Q2 2026 Arthur J Gallagher & Co Earnings Call

July 30, 2026

Speaker #1: Good afternoon, and welcome to Arthur J. Gallagher & Company's Q2 2026 earnings conference call. Participants have been placed on a listen-only mode. Your lines will be open for questions following the presentation.

Speaker #1: Today's call is being recorded. If you have any objections, you may disconnect at this time. Some of the comments made during this conference call, including answers given in response to questions, may constitute forward-looking statements within the meaning of the securities laws.

Speaker #1: 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; please refer to the information concerning forward-looking statements and risk factors sections contained in the company's most recent 10-K, 10-Q, and 8-K filings for more details on such risks and uncertainties.

Speaker #1: Good afternoon, and welcome to Arthur J. Gallagher & Co.'s second quarter 2026 earnings conference call. Participants have been placed on listen-only mode. Your lines will be open for questions following the presentation.

Speaker #1: In addition, for reconciliations of the non-GAAP measures discussed on this call, as well as other information regarding these measures, please refer to the earnings release and other materials in the Investor Relations section of the company's website.

Speaker #1: It is now my pleasure to introduce Jay Patrick Gallagher, Jr., Chairman and CEO of Arthur J. Gallagher & Company, Mr. Gallagher, you may begin.

Speaker #2: Good afternoon, and thank you for joining us for our Q2 2026 earnings call. On the call with me today is Doug Howell, our CFO, and other members of the management team.

Speaker #2: Before we get into the quarter, I want to take a moment to recognize the passing of Dave Johnson, a valued member of our board of directors.

Speaker #2: Dave helped guide Gallagher with wisdom, integrity, and sound judgment, and he cared deeply about our company, our values, and our people. On behalf of our board, our leadership team, and all of our colleagues, we extend our deepest condolences to Dave's family and loved ones.

Speaker #2: He will be greatly missed. And knowing Dave and the pride he took in this company, I believe he'd be very proud of what our team accomplished this quarter.

Speaker #2: Our team's disciplined execution delivered another excellent quarter, reflecting the continued momentum across our business. For a combined brokerage and risk management segments, our two-pronged revenue growth strategy, growing both organically and through acquisitions, delivered total revenue growth of 24% in the Q2.

Speaker #1: It is now my pleasure to introduce J. Patrick Gallagher, Jr., Chairman and CEO of Arthur J. Gallagher & Co. Mr. Gallagher, you may begin.

Speaker #2: Good afternoon, and thank you for joining us for our second quarter 2026 earnings call. On the call with me today is Doug Howell, our CFO, and other members of the management team.

Speaker #2: Organic growth was 6%, reflecting continued strength across each of our businesses. And we continue to generate excellent profits. This quarter marks 25 consecutive quarters of double-digit adjusted EBITDA growth, and another quarter of solid underlying margin expansion.

Speaker #2: Before we get into the quarter, I want to take a moment to recognize the passing of Dave Johnson, a valued member of our Board of Directors.

Speaker #2: Doug will break that down for you in a few minutes. On a segment basis, brokerage revenues were up 26%, of which organic was 5%.

Speaker #2: He will be greatly missed. And knowing Dave and the pride he took in this company, I believe he'd be very proud of what our team accomplished this quarter.

Speaker #2: We saw strong results from assured partners and growth across retail, PC, wholesale, reinsurance, and benefits. Nearly a year into the assured partners' combination, the business is performing well, retention remains strong, and the teams are working great together.

Speaker #2: Our team's disciplined execution delivered another excellent quarter, reflecting the continued momentum across our business. For our combined Brokerage and Risk Management segments, our two-pronged revenue growth strategy—growing both organically and through acquisitions—delivered total revenue growth of 24% in the second quarter.

Speaker #2: Our risk management segment, Gallagher Bassett, posted revenue growth of 16%, which includes organic of 12%, driven by excellent new business and strong client retention.

Speaker #2: Organic growth was 6%, reflecting continued strength across each of our businesses. We continue to generate excellent profits. This quarter marks 25 consecutive quarters of double-digit adjusted EBITDA growth, and another quarter of solid underlying margin expansion.

Speaker #2: Now I'll again touch on the four strategic pillars that have guided Gallagher's long-term growth for decades. Growing organically, growing through mergers and acquisitions, improving our productivity and quality, and maintaining our culture.

Speaker #2: First, organic growth. Our client retention remains strong. New business is excellent, and our clients' underlying business activity continues to be positive. Insurance rates continue to contribute to growth, but less than they have over the past several years.

Speaker #2: Doug will break that down for you in a few minutes. On a segment basis, brokerage revenues were up 26%, of which organic was 5%.

Speaker #2: We saw a strong result from AssuredPartners and growth across retail, PC, wholesale, reinsurance, and benefits. Nearly a year into the AssuredPartners combination, the business is performing well, retention remains strong, and the teams are working great together.

Speaker #2: In this environment, only about 1 point of our organic growth is tied to rates. The bigger drivers continue to be new business, strong retention, exposure growth, and the diversity of our model across PC, benefits, reinsurance, and claims.

Speaker #2: Our risk management segment, Gallagher Bassett, posted revenue growth of 16%, which includes organic growth of 12%, driven by excellent new business and strong client retention.

Speaker #2: We are also benefiting from activity across construction, infrastructure, energy, and data centers. These areas create new and more complex client needs, where clients require more advice, broader capabilities, and deeper expertise, and that plays directly into Gallagher's advisory strength.

Speaker #2: Now, I'll again touch on the four strategic pillars that have guided Gallagher's long-term growth for decades: growing organically, growing through mergers and acquisitions, improving our productivity and quality, and maintaining our culture.

Speaker #2: Overall, we continue to view the global PC market as segmented. Carriers are looking to grow where they are earning acceptable returns and remain disciplined where underwriting margins require support.

Speaker #2: Property continues to ease, especially on larger and CAT-exposed risks. Small and middle-market accounts remain more stable. Casually remains firmer given lost-cost trends and underwriting discipline.

Speaker #2: Good loss experience accounts can typically see some premium relief, while accounts with poor experience are seeing increases. Let me spend a few minutes breaking down this by business.

Speaker #2: Within our global retail PC business, broad market themes remain consistent with last quarter, and as expected, the softness in property was more pronounced in the Q2 given the seasonally heavier renewal mix.

Speaker #2: We are also benefiting from activity across construction, infrastructure, energy, and data centers. These areas create new and more complex client needs, where clients require more advice, broader capabilities, and deeper expertise. That plays directly into Gallagher's advisory strength.

Speaker #2: In the Q2, we saw the following in renewal premium changes by line of business. Property was down 10%. Casually lines, which included general liability, commercial auto, and umbrella, were up 3% overall.

Speaker #2: Professional lines, including D&O and cyber, were up 1%. Workers' comp up 2%. Personal lines up 3%, and package up 2%. Excluding property, renewal premium changes increased 3% in the quarter, with higher increases in the US versus international markets.

Speaker #2: Property continues to ease, especially on larger and CAT-exposed risks. Small and middle-market accounts remain more stable. Casualty remains firmer given loss cost trends and underwriting discipline.

Speaker #2: Accounts with good loss experience can typically see some premium relief, while accounts with poor experience are seeing increases. Let me spend a few minutes breaking this down by business.

Speaker #2: It's important to remember that premium changes in Gallagher's revenues do not move one-for-one. As property pricing eases, many clients are opting in and using the savings to buy back coverage, increase limits, or improve structure after several years of opting out and making difficult trade-offs.

Speaker #2: Within our global retail PC business, broad market themes remain consistent with last quarter and, as expected, the softness in property was more pronounced in the second quarter, given the seasonally heavier renewal mix.

Speaker #2: And in this environment, the value of our advice, advocacy, and market access becomes even more important. Within US excess and surplus, we continue to see a bifurcated market.

Speaker #2: In the second quarter, we saw the following in renewal premium changes by line of business: Property was down 10%. Casualty lines, which include general liability, commercial auto, and umbrella, were up 3% overall.

Speaker #2: Property, especially CAT-exposed, is the most competitive area right now. That reflects a pricing reset after several years of a very strong hard market, not a reduction in demand.

Speaker #2: Professional lines, including D&O and cyber, were up 1%. Workers' comp was up 2%, personal lines up 3%, and package up 2%. Excluding property, renewal premium changes increased 3% in the quarter, with higher increases in the U.S. versus international markets.

Speaker #2: Submissions and policy counts remain healthy, and E&S continues to be an important solution for complex property risks. Casually remains firmer, renewal premiums are up mid-single digits, and demand remains steady across general liability, excess liability, and umbrella.

Speaker #2: It's important to remember that premium changes in Gallagher's revenues do not move one-for-one. As property pricing eases, many clients are opting in and using the savings to buy back coverage, increase limits, or improve structure, after several years of opting out and making difficult trade-offs.

Speaker #2: At its core, the E&S market is driven by complexity. AI-related infrastructure, including data centers, difficult liability risks, and other emerging specialty exposures, often do not fit neatly in admitted markets.

Speaker #2: That creates a multi-year opportunity for our wholesale teams, because clients and carriers need expertise, structure, and speed as well as market access. Turning to London specialty, contusions are conditions are similar to what we are seeing in the US E&S market.

Speaker #2: And in this environment, the value of our advice, advocacy, and market access becomes even more important. Within U.S. excess and surplus, we continue to see a bifurcated market: property, especially cat-exposed, is the most competitive area right now.

Speaker #2: North American CAT-exposed property remains competitive, while D&O, professional lines, financial institutions, and cyber are more stable than they were earlier in the cycle. The clear exception is war-related risk.

Speaker #2: That reflects a pricing reset after several years of a very strong hard market, not a reduction in demand. Submissions and policy counts remain healthy, and E&S continues to be an important solution for complex property risks.

Speaker #2: Marine, aviation, and political violence exposures tied to active conflict zones are seeing significant repricing and more selective deployment of capacity. Coverage remains available, but it requires careful structure, and coordinated execution across markets.

Speaker #2: Casually remains firmer, renewal premiums are up mid-single digits, and demand remains steady across general liability, excess liability, and umbrella. At its core, the E&S market is driven by complexity.

Speaker #2: That is where our London US and international teams work especially well together. We are helping clients navigate increasingly dynamic markets. Moving to reinsurance. The market remains well-capitalized, and renewal activity continues to reflect ample capacity.

Speaker #2: AI-related infrastructure, including data centers, difficult liability risks, and other emerging specialty exposures, often do not fit neatly in admitted markets. That creates a multi-year opportunity for our wholesale teams, because clients and carriers need expertise, structure, and speed, as well as market access.

Speaker #2: In the Q2, we saw strong growth across lines and across geographies, with excellent new business helping offset rate headwinds. That performance reflects broad-based contributions from areas including facultative casually and capital advisory.

Speaker #2: Turning to London specialty, conditions are similar to what we are seeing in the U.S. E&S market. North American cat-exposed property remains competitive, while D&O, professional lines, financial institutions, and cyber are more stable than they were earlier in the cycle.

Speaker #2: Demonstrating that Gallagher reads growth is not solely dependent on the pricing cycle. Conditions at the 401 renewals were generally consistent with those we saw at 101, with someone greater downward pricing pressure on the Japan-specific contracts.

Speaker #2: The clear exception is war-related risk. Marine, aviation, and political violence exposures tied to active conflict zones are seeing significant repricing and more selective deployment of capacity.

Speaker #2: At the mid-year renewals, including 61, property CAT pricing moved lower again, reflecting abundant capacity, demand remained healthy, and many clients used the savings to improve structure by additional limits or better manage earnings volatility.

Speaker #2: Coverage remains available, but it requires careful structure and coordinated execution across markets. That is where our London, US, and international teams work especially well together.

Speaker #2: We are helping clients navigate increasingly dynamic markets. Moving to reinsurance, the market remains well-capitalized, and renewal activity continues to reflect ample capacity. In the second quarter, we saw strong growth across lines and across geographies, with excellent new business helping offset rate headwinds.

Speaker #2: Casually remains more disciplined, particularly for US-focused risks, given lost-cost trends and prior-year development. Even in a softer reinsurance market, clients need more than price.

Speaker #2: They need advice, structure, analytics, and access to capital. That plays directly into Gallagher Reed's strength. Moving to employee benefits. We're seeing steady demand for employers from employers across health, retirement, benefits, executive benefits, life, and HR solutions.

Speaker #2: That performance reflects broad-based contributions from areas including facultative, casualty, and capital advisory, demonstrating that Gallagher's growth is not solely dependent on the pricing cycle.

