfect. That is good news. Second question, just looking for a brief overview of your appetite for additional acquisitions in personal lines, I guess, both within high net worth and beyond that. Well, you know, you're talking about purse lines just being a pure auto rider.

Unknown Executive: Thanks. Two quick ones, I think.

Unknown Executive: First, that's something hopefully we'll need to know this, but give us a sense as to the contingent emissions exposure. Do hurricanes, even? Now, it's very small. Very small. Most of that can expose, especially as in the access and surplus. We're, we're the largest access and surplus broker, I think, in the state. A lot of that is, they've all had access in the NS markets, and none of those are subject to the contingents.

Speaker Change #153: No, it's very small. Very small.

Speaker Change #154: Most of that American Exposed business is in the excess and surplus. Meyer, we're the largest excess and surplus broker I think in the state. A lot of that is, all that's in the E&S markets and none of those are subject to contingents.

Unknown Executive: Okay, perfect.

Thomas Gallagher: That is good news. Just looking for a brief overview of your appetite for additional acquisitions in personal lines, I guess, both within the high net worth and beyond that. Well, you know, you're talking about personal lines as being a pure auto writer. Yeah, that's probably not what we're going to do. We're not, we're not great at it. We're an advisor. So if somebody's going to use us to use our advice to help them buy their insurance, that's the business we'd like to be in. High net worth on, we do a terrific job of it. I'm telling you, our folks are at some of the very best in the business, and that's an important spot right now.

Speaker Change #155: Okay, perfect. That is good news. Second question, I was just looking for a brief overview of your appetite for additional acquisitions in personal lines, I guess, both within high net worth and beyond that.

Patrick M. Gallagher: You know, that's probably not what we're gonna do. We're not We're not great at it. We're an advisor. So if somebody is going to use this to use our advice to help them buy their insurance, that's the business that we'd like to be in. High net worth on, we do a terrific job of it. I'm telling you, our folks are some of the very best in the business. And that's an important spot right now.

Speaker Change #156: Well, you know, you're talking about Purcelline just being a pure auto rider.

Thomas Gallagher: There's planes, there's boats, there's houses on sand bars, there's houses on views that have landslide risk. High net worth needs an advisor probably as much as any complex, any, you know, a mid-market commercial client. Just going down and trying to buy an auto, you know, a writer, it does auto is probably not what we're looking to do. If it's going to be one of those things that takes advice, we'll be there in that space.

Patrick M. Gallagher: There's planes, there's boats, there's houses on sandbars, there's houses on views that have landslide risk. High net worth needs an advisor, probably as much as any complex or any, you know, mid-market commercial client. Just going out and trying to buy an auto agent, you know, a rider that does auto is probably not what we're looking to do.

Speaker Change #157: There's planes, there's boats, there's houses on sandbars, there's houses on views that have landslide risk. High net worth needs an advisor.

Speaker Change #157: [inaudible]

Patrick M. Gallagher: If it's going to be one of those that takes advice, we'll be there in that space. Yeah, we're actually very excited about it. I think that's, as Mark said, a real opportunity for us. We'll take your call. Just go ahead. We'll help you out with it. I've got a ping-pong table; let's go to it. Well, there's a slip and fall on that one, Cameron.

Thomas Gallagher: Yeah, we're actually very excited about that. I think that's, it's, it's, it's, it's like that a real opportunity for us.

Speaker Change #158: We're actually very excited about this stuff, I think that's a real opportunity for us.

Unknown Executive: Well, take your call. Just go ahead and we'll help you out with it. I've got a thing on the table. Let's go to it. I think there's a weapon fall on that one comment.

Speaker Change #159: We'll take your call. Just go ahead. We'll help you out with it.

Speaker Change #159: I've got a ping-pong table, let's go to...

Patrick M. Gallagher: I think that's our last comment, so just our last question. Let me make just a few comments on the way out here. Thank you again very much, all of you, for joining us. I know it's a little late. And thanks to all of our Gallagher colleagues around the world for their hard work and their dedication. These quarters don't just happen. Thanks to your efforts, that means our people.

Unknown Executive: I think that's our last comment.

Speaker Change #160: Well, there's a slip and fall on that one, Cameron. I think that's our last comment, so just our last question, let me make just a few comments on the way out here. Thank you again very much, all of you, for joining us. I know it's a little late. And thanks to all of our Gallagher colleagues around the world for their hard work and their dedication. These quarters don't just happen.

Unknown Executive: So just our last question.

Thomas Gallagher: Let me make just a few comments on the way out here. Thank you again very much, all of you, for joining us. I know it's a little late. And thanks to all of our Gallagher colleagues around the world for their hard work and their dedication. These quarters don't just happen. Thanks to your efforts. That means our people were in a really invulable position. Our net new businesses up our emanate pipeline is growing. I'm proud of the year-to-date financial performance. And, as you can tell, I'm bullish on 24 and beyond. So 40 years, 16% TASR compound average annual growth rate.

Patrick M. Gallagher: We're in a really enviable position. Our net new business is up. Our M&A pipeline is growing. I'm proud of the year-to-date financial performance. And, as you can tell, I'm bullish on 24 and beyond. 40 years, 16 percent. Tested TSR, Compound Average Annual Growth Rate, pretty good 40 years, so I'm looking forward to the next 40. Thanks for being with us.

Speaker Change #160: Thanks to your efforts, that means our people, we're in a really enviable position. Our net new business is up, our M&A pipeline is growing. I'm proud of the year-to-date financial performance, and as you can tell, I'm bullish on 24 and beyond.

Speaker Change #161: 40 years, 16 percent.

Speaker Change #161: Tested TSR, Compound Average Annual Growth Rate, pretty good 40 years, I'm looking forward to the next 40. Thanks for being with us. That does conclude today's conference call. You may disconnect your lines at this time.

Unknown Executive: Pretty good 40 years. I'm looking forward to the next 40. Thanks for being with us.

Unknown Executive: Let this conclude today's conference call. You may disconnect your line.