Q1 2025 Arthur J. Gallagher & Co Earnings Call
[music].
Operator: Microsoft Office Word MSWordDoc Word.Document.8 Good afternoon, and welcome to Arthur J Gallagher and Company's first quarter 2025 earnings conference call. Participants have been placed on a listen-only mode. Your lines will be open for questions following the presentation. Today's call is being recorded. If you have any objections, you may disconnect at this time.
Good afternoon, and welcome to Arthur J Gallagher <unk> company's first quarter 2025 earnings conference call.
Participants have been placed on a listen only mode.
Your lines will be opened for questions. Following the presentation.
Today's call is being recorded.
If you have any objections you may disconnect at this time.
Operator: 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 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 can cause actual results to differ materially.
Some of the comments made during this conference call, including answers given in response to questions may constitute forward looking statements within the meaning of the securities laws.
The company does not assume any obligation to update information or forward looking statements provided on this call.
These forward looking statements are subject to risks and uncertainties that can cause actual results to differ materially.
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.
Please refer to the information concerning forward looking statements and risk factors sections contained in the company's most recent 10-K 10-Q and 8-K filings for more details on such risks and uncertainties.
Operator: In addition, for reconciliations of 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.
In addition for reconciliations of 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.
Patrick Gallagher: It is now my pleasure to introduce J. Patrick Gallagher, Jr., Chairman and CEO of Arthur J Gallagher and Company. Mr. Gallagher, you may begin. Thank you. Good afternoon, and thank you for joining us for our first quarter 25 earnings call. On the call today is Doug Howell, our CFO and other members of our management team. We had a fantastic first quarter. For our combined brokerage and risk management segments, we posted 14% growth in revenue, 9% organic growth, reported net earnings margin of 23%, adjusted EBITDAG margin of 41.1%, up 338 basis points year-over-year, adjusted EBITDAG growth of 26%, our 20th consecutive quarter of double-digit growth.
Speaker Change: It is now my pleasure to introduce J, Patrick Gallagher, Jr, Chairman and CEO of Arthur J Gallagher and company.
Speaker Change: Mr. Gallagher you may begin.
Speaker Change: Thank you good afternoon, and thank you for joining us for our first quarter 25 earnings call on the call today is Doug Howell, our CFO and other members of our management team.
Speaker Change: We had a fantastic first quarter for our combined brokerage and risk management segments, we posted 14% growth in revenue, 9% organic growth reported net earnings margin of 23% adjusted EBITDA margin of 41, 1% up 338 basis points year over year.
Speaker Change: Adjusted EBITDA growth of 26% or 28th consecutive quarter of double digit growth GAAP earnings per share of $3 29, and adjusted earnings per share of $4 16.
Patrick Gallagher: Gap earnings per share of $3.29 and adjusted earnings per share of $4.16, another excellent quarter by the team. Moving to results on a segment basis, starting with the brokerage segment, reported revenue growth was 16%. Organic growth was 9.5%, which included about a point of favorable timing. Even without the timing impact, all in organic was right in line with our expectations. Adjusted EBITDA margin expanded 359 basis points to 43.4%, with underlying margins up a full percentage point.
Speaker Change: Another excellent quarter by the team.
Speaker Change: Moving to results on a segment basis, starting with the brokerage segment reported revenue growth was 16% organic growth was nine 5%, which included about one point of favorable timing, even without the timing impact all in organic was right in line with our expectations adjusted EBITDA margin expanded three.
Speaker Change: <unk> hundred 59 basis points to 43, 4% with underlying margins up a full percentage point, Doug will impact this in his comments.
Douglas Howell: Doug will unpack this in his comments.
Patrick Gallagher: For more information visit www.FEMA.gov Let me provide you with some insights behind our brokerage segment organic. Within our retail PC operations, we delivered 5% organic overall. US Organic was north of 5% while our international operations primarily in the UK, Canada, Australia and New Zealand were closer to 4%. Our global employee benefit brokerage and consulting business posted organic of more than 7%.
Speaker Change: Let me provide you with some insights behind our brokerage segment organic within our retail PC operations, we delivered 5% organic overall.
Speaker Change: U S organic was north of 5%, while our international operations, primarily in the U K, Canada, Australia, and New Zealand were closer to 4% our.
Speaker Change: Our global employee benefit brokerage and consulting business posted organic of more than 7%.
Patrick Gallagher: Shifting to our reinsurance, wholesale and specialty businesses, in total organic of 13%. This includes 20% organic from Gallagher Reed and 8% organic from our wholesale and specialty businesses. So we continue to report strong growth across retail, PC, wholesale, reinsurance, and benefits.
Speaker Change: Shifting to our reinsurance wholesale and specialty businesses.
Speaker Change: Total organic of 13%. This includes 20% organic from Gallagher to read and 8% organic from our wholesale and specialty businesses. So we continue to report strong growth across retail PC wholesale reinsurance and benefits.
Patrick Gallagher: Next, let me provide some thoughts on the PC insurance pricing environment, starting with the primary insurance market. Overall, the global PC insurance market continues to behave rationally with carriers looking to grow in lines and geographies where there's an acceptable return and seeking rate increases where it's needed to generate an appropriate underwriting profit. Breaking Down First Quarter Global Renewal Premium Changes by Product Line, we saw the following. property down to D&O down 3%, Workers Comp up 5%, Personal Lines up 8%, Casualty Lines up 8% overall, including General Liability up 5%, Commercial Auto up 6%, and Umbrella up 11%.
Speaker Change: Next let me provide some thoughts on the PC insurance pricing environment, starting with the primary insurance market.
Speaker Change: Overall, the global PC insurance market continues to behave rationally with carriers looking to grow in lines in geographies, where there is an acceptable return and seeking rate increases where it's needed to generate an appropriate underwriting profit.
Speaker Change: Breaking down first quarter global renewal premium changes by product line, we saw the following.
Speaker Change: Property down, 2% D&O down 3%.
Speaker Change: Comped up 5%.
Speaker Change: Personal lines up 8% casualty lines up 8% overall, including general liability up 5% commercial auto up 6% and umbrella up 11%.
Patrick Gallagher: Breaking down renewal premiums by client size, we continue to see a divergence between small to midsize accounts and large accounts. For small to mid-sized accounts, which we define as accounts generating less than $100,000 of revenue, renewal premiums were up 5%. For large accounts or clients generating more than $100,000 of revenue, renewal premiums were up 1%.
Speaker Change: Breaking down renewal premiums by client size, we continue to see a divergence between small to mid size accounts and large accounts for small to mid size accounts, which we define as accounts generating less than $100000 of revenue renewal premiums were up 5% for large accounts where clients generating.
Speaker Change: More than $100000 of revenue renewal premiums were up 1%.
Patrick Gallagher: All that said, pricing is ultimately driven by client loss. Good accounts are getting some premium relief in certain lines, however, accounts with poor experience are seeing greater increases.
Speaker Change: All that said pricing is ultimately driven by client loss experience. Good accounts are getting some premium relief in certain lines. However accounts with poor experience are seeing greater increases.
Patrick Gallagher: Having a trusted advisor like Gallagher can help businesses navigate a complex insurance and economic backdrop by finding the best coverage for our clients while mitigating price increases. Today's environment is the ideal market for us to show our expertise, product knowledge and our data driven capabilities.
Speaker Change: Having a trusted advisor like Gallagher can help businesses navigate a complex insurance and economic backdrop by finding the best coverage for our clients, while mitigating price increases today's environment is the ideal market for us to show our expertise product knowledge and our data driven capabilities.
Patrick Gallagher: Let me move to the reinsurance, Mark.
Speaker Change: Let me move to the reinsurance market.
Patrick Gallagher: First quarter dynamics, which is mostly influenced by January 1st renewals, reflected an environment that generally favored reinsurance buyers. Overall, reinsurers were able to meet increased client demand with sufficient capacity, while remaining disciplined on terms. The Gallagher REIT team shined with excellent retention and some fantastic new business wins. April renewals experienced similar trading conditions as earlier in the year, and as expected, saw a bit more downward pricing pressure. The January wildfire losses and continued casualty reserve increases remain a focus for the industry, but neither caused much upward movement in pricing given the large proportion of Japanese buyers in April.
Speaker Change: First quarter dynamics, which is mostly influenced by January 1st renewals reflected an environment that generally favored reinsurance buyers overall reinsurers were able to meet increased client demand with sufficient capacity, while remaining disciplined in terms of the Gallagher re team shined with excellent retention and some.
Speaker Change: Tastic new business wins.
Speaker Change: April renewals experienced similar trading conditions as earlier in the year and as expected.
Speaker Change: Get more downward pricing pressure the January wildfire losses, and continued casualty reserve increases remain a focus for the industry, but neither caused much upward movement in pricing given the large proportion of the Japanese buyers in April but that said U S. Severe convective storm season is here, which suddenly.
Patrick Gallagher: With that said, U.S. severe convective storm season is here, which then leads us to U.S. wind season. Time will tell how the year plays out.
Speaker Change: Leads us to U S. Wind season time will tell how the year plays out regardless Gallagher REIT should continue to excel in this environment.
Patrick Gallagher: Regardless, Gallagher Re should continue to excel in this environment.
Patrick Gallagher: Moving to some comments on our customers business activity. During the first quarter, our daily revenue indications from audits, endorsements, and cancellations continue to be a net positive. While the upward revenue adjustments are not quite as high as last year, we continue to see solid client business activity and no signs of meaningful global economic slowdown. Our daily revenue indications through the end of April are not showing any significant changes in our customers' business activity from the prospect of tariffs. Our daily indications have historically given us some early insights into our clients' business activity, so we will continue to watch these very carefully.
Speaker Change: Moving to some comments on our customers' business activity.
Speaker Change: During the first quarter, our daily revenue indications from audits endorsements and cancellations continued to be a net positive.
Speaker Change: The upward revenue adjustments are not quite as high as last year, we continue to see solid client business activity and no signs of a meaningful global economic slowdown our daily revenue indications through the end of April are not showing any significant changes in our customers' business activity from the prospects.
Speaker Change: Tariffs are daily indications have historically given us some early insights into our clients' business activity. So we will continue to watch these very carefully.
Patrick Gallagher: We're also closely watching the U.S. labor market, and there continues to be a strong demand for new workers. The number of open jobs in the U.S. stood at more than 7 million, still at a level that is well above the number of unemployed people looking for work.