Speaker #2: Our clients remain focused on talent attraction and retention while managing pressure from increased medical utilization, advanced treatments, and escalating prescription drug costs. That is why they value our advice, advocacy, creative plan design, and cross-management strategies.

Speaker #2: Conditions at the 401 renewals were generally consistent with those we saw at 101, with somewhat greater downward pricing pressure on the Japan-specific contracts. At the mid-year renewals, including 601, property cat pricing moved lower again, reflecting abundant capacity. Demand remained healthy, and many clients used the savings to improve structure by adding additional limits or better managing earnings volatility.

Speaker #2: All of which continue to support demand and retention across our benefits business. Moving on to Gallagher Bassett, GB had another terrific quarter driven by excellent new business and strong client retention.

Speaker #2: Casualty remains more disciplined, particularly for US-focused risks, given loss cost trends and prior-year development. Even in a softer reinsurance market, clients need more than price.

Speaker #2: The team continues to broaden its capabilities and put data, AI, and machine learning to work in very practical ways. To improve service, drive better claims outcomes, and create further operating efficiencies.

Speaker #2: They need advice, structure, analytics, and access to capital. That plays directly into Gallagher's strengths. Moving to employee benefits, we're seeing steady demand from employers across health, retirement benefits, executive benefits, life, and HR solutions.

Speaker #2: These investments continue to strengthen GB's competitive position, and with good momentum and a healthy pipeline of opportunities, GB is well-positioned for another strong year in 2026.

Speaker #2: Now, let me provide some comments on our view of the economy. The US labor market remains healthy, with a number of job openings still ahead of the number of people looking for work.

Speaker #2: Our daily revenue indications have historically been a terrific indicator of economic activity. And our proprietary data from audits, endorsements, and cancellations showed solid business activity throughout the Q2 and through yesterday.

Speaker #2: All of which continue to support demand and retention across our benefits business. Moving on to Gallagher Bassett, GB had another terrific quarter, driven by excellent new business and strong client retention.

Speaker #2: Our data continues to show that exposure units such as revenues, payroll, headcount, or trucks on the road, to name a few, are still in positive territory, and our clients' businesses are continuing to grow.

Speaker #2: The team continues to broaden its capabilities and put data, AI, and machine learning to work in very practical ways to improve service, drive better claims outcomes, and create further operating efficiencies.

Speaker #2: So to wrap up my thoughts on our organic growth prospects, property, pricing is moderating, and that's well understood. But property is only one part of our very large and very diverse portfolio.

Speaker #2: These investments continue to strengthen GB's competitive position, and with good momentum and a healthy pipeline of opportunities, GB is well positioned for another strong year in 2026.

Speaker #2: Client retention remains strong, and the business activity is excellent. Client exposure growth is positive. We are also seeing clients opt back into coverage as pricing moderates, and our growth is broad-based across geographies, client sizes, and products.

Speaker #2: Now, let me provide some comments on our view of the economy. The U.S. labor market remains healthy, with the number of job openings still ahead of the number of people looking for work.

Speaker #2: Most importantly, clients continue to need our advice, advocacy, analytics, and market access, as risk becomes more complex, the value of Gallagher's expertise becomes more important, not less.

Speaker #2: That is why we remain confident in the durability of our results and that our 2026 full-year organic growth outlook of 6%. Now, shifting to our second strategic pillar, mergers and acquisitions.

Speaker #2: Our data continues to show that exposure units—such as revenues, payroll, headcount, or trucks on the road, to name a few—are still in positive territory, and our clients' businesses are continuing to grow.

Speaker #2: During the Q2, we completed seven new tuck-in acquisitions, representing around 63 million dollars of estimated annualized revenue. Looking at our pipeline, we have over 30 term sheets signed or being prepared, representing around 500 million of annualized revenues.

Speaker #2: So, to wrap up my thoughts on our organic growth prospects—property pricing is moderating, and that's well understood. But property is only one part of our very large and very diverse portfolio.

Speaker #2: Client retention remains strong, new business activity is excellent, client exposure growth is positive, and we are also seeing clients opt back into coverage as pricing moderates. Our growth is broad-based across geographies, client sizes, and products.

Speaker #2: Our acquisition strategy continues to be a powerful driver of Gallagher's growth. Since last April, we've completed 38 acquisitions, including Woodruff Sawyer and Assured Partners, and each one strengthens Gallagher in its own way.

Speaker #2: Most importantly, clients continue to need our advice. Advocacy, analytics, and market access—as risk becomes more complex, the value of Gallagher's expertise becomes more important.

Speaker #2: Adding talent, capabilities, relationships, and new growth opportunities. Assured Partners is one example of that strategy at work. The business is performing very well, retention is strong, and the teams are already better together.

Speaker #2: Not less. That is why we remain confident in the durability of our results and in our 2026 full-year organic growth outlook of 6%. Now, shifting to our second strategic pillar: mergers and acquisitions.

Speaker #2: We're collaborating on opportunities, sharing capabilities, putting Gallagher's tools, data, analytics, and expertise to work across the entire combined team. That is good for clients, good for colleagues, and a strong message of their high-quality firms thinking about their future.

Speaker #2: During the second quarter, we completed seven new tuck-in acquisitions, representing around $63 million of estimated annualized revenue. Looking at our pipeline, we have over 30 term sheets signed or being prepared, representing around $500 million of annualized revenues.

Speaker #2: For those new partners joining us, I'd like to extend a very warm welcome to the Gallagher family of professionals. Good firms always have a choice, and it'd be terrific if they chose to partner with Gallagher.

Speaker #2: Our acquisition strategy continues to be a powerful driver of Gallagher's growth. Since last April, we've completed 38 acquisitions, including Woodruff Sawyer and AssuredPartners, and each one strengthens Gallagher in its own way.

Speaker #2: Next, let me move to our third strategic pillar, continuously improving our productivity and quality. For more than two decades, we've been improving productivity and quality by standardizing workflows, building our centers of excellence, and bringing more of our data together around the world.

Speaker #2: Adding talent, capabilities, relationships, and new growth opportunities—Assured Partners is one example of that strategy at work. The business is performing very well. Retention is strong, and the teams are already better together.

Speaker #2: AI, digitization, and automation are simply the next tools in that effort, and we are putting them to work across the broader Gallagher team. And the point is simple.

Speaker #2: We're collaborating on opportunities, sharing capabilities, and putting Gallagher's tools, data, analytics, and expertise to work across the entire combined team. That is good for clients, good for colleagues, and a strong message to other high-quality firms thinking about their future.

Speaker #2: These tools make our professionals faster, better informed, and more productive, but they do not replace judgment, advocacy, relationships, or accountability to our clients. Over time, they should help us serve clients better, further improve our quality, help us win new business, and keep us growing the right way.

Speaker #2: For those new partners joining us, I'd like to extend a very warm welcome to the Gallagher family of professionals. Good firms always have a choice, and it would be terrific if they chose to partner with Gallagher.

Speaker #2: Let me wrap up with our fourth strategic pillar, our culture. Gallagher is a growth culture company. Our culture helps us attract talent, welcome merger partners, and execute consistently across a large and diverse global company.

Speaker #2: Next, let me move to our third strategic pillar: continuously improving our productivity and quality. For more than two decades, we've been improving productivity and quality by standardizing workflows, building our centers of excellence, and bringing more of our data together around the world.

Speaker #2: And culture is what makes our investments in talent technology, data, and AI work. Our people are willing to learn new tools and new ways of working when these tools help them serve clients better, improve quality, and move faster.

Speaker #2: AI, digitization, and automation are simply the next tools in that effort, and we are putting them to work across the broader Gallagher team. The point is simple.

Speaker #2: That is what helps turn investment into execution. We have the scale, we have the data, we have the operating discipline, and because of our culture, our people put those capabilities to work every day.

Speaker #2: That drives productivity, improves quality, helps retention, helps new business, and over time, it shows up in our financial performance. So when we talk about Gallagher's performance, our culture is not separate from the numbers.

Speaker #2: It's embedded in them. Okay. Another excellent quarter behind us. A terrific future ahead of us. I'll stop now and turn it over to Doug to walk through the financial details.

Speaker #2: Let me wrap up with our fourth strategic pillar: our culture. Gallagher is a growth-culture company. Our culture helps us attract talent, welcome merger partners, and execute consistently across a large and diverse global company.

Speaker #2: Doug?

Speaker #3: All right. Thanks, Pat. And hello, everyone. Today, I'll spend about two minutes flipping through our earnings release and give some quick highlights, and I'll spend about five minutes on the CFO commentary document that we post on our website, and then I'll close with a minute on cash, M&A, and capital management.

Speaker #2: And culture is what makes our investments in talent, technology, data, and AI work. Our people are willing to learn new tools and new ways of working when these tools help them serve clients better, improve quality, and move faster.

Speaker #3: Overall punchline, which you've probably already dug out, we had a great quarter. Right in line, and in many cases, better than we had forecasted in our June investor day.

Speaker #3: One housekeeping reminder before I jump in. In the first three quarters of '25, our brokerage segment earned investment income on the funds we are holding to buy Assured Partners.

Speaker #2: That drives productivity, improves quality, helps retention, helps new business, and, over time, it shows up in our financial performance. So, when we talk about Gallagher's performance, our culture is not separate from the numbers.

Speaker #3: Q2 '25 revenues and EBITDA were benefited by investment income of 144 million dollars. That's 42 cents per share. And then as a reminder, for the first quarter of '25, that was 143 million dollars or 41 cents and Q2 '25 results had 76 million dollars or 22 cents of income.

Speaker #2: It's embedded in them. Okay. Another excellent quarter behind us, a terrific future ahead of us. I'll stop now and turn it over to Doug to walk through the financial details.

Speaker #2: Doug?

Speaker #3: All right. Thanks, Pat. And hello, everyone. Today, I'll spend about two minutes flipping through our earnings release and give some quick highlights, then I'll spend about five minutes on the CFO commentary document that we post on our website, and then I'll close with a minute on cash, M&A, and capital management.

Speaker #3: This is caused, and will again caused in the third quarter, a lot of comparability noise. Fortunately, this headline headache will be behind us by the fourth quarter.

Speaker #3: Okay. Let's go to the earnings release, page one. We're moving from prior to impact of investment income on AP funds as I just noted.

Speaker #3: Overall punchline, which you've probably already picked up, we had a great quarter—right in line, and in many cases better, than we had forecasted at our June Investor Day.

Speaker #3: You've computed adjusted revenues, adjusted EBITDA, and adjusted EPS each up over 30% for our combined brokerage and risk management segments. That's an incredible quarter and demonstrates our four strategic pillars, our delivering terrific shareholder value.

Speaker #3: One housekeeping reminder before I jump in. In the first three quarters of '25, our brokerage segment earned investment income on the funds we're holding to buy Assured Partners.

Speaker #3: Second quarter '25 revenues and EBITDA were benefited by investment income of $144 million. That's 42 cents per share. And then as a reminder, for the first quarter '25, that was $143 million, or 41 cents, and third quarter '25 results had $76 million, or 22 cents, of income.

Speaker #3: Next, when you combine brokerage organic at 5% from page three, and risk management organic at 12% from page five, you'll get to that 6% organic growth that Pat just cited.

Speaker #3: This is excellent execution right in line with our June IRD forecast. One other note. Brokerage posted excellent combined supplemental and contingent growth and risk management had strong performance bonus revenues.

Speaker #3: This is causing, and will again cause in the third quarter, a lot of comparability noise. Fortunately, this headline headache will be behind us by the fourth quarter.

Speaker #3: Both reflect the value we bring to our clients and capital providers. Moving to page four on top of page five. As we've been discussing for nearly a year, the current quarter percentages at the bottom of these tables are really not all that helpful when compared to the prior year because of the interest income we earned in '25 on the AP funds.

Speaker #3: Okay, let's go to the earnings release, page one. We're moving from prior to impact of investment income on AP funds, as I just noted.

Speaker #3: You'd compute adjusted revenues, adjusted EBITDA, and adjusted EPS, each up over 30% for our combined Brokerage and Risk Management segments. That's an incredible quarter and demonstrates our four strategic pillars are delivering terrific shareholder value.

Speaker #3: That really clouds comparability. So it's better for me to defer comments on our brokerage EBITDA margin until I get to page seven of the CFO commentary.

Speaker #3: That said, when I do, you'll quickly see that our productivity and quality strategic pillar delivered strong underlying margin expansion this quarter. Right in line with our IRD forecast.