Speaker Change: We're also they also closely watching the U S labor market and there continues to be a strong demand for new workers. The number of open jobs in the U S stood at more than 7 million still at a level that is well above the number of unemployed people looking for work. We've also seen recent health insurance carrier results showed continued in.
Patrick Gallagher: We've also seen recent health insurance carry results, show continued increases in the utilization and cost of health care. With these two trends as the backdrop, we are seeing more and more employers looking for ways to grow their workforce and control their benefit costs. Our experts can provide creative solutions to solve these challenges.
Speaker Change: Increases in the utilization and cost of health care with these two trends as the backdrop, we are seeing more and more employers looking for ways to grow their workforce and control their benefit costs are experts can provide creative solutions to solve these challenges.
Patrick Gallagher: Regardless of market and economic conditions, I believe we are well positioned to compete and to win. From our niche expertise, outstanding service or extensive data and analytics offerings. We have the resources and know how to service any account of any size of any complexity anywhere around the globe. So with a fantastic first quarter behind us, we continue to see full year 25 brokerage segment organic in the six to 8% range.
Speaker Change: Regardless of market and economic conditions, I believe we are well positioned to compete and to win from our niche expertise outstanding service, our extensive data and analytics offerings, we have the resources and Knowhow to service any account of any size of any complexity anywhere around the globe.
Speaker Change: So with a fantastic first quarter behind US we continue to see full year twenty-five brokerage segment organic in the 6% to 8% range.
Patrick Gallagher: Moving on to our risk management segment, Gallagher Bassett. First quarter revenue growth was 6%, including organic of about 4%. We continue to see excellent client retention and strong new business production.
Speaker Change: Moving on to our risk management segment Gallagher Bassett excuse me.
Speaker Change: First quarter revenue growth was 6%, including organic of about 4%. We continue to see excellent client retention and strong new business production. However sold new business within the risk management segment typically takes longer to materialize into revenue as these new client contracts in Sep and begin to Jennie.
Patrick Gallagher: However, sold new business within the risk management segment typically takes longer to materialize into revenue. As these new client contracts incept and begin to generate revenue in the coming months, we are confident we will see stronger revenue growth in the second half of the year. Adjusted EBITDAG margins 20.5% in line with our March expectations.
Speaker Change: <unk> revenue in the coming months, we are confident we will see stronger revenue growth in the second half of the year.
Speaker Change: Adjusted EBITDA margin was 25% in line with our March expectations. Looking ahead, we still see full year 'twenty five organic in that 6% to 8% range and margins around 25%.
Patrick Gallagher: Looking ahead, we still see full year 25 organic in that 6% to 8% range and margins around 20.5%.
Patrick Gallagher: Shifting to Mergers and Acquisitions. During the first quarter, we completed 11 new tuck-in mergers, representing around $100 million of estimated annualized revenue. We also announced the acquisition of Woodruff-Sawyer during the quarter and completed that in early April. That means through today, we already are at $400 million of acquired revenue.
Speaker Change: [noise] shifting to mergers and acquisitions.
Speaker Change: During the first quarter, we completed 11, new tuck in mergers representing around $100 million of estimated annualized revenue. We also announced the acquisition of Woodruff Sawyer during the quarter and completed that in early April that means through today, we already are at $400 million of acquired revenue.
Patrick Gallagher: For those new partners joining us, I'd like to extend a very warm welcome to the Gallagher family of professionals.
Speaker Change: For those new partners, joining us I'd like to extend a very warm welcome to the Gallagher family of professionals.
Patrick Gallagher: As for the pending assured partners acquisition, not much to update relative to our March IR day comments. We are working to respond to the second request, and we still expect to close in the second half of 2025. Looking at our pipeline, we have more than 40 term sheets signed or being prepared, representing north of $450 million of annualized revenue.
Speaker Change: As for the pending assured partners acquisition not much to update relative to our March IR day comments, we are working to respond to the second request and we still expect to close in the second half of 2025.
Speaker Change: Looking at our pipeline, we have more than 40 term sheets signed or being prepared representing north of $450 million of annualized revenue.
Patrick Gallagher: Good firms always have a choice and it would be terrific if they chose to partner with Gallagher.
Speaker Change: Good firms always have a choice and it would be terrific. If they chose to partner with Gallagher.
Patrick Gallagher: I'll conclude with some comments about our bedrock Gallagher culture. During our Global Sales Award meeting in early March, our unique Gallagher culture was on full display. It was inspiring to watch the interactions among thousands of our colleagues across geographies, business units, and product lines.
Speaker Change: I'll conclude with some comments about our bedrock Gallagher culture.
Speaker Change: During our global sales award meeting in early March our unique Gallagher culture was on full display it was inspiring to watch the interactions among thousands of our colleagues across geographies and business units and product lines I came away even more convinced that our greatest asset is our people and our biggest differentiator is our COO.
Patrick Gallagher: I came away even more convinced that our greatest asset is our people and our biggest differentiator is our culture, and that is the Gallagher way.
Speaker Change: Culture and that is the Gallagher way.
Douglas Howell: Okay, I'll stop now and turn it over to Doug. Doug? Thanks, Pat, and hello, everyone. Today, I'll walk you through our earnings release, starting with some comments on first quarter organic growth and margins by segment, including how we are seeing these shape up for the full year 25. Next, I'll move to the CFO commentary document that we post on our IR website and walk you through our typical modeling helpers, and then I'll conclude my prepared remarks with my usual comments on cash, M&A, and capital management.
Speaker Change: I'll stop now and turn it over to Doug Doug.
Doug: Thanks, Pat and Hello, everyone. Today, I'll walk you through our earnings release, starting with some comments on our first quarter organic growth in margins by.
Speaker Change: Including how we are seeing these shape up for the full year 'twenty five.
Speaker Change: Next I'll move to the CFO commentary document that we posted on our IR website and walk you through our typical modeling helpers and then I'll conclude my prepared remarks with my usual comments on cash M&A and capital management.
Douglas Howell: Okay, let's flip to page two of the earnings... Headline Brokerage Segment Organic Growth of 9.5% was a great quarter and it helps bolster our view that full year organic will be in that 6% to 8% range. And that range is in line with what we've been saying all year. As Pat mentioned, first quarter did have some favorable timing of about a point. So looking forward, we see some favorable timing again in the second quarter, but not to the same magnitude, and then all of the first half timing will reverse itself in the third and fourth quarters with no impact on full year 25.
Speaker Change: Okay, let's flip to page two of the earnings release headline brokerage segment organic growth of nine 5% was a great quarter.
Speaker Change: Helps our book and it helps bolster our view that full year organic will be in that 6% to 8% range and that range is in line with what we've been saying all year.
Speaker Change: Pat mentioned first quarter did have some favorable timing of about a point.
Speaker Change: So looking forward, we see some favorable timing again in the second quarter, but not to the same magnitude and then all of the first half timing will reverse itself in the third and fourth quarters with no impact on full year 'twenty five.
Douglas Howell: So as we look through to the rest of the year, second quarter might be more like 6 to 7 percent. Then we'll see the timing flip in the third and fourth quarters, might mean third and fourth quarter organic of about 5 percent. causes a little noise across the quarters, but with a nine and a half percent first quarter, the math gets us back to a full year 25 organic in that six to eight percent range. That would be a terrific year.
Speaker Change: We look through to the rest of the year second quarter might be more like 6% to 7% then we don't see the timing flip in the third and fourth quarters might mean third and fourth quarter organic of about 5% each.
Speaker Change: Causes a little noise across the quarters, but with a nine 5% first quarter. The math gets us back to a full year 25 organic in that 6% to 8% range that would be a terrific year.
Douglas Howell: So put me now to page 4 of the earnings release for the Brokerage Segment Adjusted Even Act. First Quarter Adjusted EBITDAC Margin was 43.4%, up 359 basis points year-over-year and above our March IR Day expectations. So let me walk you through a bridge from last year, as we typically do. First, if you pull out last year's 2024 first quarter earnings release, you'd see we reported back then adjusted EBITDA margin of 39.9%. But now using current period FX rates, that would have been 39.8%. Then organic growth of 9.5% gave us about 120 basis points of expansion this quarter.
Speaker Change: So let me now to page four of the earnings release for the appropriate segment adjusted EBITDA table.
Speaker Change: First quarter adjusted EBITDA margin was 43, 4% up 359 basis points year over year and above our March IR day expectations.
Speaker Change: So let me walk you through a bridge from last year as we typically do.
Speaker Change: First if you pull out last year's 2024 first quarter earnings release, it see reported back that adjusted EBITDA margin of 39, 9%, but now using current period FX rate that would have been 39, 8%.
Speaker Change: And organic growth of nine 5% gave us about 120 basis points of expansion this quarter.
Douglas Howell: The rolling impact of M&A and lower interest rates each used about 10 basis points of margin this Finally, the footnote at the bottom of that of that table notes, the impact of interest income on from the cash that we're holding for the assured partners acquisition at about at about 260 basis points of margin this quarter, follow that bridge and it will get you to first quarter 2025 margin of 43.4%. That is really, really great work by the As for second quarter headline margin expansion, it's still looking like we will be pushing around 300 bases. Again, driven by strong underlying margin expansion of approximately 60 to 80 basis points, assuming organic in that 6 to 7% range, and also interest income related to the cash we're holding for AP, plus a small offset by the rolling of M&A and lower interest.
Speaker Change: All in impact of M&A and lower interest rates each used about 10 basis points of margin this quarter.
Speaker Change: Finally, the footnote at the bottom of that table notes the.
Speaker Change: Pact of interest income.
Speaker Change: From the cash that we're holding for the assured partners acquisition at about at about 260 basis points of margin this quarter.
Speaker Change: All of that branch and I won't get you to first quarter 2025 margin of 43, 4% that is really really great work by the team.
Speaker Change: As for our second quarter headline margin expansion, it's still looking like we will be pushing around 300 basis points again, driven by strong underlying margin expansion of approximately 60 to 80 basis points, assuming organic in that 6% to 7% range and also interest income related to the cash rolling for AEP.
Speaker Change: Well, it's a small offset by the rollout of M&A and lower interest rates.
Douglas Howell: Looking out towards the third quarter, we would still expect underlying margin expansion, and then we'll also have the impact of investment income on the funds we're holding for AP. So in total, we're thinking expansion could be 250 to 280 basis. This, of course, would change if we get AP closed before September 30. As for fourth quarter, we would hope we'd have AP closed, so we would have underlying margin expansion still, but lose the extra investment income, yet have AP's fourth quarter results in our book.
Speaker Change: Looking out towards the third quarter, we would still expect underlying margin expansion and then we'll also have the impact of investment income on the funds were holding for AP. So in total.
Speaker Change: We're thinking expansion could be 250 to 280 basis points. That's of course would change if we get a P close before September 30 as.
Speaker Change: As for fourth quarter, we would hope we would have a P. Clause. So we would have underlying margin expansion itself, but lose the extra investment income yeah have Aps fourth quarter results in our books.
Douglas Howell: The punchline here is there's nothing we're seeing that causes us to change how we view underlying margin expansion potential. We believe that organic greater than 4% we should see some underlying margin. At 6% organic, maybe 60 basis points of expansion, and at 8% organic, perhaps around 100 basis points of expansion. So again, there's no new news here. We still believe we are positioned to expand underlying full year margins by about 60 to 100 basis.
Speaker Change: The punch line here is theres nothing were seeing that causes us to change how we view underlying margin expansion potential we believe that organic greater than 4%, we should see some underlying margin expansion at 6% organic maybe 60 basis points of expansion at 8% organic perhaps around 100 basis points of <unk>.
Speaker Change: Spansion. So again, there's no new news here, we still believe we are positioned to expand underlying full year margins by about 60 day to a 100 basis points.
Douglas Howell: Sticking on page four, risk management segment organic was 3.9%. That's a bit below our 5% expectation due to lower new business revenue.
Speaker Change: Sticking on page four our risk management segment organic growth three 9%, that's a bit below our 5% expectation due to lower new business revenue as Pat mentioned, we expect this to improve in the second half of the year as we have already sold new contracts, but these have yet to start generating revenue. So we see organic moving back towards <unk>.
Douglas Howell: As Pat mentioned, we expect this to improve in the second half of the year, as we have already sold new contracts, but these have yet to start generating revenue.
Douglas Howell: So we see organic moving back towards six to 8% throughout the Adjusted EBITDAC margin of 20.5% was in line with our March IRD expectations, and looking forward, we still see full year margins again around 20.5%.
Speaker Change: 6% to 8% throughout the year.
Speaker Change: Adjusted EBITDA margin of 25% was in line with our March IR day expectations and looking forward, we still see full year margins again around 25%.
Douglas Howell: Turning now to page six of the earnings release and the corporate segment shortcut table. For the Adjusted Interest in Banking, Clean Energy, and Acquisition Lines, all were very close to our March IR Day expectations. The Corporate Line was better than our March expectations due to some expense timing, a few favorable tax items, including the tax benefit from stock-based compensation, somewhat offset by an unrealized FX remeasurement loss.
Speaker Change: Turning now to page six of the earnings release, and the corporate segment shortcut table.
Speaker Change: The adjusted interest and banking clean energy and acquisition lines. All were very close to our March IR day expectations. The corporate line was better than our margin expectations due to some expense timing a few favorable tax items, including the tax benefit from stock based compensation somewhat offset by an unrealized FX.
Speaker Change: Remeasurement loss.
Douglas Howell: So now let's move from the earnings release to the CFO commentary document that we post on our website. versus an overall statement. Please read the headers and footnotes carefully on how these numbers in this document include or exclude the impact of assured part That said, let's flip to page three in our modeling helpers across the board.
Speaker Change: So that was moved from the earnings release to the CFO commentary document that we posted on our website.
Speaker Change: First as an overall statement please read the heather's and footnotes carefully at how these numbers in this document include or exclude the impact of assured partners.
Speaker Change: Let's flip to page three in our modeling helpers across the board first quarter 'twenty five actual numbers were fairly close to what we provided back in March one thing to call out in our 'twenty outlook or changes from FX from both the brokerage and risk management segments with the dollar weakening since mid March we've provided updated estimates for revenue and.
Douglas Howell: First quarter 25 actual numbers were fairly close to what we provided back in March. One thing to call out in our 25 outlook are changes from FX for both the brokerage and risk management segments. With the dollar weakening since mid March, we have provided updated estimates for revenue and EPS impacts for the remainder of the year. So take a look at this disclosure as you refine your model.
Speaker Change: EPS impact for the remainder of the year, just taking a look at this disclosure as you refine your models.
Douglas Howell: Turning now to page four, and the corporate segment outlook for 25. Within the corporate line of the corporate segment, like I mentioned earlier, we had some favorable expense timing in the first quarter. So you'll see some of that comes back over the rest of the year, we've increased after tax expense by about a million dollars per quarter for the remainder of 25. However, the rest of our outlook for the corporate segment is unchanged from six weeks.
Speaker Change: Turning now to page four and our corporate segment outlook for 'twenty five within the corporate line in the corporate segment like I mentioned earlier, we had some favorable expense timing in the first quarter. So youll see some of that comes back over the rest of the year. We've increased after tax expense by about $1 million per quarter for the remainder of 'twenty five however, the rest of them.
Speaker Change: Our outlook for the corporate segment is unchanged from six weeks ago.
Douglas Howell: Flipping to page five to our tax credit carryovers, this is a reminder page as of March 31st, we have about $710 million of tax credits. We continue to expect additional cash flow of more than $180 million this year, and even more in 26 and later years.
Speaker Change: Flipping to page five to our tax credit carryover as a reminder, this is a reminder page as of March 31, we have about 700.
Speaker Change: $10 million of tax credits, how we continue to expect additional cash flow of more than $180 million this year and even more in 'twenty six in later years and don't forget this benefit will show up in our cash flow statement, rather than our P&L. So it's still a nice sweetener to fund future M&A.
Douglas Howell: And don't forget, this benefit will show up in our cash flow statement rather than our P&L. So it's still a nice sweetener to fund a future M&A.
Douglas Howell: Turning now to page six, the investment income table. We've updated our forecast to reflect current FX rates and changes in fiduciary cash balances. And you'll see here that we're still assuming two 25 basis point rate cuts during 25. You'll also see that we've provided a separate line to show our estimates of interest income associated with the funds that we're holding to pay for assured part Shifting down on that page of the rollover revenue table, first quarter, 25 columns, subtotal is around $80 million and $92 million before divestment. These numbers are consistent with our March IR day expectations.
Speaker Change: Turning now to page six the investment income table, we've updated our forecast to reflect current FX rates and changes in fiduciary cash balances and you'll see here that we're still assuming 225 basis point rate cuts. During 25, you can also say that we've provided a separate line to show our estimates of interest income associated.
With the funds that were holding to pay for a shirt partners.
Speaker Change: Shifting down on that page the rollover revenue table first quarter 'twenty five column sub total is around $80 million and $92 million before divestitures.
Speaker Change: These numbers are consistent with our March IR day expectations.
Douglas Howell: Looking forward, the pinkish columns to the right include estimated revenues for brokerage M&A closed through yesterday.
Looking forward the pinkish columns to the right include estimated revenues for brokerage M&A closed through yesterday, and just a reminder, youll make a peg that youll need to make a pick for future M&A.
Douglas Howell: And just a reminder, you'll make a pick that you'll need to make a pick for future M&A. Then below that table, we have a separate section for assured partners. We show you what we expect for monthly pro forma revenues in purple. And then finally, continuing down on the page, you'll see the risk management segment rollover revenues too.
Speaker Change: And below that table, we have a separate separate section for assured partners. We show you what we expect for a monthly pro forma revenues in purple.
Speaker Change: And then finally, continuing down the page, you'll see that risk management segment rollover revenues too.
Douglas Howell: So moving to cash capital management and M&A funding. We had no outstanding borrowings on our line of credit at March 31.
Speaker Change: So moving to cash capital management and M&A funding, we had no outstanding borrowings borrowings on our line of credit at March 31, and you might have seen that in early April we amended our credit agreement. We extended the maturity date to April of 2030, and also increased our borrowing capacity from $1 seven.
Douglas Howell: And you might have seen that in early April, we amended our credit We extended the maturity date to April of 2030 and also increased our borrowing capacity from $1.7 billion to $2.5 billion. Our current cash position, potential borrowing capacity, and strong expected free cash flow position us well for our pipeline of M&A opportunities. So, even after the $13.5 billion for Assured, paying for Woodruff, and paying for the Willis-Reed earn-out, and after the other 11 deals we've already done through Q1, we still have over $2 billion of M&A capacity here in 2025, and another $5 billion of capacity in 2026 before using any stock.
Speaker Change: To $2 5 billion.
Speaker Change: Our current cash position potential borrowing capacity and strong expected free cash flow position us well for our pipeline of M&A opportunities.
Speaker Change: So even after the $13 5 billion for assured paying for Woodruff and and paying for that Willis re earn out and after the 11. Other 11 deals we've already done through Q1, we still have over $2 billion of M&A capacity here in 'twenty, five and another $5 billion of capacity in 'twenty six.
Speaker Change: Before using any stock so our M&A strategy has a tremendous runway.
Douglas Howell: So our M&A strategy has a tremendous run-off.
Douglas Howell: So another excellent quarter in the books. As we look ahead, we see strong organic growth, a terrific M&A pipeline. We continue to see opportunities to improve our productivity and quality. And as Pat said, we have a winning culture. So it looks like we're well on track for another great year.
Speaker Change: So another excellent quarter in the books as we look ahead, we see strong organic growth a terrific M&A pipeline, we continue to see opportunities to improve our productivity and quality and as Pat said, we havent winning culture. So it looks like we're well on track for another great year back to you Pat Thanks, Doug Operator, I think we're ready to go to quest.
Patrick Gallagher: Back to you, Pat. Thanks, Doug.
Operator: Operator, I think we're ready to go to questions and answers. Thank you.
Speaker Change: That answers.
Operator: The call is now open for questions. If you have a question, please pick up your handset and press star 1 on your telephone at this time. If you are on a speakerphone, please disable that function prior to pressing star 1 to ensure optimum sound quality. You may remove yourself from the queue at any point by pressing star 2.
Speaker Change: Thank you the call is now open for questions. If you have a question. Please pickup your handset and press star one on your telephone at this time.
Speaker Change: We're on a speaker phone please disable that function prior to pressing star one to ensure optimum sound quality you may remove yourself from the queue at any point by pressing star. Two. Additionally, we ask that you each person each participant limit themselves to one question and one follow one again Thats star one for questions.