Speaker #3: Next, when you combine brokerage organic at 5% from page three and risk management organic at 12% from page five, you'll get to that 6% organic growth that Pat just cited.

Speaker #3: So moving to page six. No impact on these numbers from interest from holding AP funds. Risk management showed continued operational efficiencies leading to an adjusted EBITDA margin up 140 basis points to 22.3%.

Speaker #3: This is excellent execution, right in line with our June IR Day forecast. One other note: Brokerage posted excellent combined supplemental and contingent growth, and Risk Management had strong performance bonus revenues.

Speaker #3: Both reflect the value we bring to our clients and capital providers. Moving to page four and the top of page five. As we've been discussing for nearly a year, the current quarter percentages at the bottom of these tables are really not all that helpful when compared to the prior year because of the interest income we earned in '25 on the AP funds.

Speaker #3: That plus excellent revenue growth of 14% led to 22% growth in our adjusted EBITDA. Looking forward, we see Q3 and full year '26 adjusted EBITDA margins north of 22%.

Speaker #3: Flipping to page seven. Corporate segment adjusted results in total were a bit better than what we provided during our June investor day. That's mostly due to a small movement in unrealized FX.

Speaker #3: That really clouds comparability. So it's better for me to defer comments on our brokerage EBITDA margin until I get to page seven of the CFO commentary.

Speaker #3: And as I've said before, this is a non-cash item, but it does move our corporate results around a bit as the foreign exchange rates bounce around.

Speaker #3: That said, when I do, you'll quickly see that our Productivity and Quality strategic pillar delivered strong underlying margin expansion this quarter, right in line with our IR Day forecast.

Speaker #3: Last on page eight, about halfway down, you'll repurchase about 850,000 shares for approximately 170 million dollars in the Q2. That brings repurchases to about 480 million dollars through June 30.

Speaker #3: So, moving to page six. No impact on these numbers from interest from holding AP funds. Risk Management showed continued operational efficiencies, leading to an adjusted EBITDA margin up 140 basis points to 22.3%.

Speaker #3: Okay. Let's now go to the CFO commentary document. Starting on page three. Most items here are very close to what we provided in June.

Speaker #3: That, plus excellent revenue growth of 14%, led to 22% growth in our adjusted EBITDA. Looking forward, we see third quarter and full year '26 adjusted EBITDA margins north of 22%.

Speaker #3: A couple of callouts. The FX impact has been up the latest exchange rates and we have updated our non-cash earn-out expense estimate to reflect a couple of earn-out payments made in the quarter.

Speaker #3: So just double-check these items as you consider that these are considered in your models. Moving to page four. Organic growth by business. Here are the punchlines.

Speaker #3: And as I've said before, this is a non-cash item, but it does move our corporate results around a bit as the foreign exchange rates bounce around.

Speaker #3: First, we saw another solid quarter of organic growth across each business in geography. Apex, specialty, and risk management, that's Gallagher Bassett, each had a really strong finish and all others were right in line with our forecast provided during our June IR day.

Speaker #3: Last, on page eight, about halfway down, you'll see we repurchased about 850,000 shares for approximately $170 million in the second quarter. That brings repurchases to about $480 million through June 30.

Speaker #3: Looking forward, we've added our Q3 organic growth outlook and updated our full year. Percentages reflect the midpoint of our estimates and reflect similar new business retention, client business activity, and economic conditions that Pat just provided as well as our view of where rates might be.

Speaker #3: Okay, let's now go to the CFO commentary document, starting on page three. Most items here are very close to what we provided in June.

Speaker #3: For full year, we brought up APAC and Gallagher Bassett a bit due to their strong Q2 and reinsurance rounded down really less than a point.

Speaker #3: A couple of callouts: the FX impact has been updated to the latest exchange rates, and we have updated our non-cash earn-out expense estimate to reflect a couple of earn-out payments made in the quarter.

Speaker #3: So not much new news from our June IR day outlook. We are still comfortable with our full year total company organic outlet of 6%.

Speaker #3: So just double-check these items as you consider that these are considered in your models. Moving to page four—organic growth by business. Here are the punchlines.

Speaker #3: Brokerage at 5.5% and risk management at 9%. We post that in '26 will be another year of excellent organic growth. Okay. Let's move to the top of page five, the investment income table.

Speaker #3: First, we saw another solid quarter of organic growth across each business and geography. Apex, Specialty, and Risk Management—that's Gallagher Bassett—each had a really strong finish, and all others were right in line with our forecast provided during our June IR day.

Speaker #3: A couple of quick comments here. First on the left side, this is where you see the interest earned on the '25 earned in '25 on the funds we were holding to buy AP that I mentioned earlier.

Speaker #3: Looking forward, we've added our third quarter organic growth outlook and updated our full year. Percentages reflect the midpoint of our estimates and reflect similar new business retention, client business activity, and economic conditions that Pat just provided, as well as our view of where rates might be.

Speaker #3: And second, our '26 forecast reflect current FX rates, changes in fiduciary cash balances, and assumes no rate cuts this year. Staying on page five, but shifting down to the rollover revenue table, which excludes assured partners.

Speaker #3: For the full year, we brought up APAC and Gallagher Bassett a bit due to their strong second quarter, and reinsurance rounded down really less than a point.

Speaker #3: Three comments here. First, the Q2 '26 column subtotal of 66 million dollars for brokerage came in pretty close to our estimates that we provided in June.

Speaker #3: So, not much new news from our June IR Day outlook. We are still comfortable with our full-year total company organic outlook of 6%.

Speaker #3: Second, please make sure you adjust the prior year revenues for the amount noted in the divestiture and other line before you apply your organic growth assumptions.

Speaker #3: Brokerage at 5.5% and risk management at 9%. We post that in ’26 will be another year of excellent organic growth. Okay, let's move to the top of page five, the investment income table.

Speaker #3: Then third, the pinkish columns to the right reflect 2026 revenues for M&A closed through yesterday. But remember, you'll also need to make a pick for future M&A.

Speaker #3: A couple of quick comments here. First, on the left side, this is where you see the interest earned on the '25 earned in '25 on the funds we were holding to buy AP that I mentioned earlier.

Speaker #3: Moving to page six. This is information on assured partners. Five comments here. First, assured partners Q2 EBITDA of 222 million dollars came in at our June investor day estimates and we remain confident in our full year '26 outlook.

Speaker #3: And second, our '26 forecast reflects current FX rates, changes in fiduciary cash balances, and assumes no rate cuts this year. Staying on page five, but shifting down to the rollover revenue table, which excludes AssuredPartners.

Speaker #3: That's really great performance. Second, remember that forecasted numbers we provide in this table are at the midpoint of our estimates. As we convert locations onto our systems, there could be some small movements between quarters and some additional revenue netting like we have seen over the last couple of quarters.

Speaker #3: Three comments here. First, the second quarter '26 column subtotal of $66 million for brokerage came in pretty close to our estimates that we provided in June.

Speaker #3: Second, please make sure you adjust the prior year revenues for the amount noted in the divestiture and other line before you apply your organic growth assumptions.

Speaker #3: Third, my standard reminder that for third and fourth quarters '26, you should only model the delta between the future estimates in pink and the '25 numbers in blue.

Speaker #3: Then third, the pinkish columns to the right reflect 2026 revenues for M&A closed through yesterday. But remember, you'll also need to make a pick for future M&A.

Speaker #3: Otherwise, for example, you'd be double counting about 500 million dollars of revenue in the third quarter. Fourth, the footnote reminds you that the non-cash figures shown on this page which reflect depreciation and earn-out payable are included within our estimates on page three.

Speaker #3: Moving to page six. This is information on Assured Partners. Five comments here. First, Assured Partners' second quarter EBITDA of $222 million came in at our June Investor Day estimates, and we remain confident in our full year '26 outlook.

Speaker #3: So please don't double count these. And fifth, importantly, you'll read in the footnote, we still see annualized run rate synergies of 160 million dollars by the end of '26 and then up to 325 million dollars by early '28.

Speaker #3: That's really great performance. Second, remember that the forecasted numbers we provide in this table are at the midpoint of our estimates. As we convert locations onto our systems, there could be some small movements between quarters and some additional revenue netting, like we have seen over the last couple of quarters.

Speaker #3: Now, one heads up here. This table does not include synergies. Those synergies are shown in the margin wall table on page seven for '26.

Speaker #3: So don't double count. So moving on to page seven, the brokerage segment margin bridge. This table makes it very easy to see all the components that influence our margin change period over period.

Speaker #3: Third, my standard reminder that for third and fourth quarters 2026, you should only model the delta between the future estimates in pink and the 2025 numbers in blue.

Speaker #3: Otherwise, for example, you'd be double-counting about $500 million of revenue in the third quarter. Fourth, the footnote reminds you that the non-cash figures shown on this page, which reflect depreciation and earn-out payable, are included within our estimates on page three.

Speaker #3: So here are some punchlines. AP is delivering margin lift. Our productivity and quality efforts again delivered another terrific quarter of underlying margin expansion of 50 basis points.

Speaker #3: Looking forward, you'll see to the far right, we're still forecasting full year '26 underlying margin expansion of 40 to 60 basis points. All of this is right in line for what we provided our June investor day and we deliver on that and it would mean another outstanding year of margin expansion.

Speaker #3: So please don't double count these. And fifth, importantly, as you'll read in the footnote, we still see annualized run rate synergies of $160 million by the end of '26, and then up to $325 million by early '28.

Speaker #3: Moving to page eight, our corporate segment. You'll see that our adjusted Q2 as well as our outlook for the rest of the year are very close to what we presented in June.

Speaker #3: Now, one heads up here. This table does not include synergies. Those synergies are shown in the margin wall table on page seven for '26.

Speaker #3: So there's really no new news here. Also, a reminder, the upper right box is where you find the impact of FX that I mentioned earlier.

Speaker #3: So don't double count. Moving on to page seven, the brokerage segment margin bridge—this table makes it very easy to see all the components that influence our margin change period over period.

Speaker #3: And then the lower box shows you the 3.4 billion dollars of future tax savings from tax credits and tax deductible intangible amortization. That means your models should reflect cash taxes paid at about 10% of EBITDA and you'll get close.

Speaker #3: These credits and deductible amortization shields create a nice cash flow sweetener to fund future M&A. All right. Let me wrap up with a few comments on cash, capital management, and M&A funding.

Speaker #3: Looking forward, you'll see to the far right, we're still forecasting full-year '26 underlying margin expansion of 40 to 60 basis points. All of this is right in line with what we provided at our June investor day, and if we deliver on that, it would mean another outstanding year of margin expansion.

Speaker #3: When I look forward, available cash on hand, expected free cash flows, and future investment-grade borrowings we estimate close to 10 billion dollars of capacity to deploy over the next two years.

Speaker #3: We still favor M&A, but it might also do share repurchases opportunistically. Currently, our M&A pipeline remains strong and is full of targets at attractive multiples.

Speaker #3: Moving to page eight, our Corporate segment. You'll see that our adjusted second quarter, as well as our outlook for the rest of the year, are very close to what we presented in June.

Speaker #3: So there's really no new news here. Also, a reminder—the upper right box is where you find the impact of FX that I mentioned earlier.

Speaker #3: Staying consistent in our approach and disciplined in our pricing creates immediate shareholder value through a nice arbitrage. It also builds a bigger team that brings value to our clients and makes our offerings compelling to our prospects and that fuels our long-term growth.

Speaker #3: And then the lower box shows you the $3.4 billion of future tax savings from tax credits and tax-deductible intangible amortization. That means your models should reflect cash taxes paid at about 10% of EBITDA, and you'll get close.

Speaker #3: That creates long-term shareholder value. Okay. Those are my comments. Another fantastic quarter and continued expectation for another terrific year. Back to you, Pat.

Speaker #3: These credits and deductible amortization shields create a nice cash flow sweetener to fund future M&A. All right, let me wrap up with a few comments on cash, capital management, and M&A funding.

Speaker #1: Thanks, Doug. Operator, I think we're ready for some questions.

Speaker #2: Thank you so much. The call is now open for questions. If you have a question, please pick up your hand and press star one.

Speaker #3: When I look forward—available cash on hand, expected free cash flows, and future investment-grade borrowings—we estimate close to $10 billion of capacity to deploy over the next two years.

Speaker #2: And your telephone keypad at this time. If you are on speakerphone, please disable that function prior to pressing star one to ensure optimum sound quality.

Speaker #2: You may remove yourself from the queue at any point by pressing star two. Additionally, we ask that you limit yourself to one question and one follow-up question.

Speaker #3: We still favor M&A, but might also do share repurchases opportunistically. Currently, our M&A pipeline remains strong and is full of targets that are attractive at these multiples.

Speaker #2: Again, that's star one for questions. Our first questions come from the line of Mike Zarembski with BMO Capital Markets. Please proceed with your questions.

Speaker #3: Staying consistent in our approach and disciplined in our pricing creates immediate shareholder value through a nice arbitrage. It also builds a bigger team that brings value to our clients, makes our offerings compelling to our prospects, and fuels our long-term growth.

Speaker #4: Hey, good evening. Thanks. I guess my questions specifically regarding RPC and pricing and I believe reinsurance organic doesn't flow through RPC. So feel free to add it in in your answer if you'd like.

Speaker #3: That creates long-term shareholder value. Okay, those are my comments. Another fantastic quarter and continued expectation for another terrific year. Back to you, Pat.

Speaker #1: Thanks, Doug. Operator, I think we're ready for some questions.

Speaker #4: But we get asked a lot and I'm sure you do too about if "the overall pricing environment continues to moderate into '27, can brokers such as AJG will they continue to show a decell trend?" You all have shown kind of more stability in the face of declining RPC.

Speaker #2: Thank you so much. The call is now open for questions. If you have a question, please pick up your handset and press star one.

Speaker #2: And your telephone keypad at this time. If you are on speakerphone, please disable that function prior to pressing star one to ensure optimum sound quality.

Speaker #2: You may remove yourself from the queue at any point by pressing star two. Additionally, we ask that you limit yourself to one question and one follow-up question.

Speaker #2: Again, that's star one for questions. Our first questions come from the line of Mike Zarembski with BMO Capital Markets. Please proceed with your question.

Speaker #4: But maybe you can kind of help us understand, do you feel like the RPC we've kind of based here in terms of pricing, in terms of your expectations, thinking out next 6, 12 months or even if it does go down a little bit, can you can AJ continue to kind of decouple and you feel like your organic has kind of based because you guys have done a much better job at selling and kind of just growing organically despite.

Speaker #4: Hey, good evening. Thanks. I guess my question is specifically regarding RPC and pricing, and I believe reinsurance organic doesn't flow through our RPC, so feel free to add that in your answer if you'd like.

Speaker #4: Downwards RPC pressure. So any help there would be great.

Speaker #1: Oh, this is Pat, Mike. Yeah, clearly. Look, the market's the market, but we hold ourselves accountable every day to sell a lot of insurance and to get new business out of the books.

Speaker #1: We measure that very clearly. Our pipeline is strong as could be. We look at what we're writing on an annualized basis literally every week.

Speaker #1: We thermometer that. We look at it. We know whether we're strong everywhere. And I will tell you, around the world, as we said in our prepared remarks, the differentiation that we're seeing with the tools that we've built, our capability of getting at data, showing that to clients, it's making a difference.

Speaker #4: But maybe you can kind of help us understand. Do you feel like the RPC we've kind of based here, in terms of pricing and in terms of your expectations, thinking out the next six or twelve months—or even if it does go down a little bit—can you guys, can AJG, continue to kind of decouple? And do you feel like your organic has kind of based, because you guys have done a much better job at selling and just growing organically, despite downward RPC pressure?

Speaker #1: So I think our retention is solid. New business continues to be very strong. One metric we don't typically provide is velocity. What type of new business are we writing against trailing earnings?

Speaker #1: Those are very, very strong numbers in our company. I don't want to give them up because then you'll ask me for a comparator every quarter and I'm not going to do that.

Speaker #1: But the fact is, we measure that all the time. So we know, look, what's happening? So I feel very good about being able to sell in this environment.

Speaker #4: So any help there would be great.

Speaker #1: Oh, this is Pat, Mike. Yeah, clearly. Look, the market's the market, but we hold ourselves accountable every day to sell a lot of insurance and to get new business onto the books.

Speaker #1: I also feel good comparing this to past soft markets. Every other past soft market, the market has dropped like a brick across every line all at once.

Speaker #1: We measure that very clearly. Our pipeline is as strong as it could be. We look at what we're writing on an annualized basis literally every week.

Speaker #1: This is a property reset. That's what this really is. And by the way, our clients deserve that. When we talk to our clients in '17, '18, '20, '21, and we're trying to explain why prices have to triple, why at the same time values have to triple or double, and why maybe we don't even have a full line of cover to offer them.

Speaker #1: We thermometer that. We look at it. We know whether we're strong everywhere. And I will tell you, around the world, as we said in our prepared remarks, the differentiation that we're seeing with the tools that we build—our capability of getting at data, showing that to clients—it's making a difference.

Speaker #1: So, I think our retention is solid. New business continues to be very strong. One metric we don't typically provide is velocity. What type of new business are we writing against trailing earnings?

Speaker #1: So today, I think they're benefiting from that. And as we said, people are, in fact, buying more insurance. So look at this and I go, look, it's a different market.

Speaker #1: Gallagher thrives on change. The complexity of the world today, what's going on in data centers, the supply chains, and war risk, I think it tees us up very, very well for continued growth.

Speaker #1: Those are very, very strong numbers in our company. I don't want to give them up, because then you'll ask me for a comparator every quarter, and I'm not going to do that.

Speaker #1: But the fact is, we measure that all the time. So we know, look, what's happening? So I feel very good about being able to sell in this environment.

Speaker #1: And sorry for the long-winded answer, but yes, I think we'll grow through it.

Speaker #4: Okay. That's helpful. And my follow-up, I'm probably for Doug, regarding kind of your longish term or maybe not so long-term kind of margin potential improvements due to technology such as AI and kudos to you all for being the first out there with kind of a strong viewpoint.

Speaker #1: I also feel good comparing this to past soft markets. In every other past soft market, the market has dropped like a brick across every line all at once.

Speaker #4: One of your peers came out with a strong viewpoint today as well with a timeframe that's fairly quick in terms of implementation in its early days.

Speaker #4: I guess one of the pushbacks we get is that some of these AI solutions might not have kind of locked down long-term costs. There are known and could maybe creep up over time.

Speaker #1: So today, I think they're benefiting from that. And as we said, people are, in fact, buying more insurance. So I look at this and I go, look, it's a different market.

Speaker #1: Gallagher thrives on change. The complexity of the world today—what's going on in data centers, the supply chains, and war risk—I think it tees us up very, very well for continued growth.

Speaker #4: Just any thoughts on that latter statement?

Speaker #3: I think the cost of AI will be de minimis for the savings that we will be able to realize because we have already put in the cost effort to centralize and standardize our data and our processes.

Speaker #1: And sorry for the long-winded answer, but yes, I think we'll grow through it.

Speaker #3: So I think a lot of that cost, it's not directly to the technology called AI. It's the cost of implementing and then changing your environment.

Speaker #3: So I believe we have already spent that money. So the cost for us to continue to implement AI is pretty small relative to, let's say, another company or any company that's just starting from ground zero.

Speaker #4: One of your peers came out with a strong viewpoint today as well, with a timeframe that's fairly quick in terms of implementation in its early days.

Speaker #4: I guess one of the pushbacks we get is that some of these AI solutions might not have kind of locked down long-term costs. There are unknowns, and those could maybe creep up over time.

Speaker #4: Helpful. Thank you.

Speaker #2: Thank you. Our next questions come from the line. Elise Greenspan with Wells Fargo. Please proceed with your questions.

Speaker #4: Just any thoughts on that latter statement?

Speaker #5: Hi. Thanks. Good evening. My first question is on the brokerage organic right? So I believe through the first half of the year, you guys around five, if we calculate it's a four, six.

Speaker #3: I think the cost of AI will be de minimis compared to the savings that we will be able to realize, because we have already put in the cost and effort to centralize and standardize our data and our processes.

Speaker #5: You guided to five in the Q3. And then the full year guide is a five and a half. So I'm trying to kind of square and I know that this is the first year you guys have given a precise full year number.

Speaker #3: So I think a lot of that cost, it's not directly tied to the technology called AI. It's the cost of implementing it and then changing your environment.

Speaker #5: Normally, it's a range. But if the guide for the full year is five and a half, that implies something at least within range of a seven for the fourth quarter.

Speaker #5: So I'm just trying to understand if you're just waiting to update the full year guide after we get through the Q3 and you give us the fourth quarter, or are you assuming some kind of uplift in the fourth quarter?

Speaker #4: Helpful. Thank you.

Speaker #2: Thank you. Our next questions come from the line of Elise Greenspan with Wells Fargo. Please proceed with your questions.

Speaker #5: And what would that be driven by?

Speaker #3: Right. Two answers. First, the numbers we do provide in the pink on the page four, they are the midpoint of our estimates as we get closer to the end of the year with more behind us than there is in front of us.

Speaker #5: Hi, thanks and good evening. My first question is on the brokerage organic, right? So, I believe through the first half of the year, you guys are around five—if we calculate, it's a 4.6.

Speaker #3: Obviously, the ranges get smaller around those numbers. So it is a midpoint of an estimate. Second of all, this is a ground-up analysis. We believe that when we work through our data and we understand what's going on in business, this is ground up and we give it to you as we get it from the divisions and the units that have been pretty damn close in the past.

Speaker #5: You guided to five in the Q3, and then the full year guide is at five and a half. So I'm trying to kind of square that, and I know that this is the first year you guys have given a precise full-year number.

Speaker #5: Normally, it's a range, but if the guide for the full year is five and a half, that implies something at least within range of a seven for the fourth quarter.

Speaker #3: There was some variability around it, but I think we're sitting here on we've got five months of the year left and this is an estimate.

Speaker #5: So I'm just trying to understand if you're just waiting to update the full-year guide after we get through Q3 and you give us the fourth quarter, or are you assuming some kind of uplift in the fourth quarter? And what would that be driven by?

Speaker #3: I think if we post these numbers anywhere near these numbers, it's going to be a fantastic year. So yes, it would say that we'd have a little bit of a step up in the fourth quarter relative to these numbers.

Speaker #3: Why is that? The second quarter is a little bit low because of the property renewals that we are more impacted by property in the second quarter.

Speaker #3: Right. Two answers. First, the numbers we do provide, in the pink on page four, they are the midpoint of our estimates. As we get closer to the end of the year, with more behind us than there is in front of us, obviously the ranges get smaller around those numbers.

Speaker #3: That seasonality. And we won't see that as much in the fourth quarter. So that's probably the primary driver in it.

Speaker #5: Thanks. And then my second question is on assured partners. You guys will annualize the deal, right, in the third quarter. So I know it's only going to be an organic, right, for a small part of the year.

Speaker #3: So it is a midpoint of an estimate. Second of all, this is a ground-up analysis. We believe that when we work through our data and we understand what's going on in our business, this is ground-up, and we give it to you as we get it from the divisions and the units that have been pretty damn close in the past.

Speaker #5: But I'm just if you could give us a sense of just the underlying growth AP has been seeing and then within the CFO sheet, when you're thinking about part of the third quarter and the fourth quarter organic, what do you assuming for growth for AP?

Speaker #3: There was some variability around it, but I think as we're sitting here, we've got five months of the year left, and this is an estimate.

Speaker #3: I think if we post numbers anywhere near these, it's going to be a fantastic year. So yes, I would say that we'd have a little bit of a step up in the fourth quarter relative to these numbers.

Speaker #3: All right. First, I think that we're sitting at this as we're clearly not going to have a stub period in the third quarter to report organic.

Speaker #3: Why is that? The second quarter is a little bit low because of the property renewals. We are more impacted by property in the second quarter.

Speaker #3: We closed it on August 18th. I think that we'll probably target to start showing organic for assured partners beginning with the fourth quarter. But let's just see how well our conversions do.

Speaker #3: That’s seasonality, and we won’t see that as much in the fourth quarter. So that’s probably the primary driver in it.

Speaker #3: And I can give you at least anecdotally what we're seeing. We're running around 4% right now with assured partners. And I think that pretty well stacks up with a lot of the like-for-like businesses here in the US that may be a point lower.

Speaker #5: Thanks. And then my second question is on Assured Partners. You guys will annualize the deal, right, in the third quarter? So, I know it's only going to be organic for a small part of the year.

Speaker #3: The numbers that you see on page four for the well, you don't see the fourth quarter, but for the full year, do not include assured partners.