Operator: Additionally, we ask that each participant limit themselves to one question and one follow-up. Again, that's star 1 for questions.
Elyse Greenspan: Our first questions come from the line of Elyse Greenspan with Wells Fargo.
Speaker Change: Our first questions come from the line of Elyse Greenspan with Wells Fargo. Please proceed with your question.
Patrick Gallagher: Please, please proceed with your question. Hi, thanks. Good evening. My first question, I wanted to start with, you know, the pretty impressive 20% growth that you guys saw in re-insurance. Can you just, you know, try to break that down between, you know, what's coming from pricing, retention, new demand, and then it would give us a sense like if it's new new or if it's, you know, business that you're, you know, taking from peers. That's a pretty strong number.
Elyse Greenspan: Hi, Thanks.
Speaker Change: Evening.
Speaker Change: My first question.
Wanted to start with they are pretty impressive 20% growth that you guys saw in reinsurance can you just.
Speaker Change: Try to break that down between what's coming from pricing.
Speaker Change: Retention, new demand and then if you could give us a sense like if it's new new or if it's business that you're taking from peers.
Patrick Gallagher: Well, thanks, Elyse. And let me try to break down some of the 20% organic. First, the re-insurance folks are just on fire. They had a great quarter. And a lot of it, you know, came with the January 1 renewal. So let me break down three pieces. Our new business spread was responsible for more than half the organic this quarter. In fact, we had about 15 new client wins within more than a million each. These are big, chunky deals. This is not similar to what we do on the retail side. Increased renewal premiums from carrier growth was another 5% or so.
Speaker Change: Strong number.
Speaker Change: Well, Thanks, Alicia let me, let me try to break down some of the 20% organic growth first the the reinsurance folks are just on fire. They had a great quarter and a lot of it came with the January one renewals. So let me break down three pieces of new business spread was responsible for more than half the organic this quarter in fact, we had.
Speaker Change: About 15, new client wins with more than $1 million. Each these are big chunky deals. This is not the similar to what we do on the retail side.
Speaker Change: Increased renewal premiums from care growth was another 5% or so inflation people buying more cover as you see some rates come down people have some room for additional cover et cetera, and the remainder was some favorable timing.
Patrick Gallagher: Inflation, people buying more cover. As you see some rates come down, people have some room for additional cover, et cetera. And the remainder was some favorable timing. We have now better insights into it. And as I noted, it will reverse itself in the latter half of the year. But let me be clear. We said from the very beginning that we thought this was a group of folks that when working with our overall company, when we integrated them into working with retail and our wholesale and specialty people, that it would be a good match. And that's what we're seeing.
Speaker Change: We have now better insights into it and as I noted it will reverse itself in the AR and.
Speaker Change: In the latter half of the year, but let me be clear, we said from the very beginning that we thought this was a group of folks that when working with our overall company when the when we integrated them into working with retail and our wholesale and specialty people that it would be a good match and that's what we're seeing these guys and gals are.
Patrick Gallagher: These guys and gals are just doing a tremendous job. And the new business was outstanding.
Speaker Change: Just doing a tremendous job and the new business was outstanding congratulations to them.
Elyse Greenspan: Congratulations to them. That's great.
Speaker Change: Yeah.
Patrick Gallagher: And then my second question. So it sounds like you guys are still working, I guess, not a lot to update us, you said, like working on a response to the DOJ. So is that something I guess you guys would expect to respond? I think there's like a 30-day clock once that happens. Is that something that based on the timeline of a Q4 close, Doug, is that would you expect to just respond to comments? I guess that would be something that would happen in the Q2. Is that your expectation? All right, so we're obviously putting together all the information that's been requested, and we're working hard on it, both on our side, and then the AP team is doing the same thing.
Speaker Change: That's great and then on my my second question.
Speaker Change: So it sounds like you guys are still working I guess not a lot to update US you said like working on our response to.
Speaker Change: The Doj so is that something I guess, you guys thought it would.
Speaker Change: Specter respond I think there was like a 30 day clock once that happens is that something that based on the timeline of a Q4 close Doug is that would you expect to just respond to comments I guess that would be something that would happen in the Q2 is that your expectation.
Speaker Change: Alright. So this will obviously, putting together all the information that's been requested and we're working hard on it both on our side and then the a P. Team is doing the same thing we will get that over to them sometime in mid third quarter and then it does start a clock ticking they have the right to ask some questions, but there is a process here first getting that over.
Patrick Gallagher: We'll get that over to them sometime in mid third quarter. And then it does start a clock ticking, they have the right to ask some questions.
Patrick Gallagher: But there is a process here, first getting that over, certifying to it, and then, and then they'll have, you know, 30 days to get back Okay, and then, and then I just you mentioned that there was, I guess, some timing that impacted the first quarter, some kind of it was it a pull forward from other quarters? I think it was 1%. And then there was also going to be an impact in the Q2. Yeah, all right.
Speaker Change: Certifying to it and then and then they'll have.
Speaker Change: 30 days to get back to us on that.
Speaker Change: Okay.
Speaker Change: And then.
Speaker Change: And then I guess, you mentioned that there was I guess, some timing that impacted that.
Speaker Change: First quarter, some kind of it was that a pull forward from other quarters I think it was 1% and then there was also can be an impact in the Q2, yeah. All right. So let's go through that a little bit because I think it's a good question.
Patrick Gallagher: So let's go through that a little bit, because I think it's a good question. First, it doesn't do anything to full year. Second, we're just getting some better insights into the development of revenues. You know, we've implemented our new reinsurance system last fall. So that's up and running. We've got a new benefit system. So those systems help us look into the treaties and then to the expected headcount in our benefits business. So while the timing this quarter was mostly in reinsurance, let's call that about two thirds, and the other one third is across our benefits business and a little bit in the specialty business.
Speaker Change: First it doesn't do anything to full year second we're just getting some better insights into.
Speaker Change: The development of revenues, we've implemented our new reinsurance system last fall. So that's up and running we've got a new benefits system. So those systems help us look into the treaty and then to the expected head count.
Speaker Change: And our benefits business. So while the timing this quarter was mostly in reinsurance, let's call that about two thirds and the other one third is across our benefits business and a little bit of in the specialty business, but without this timing in the first quarter.
Patrick Gallagher: But without this timing, the first quarter, you know, for reinsurance was still in the upper teens. And it impacted specialty and benefits each about a point. But, you know, we're going to have a little bit of that again in the second quarter, but to a lesser magnitude. And then again, this is the time to reverse itself compared to last year in the third and fourth quarters. So no impact for a full year organic. And we would say, you know, that this is the result of just putting in new systems and be able to make better estimates earlier on in the year.
Speaker Change: For reinsurance, but still in the upper teens and it impacted specialty and benefits each about a point.
Speaker Change: But you know we're going to have a little bit of that again in the second quarter, but to a lesser magnitude.
Speaker Change: And then again this is the time of reverse itself compared to last year in the third and fourth quarters, So no impact where full year organic and we would say.
Speaker Change: This is this is the result of just putting in new systems and be able to.
Speaker Change: Make better estimates earlier on in the year.
Elyse Greenspan: Thank you.
Speaker Change: Thank you.
Elyse Greenspan: Thanks, Elyse. Thank you.
Speaker Change: Thanks Elyse.
Greg Peters: Our next questions come from the line of Greg Peters with Raymond James. Please proceed with your question. Good afternoon. So, Pat, in your comments... I think it was, yeah, Pat, it was you that talked about the bifurcation of renewal pricing in the small to mid to count, which was you define as less than 100,000. And then the mid to large account.
Speaker Change: Thank you our next questions come from the line of Greg Peters with Raymond James. Please proceed with your question.
Speaker Change: Okay.
Greg Peters: Good afternoon.
Greg Peters: So.
Greg Peters: And your comments.
Greg Peters: I think it was yeah patterns, you talked about the bifurcation of renewal pricing in the small to mid day, count, which was defined as less than 100000.
Greg Peters: And then the mid to large account.
Patrick Gallagher: I was wondering if you could provide some more color because the commentary we're hearing in the marketplace around that seems to suggest that the larger account business might be under a little bit more rate pressure specifically in the property area. Well, it's exactly what I said, Greg. I mean, I think we're seeing in the large account area. And it's the typical economics, you got a bigger account, you got more swag, right? You can you can get a better deal, especially if you've got good results. And these larger accounts are better managed from a risk management standpoint.
Greg Peters: I was wondering if you could provide some more color because the commentary were hearing in the marketplace around that seems to suggest that the larger account business might be under a little bit more rate pressure specifically in the property areas.
Greg Peters: Well, it's exactly what I said, Greg I mean, I think we're seeing in the large account area.
Greg Peters: It's the typical economics, you've got a bigger kind of got more swag right now.
Greg Peters: Get a better deal, especially if you've got good results in these larger accounts are better managed from a risk management standpoint.
Patrick Gallagher: And they're seeing the results of that our people are clearly helping with that. You get down into the smaller accounts all the way down to your personal lines, you don't have the negotiating power. And at the same time, they don't have the great results. So it's it's a fluid market. But it makes sense to me that if you're bigger, you get a little bit better deal than if you're smaller. Yeah, it's pretty linear to Greg, if you look at it, let's say over 100, we said, you know, it's up a point or so something like that.
Greg Peters: They're seeing the result of that our people are clearly, helping with that to get down into the smaller accounts all the way down to your personal lines you don't have the negotiating power and at the same time. They don't have the great results. So it's a fluid market, but it makes sense to me that if you're bigger you could get a little bit better deal than if you're a smaller.
Greg Peters: Yes, it's pretty linear to Greg if you look at it let's say over 100, we set up its up a point or so something like that but you know when you go to like 25 to 100000, maybe it.
Patrick Gallagher: But you know, when you go to like 25 to 100,000, you know, maybe a 3.5%, 4% you get a little lower than that $10,000 to $25,000 count. Maybe you're getting in the mid-fours and then we get less than $10,000 as that count side. Now, this is, you know, for premiums, you're seeing it being up in the mid-fives. So it's consistent even within that under $100,000 that the smaller it gets, the higher the rate increases. Now, we saw that not going up as fast on the other side, too, when rates were going up. So I don't know if it's as much that they're just, you know, reversion to the mean.
Greg Peters: 354%, you get a little lower than that 20% to 25000 dollar count maybe you're getting a mid fours and then we get less than $10000 as that account side now this is.