Speaker #5: If you could give us a sense of just the underlying growth AP has been seeing, and then within the CFO sheet, when you're thinking about part of the third quarter and the fourth quarter organic, what are you assuming for growth for AP?

Speaker #3: But we think that we'll be a year into it. They have the sales tools on their desk. And we're getting a lot of success coming out of it.

Speaker #3: But right now, they're running around 4%.

Speaker #5: Thank you.

Speaker #2: Thank you. Our next questions come from the line of Greg Peters with Raymond James. Please proceed with your questions.

Speaker #3: All right. First, I think that where we're sitting at this, we're clearly not going to have a stub period in the third quarter to report organic.

Speaker #6: Well, hey, good afternoon. So I guess I'll pivot one of the areas and important areas is M&A for you guys. And boy, the whole sector has experienced a massive step change lower in the valuations just curious if you've seen any flow-through in terms of expectations from sellers on exit pricing as a result of what's happened to the valuation of the strategics.

Speaker #3: We closed it on August 18th. I think that we'll probably target to start showing organic for Assured Partners beginning with the fourth quarter. But let's just see how well our conversions do.

Speaker #3: And I can give you at least anecdotally what we're seeing. We're running around 4% right now with Assured Partners, and I think that pretty well stacks up with a lot of the like-for-like businesses here in the U.S. That may be a point lower.

Speaker #3: The numbers that you see on page four for the well—you don't see the fourth quarter—but for the full year, do not include AssuredPartners.

Speaker #6: And any commentary on I know there's a backlog of PE sponsored vehicles out there looking for some sunlight. Just curious what kind of rhetoric you're hearing in the marketplace on that topic as well.

Speaker #3: But we think that we'll be a year into it. They have the sales tools on their desks, and we're getting a lot of success coming out of it.

Speaker #3: But right now, they're running around 4%.

Speaker #5: Thank you.

Speaker #3: Well, I'll just do the anecdotal stuff and Doug can give you the facts. The anecdotal side is everybody's talking about the reset, Greg. And you've got a lot of consulting brokers out there, selling into the community saying that, "Hey, if you've got a great firm, those multiples haven't changed a bit.

Speaker #2: Thank you. Our next questions come from the line of Greg Peters with Raymond James. Please proceed with your questions.

Speaker #6: Well, hey, good afternoon. So I guess I'll pivot—one of the important areas is M&A for you guys. And boy, the whole sector has experienced a massive step change lower in the valuations. Just curious if you've seen any flow-through in terms of expectations from sellers on exit pricing as a result of what's happened to the valuation of the strategics.

Speaker #3: There's an awful lot of demand. Pent up new PE money's coming in. Hang tight. It ain't happening." Multiples are coming down. And we're maintaining our discipline and we're closing deals.

Speaker #3: Now, also, you see a slowdown in our deal count. It's not as great as it was. And part of that, I believe, is sellers are actually reacting to the reset.

Speaker #3: They're realizing that the days of 15, 16, if you got a platform, maybe 17 times EBITDA are over. And so you sit there and go, "Well, okay, does that mean you're not going to be a seller at these prices?" And I'm not going to give you a range on the downside because they do vary by what in the size they are, whether they're a platform or not.

Speaker #6: And any commentary on—I know there's a backlog of PE-sponsored vehicles out there looking for some sunlight. Just curious, what kind of rhetoric are you hearing in the marketplace on that topic as well?

Speaker #3: Well, I'll just do the anecdotal stuff, and Doug can give you the facts. The anecdotal side is everybody's talking about the reset, Greg. And you've got a lot of consulting brokers out there selling into the community, saying that, "Hey, if you've got a great firm, those multiples haven't changed a bit."

Speaker #3: And they are negotiated. And there is competition, as I said in my prepared remarks, they all have choices. But clearly, pricing is coming down.

Speaker #3: We are not in the business of diluting our shareholders. And we stand by that. And we're seeing reductions.

Speaker #4: Yeah. We're still getting a nice arbitrage. If you go back to page three of the CFO commentary, we paid about 9.4 times in the first quarter.

Speaker #3: There's an awful lot of demand. Pent-up new PE money's coming in. Hang tight. It ain't happening. Multiples are coming down. And we're maintaining our discipline and we're closing deals.

Speaker #4: And it is at 11.3 times here in the second quarter. But notably, there were two acquisitions that we did that have we believe trading with ourselves synergies.

Speaker #3: Now also, you see a slowdown in our deal count. It's not as great as it was, and part of that, I believe, is sellers are actually reacting to the reset.

Speaker #4: And we don't put those in when we do our tuck-in acquisitions, we don't assume synergies when we do the math. We talk about that forever.

Speaker #3: They're realizing that the days of 15, 16, if you got a platform maybe 17 times EBITDA, are over. And so you sit there and go, "Well, okay, does that mean you're not going to be a seller at these prices?" And I'm not going to give you a range on the downside, because they do vary by what business they're in and the geography.

Speaker #4: When we do a large deal like shared partnership, we can estimate synergies on that. We understand how being better together can create revenue and expense synergies.

Speaker #4: Typically, we don't do that when we report out our information on page three. When you really peel it back, there's about 2 million dollars of additional revenues that are going to come out and excuse me, EBITDA that's going to come out of a couple of deals we did in the second quarter.

Speaker #3: They're the size they are, whether they're a platform or not, and they are negotiated. And there is competition—as I said in my prepared remarks, they all have choices.

Speaker #3: But clearly, pricing is coming down. We are not in the business of diluting our shareholders, and we stand by that. We're seeing reductions.

Speaker #4: But by and large, we're paying around 9 times for, let's say, US retail and benefits businesses wholesale was getting just a little bit more.

Speaker #7: Yeah. We're still getting a nice arbitrage. If you go back to page three of the CFO commentary, we paid about 9.4 times in the first quarter.

Speaker #4: And sometimes in the UK, but again, if you factor in the synergies that we're getting and you see that on page three, we're clearly down below 11 times, 10 times on the multiple.

Speaker #7: And it is at 11.3 times here in the second quarter. But notably, there were two acquisitions that we did that have, we believe, trading-with-ourselves synergies.

Speaker #4: That creates still an immediate arbitrage and value for our shareholders because we're still getting that multiple that pricing arbitrage there.

Speaker #7: And we don't put those in when we do our tuck-in acquisitions; we don't assume synergies when we do the math. We've talked about that forever.

Speaker #7: When we do a large deal, like a shared partnership, we can estimate synergies on that. We understand how being better together can create revenue and expense synergies.

Speaker #6: Excellent detail. Related to that, just I noted your comments about the $10 billion of capital to deploy. Over the next two years, you also mentioned the repurchase activity in the second quarter.

Speaker #7: Typically, we don't do that when we report out our information on page three. When you really peel it back, there's about $2 million of additional revenues that are going to come out—and, excuse me, EBITDA that's going to come out—of a couple of deals we did in the second quarter.

Speaker #6: Building upon what you did in the first quarter, so you're prolific with the guidance you provide. Given the reset of the stock price, do you think that we should start modeling in some normalized run rate of share repurchase unless there's a recovery?

Speaker #7: But by and large, we're paying around 9 times for, let's say, U.S. retail and benefits businesses. The wholesaler was getting just a little bit more, and sometimes in the U.K., but again, if you factor in the synergies that we're getting—and you see that on page 3—we're clearly down below 11 times, 10 times on the multiple.

Speaker #6: And just assume that's now part of the capital deployment strategy going forward?

Speaker #3: So Greg, I think here's the answer to that question is I wouldn't model much. Our acquisition pipeline is pretty darn good right now. And I think you're going to see more and more brokers that realize that the tools and capabilities that their customers need, they just can't do it.

Speaker #7: That still creates an immediate arbitrage and value for our shareholders, because we're still getting that multiple—that pricing arbitrage there.

Speaker #6: Excellent detail. Related to that, I just noted your comments about the $10 billion of capital to deploy over the next two years. You also mentioned the repurchase activity in the second quarter.

Speaker #3: They just can't do it themselves. And so they need to great with their customers. They're great. They have great relationships. But we get to bring them an infrastructure that makes them better and provide a better service.

Speaker #3: They're probably sitting on the sidelines a little bit right now, but I think they'll be back. So I wouldn't model a ton of share repurchases, but we'll certainly be opportunistic.

Speaker #6: Building upon what you did in the first quarter, you're prolific with the guidance you provide. Given the reset of the stock price, do you think that we should start modeling in some normalized run rate of share repurchase, unless there's a recovery, and just assume that's now part of the capital deployment strategy going forward?

Speaker #6: Got it. Thanks for the detail.

Speaker #2: Thank you. Our next questions come from the line of Dean Krishi-Tiello with Wolf Research. Please proceed with your questions.

Speaker #5: Hey, thanks for taking my question. Since your M&A growth has sort of slowed in recent periods, I was wondering right, meaning you guys are onboarding less producers inorganically.

Speaker #3: Well, Greg, I think the answer to that question is I wouldn't model much. Our acquisition pipeline is pretty darn good right now. And I think you're going to see more and more brokers that realize that the tools and capabilities that their customers need—they just can't do it.

Speaker #5: Does that kind of change your hiring strategy, or do you not think about the 2 in tandem?

Speaker #3: Awesome. We're always open for business for producers. That's for darn sure. Anybody that thinks that they want to toil and spend their life with us, I think that this would be a we think that we offer the one of the greatest places to work.

Speaker #3: They just can't do it themselves. And so they need to—it's great with their customers. They're great, they have great relationships. But we get to bring them an infrastructure that makes them better and provides a better service.

Speaker #3: In terms of does it change our thinking, not really. I mean, we think that we're not going to all of a sudden throttle more into organic hiring.

Speaker #3: They're probably sitting on the sidelines a little bit right now, but I think they'll be back. So I wouldn't model a ton of share repurchases, but we'll certainly be opportunistic.

Speaker #3: But when I think there's a lot of folks that are going to be available in the future because I think the dream of where they are in PE-owned firms is probably turning into a little bit of a nightmare.

Speaker #6: Got it. Thanks for the detail.

Speaker #3: So I believe that they might have more of an opportunity to hitch their star with us. So the market could present that opportunity.

Speaker #2: Thank you. Our next questions come from the line of Dean Crescitiello with Wolfe Research. Please proceed with your questions.

Speaker #6: Those are market hires, Dean, but we also remember we are the biggest we have the biggest commitment I know of to interns. And our internship ends next week.

Speaker #8: Hey, thanks for taking my question. Since your M&A growth has sort of slowed in recent periods, I was wondering—right, meaning you guys are onboarding fewer producers inorganically.

Speaker #6: It's 600 kids that have come in to look at our industry. Now, we won't hire all those, but we'll make offers to the seniors probably to 50, 60 percent of them.

Speaker #8: Does that kind of change your hiring strategy, or do you not think about the two in tandem?

Speaker #6: And that's continuing on from the prior year and the prior. And these young people validate faster than most people think. So I think that we're in a pretty good spot to maintain a sales culture that is pretty darn unique.

Speaker #3: In terms of does it change our thinking—not really. I mean, we think that we're not going to all of a sudden throttle more into organic hiring.

Speaker #6: And I do think Doug's right. It will also attract others that find they just don't have the tools where they are. And you can talk about jumping on the AI bandwagon and looking out to the future, but our clients are demanding this stuff today.

Speaker #3: But when I think, there's a lot of folks that are going to be available in the future, because I think the dream of where they are in PE-owned firms is probably turning into a little bit of a nightmare.

Speaker #6: And I think it does bode well. As Doug said, we are always open to recruit new seasoned producers and we're loading the field with interns.

Speaker #3: So, I believe that they might have more of an opportunity to hitch their star with us. So, the market could present that opportunity.

Speaker #4: Yeah. And one thing, just to point, we're really only running about 80% of our historical average on acquisitions. Right now. So we're running 80%.

Speaker #8: Those are market hires, Dean, but we also remember we are the biggest we have the biggest commitment I know of to interns. And our internship ends next week at 600 kids that have come in to look at our industry.

Speaker #4: So we're not this isn't a huge step back in acquisition activity. We're talking about a 20% backwards. And that can change overnight when market conditions change.

Speaker #8: Now, we won't hire all of those, but we'll make offers to the seniors—probably to 50% or 60% of them. And that's continuing on from the prior year and the prior year.

Speaker #6: Understood. And then my follow-up,

Speaker #5: yeah, it seems like the organic growth and brokerage has been supported by strong organic and supplemental revenues. So can you just kind of highlight what's driving that?

Speaker #8: And these young people validate faster than most people think. So I think that we're in a pretty good spot to maintain a sales culture that is pretty darn unique.

Speaker #5: And then maybe talk about the sustainability of that in the future.

Speaker #8: And I do think Doug's right. It will also attract others that find they just don't have the tools where they are. And you can talk about jumping on the AI bandwagon and looking out to the future, but our clients are demanding this stuff today.

Speaker #3: Premium growth equals supplementals and contingents. Primarily supplementals. And we are a premium grower. Contingents, as you know, are contingent more on profitability. And that can go up and down if there's a reset in either premiums drastically or if there's a significant amount of loss.

Speaker #8: And I think it does bode well. As Doug said, we are always open to recruit new seasoned producers, and we're loading the field with interns.

Speaker #3: But those losses tend over the last few years to be typically property. So I think that that line is managed well and should continue to grow.

Speaker #7: Yeah, and one thing—just a point—we're really only running at about 80% of our historical average on acquisitions right now, so we're running at 80%.

Speaker #4: And just as a reminder, I wouldn't place all that much stock on the individual lines because there are changes in contracts. So in this case, we flipped a bunch of contingent contracts into supplementals here and that's why you're seeing you got to look at the two numbers together and it's about 9% growth.

Speaker #7: So, we're not—this isn't a huge step back in acquisition activity. We're talking about a 20% step backwards, and that can change overnight when market conditions change.

Speaker #8: Understood. And then my follow-up—yeah, it seems like the organic growth in brokerage has been supported by strong organic and supplemental revenues. So can you just kind of highlight what's driving that?

Speaker #4: One thing I will say, maybe is that it sure shows you that the distribution is appreciated. And I think that the value we bring and the value we bring to the clients and what we bring to our carrier and other capital provider partners it shows that we bring a lot of value in this value chain.

Speaker #8: And then maybe talk about the sustainability of that in the future.

Speaker #3: Premium growth equals supplementals and contingents—primarily supplementals. And we are a premium grower. Contingents, as you know, are contingent more on profitability, and that can go up and down if there's a reset in either premiums drastically, or if there's a significant amount of loss.

Speaker #2: Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone keypad. Our next questions come from the line of David Motamatin with Evercore ISI.

Speaker #3: But those losses tend, over the last few years, to be typically property. So, I think that line is managed well and should continue to grow.

Speaker #2: Please proceed with your questions.

Speaker #7: And just as a reminder, I wouldn't place all that much stock on the individual lines because there are changes in contracts. So in this case, we flipped a bunch of contingent contracts into supplementals here, and that's why you're seeing that—you've got to look at the two numbers together, and it's about 9% growth.

Speaker #5: Hey, thanks. Good evening. Doug, in the past, you had thrown some numbers out there. Just in terms of potential cost savings, from AI, I'm wondering if you have any thoughts in terms of when you think that those will be realized.

Speaker #7: One thing I will say, maybe, is that it sure shows you that the distribution is appreciated. And I think that the value we bring, the value we bring to the clients, and what we bring to our carrier and other capital provider partners—it shows that we bring a lot of value in this value chain.

Speaker #5: And then maybe a philosophical question. When you guys think about that, is that something where you would announce more of a formal program, or is that something that we will just see coming through as incremental margin expansion on top of the I think it was 40 to 50 basis points of sort of normal operating leverage?

Speaker #3: All right. So it's incremental to the underlying margin expansion that we talked about to that point. If you recall, I think I said it, but we'd get about 5% savings in our production layer cost, maybe another 10 to 15 percent in our support layer cost, and maybe to 20 to 30 percent in our back office layer.

Speaker #2: Please proceed with your questions.

Speaker #8: Hey, thanks. Good evening. Doug, in the past you had thrown some numbers out there, just in terms of potential cost savings from AI. I'm wondering if you have any thoughts in terms of when you think those will be realized.

Speaker #3: I don't see any difference in that today. And I think it'll take us three to five years to fully realize those levels. Now, that math would produce 600 basis points of margin expansion.

Speaker #3: I've cautioned that maybe there's going to be offsets to a certain extent. So maybe we can harvest two-thirds of that. So maybe there's 400 basis points there.

Speaker #3: And the way we look at it, we have 1,000 projects the flowers and blooming now. We've got dozens and dozens of real tangible projects that are showing immediate results.

Speaker #8: And then maybe a philosophical question: When you guys think about that, is that something where you would announce more of a formal program, or is that something that we will just see coming through as incremental margin expansion on top of the, I think it was, 40 to 50 basis points of sort of normal operating leverage?

Speaker #3: So I'm still very comfortable in viewing that it can make us better and more cost-efficient. It's real. It's happening. And I think the work that we put in in the past is will pay a huge dividend because we're already centralized in so many of our points.

Speaker #7: Right. So, it's incremental to the underlying margin expansion that we talked about to that point. If you recall, I think I said if we could get about 5% savings in our production layer cost, maybe another 10% to 15% in our support layer cost, and maybe 20% to 30% in our back office layer.

Speaker #3: Here's a point. Number one, so over the last 20 years, did we talk about that we were launching a program to move work to lower-cost locations?

Speaker #7: I don't see any difference in that today, and I think it'll take us three to five years to fully realize those levels. Now, that math would produce 600 basis points of margin expansion.

Speaker #3: We were not talking about the we didn't talk about the investments that we were making in the system. If you go way back when, I said that there was probably one point of margin that was being reinvested every year in betterment-type improvement.

Speaker #7: I've cautioned that maybe there's going to be offsets to a certain extent, so maybe we can harvest two-thirds of that. So, maybe there's 400 basis points there.

Speaker #7: And the way we look at it, we have 1,000 projects—the flowers are blooming now. We've got dozens and dozens of real, tangible projects that are showing immediate results.

Speaker #3: That's true today. And I think that you have to understand this is just cultural for us. We do this every day. And it's not something where we're going to announce a huge transformation exercise.

Speaker #3: You'll just see us naturally do that over time.

Speaker #7: So I'm still very comfortable in viewing that it can make us better and more cost-efficient. It's real. It's happening. And I think the work that we put in in the past will pay a huge dividend because we're already centralized in so many of our points.

Speaker #5: Okay. Great. I appreciate that. And then maybe just as a follow-up, on just on the reinsurance side, obviously, still very good growth and the outlook was lowered a little bit, but still solid at the 9%.

Speaker #7: Here's a point. Never once over the last 20 years did we talk about launching a program to move work to lower-cost locations.

Speaker #5: Could you just unpack how much of that is specifically coming from share gain versus maybe buy-up and just pure rate pressure? Just sort of thinking through the sustainability of that as we move forward into the next few years.

Speaker #7: We were not talking about, we didn't talk about the investments that we were making in the system. If you go way back when, I said that there was probably one point of margin that was being reinvested every year in betterment-type improvements.

Speaker #7: That's true today. And I think you have to understand this is just cultural for us. We do this every day, and it's not something where we're going to announce a huge transformation exercise.

Speaker #3: Yeah. Most all of it is net new business. I think that's what you've got to look at it. I think that the buyers are recognizing the value that we bring.

Speaker #3: And I think they're giving us a great shot to tell our story. So this is there's three of us at the table that are very strong at this.

Speaker #7: You'll just see us naturally do that over time.

Speaker #8: Okay, great. I appreciate that. And then maybe just as a follow-up, just on the reinsurance side—obviously, still very good growth, and the outlook was lowered a little bit, but still solid at 9%.

Speaker #3: And I think they're realizing exactly how strong we are. So we're winning a lot of new business.

Speaker #2: Thank you. Our next questions come from the line of Andrew Anderson with Jefferies. Please proceed with your question.

Speaker #6: Hey. Good afternoon. Just since announcing the AP transaction, the expected run rate synergy has increased a few times. Could you maybe just talk about whether that's coming from existing synergy buckets, simply proving larger than expected, or entirely new sources of savings and revenue opportunities?

Speaker #8: Could you just unpack how much of that is specifically coming from share gain versus maybe buy-up and just pure rate pressure? Just sort of thinking through the sustainability of that as we move forward into the next few years.

Speaker #7: Yeah, most all of it is net new business. I think that's why you've got to look at it. I think that the buyers are recognizing the value that we bring.

Speaker #3: I think we're getting more revenue synergies than we maybe initially looked at and announced. That's great as we start trading better together. That's happening every day.

Speaker #7: And I think they're giving us a great shot to tell our story. So there's three of us at the table that are very strong at this.

Speaker #3: And I think that I got to give it to our new partners at that came from assured partners. They recognize the value that other parts of Gallagher bring to their relationship with their customers.

Speaker #7: And I think they're realizing exactly how strong we are. So we're winning a lot of new business.

Speaker #3: So that's good. I think from cost standpoint, I think that we're just it hit at exactly the right time where our US chassis have the ability for all the investment we put into them over time to handle a substantial amount of additional revenue.

Speaker #2: Thank you. Our next questions come from the line of Andrew Anderson with Jefferies. Please proceed with your questions.

Speaker #8: Hey, good afternoon. Since announcing the AP transaction, the expected run-rate synergy has increased a few times. Could you maybe just talk about whether that's coming from existing synergy buckets simply proving larger than expected, or entirely new sources of savings and revenue opportunities?

Speaker #3: So the additional adds on IT, real estate, back office costs are pretty small. So we're seeing this come onto our systems without adding as much cost as we thought it might.

Speaker #3: So we're really picking up the volume advantages that we have here.

Speaker #7: I'd also add, when Doug talks about better together, this is not just Gallagher Tools being well received by a new Salesforce. The better together, we've got a lot of terrific new professionals from AP.

Speaker #7: I think we're getting more revenue synergies than we maybe initially looked at and announced. That's great as we start trading better together. That's happening every day.

Speaker #7: And I think that I’ve got to give it to our new partners that came from shared partners. They recognize the value that other parts of Gallagher bring to their relationships with their customers.

Speaker #7: Working with side-by-side, the Gallagher folks, and on their own, terrific production going on.

Speaker #7: So that's good. I think, from a cost standpoint, that we're just hitting at exactly the right time, where our US chassis have the ability, from all the investment we've put into them over time, to handle a substantial amount of additional revenue.

Speaker #5: Thanks. And then looking at the geographic table or the organic table and the geographic breakdown, it does seem like a lot of these regions EMEA and APAC are kind of decoupling from what I would think is an even softer price environment.

Speaker #7: So the additional add-ons—IT, real estate, back office costs—are pretty small. So we're seeing this come onto our systems without adding as much cost as we thought it might.

Speaker #5: So could you just talk a bit about how you are able to capture these market share gains or maybe the exposure growth underlying it?

Speaker #3: Well, let's make sure we put this in perspective. When it comes to market share, there's 7 trillion of premium floating around there. And we're touching 200, 250 billion.

Speaker #7: So we're really picking up the volume advantages that we have here.

Speaker #3: So the fact is, there's an infinite amount of market space for us to go and I think our folks are just showing that the tools and capabilities are letting us outshine the competitors.

Speaker #3: I'd also add, when Doug talks about "better together," this is not just Gallagher Tools being well received by a new sales force. The "better together"—we've got a lot of terrific new professionals from AP.

Speaker #3: But there is so much market opportunity out there. We're not bumping up against any problems of so market share is pretty hard to measure.

Speaker #3: Working with Side-by-Side, the Gallagher folks, and on their own—terrific production going on.

Speaker #3: But 250 billion out of 7 trillion, you can do the math. It's not a very big number.

Speaker #7: And I will tell you that when we look at our new business annualized, it's an astounding number. And it grows every year. And as Doug the harder we run, we don't make any progress and really denting the share.

Speaker #8: Thanks. And then, looking at the geographic table or the organic table and the geographic breakdown, it does seem like a lot of these regions—EMEA and APAC—are kind of decoupling from what I would think is an even softer price environment.

Speaker #7: But we know we're taking share.

Speaker #5: Thank you.

Speaker #8: So, could you just talk a bit about how you are able to capture these market share gains, or maybe the exposure growth underlying it?

Speaker #2: Thank you. Our next questions come from the line of Iran Kunar with Mizuho Securities. Please proceed with your questions.

Speaker #8: Thanks, good evening. I had a question with regards to the M&A kind of being maybe at 80% of normal capacity. How much of a boost is that to margin and brokerage?

Speaker #7: Well, listen, let's make sure we put this in perspective. When it comes to market share, there's $7 trillion of premium floating around out there, and we're touching $200 to $250 billion.