Greg Peters: For premiums that Youre seeing youre seeing it being up in the mid fives. So it is it's consistent even within that under 100000 smaller against the higher the rate increases that we saw.
Greg Peters: Saw that not going up as fast on the other side too when rates were going up so I don't know if it's as much the they're just.
You know a reversion to the mean.
Patrick Gallagher: Also, that the smaller accounts are catching up. That makes sense.
Greg Peters: Also the smaller accounts are catching up.
Greg Peters: Okay that makes sense.
Greg Peters: Um, for my second question, my follow up question, I'm going to pivot back to the pending acquisition of assured partners. Yeah, this has been you, you've obviously been working very closely with them for the last several months now, and trying to get to the finish line. And I know you were pretty, pretty forthcoming with, you know, details about how you expected margin improvement to materialize and, you know, retention, and organic revenue growth to develop. And I'm just curious, now that you know, we're here in May, if you have a different perspective for those any different changes you have on the views on the opportunity to ensure partners, you know, for all of the areas I mentioned?
Speaker Change: For my second question My follow up question I'm going to pivot back to the pending acquisition of assured partners.
Ben: This is Ben.
Ben: You've obviously been working very closely with them for the last several months now and trying to get to the finish line.
Ben: And I know you were pretty pretty forthcoming with you.
Ben: Details about how you expected.
Ben: Margin improvement to materialize in retention and organic revenue growth to develop and I'm. Just curious now that we're here in may if you have a different perspective. If there is any different changes you have on the views on the opportunity insured partners for all of their.
Ben: As I mentioned well. Thank you for the question, Greg, but I'll tell you, it's actually gotten stronger I mean, we did our board meeting this week and that was of course, one of the key questions.
Patrick Gallagher: Well, thank you for the question, Greg. But I'll tell you, it's actually gotten stronger. I mean, we did our board meeting this week. And that was, of course, one of the key questions. Their turnover is actually better than ours, not by a lot, by maybe half a point to a point. So they're staying very consistent with what they've had in the past. And that's after bonuses have been paid. So we're not seeing an uptick. I said when we did the deal, I didn't expect any breakage. We've seen a producer here or there depart. But you know, that's common business across all of our platforms. In terms of the people, we've had to be careful given the request for a another bit of information.
Ben: Their turnover is actually better than ours, not by a lot by half a point to a point so they're staying very consistent with what they've had in the in the past and that's after bonuses have been paid so we're not seen it uptick.
Ben: Said, when we did the deal I Didnt expect any break grid breakage.
Ben: Being a producer here there depart, but that's common business across all of our platforms.
Ben: In terms of the people we've had to be careful given the request for another bit of information, but there are certain work streams that have been allowed to continue and I'll tell you. What just every single day, our people are more affirmative and the fact that they're dealing with folks that they really like they understand the business. They love the business and they can't wait to get the two organs.
Patrick Gallagher: But there are certain work streams that have been allowed to continue. And I'll tell you what, just every single day, our people are more affirmed in the fact that they're dealing with folks that they really like, they understand the business, they love the business, and they can't wait to get the two organizations together. There's no waffling, there's no mama crying, it's people that just want to go out and sell a lot of insurance. And we're very, very excited, more excited than we were in January. Got it.
Ben: <unk> together, there's no waffling Theres no Mama crying, it's people that just want to go out and sell a lot of insurance and we're very very excited more excited than we were in January.
Greg Peters: Um, can you just just a detailed question on that? Is the organic profile at Assured based on what you've seen just similar to what you're seeing inside your retail business? Yeah. It is weird. Yeah, I mean, they account for 606 differently, but let's just say it is you can throw a hat on Perfect. Thank you.
Ben: Got it.
Ben: Can you just just a detailed question on that is the organic profile of assured based on what you've seen just similar to what you're seeing inside your retail business.
Ben: Yeah.
Ben: And as we perfect.
Ben: Yeah, I mean, they account for 606 differently, but let's just say it is if you can throw out of them.
Ben: Perfect. Thank you.
Greg Peters: Thanks, Greg. Thank you.
Ben: Thanks, Greg.
Mike Zaremski: Our next questions come from the line of Mike Zaremski with BMO Capital Markets.
Ben: Thank you. Our next question is come from the line of Mike Zaremski with BMO capital markets. Please proceed with your questions.
Mike Zaremski: Please proceed with your Thanks. Good evening. Doug, the or I think Pat might pull this too, the one point of timing benefit in brokerage organic Is that in addition to the $26 million reversal on page 6 of the CFO commentary, which I'll admit is kind of over my head? Yeah, I think you're calling out the fact last year, we highlighted it last year, there was a gross up of revenues and a gross up of expenses as we implemented our conforming accounting policies on some historical acquisitions that caused a gross up. So we didn't take credit for the $26 million as revenue last year, and so we shouldn't be measured by that again this year.
Ben: Okay.
Speaker Change: Thanks, Good evening.
Ben: Doug.
Well I think Michael as to that the one plant timing benefit and brokerage organic.
Ben: Is that in addition to the $26 million.
Ben: Reversal line on page six of the CFO commentary, which I'll admit it's kind of over my head.
Ben: Charles explanation, Yeah, I think it was calling out in fact last year and we highlighted it last year. There was a gross up of revenues and a gross up of gross spend.
Expenses as we implemented our conforming accounting policies on some historical acquisition that caused the gross up so we didnt take credit for the $26 million as revenue last year and.
Ben: So we shouldn't be measured by that again next year. So it just as you gross up the revenues and gross up the comp on the revenues and a lot of those revenues triggered some extra earn outs on it at all Washington, Nothing and we did talk about it last year, but it kind of sticks out a little bit more now you can see that we repeated that note about that odd page.
Douglas Howell: So it's just as you gross up the revenues, you gross up the comp on the revenues, and a lot of those revenues triggered some extra earnouts on it. It all washed to nothing. And we did talk about it last year, but it kind of sticks out a little bit more now. You can see that we repeated the note about that on page six, I think it's in the third footnote or second or third footnote there. So we're levelizing for a change in purchase accounting, which I think is 100% appropriate. Okay, I got it.
Ben: Six I think it's in that third putting out our second or third footnote there so yes.
Ben: At one level I think for a change in purchase accounting, which I think is 100% appropriate.
Ben: Okay.
Mike Zaremski: I'll, uh, I'll make sure to go through that.
Ben: Got it.
Ben: I'll make sure to take us through that.
Douglas Howell: Switching gears a bit. A question on also a brokerage organic. The RPC stat that you, you know, you began giving out in recent years, which is helpful. I think it was 4% this past quarter. and, you know, organic obviously tremendous, you know, five plus points above that.
Speaker Change: Switching gears a bit.
Speaker Change: A question on also a brokerage organic.
Speaker Change: The RPC stat that you.
Speaker Change: Began giving out in recent years, which is helpful.
Speaker Change: I think it was 4% this past quarter.
Speaker Change: And organic obviously tremendous.
Speaker Change: Five points above that if we look kind of going back.
Patrick Gallagher: But if we look kind of going back We were a different company than we were then. And number one, we've got many more large accounts. Our large account penetration continues to grow every month, and a lot of that business is on fees. Then also, when you take a look at the business and how we're selling it, I think that we're better sellers today. We've got we've got tools that are just unbelievable in terms of helping our producers get out and drive new business, whether it be We call Gallagher WIN, which is Salesforce. And then you've got the data analytics and Gallagher Drive, which I think most of you have seen these tools, we presented them to you.
Speaker Change: A few years I can disclose RPC the.
Speaker Change: It's much.
Speaker Change: The gap between organic and RPC is much narrower.
Speaker Change: I'm curious you know should the gap stay.
Speaker Change: Wider than historical.
Speaker Change: Implied by your guidance and maybe part of the reason is reinsurance isn't included in RPC, but E. M. I am I asking the question do you think it's there.
Speaker Change: It's a fair question, Mike, but here are a couple of things we are different company than we were then and number one we've got many more large accounts. Our large account penetration continues to grow every month and a lot of that business is on fees then.
Speaker Change: And then also when you take a look at the business and how we're selling it.
Speaker Change: I think that we're better sellers today, we've got we've got.
Speaker Change: Tools that are just unbelievable in terms of helping our producers get out and drive new business, whether it be <unk>.
Speaker Change: He called Gallagher win which is Salesforce and then you've got the data and analytics and Gallagher drive, which I think most of you have seen these tools, we presented them to you and you know they are maturing now theyre in the hands of solid producers that have got anytime the market's influx that's great news for our producers up and down and frankly right now is a great.
Patrick Gallagher: And, you know, they're maturing now, they're in the hands of solid producers that have got anytime the markets in flux, that's great news for our producers, up and down. And frankly, right now is a great time. And it's a great message for our client base and our prospect base, work with Gallagher, we think we've got an opportunity to really do a great job on your pricing, as well as your coverage. And your terms. So we're a different company, better opportunities, more free business. Larger platform. Stronger Players.
Time, and it's a great message for our client base and our prospect base work with Gallagher and we think we've got an opportunity to really do a great job on your pricing as well as your coverage and your terms. So we're a different company better opportunities more fee business.
Speaker Change: Larger platform.
Speaker Change: Stronger players.
Mike Zaremski: Okay, that makes sense. If I could just sneak one last one, a follow up in to, you know, you said that you'll respond to the, I guess, government about the assured data request in a number of months. Any, any color on, you know, why this data request would take such a long time?
Speaker Change: Okay that makes sense, if I could just sneak one last one a follow up in two you said that youll.
Speaker Change: Respond to.
Speaker Change: Yeah I.
I guess the government about the shared data request in a number of months.
Speaker Change: Any color on you know why.
Speaker Change: The state of request would take such a long.
Patrick Gallagher: I'll give you one bit of color, Mike. We're not talking a lot about this. That's intentional. It's a lot of data. from both parties. Appreciate it, Pat. Sure thing.
Mike Zaremski: I'll give you one bit of color, Mike we're not talking a lot about this that's intentional it's a lot of data.
Speaker Change: From both products.
Speaker Change: Appreciate it pad drilling.
Mark Hughes: Our next questions come from the line of Mark Hughes with Truist Securities. Please proceed with your Yeah, thank you. Good afternoon.
Speaker Change: Thank you our next questions come from the line of Mark Hughes with true Securities. Please proceed with your questions.
Mark Hughes: Yes. Thank you.
Mark Hughes: Hey, Mark. Pat. Pat, if I heard you properly, you said the workers comp up five per I think it was up 1% last quarter. Yep. Is there something going on there? Not really. I mean, we did actually plumb for that among Gallagher. Gallagher Bassett's biggest line of cover, of course, is comp. We were asking ourselves, is there any systemic change here? We don't see it. You know, most of comp is fee schedule stuff. So I think it's underlying comp costs are up with medical. But I also do think it's a better economy than I think people are writing about.
Speaker Change: Hey, Mark.
Speaker Change: And if I heard you properly you said the workers' comp of 5%.
Speaker Change: I think it was up 1% last quarter.
Speaker Change: There's nothing going on there.
Speaker Change: Not really I mean, we.
Speaker Change: We did it actually plum for that among Gallagher, our Gallagher Bassett. Its biggest line of covers of course was cop. We were asking ourselves is there is there any systemic change there we don't see it most of comp is reschedule stuff. So.
Speaker Change: So I think it's underlying comp costs are up with medical but I also do think it's it's it's a it's a better economy than I think people are writing about our daily daily check in on the economies that are middle market accounts in particular are pretty robust.
Patrick Gallagher: Our daily check-in on the economy is that our middle market accounts, in particular, are pretty robust. Yeah, we're still seeing good employment and growth in those folks. We are, you know, I think there is starting to be more chatter around medical inflation. So there could be some proactiveness there by the carriers on that in order to make sure they stay ahead of it. So, you know, it's not a huge portion of our book, really, but it is an interesting uptick. Remember, that's both rate and exposure. So, you know, it's It's moving north and our educated guess is more exposure and higher medical inflation.
Speaker Change: Still seeing good employment growth and those folks. We are you know I think there is starting to be more chatter around medical inflation.
Speaker Change: There could be some proactive ness there by the carriers on that in order to make sure. They stay ahead of it so yes. It is.
Speaker Change: Not a huge portion of our of our book really but it is an interesting uptick that is both a member that's both rate and exposure so yeah.
Speaker Change: Okay.
Speaker Change: It's moving north.
Speaker Change: Our our educated guesses.
Speaker Change: As more exposure and and and higher medical inflation.
Speaker Change: Yeah.
Patrick Gallagher: And then on the property market, Pat, what's your sense of how this thing plays out? You obviously sensitive to cat losses. So a lot of it depends, but in your experience where you've had kind of a run up and then you start to see it turn back a little bit, how is this going to work over the next few quarters, couple of years?
Speaker Change: And then on the property market Pat what's your sense of how this thing plays out.
Speaker Change: Obviously, it's sensitive to cat losses, so a lot of it depends but.
Speaker Change: Your experience, where you've had kind of a run up and then you start to see it.
Speaker Change: Turned back a little bit.
Speaker Change: Is this going to work over the next few quarters couple of years.
Patrick Gallagher: Well, again, Mark, let me go back in my history, which is a long one now. The property markets, I would define it as fragile, right? When you're when you're minting money, it's a great place to be. And of course, you're going to give customers back some of the some of the money you've made. But boy, the bill comes hard when it comes. And it's not gradual.
Mark Hughes: Well again, Mark let me go back in my history, which is a long window.
Mark Hughes: The property market I would define it as fragile right when you're when you're minting money, it's a great place to be and of course youre going to give customers back some of the some of the money you've made but boy the bill comes hard when it comes in it's not gradual.
Patrick Gallagher: And so, you know, if it just seems that we're all concerned, in fact, you might recall a year ago or so we surveyed over 1000 of our customers, middle market customers, their number one concern was weather related climate change. And I think we all see it. Whenever we never had tornadoes in the fall, these convective storms have got every scratch in their head. The prediction for the hurricane season is, you know, more storms than normal. And I'll bet last year there was that prediction as well, and it wasn't as severe. But I'll tell you, whoever saw California wildfires coming, you combine those with some storms, both in California and around the world.
Mark Hughes: And so.
Speaker Change: It just seems that we're all concerned in fact, you might recall a year ago or so we surveyed over 1000 of our customers middle market customers. Their number one concern was weather related climate change and I think we all see it whenever we never had tornados in the fall. This convective storms, we've got a really scratching their head.
Speaker Change: The prediction for the Hurricane season is more storms than normal and all of that last year, there was that prediction as well and it wasn't as severe.
Speaker Change: But I'll tell Ya whoever saw California, wildfires come and you combine those with some storms, both in California and around the world well the thing about properties that can change on a dime now we certainly hope that doesn't happen because our customers have been shocked you know how I feel about hard markets I'd much rather have a market that's pretty stable.
Patrick Gallagher: Well, the thing about property is it can change on a dime. Now, we certainly hope that doesn't happen because our customers have been shocked. You know how I feel about hard markets.
Patrick Gallagher: I'd much rather have a market that's pretty stable, lets us show our tools, help us contain the cost for our clients. It's hard to explain to people why rates are jumping. You can do it in property because you can show them the losses. But I think you're right to ask the question. It's all well and good now. I think customers deserve a bit of a decrease. Carriers are on a little bit of an edge, if you will. You know, they know they've got to give some money back. The market's competitive. But if the wind blows, the story could change very quickly.
Speaker Change: Let's show our tools help us contain the costs for our clients. It's hard to explain to people why rates are jumping you can do it and property because you can show them the losses, but I think youre right to ask the question, it's all well and good now I think customers deserve a bit of a decrease carriers are.
Speaker Change: On a little bit of an edge if you will.
Speaker Change: They know they've got to give some money back the market is competitive but if the wind blows story could change very quickly.
Mark Hughes: Very good. Well, everything is definitely crazy out there with the Cubs in first place. I'm with you.
Speaker Change: Very good well everything is definitely a crazy out there with the Cubs in the first place.
Mark Hughes: I'm with you know Mark that's the new normal.
Mark Hughes: No, Mark, that's the new normal. Okay, all right. We waited 100 years. Some people have a bad decade. We had a bad century. We're back for good.
Speaker Change: [laughter], Okay alright.
Speaker Change: We waited 100 years some people have a bed decade, we had a bad century, we're back for good.
Mark Hughes: Alright, I'll Thanks.
Speaker Change: Alright.
Speaker Change: Thanks, Thank you.
David Motemaden: Our next questions come from the line of David Motemaden with Evercore ISI.
Speaker Change: Thank you our next questions come from the line of David motivated with Evercore ISI. Please proceed with your questions.
Douglas Howell: Please proceed with your Hey, good evening. My question, I missed it. Just on the RPC. For this quarter, I think you had said it was 5%. Last quarter was trending around 4%. On the first two months of the quarter, this this one queue. Where did that end up? For one queue and within your outlook? What are you guys assuming for the rest of So let me see if I can break that apart. What's your question? You want to know what the renewal premium change was in the first quarter and what our outlook is for the rest of the year?
David: Hey, good evening.
Speaker Change: My question I missed it.
Speaker Change: Just on the RPC for this quarter I think you had said it was 5% last quarter it was trending around 4%.
Speaker Change: The first two months.
Speaker Change: The quarter.
Speaker Change: This <unk>.
Speaker Change: Where did that end up.
Speaker Change: For for <unk> and within your outlook what are you guys assuming for the rest of the year.
Speaker Change: So let me see if I can break that apart. What's your question you want to know.
Speaker Change: What the renewal premium change was in the first quarter and what our outlook is for the rest of the year is that the question.
Douglas Howell: Is that the question? Yeah, what's what's embedded in the outlook that you gave the organic cadence? basically about the same. We don't see it further, you know, property, you know, down 2%, call it flat. We, you know, the casualty rates, you know, we've had a lot of quarters on casualty rates, as I look across the grid here, consistently in that eight, you know, seven, eight, 10, nine, nine, nine, 10, you know, as I look at casualty rates coming across, so I think there's still some concerns over casualty on that. So our outlook as we shape our organic for the rest of the year is assuming similar to what we saw right I know, David, back to Mark's comments before about a long time to look back, in my past experience, when markets became a little squishy, you'd see them fall quite dramatically across all lines.
Speaker Change: Yes, what's embedded in the outlook that you gave the organic cadence that you need basically about the same.
Speaker Change: See a further property down 2% call it flat.
Speaker Change: The casually rates.
Speaker Change: You have a lot of quarters on casualty rates as I look across the grid here consistently in that.
Speaker Change: Seven 810, 999, 10, you know as I look at casualty rates coming across I think theres still some concerns on the casually on that so.
So our outlook as we shape our organic for the rest of the year is assuming similar to what we saw right now.
Speaker Change: All right this quarter.
Speaker Change: They know David back to Mark's comments before about.
Speaker Change: A long time to look back.
Speaker Change: In my past experience when markets.
Speaker Change: It came a little squishy, there you'd see them fall quite dramatically across all lines that is not what we're seeing today.
Douglas Howell: That is not what we're seeing today. Umbrella cover up this past quarter 11%, continuing push up of casualty, a little bit down on property. As we said at our opening remarks, this is a pretty, this is a pretty logical market. So I don't think you're going to see any major change. And if we do, we'll give it to you at our IRD update.
Speaker Change: Umbrella cover up this past quarter, 11%.
Speaker Change: Continuing pushup of casualty a little bit down on property as we said at our opening remarks. This is a pretty it's a pretty logical market.
Speaker Change: So I don't think you're going to see it.
Speaker Change: Any major change and if we do we'll give it to you at our IR day updates.
Speaker Change: Yeah.
David Motemaden: Got it.
Patrick Gallagher: Thank you. And then I guess I'm also wondering, you know, that that difference between the middle market and large account. I guess I'm wondering, just, you know, I know that there's typically the large account business is more cyclical, and you guys are underweight that. But outside of that, when you look at your middle market property book, Small Market Property Book. Would you say that's more SES exposed and therefore, you know, the pricing might be a little bit more durable there?
Speaker Change: Got it. Thank you and then I guess I'm also wondering.
Speaker Change: Yes that difference between the middle market and large accounts.
Speaker Change: I guess I'm wondering just yeah, I know that there's typically the large account business is more cyclical and you guys are underweight that.
Speaker Change: But outside of that when you look at your middle market property book in small market property book would you say, that's more SCS exposed and therefore.
Speaker Change: The pricing might be a little bit more durable there or is that just is.