Speaker #7: So the fact is, there's an infinite amount of market space for us to go, and I think our folks are just showing that the tools and capabilities are letting us outshine the competitors.

Speaker #3: Well, listen, in terms of deal count, we've done 80% of our average over the last 10 years, something like that. In terms of lift that the M&A is providing, in our margin, actually, the roll-in of M&A if you go back to page seven of the CFO commentary, if you roll in, it provided no impact in the second quarter, first quarter was actually a little bit of a margin drag because of the seasonality of what we've so we haven't really if you look at our outlook, roll-in of tuck-in M&A, we're saying is not going to provide much lift on margin in the next couple of quarters.

Speaker #7: But there is so much market opportunity out there. We're not bumping up against any problems, so market share is pretty hard to measure.

Speaker #7: But $250 billion out of $7 trillion—you can do the math. It's not a very big number.

Speaker #3: And I will tell you that when we look at our new business annualized, it's an astounding number, and it grows every year. And as Doug said, the harder we run, we don't make any progress in really denting the share.

Speaker #3: But we know we're taking share.

Speaker #8: Thank you.

Speaker #2: Thank you. Our next questions come from the line of Ifeanyi Canar with Mizuho Securities. Please proceed with your questions.

Speaker #3: So when you aggregate them all together, you do get scale advantages. But when you just rolling in 10 a quarter or something like that, those roll-ins are not providing much margin lift.

Speaker #1: Thanks. Good evening. I had a question with regards to the M&A being maybe at 80% of normal capacity. How much of a boost is that to margin and brokerage?

Speaker #8: Okay. And then conversely, I think the divestiture activity has been a little bit larger than normal over the last few quarters. Has that what kind of impact has that had on margins?

Speaker #7: Well, listen, in terms of deal count, we've done 80% of our average over the last 10 years—something like that. In terms of lift that the M&A is providing in our margin, actually, the roll-in of M&A—if you go back to page seven of the CFO commentary—if you roll in, it provided no impact in the second quarter.

Speaker #3: Well, listen, I think some of those businesses they fit better elsewhere than they do inside of Gallagher. I think that with assured partners coming on, we said, "Listen, we're just going to refocus and get out of some businesses that would be either we sold off our non-standard auto business that we went into eight years ago, something like that." And so I just think that that naturally provides a little bit of margin lift if they were underperforming.

Speaker #7: First quarter was actually a little bit of a margin drag because of the seasonality of what we've—so we haven't really—if you look at our outlook, roll-in of tuck-in M&A, we're saying is not going to provide much lift on margin in the next couple of quarters.

Speaker #3: But a lot of these that we get out of, it's just because they're just they just don't fit in our current portfolio.

Speaker #7: So, when you aggregate them all together, you do get scale advantages. But when you're just rolling in 10 a quarter or something like that, those roll-ins are not providing much margin lift.

Speaker #8: Right. Okay. Thank you.

Speaker #7: Thanks, Sean.

Speaker #2: Thanks. Thank you. Our next questions come from the line of Mark Hughes with Truist. Please proceed with your questions.

Speaker #1: Okay. And then conversely, I think the divestiture activity has been a little bit larger than normal the last few quarters. What kind of impact has that had on margins?

Speaker #6: Yeah. Thank you, good afternoon. On the benefits business in US P&C, that's been lagging a little bit here lately. Is this the right kind of go-forward organic growth rate, or should that be a little bit faster?

Speaker #7: Well, listen, I think some of those businesses they fit better elsewhere than they do inside of Gallagher. I think that with a shared partners coming on, we said, listen, we're just going to refocus and get out of some businesses that would be either we sold off our non-standard auto business that we went into eight years ago, something like that.

Speaker #3: Let's see. Let me see if I understand the question. Are you talking about just our health and welfare benefit business that you questioned? Is that what you're teasing out there?

Speaker #7: And so I just think that that naturally provides a little bit of margin lift if they were if they were underperforming. But a lot of these that we get out of is just it's because they're just they just don't fit in our current portfolio.

Speaker #6: Yeah.

Speaker #3: Yeah. We actually don't we take out the kind of the large life cases so that those can be lumpy, but they do fuel our organic a little bit.

Speaker #3: But we've moved past that discussion. And our benefits brokerage, three to four percent, I think in today's environment, is a pretty good growth rate in that business.

Speaker #1: Right. Okay. Thank you.

Speaker #3: Thanks, John.

Speaker #2: Thanks. Thank you. Our next questions come from the line of Mark Hughes with Truist. Please proceed with your questions.

Speaker #3: We're not seeing tons of employment growth in total happening. I think they're looking more and more at ways to attract talent. So there could be some upside to that number going forward as people understand that they really need our expertise to help them with talent attraction.

Speaker #8: Yeah, thank you. Good afternoon. On the benefits business in U.S. P&C, that's been lagging a little bit here lately. Is this the right kind of go-forward organic growth rate, or should that be a little bit faster?

Speaker #3: Retention and then also right now, the employees are of medical cost inflation. So I think that you could see an upside on that if you look at it over the next three months, six months, 15 months, something like that.

Speaker #7: Let's see. Let me see if I understand the question. Are you talking about just our Health and Welfare Benefit business—that your question is teasing out there?

Speaker #3: I think that employers are going to need our services now that with I'm not going to say it's runaway inflation, but it's pretty close.

Speaker #8: Yeah.

Speaker #7: We actually don’t. We take out the kind of large live cases so that those can be lumpy, but they do fuel our organic a little bit.

Speaker #7: And every buyer market, they're fraught. I mean, that's what we're hearing everywhere you go. The pricing that the cost medical in particular is just killing us.

Speaker #7: But we've moved past that discussion. And our benefits brokerage, 3% to 4%—I think in today's environment, that's a pretty good growth rate in that business.

Speaker #7: So I do think that's going to provide us with more opportunity. But I agree with Doug that where we are now is probably about right.

Speaker #7: We're not seeing tons of employment growth in total happening. I think they're looking more and more at ways to attract talent, so there could be some upside to that number going forward, as people understand that they really need our expertise to help them with talent attraction.

Speaker #6: Okay. And then on the risk management margin, Doug, I think you described 22% plus. Seems like that just continues to move higher and higher.

Speaker #6: You've talked about AI, some new capabilities, does that is there an upper bound? I think there used to be maybe talking about 20%. Does it is it just one of these it's going to keep going 50 bips is the way to think about it?

Speaker #7: Retention. And then also, right now, employees are staring in the face of massive amounts of medical cost inflation. So I think you could see an upside on that if you look at it over the next three months, six months, fifteen months, something like that.

Speaker #3: Yeah. Listen, I actually think that they're seeing some they're having some good success with AI. I think that customer their customers are understanding the value they're bringing.

Speaker #7: I think that employers are going to need our services now that—with, I'm not going to say it's runaway inflation, but it's pretty close.

Speaker #3: They're doing a great job of telling the story about how it's not our cost that matters. It's the total cost of settling claims. Settling this, getting their folks back to work, protecting brands by being better on the general liability side.

Speaker #3: And every biomarker is—they're fraught. I mean, that's what we're hearing everywhere you go. The pricing, the cost, medical in particular, is just killing us.

Speaker #3: I think that this is a business that's really reached a good sale point. So you could see, is it 50 basis points a year?

Speaker #3: So, I do think that's going to provide us with more opportunity. But I agree with Doug that where we are now is probably about right.

Speaker #8: Okay. And then on the risk management margin, Doug, I think you described 22% plus. It seems like that just continues to move higher and higher.

Speaker #3: You have to continue to grow 12% a year like they've done from time to time. That's not unreasonable at all. So this is a great business.

Speaker #3: It comes a little bit more lumpy as they attract some larger customers. But it really is at a point right now where it's getting some scale advantages.

Speaker #8: You've talked about AI, some new capabilities. Is there an upper bound? I think there used to be maybe talk about 20%. Is it just one of these that's going to keep going? Is 50 basis points the way to think about it?

Speaker #7: And I can't you can't underestimate the scale advantages, Mark. I mean, I'm looking out at the insurance company marketplace as a place that I think over the next decade just throws in the towel.

Speaker #7: Yeah. Listen, I actually think that they're seeing some—they're having some good success with AI. I think that their customers are understanding the value they're bringing.

Speaker #7: They just can't keep up. And we've got one example that I can't mention any names, but just our AI fraud detection capabilities has saved one, and this is auditable numbers, we've saved one client $100 million.

Speaker #7: They're doing a great job of telling the story about how it's not our cost that matters. It's the total cost of settling claims, settling this, getting their folks back to work, protecting brands by being better on the general liability side.

Speaker #7: And I don't know what insurance company that has the capability we put forward on that account.

Speaker #7: I think that this is a business that's really reached—it's at a good sale point. So you could see… Is it 50 basis points a year?

Speaker #6: Is that a curiosity? What was the fraud?

Speaker #3: Bad people. Medical fraud.

Speaker #7: Yeah, if they continue to grow 12% a year, like they've done from time to time, that's not unreasonable at all. So this is a great business.

Speaker #6: Very good. Thank you.

Speaker #7: That's smart.

Speaker #2: Thank you. Our next questions come from the line of Meyer Shields with KBW. Please proceed with your questions.

Speaker #7: It comes a little bit more lumpy as they attract some larger customers, but it really is at a point right now where it's getting some scale advantages.

Speaker #8: Thanks. This is sort of a follow-up, I guess, to the last question. But we've been hearing for years about social inflation. And I was hoping you could talk about how Gallagher Bassett's ability to combat that has changed or improved over the last few years.

Speaker #3: And you can't underestimate the scale advantages, Mark. I mean, I'm looking out at the insurance company marketplace as a place that I think, over the next decade, just throws in the towel.

Speaker #3: Well, listen, I think they just do a damn good job of getting after the claims and making sure that they get in front of the claimant.

Speaker #3: They just can't keep up. And we've got one example that—I can't mention any names—but just our AI fraud detection capabilities have saved one, and these are auditable numbers, we've saved one client $100 million.

Speaker #3: And their employer, and they say that, "Listen, going down the litigation path isn't going to prove isn't going to prove good for anybody, but the plaintiffs are." And they have done a terrific job of educating that it's a return to work three points of contact by nurses.

Speaker #3: And I don't know which insurance company has the capability we put forward on that account.

Speaker #8: It's out of curiosity. What was the fraud?

Speaker #3: Our nurse case managers have a really, really professional way of dealing with somebody. So they're breaking down this barrier between the adversary claim adjuster with a resolution manager and just that philosophical difference reduces the total cost of the claim.

Speaker #7: Bad people. Medical fraud.

Speaker #8: Very good. Thank you.

Speaker #3: Thanks, Mark.

Speaker #2: Thank you. Our next questions come from the line of Meyer Shields with KBW. Please proceed with your questions.

Speaker #1: Thanks. This is sort of a follow-up, I guess, to the last question. But we've been hearing for years about social inflation, and I was hoping you could talk about how Gallagher Bassett's ability to combat that has changed or improved over the last few years.

Speaker #3: They are a resolution manager to manage this case versus a claim adjuster that just wants to fight you tooth and nail.

Speaker #7: Well, and part of this is AI. I mean, take a look at one of the problems with the TPA any claims organization. Hundreds, thousands, hundreds of thousands of claims poured in the door.

Speaker #7: Well, I think they just do a damn good job of getting after the claims and making sure that they get in front of the claimant.

Speaker #7: They're just pouring. And sorting through that to figure out which one of these have I got to put my absolute top people on it, seem near impossible.

Speaker #7: And their employer, and they say that, listen, going down the litigation path isn't going to prove good for anybody. But the plaintiffs are.

Speaker #7: And it's that one that blows up. So the more we can scale AI to look at that stuff as it's coming in, the more we can say, "Whoa, whoa, whoa, flag this," and it can be it could be territory, it could be law, it could be a million different things that's all of a sudden sort this out, pull it off the conveyor belt, and manage it.

Speaker #7: And they have done a terrific job of educating that it’s a return to work. It’s a three points of contact by nurses. Our nurse case managers have a really, really professional way of dealing with somebody.

Speaker #7: So they're breaking down this barrier between the adversary claim adjuster and a resolution manager, and just that philosophical difference reduces the total cost of the claim.

Speaker #7: We're getting better and better at saying to people, "If you want to have an improvement in your outcomes, that's how to measure Gallagher Bassett." We're getting better at proving that.

Speaker #8: Okay. That's very helpful. I really appreciate it. And then second question, Doug, I'm looking at the updated organic growth by line of business. This is a tremendous table.