Patrick Gallagher: Or is that just, is that not the right way to think about I don't like to think about it that way, and I'll tell you why. Convective storms are, you know, they seem to be localized to the Midwest. You know, you got fire risk in lots of states I never thought of before, like New Jersey, but I don't I don't, I don't think that's necessarily something you'd say is more akin to hurting those accounts. Although you have to say, there are a heck of a lot more small accounts than there are large accounts. There's 1000 fortune 1000 accounts.
Speaker Change: Is that not the right way to think about it.
I don't like to think about it that way and I'll tell you why.
Speaker Change: Convective storms.
Speaker Change: Our.
Speaker Change: There seem to be localized to the Midwest.
Speaker Change: Got fire risk and lots of states I never thought of before like New Jersey, but I don't I don't I don't think that's necessarily.
Speaker Change: And you'd say.
Speaker Change: Is more akin to hurting those accounts, although you'd have to say there are a heck of a lot more small accounts and there are large accounts. There is a 1000 and fortune 1000 accounts.
Patrick Gallagher: There's 1000 small accounts in Schaumburg, So, I guess in one sense I'd argue no, I don't think those storms fall necessarily harder on one book of business than another, except by virtue of the fact that the numbers are just greater. I think it's buying power. That's what I'd say, David. It's just real simple. You know, if I've got an account that's going to pay me $100,000 or an account that's going to pay me $100 million, who gets the better deal? $100 million. Yep, no, that that makes sense.
Speaker Change: <unk> thousand small accounts in Schaumburg.
Speaker Change: So I guess in one sense I'd argue no I don't think those storms fall necessarily harder on one book of business and another except by virtue of the fact that the numbers are just greater.
Speaker Change: I think its buying power.
Speaker Change: That's what I would say it was just a real simple.
Speaker Change: Got it got it account that's going to pay me 100 Grand or pick out that's going to pay me 100 million, who gets the better deal the $100 million.
Speaker Change: Yes.
Speaker Change: That makes sense.
David Motemaden: And then lastly, so I might be nitpicking here, but I think you guys has called out 5% organic in US retail. And it sounds like that was maybe a little bit lighter than what you guys were talking about in March. I think you guys were saying 6%.
Speaker Change: Sure.
Speaker Change: And then.
Speaker Change: Lastly, so I might be nitpicking here, but I think you guys called out 5% organic in U S retail and it sounds like that was maybe a little bit lighter.
Speaker Change: Then what you guys were talking about in March I think you guys are saying, 6%.
Patrick Gallagher: Was there anything behind that outside of just the general RPC trends that we spoke about? Listen, I think that when you get down to a point one way or another on the organic, I would I would say they're almost the same number, you know, there could be a mixed difference in there. You know, when something moves a point, I'll be honest, we don't dig into it as deeply as something moves five points. So the point is, consider it mixed, but still, you know, the point is on this is it's still going up.
Speaker Change: Was there anything behind that outside of just the general RPC trends that we spoke about.
Speaker Change: And I think that when you get down to a 0.1 way or another on the organic I would I would say almost the same number there could be a mix difference in there.
Speaker Change: When something moves a point I'll be honest, we don't dig.
Speaker Change: Intuit is deep and we have something that was five points. So.
Speaker Change: Point is considerate mix, but still you know the point is on this is it still going up.
Patrick Gallagher: And if you look across everything that we've said is we still have a market that is arguably flat in a couple spots and going up in a lot of So I think that the fact is there still is a need for for rate The carriers see that you've seen that in the releases that they've had in it So, you know, I think that you blend all that together You know, we're selling more than we're losing and we feel pretty good about a six to eight percent year You know, that'd be it'd be a terrific, you know, five or six year run up No, definitely agree.
Speaker Change: And if you look across everything that we've said is we still have a market that is arguably flat in a couple of spots and going up in a lot of spots.
Speaker Change: So I think that the fact is there still is a need for a rate the carriers see that you've seen that in the release that they've had in it so.
Speaker Change: I think that blend.
Speaker Change: Blend all that together.
Speaker Change: We're selling more than we're losing and we feel pretty good about a 6% to 8% year, yeah, that'd be that'd be a terrific.
Speaker Change: Five or six year run on that.
Speaker Change: Yes definitely agree thank you thanks, David.
David Motemaden: Thank you.
Operator: As a reminder, if you would like to ask a question, please press star one on your telephone keypad.
Speaker Change: Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Katie Sakys: Our next questions come from the line of Katie Sakys with Autonomous Research.
Speaker Change: Our next questions come from the line of Katy sockets with Autonomous Research. Please proceed with your question.
Katie Sakys: Please proceed with your Hi, thank you. I guess my first question, I wanted to, you know, go back to Doug's comment on the cadence of brokerage organic growth that you expect to see for 2Q, 3Q and 4Q. Back of the envelope math, I'm kind of getting to the midpoint of the six to eight percent full year guide. Which of those quarters, Doug, do you kind of see the most potential to upside versus your current estimates right now? How does seasonality perhaps inform that view? I think the upside could come in the fourth quarter. I think if we have a storm season, and like Pat said, as the property shifts, I also still believe that there's going to be development issues.
Katy Sockets: Hi, Thank you I guess my first question I wanted to know.
Speaker Change: Go back to Doug's comments on the cadence.
Speaker Change: Brokerage organic growth do you expect to see for T T cell <unk> and <unk>.
Speaker Change: Bank of the envelope math, I'm kind of getting to the midpoint of the 6% to 8% full year guide.
Speaker Change: Which of those coronary Scott do you kind of see the most potential to upside versus your current estimates right now and.
Speaker Change: How does seasonality, perhaps inform that deal.
Speaker Change: I think the upside could come in the fourth quarter I think if we have a storm season and like Pat said the property shifts I also still believe that theres going to be development issues.
Douglas Howell: As you get into your third quarter, actual oil reserves, as they start to do their third quarter reviews of how they feel their development is, you know, when it goes when it goes from a, you know, into a paid loss triangle versus an incurred loss triangle, you know, you kind of wake up to that when you do your actual oil reviews in the third quarter. So fourth quarter is probably the quarter where there's the most ups.
Speaker Change: Get into your third quarter actuarial reserves as they start to do their third quarter.
Speaker Change: Use of how they feel their development as you know when it when it goes from a.
Speaker Change: Into a paid loss triangle versus an incurred loss triangle.
Speaker Change: You know you kind of wake up to that when you do your actuarial reviews in the third quarter. So fourth quarter is probably the quarter, where there's the most upside.
Douglas Howell: Super helpful. And then I apologize if this next question is a little bit nitpicky, but I noticed in the CFO commentary that the average EBITDAC multiple that you guys paid for your tuck-ins this quarter was, you know, slightly elevated at 11.5 times versus the 10 to 11 times guide. Is that just the result of, you know, some noise from one-off transactions? Or is there any additional color that we should be aware of there? You know, if I peel apart the 11 that we closed in the quarter, I don't see anybody really off the map on that.
Speaker Change: Okay Super helpful. And then I apologize. If this next question is a little bit nitpicky, but I noticed in the CFO commentary that.
Speaker Change: The average EBITDA multiple that you guys paid for your tuck ins. This quarter. It was slightly elevated at 11 five times versus the 10 to 11.
Speaker Change: <unk> guide or is that just a result.
Speaker Change: And the noise from from one off transactions or is there any additional color that we should be aware of there.
Speaker Change: If I Peel apart the 11 that we closed in the quarter.
Speaker Change: Don't see anybody really off the map on that so it's being 10 to 11 is still pretty close so that's.
Douglas Howell: So, you know, being 10 to 11 is still pretty close. So, that's it.
Katie Sakys: Thank you.
Speaker Change: Thank you.
Katie Sakys: Thanks, Katie. Thanks.
Speaker Change: Thanks, Jay Thanks. Thank you our next questions come from the line of Andrew Anderson with Jefferies. Please proceed with your questions.
Andrew Anderson: Thank you. Our next questions come from the line of Andrew Anderson with Jeffries. Please proceed with your question. Hey, good afternoon. The supplemental commissions within brokerage are pretty strong. Was there any timing benefit there?
Andrew Anderson: Hey, good afternoon.
Andrew Anderson: The supplemental commissions within brokerage were pretty strong was there any timing benefit there and just maybe more broadly could you talk about how youre thinking about that those line items, the contingents and supplemental.
Douglas Howell: And just maybe more broadly, could you talk about how you're thinking about that those line items, the contingents and supplementals? All right, so supplementals in the in the in the first quarter, you know, we had, you know, we've had some pretty good work as we start to negotiate contracts for the coming year. I think the team's done a good job of getting more carrier relationships under a supplemental. So I wouldn't say that there's anything, you know, systemic there, maybe there's a couple million flip between contingent and supplemental that, you know, carriers switch back and forth between those.
Andrew Anderson: [noise] alright, so supplemental.
Andrew Anderson: In the first quarter, we had yes, we've had some pretty good work as we start to negotiate contracts for the coming year.
Andrew Anderson: I think the team has done a good job of getting more carrier relationships under our supplemental so I wouldnt say that theres anything.
Andrew Anderson: Yes, systemic there maybe there is a couple of million split between contingent and supplemental carrier switched back and forth between those theres still by and large volume based volumes up things are good.
Douglas Howell: There's still by and large volume based volumes up, things are good. Gotcha.
Douglas Howell: And then just within specialty, could you maybe talk about the growth difference between open brokerage and MGA? And I suppose where I'm going with this is I'm not sure if the MGAs are kind of weighted to property, but if we're seeing some compression in property rate, could that impact your MGA growth in the back half of the year? But then our binding business had a terrific quarter. I think they're in the mid-teens. The brokerage business was probably, you know, 5 to 6%, something like that. So, you know, I think between the two, brokerage and binding, our affinity business had a terrific quarter.
Speaker Change: Got you and then just within specialty could you maybe talk about the growth difference between open brokerage and MGA.
Speaker Change: And I, suppose where I'm going with this is I'm not sure. If the <unk> are kind of weighted to property, but if we're seeing some compression in property rate could that impact your MGA growth in the back half of the year.
Speaker Change: That's what our binding business had a terrific quarter I think they are in the mid teens the brokerage business was.
Speaker Change: 5%, 6% something like that so.
Speaker Change: I think between the two brokerage and binding affinity business had a terrific.
Douglas Howell: Capitals were a little slow this quarter. But by and large, you know, the binding business did a really great job. And the open brokerage is still continuing to show really, really nice, you know, mid-single-digit growth.
Speaker Change: Quarter cap those were a little slow this quarter.
Speaker Change: But by and large the binding business did a really great job in the open brokerage is still continuing to show really really nice mid single digit growth.
Speaker Change: Thank you.
Andrew Anderson: Thanks Andrew. Thank you.
Andrew Anderson: Thanks, Andrew.
Meyer Shields: Our next questions come from the line of Meyer Shields with KVW. Please proceed with your question. Great, thanks so much.
Speaker Change: Thank you our next questions come from the line of Meyer Shields with <unk>. Please proceed with your questions.
Andrew Anderson: Great. Thanks, so much two big picture questions, if I can first.
Patrick Gallagher: Two big picture questions, if I can. First, if memory, if my memory is correct, then one of the benefits you were talking about when you bought Gallagher Re, was that you could introduce reinsurance brokerage capabilities to all the carriers you place business with. And I'm wondering whether the 20% organic growth that you had in the first quarter, is that still a factor? Or has that played out? This is just the execution of the current team? No, that's a big factor. And that's, you know, 15 deals. Again, we're not getting granular as to who, what, where, and when.
Speaker Change: If memory if my memory is correct and one of the benefits you were talking about when you bought Calgary, whether you could introduce reinsurance brokerage capabilities to all of the carriers a place you place business with us.
Speaker Change: And I'm wondering whether the 20% organic growth that you had in in the first quarter.
Speaker Change: Does any is that still a factor or has that played out and this is just the execution of the current team.
Speaker Change: That's a big factor and that's 15 deals again.
Speaker Change: Not getting granular as to who what where in one but.
Patrick Gallagher: But that's exactly what we talked about. It's coming out the way we dreamed it. These people are working together. We've introduced them to some other players that they didn't know. They've introduced us to plenty of players we didn't know. The cross-pollinization, both in what we're doing in retail and things like pools, and what they're doing with carriers that didn't know about, has been very good for our retail team. And of course, we've got deep relations with carriers across the board that all of us at this table have traded with for years. And, you know, it's just really been a very positive development in our repertoire.
Speaker Change: It's exactly what we talked about it it's coming out the way we dreamed at these people are working together, we've introduced them to some other players that they didn't know they've introduced us to plenty of players. We didn't know the cross colonization. Both in what we're doing in retail and things like pools, and what theyre doing with carriers that we didn't know about it.
Speaker Change: Been very good for our retail team and of course, we've got deep relations with carriers across the board that all.
Speaker Change: All of US at this table have traded with for years.
Speaker Change: And you know it's not it's it's it's a it's just really been a very positive development in our repertoire.
Patrick Gallagher: Plus, in our culture, the fact that people run together to help each other, we're really seeing that. We're seeing a lot of joint meetings between our retail folks, our wholesale folks, our reinsurers.
Speaker Change: And in our culture, and the fact that people run together to help each other we're really seeing we're seeing a lot of joint meetings between our retail folks are wholesale folks our reinsurers.
Patrick Gallagher: I just spent a week in London, and all the opportunities that we have with MGAs and capital formation using the reinsurance opportunities, I think we're just scratching the surface of what Gallagher Reed will bring.
Speaker Change: I spent a week in London, and all of the opportunities that we have with MGH and capital formation using their reinsurance opportunities I think we're just scratching the surface of what.
Speaker Change: Of what Gallagher re will bring to us.
Patrick Gallagher: Okay, that's very helpful. Second question, I'm just trying to put this together in my head, you've got more leverage with the big accounts, because they've got more swag. I think that's the way Pat put it. On the other hand, there's a higher propensity towards fees there.
Speaker Change: Okay, that's very helpful.
Speaker Change: Second question I'm, just trying to put this together in my head you've got more.
Speaker Change: Leverage with the big accounts, because they're a bit more slag I think that's the way that but on the other hand.
Speaker Change: There's a higher propensity towards fees. There. So overall is the larger account business more or less sensitive.
Patrick Gallagher: So overall, is the larger account business more or less sensitive? From your perspective, the revenue growth more or less sensitive to the cycle than in small and mid? It's probably less because we're on fees. I mean, there's no question about that. You know, and the nice thing about a fee account in a softening market is that you don't get asked to take a pay cut for doing a better job.
Speaker Change: From your perspective, the revenue growth more or less sensitive to the cycle than in small in minutes.
Speaker Change: Oh, it's probably less because were on fees I mean, there's no question about that.
Speaker Change: The nice thing about a free account in a softening market is that are you.
Speaker Change: You don't get asked to take a pay cut for doing a better job.
Meyer Shields: Okay, thank you. Thanks, Farron.
Speaker Change: Okay. Thank you.
Speaker Change: Thanks Man.
Cave Matazeri: Thank you.
Patrick Gallagher: Our last questions will come from the line of Cave Matazeri with Deutsche Bank. Please proceed with your questions. Thank you. I know you guys have a pretty good real time pulse on the economy. Anyway, in your prepared remarks, you mentioned that the US labor market was still strong. But just wondering, in your conversations with clients, especially the middle market clients, what are they saying on the impact of tariffs on their business? I think that you've read all the stuff, Kate, that there is out there. I mean, everybody's got questions and it's very client specific. What business are you in?
Speaker Change: Thank you our last question will come from the line of Cave Montazeri with Deutsche Bank. Please proceed with your questions.
Cave Montazeri: Thank you.
Speaker Change: You guys have a pretty good real time pulse on the economy.
Speaker Change: In your prepared remarks, you mentioned that the U S labor market were still strong but.
Speaker Change: Just wondering in your conversations with clients, especially the middle market slides.
Speaker Change: Are they staying on the impact of tariffs on their business.
Speaker Change: I think that you've you've read all the stuff to you that there is out there I mean everybody's got questions and it's too.
Speaker Change: It's very it's very client specific.
Speaker Change: What business, you're in where does your product mix come from what's your supply chain.
Patrick Gallagher: Where does your product mix come from? What's your supply chain? Is it something that you can change one way or another? How do your clients feel about it? The good news for us is that anytime there's consternation, anytime there's change, anytime there's concern, we're there to help them through it. So if in fact, tariffs create some additional loss costs or some additional value increases, there's ways to mitigate that whether we move towards a captive higher retentions, change the language, etc, etc. But there's there's concern as to what it means to them as individuals.
Speaker Change: Is it something that you can change one way or another how do your cloud clients feel about it.
Speaker Change: The good news for US is that anytime there is consternation anytime there is change anytime there is concern.
Speaker Change: Are there to help them through it so if in fact tariffs create some additional loss costs or so of additional value increases.
Speaker Change: There's ways to mitigate that whether we move towards a captive higher retentions changed the language et cetera, et cetera, but there's concern as to what it means to them as individuals and I'd say, that's much more pronounced in the middle and small cap market.
Patrick Gallagher: And I'd say that's much more pronounced in the middle and small account market.
Patrick Gallagher: That makes sense. My follow up is on your international organic growth. I think you mentioned 4% if I remember correctly.
Speaker Change: Makes sense my follow up is on your international organic growth I think you mentioned, 4% I'm, sorry, if I remember correctly.
Patrick Gallagher: I guess it's not a bad number in absolute terms, but it is a bit of a drag on the overall work rate organic. Could you give us a bit of maybe regional color on what you're seeing internationally? Maybe like some regions being better than others? Yeah, Canada's a flat market. Australia, New Zealand first quarter is very slow because of their heavy periods are in the summer. The UK retail is hanging in there kind of similar to our retail. So you're thinking about maybe it's all called Canada flat and the rest of them maybe 5% to 6%.
Speaker Change: It's not a bad number in absolute terms, but it is a bit of a drag on your overall brokerage organic could.
Speaker Change: Could you give us a bit of maybe regional color on what you're seeing internationally.
Speaker Change: Maybe like some regions.
Speaker Change: Bedroom.
Speaker Change: Canada is a flat market, Australia, New Zealand first quarter is very slow because of.
Speaker Change: They're heavy periods or in the summer the U K retail is.
Speaker Change: Hanging in there kind of similar to our retail so youre thinking about maybe a salt call, Canada flat and the rest of them, maybe 5% to 6% and remember nowhere in the world has our casualty book.
Patrick Gallagher: And remember, nowhere in the world has our casualty book. Nobody's got our torch. So we are seeing pressure on casualty rates, and carriers are seeing pressure on their past casualty years. Yeah, that makes sense.
Speaker Change: Nobody's got a.
Speaker Change: Nobody's got our tort system. So we are seeing pressure on casualty rates.
Speaker Change: Carriers are seeing pressure on their past casualty years.
Speaker Change: Okay.
Speaker Change: Yes that makes sense.
Patrick Gallagher: In fact, let's squeeze one more in on the topic of international, like from an M&A, inorganic growth point of view, internationally, like where's your appetite, you know, geographically, where do you think there's going to be good opportunities to grow in the future? Well, first of all, you know, we now trade extensively throughout the world, as we said in our prepared comments, there's not an account anywhere in the world we can't do of any size. But if you take a look at premium, written premium, that's the ball we're following. Thank you.
Speaker Change: Squeeze one more in on the topic of international like from them from an M&A inorganic growth point of view.
Speaker Change: Internationally like where what is your appetite geographically what are you seeing just going to be good opportunities to grow in the future.
Speaker Change: Well first of all you know we now trade extensively throughout the world as we said in our prepared comments theres not an account anywhere in the world. We can't do of any size, but if you take a look at premium written premium.
Speaker Change: That's the ball or followed.
Speaker Change: Sure.
Patrick Gallagher: Thanks, Keith.
Speaker Change: Thank you thanks, Craig well. Thank you everyone for joining us. This afternoon, we had a great first quarter and a great kick off to 2025.
Patrick Gallagher: Well, thank you, everyone, for joining us this afternoon. We had a great first quarter and a great kickoff to 2025. It's important that we thank the 57,000 colleagues around the globe for doing the work that creates these results. Their creativity, dedication, and unwavering client focus is what really makes these results. Thank you all and have a great evening. Thank you.
Speaker Change: As important that we think the 57000 colleagues around the globe for doing the work that creates these results their creativity dedication and unwavering client focus it was what really makes these results. Thank you all and have a great evening.
Operator: This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your night.
Speaker Change: Thank you. This does conclude today's teleconference. We appreciate your participation.
Speaker Change: Connect your lines at this time and enjoy the rest of your night.
Speaker Change: [music].