Speaker #7: They just—they are a resolution manager to manage this case versus a claim adjuster that just wants to fight you tooth and nail.

Speaker #3: Another part of this is AI. I mean, take a look at one of the problems with the TPA—any claims organization. Hundreds, thousands, hundreds of thousands of claims pour in the door.

Speaker #8: And I'm trying to understand the seasonality and specialty in US wholesale where you can get first half of the year.

Speaker #3: They're just pouring in, and sorting through that to figure out which one of these I have to put my absolute top people on.

Speaker #3: Boy, you you broke up on us right when you asked the question. Sorry.

Speaker #8: I'm sorry. Am I coming through now?

Speaker #3: It's seemingly impossible, and it's that one that blows up. So the more we can scale AI to look at that stuff as it's coming in, the more we can say, 'Whoa, whoa, whoa, flag this,' and it could be territory.

Speaker #3: Yep, you are.

Speaker #8: Okay. I'm trying to understand the seasonality and the specialty US wholesale line because you've got the first half of the year at 4%, and you're still anticipating 6% for the full year.

Speaker #8: I didn't think that it was that much seasonality in quarterly production.

Speaker #3: It could be law, it could be a million different things. It's all of a sudden, sort this out, pull it off the conveyor belt, and manage it.

Speaker #3: Well, that line those businesses are impacted by property. Especially in the second quarter and so I think there are some also some nice 701 placements that come up on some of the larger when we get into municipalities, pools, reciprocals tend to have a 701 renewal date.

Speaker #3: We're getting better and better at saying to people, if you want to have an improvement in your outcomes, that's how to measure Gallagher Bassett.

Speaker #3: And we're getting better at proving that.

Speaker #1: Okay, that's very helpful. I really appreciate it. And then, second question—Doug, I'm looking at the updated organic growth by line of business. This is a tremendous table.

Speaker #1: And I'm trying to understand the seasonality and specialty in US wholesale, where you can get first half of the year.

Speaker #3: So there can be some seasonality in that. Benefits tend to have its biggest quarter in the first quarter, and then you get into some of our specialty lines.

Speaker #3: That have 701 renewal dates on it.

Speaker #7: Boy, you broke up on us right when you asked the question. Sorry.

Speaker #8: Okay. So it's a third quarter issue more than a fourth quarter.

Speaker #1: I'm sorry. Am I coming through now?

Speaker #7: Yep, you are.

Speaker #3: Well, and then fourth quarter all of a sudden you start getting into complex placements that are going to that you have a pretty good October one group also.

Speaker #1: Okay, I'm trying to understand the seasonality in the specialty US wholesale line, because you've got the first half of the year at 4%, and you're still anticipating 6% for the full year.

Speaker #8: Okay. Perfect. Thank you so much.

Speaker #1: I didn't think that there was that much seasonality in quarterly production.

Speaker #2: Thank you. Our next questions come from the line of Andrew Klagerman with TD Cowan. Please proceed with your questions.

Speaker #7: Well, that business, those lines, those businesses are severely impacted by property, especially in the second quarter. And so I think there are also some nice 7/1 placements that come up on some of the larger—when we get into municipalities, pools, reciprocals tend to have a 7/1 renewal date.

Speaker #8: Great. Thank you. Maybe just staying with that wholesale question. With the guidance at 6%, could you talk a little bit about and I think in your prepared remarks, you talked about the stability even where property pricing is under pressure.

Speaker #7: So there can be some seasonality in that. Benefits tends to have its biggest quarter in the first quarter, and then you get into some of our specialty lines.

Speaker #8: You're still seeing stable flows. So the part A of it is, are you seeing the flow of business kind of very stable from E&S to admitted?

Speaker #7: That have 7/1 renewal dates on it.

Speaker #1: Okay. So it's a third-quarter issue more than a fourth-quarter issue.

Speaker #7: Well, and then fourth quarter, all of a sudden, you start getting into complex placements that are going, and you have a pretty good October one group also.

Speaker #8: It's just not moving that much. It's just a pricing situation. And then with that 6% guidance, do you see the do you see that number kind of we'll stay with the first part, and I'll come back to the 6.

Speaker #1: Okay. Perfect. Thank you so much.

Speaker #2: Thank you. Our next questions come from the line of Andrew Klagerman with TD Cowen. Please proceed with your questions.

Speaker #1: Great, thank you. Maybe just staying with that wholesale question—with the guidance at 6%, could you talk a little bit about, and I think in your prepared remarks you talked about, the stability even where property pricing is under pressure?

Speaker #3: Yeah. We're just not seeing that we're just not seeing it flowing back into the admitted market the way it was in the past. I think E&S is here to stay.

Speaker #3: I think the complexity of a lot of risk that we write, I think the nimbleness of that business, it's just not flowing back into the admitted market that maybe we would have seen 20 years ago.

Speaker #1: You're still seeing stable flows. So, part A of it is: are you seeing the flow of business kind of very stable from E&S to admitted?

Speaker #3: At the E&S market is not the market of last resorts anymore. And I think it provides a really good deep niche of underwriting expertise.

Speaker #3: And our producers do a great job of making sure that they offer that to their customers because it is a viable solution.

Speaker #1: It's just not moving that much. It's just a pricing situation. And then with that 6% guidance, do you see—do you see that number kind of... We'll stay with the first part, and I'll come back to the 6.

Speaker #8: Got it. And then just tying that to assured partners because I think if assured partners wholesaling was going elsewhere if it comes into AJ Gallagher, that's considered organic growth.

Speaker #8: And if so, is that having a material impact on that 6 points of guidance? Any numbers you could put around that?

Speaker #7: Yeah, we're just not seeing that. We're just not seeing it flowing back into the admitted market the way it was in the past. I think E&S is here to stay.

Speaker #7: Well, let Doug talk about the numbers, but Andrew, I'll tell you that the consolidation of that wholesale work, which was, you're correct, spread between dozens, if not hundreds of wholesalers is going extremely well.

Speaker #7: I think the complexity of a lot of risk that we write, and the nimbleness of that business—it's just not flowing back into the admitted market like we might have seen 20 years ago.

Speaker #7: The E&S market is not the market of last resort anymore, and I think it provides a really good, deep niche of underwriting expertise. Our producers do a great job of making sure that they offer that to their customers, because it is a viable solution.

Speaker #7: AP was already about trying to figure out how to consolidate wholesale relationships. As you know, we own RPS, and RPS has become it's been a very good working relationship.

Speaker #7: It's grown between the two. Now, we were trading with them before, but we're seeing some very nice synergies there.

Speaker #3: Yeah. Numerical, it's not moving the needle for overall Gallagher, but it is meaningful. Remember, our retail producers understand it needs to go to the place that's best for the customer.

Speaker #1: Got it. And then just tying that to Assured Partners, because I think if Assured Partners' wholesaling was going elsewhere, if it comes into A.J. Gallagher, that's considered organic growth.

Speaker #3: And I think there's an awareness build that's going on that RPS and our tax and some of our other specialty lines do provide a better solution for the client.

Speaker #1: And if so, is that having a material impact on that 6 points of guidance? Any numbers you could put around that?

Speaker #3: But that's not a one-year sale. It takes time. So it's not meaningfully moving it right now, but I think if you if we look back in three years, there's probably 100 million dollars of opportunity that's going to come that will be better trading together than it is having it go to other organizations.

Speaker #3: I'll let Doug talk about the numbers. But Andrew, I'll tell you that the consolidation of that wholesale work—which was, you're correct, spread between dozens if not hundreds of wholesalers—is going extremely well.

Speaker #3: AP was already about trying to figure out how to consolidate wholesale relationships. And as you know, we own RPS, and RPS has become—it's been a very good working relationship.

Speaker #3: So.

Speaker #8: Got it. And if I could just sneak one last one on the risk management. I mean, just such awesome numbers, 10 and 12 percent organic in the last two quarters.

Speaker #3: It's grown between the two. Now, we were trading with them before, but we're seeing some very nice synergies there.

Speaker #8: Could you size the universe out there or the market that's available to you to continue this kind of awesome growth?

Speaker #7: Yeah. Numerically, it's not moving the needle for overall Gallagher, but it is meaningful. Remember, our retail producers understand it needs to go to the place that's best for the customer.

Speaker #7: Yeah. Let's figure this one out, Andrew. 7 trillion dollars of premium in the global market. 5 of that-ish, 4 to 5 of that trillion is non-life, non-health.

Speaker #7: And I think there's an awareness build that's going on that RPS, and our techs and some of our other specialty lines, do provide a better solution for the client.

Speaker #7: So let's call it PC. I don't know what the personal lines number would be. About 65% of that turns into a claim every day.

Speaker #7: But that's not a one-year sale. It takes time. So it's not meaningfully moving it right now, but I think if we look back in three years, there's probably $100 million of opportunity that's going to come that will be better trading together than it is having it go to other organizations.

Speaker #7: I think we got plenty of market. Every year, not every day. Every year, about 60% of that trillions turns into a claim.

Speaker #3: Yeah. Let's say right now we're paying about 17 billion dollars of claims, plus or minus on that. And if Pat's math is right, you take 65% times 3 billion, maybe there's 1.8 sorry, 3 trillion.

Speaker #7: So.

Speaker #1: Got it. And if I could just sneak in one last question on the risk management side. I mean, just such awesome numbers—10% and 12% organic growth in the last two quarters.

Speaker #3: 1.8 trillion dollars of claims, and we're touching 18 billion of it. So it is a huge market with great opportunity. And it's a market where a one-size-fits-all claim adjuster doesn't work anymore.

Speaker #1: Could you size the universe out there or the market that's available to you to continue this kind of awesome growth?

Speaker #3: Yeah. Let's figure this one out, Andrew. $7 trillion of premium in the global market—about $4 to $5 trillion of that is non-life, non-health.

Speaker #3: You need deep, deep vertical claim resolution managers that are proficient in a deep vertical settling a coffee shop, slip and fall is not settling a trucking loss at 80 miles an hour.

Speaker #3: So let's call it PC. I don't know what the personal lines number would be. About 65% of that turns into a claim every day.

Speaker #3: It's a completely different.

Speaker #7: So trying to do comp in Ohio and in California. No problem. I'm licensed in both. Not going to work.

Speaker #3: I think we've got plenty of market. Every year—not every day, but every year—about 60% of that trillions turns into a claim.

Speaker #8: Sounds like you'll make a dent.

Speaker #7: Yeah.

Speaker #7: Yeah. Let's say right now we're paying about $17 billion of claims, plus or minus on that. And if Pat's math is right, you take 65% times $3 trillion, maybe there's $1.8—sorry, $3 trillion.

Speaker #3: You don't think we will?

Speaker #7: I think so. Thanks, Andrew.

Speaker #2: Thank you. Our final questions will come from the line of Mike Zarembski with BMO Capital Markets. Please proceed with your questions.

Speaker #6: Oh, great. Just quick numbers follow-up for Doug. On the 10% cash tax rate, as we think about modeling it cash flow in outer years, should we be just glide pathing that up to the gap tax rate over time, or is it more of a cliff after the in outer years?

Speaker #7: $1.8 trillion of claims, and we're touching $18 billion of it. So, it is a huge market with great opportunity. And it's a market where a one-size-fits-all claim adjuster doesn't work anymore.

Speaker #7: You need deep, deep vertical claim resolution managers that are proficient in a deep vertical. Settling a coffee shop slip and fall is not settling a trucking loss at 80 miles an hour.

Speaker #6: Thanks.

Speaker #3: Two things on that. I think the amortization will continue to refresh itself as we continue to do more M&A. So I think you're going to see that.

Speaker #3: It's the equivalent of an interest yield due in your capital asset pricing model. So if you think about that, that will refresh itself. When it comes to the tax credits, tax credits are becoming we're darn good at those.

Speaker #7: It's a completely different.

Speaker #3: So, trying to do comp in Ohio and in California—no problem. I'm licensed in both. Not going to work.

Speaker #1: Sounds like you'll make a dent.

Speaker #3: These are not loopholes. These are government-permitted credits, and we're good at it. And I think that we've got many years left to run through the 628 million dollars of credits that we have sitting on our balance sheet, but we do have other projects that we're looking at that might keep that number up.

Speaker #3: Yeah, I think so. Thanks, Andrew.

Speaker #2: Thank you. Our final questions will come from the line of Mike Zarembski with BMO Capital Markets. Please proceed with your questions.

Speaker #5: Oh, great. Just a quick numbers follow-up for Doug. On the 10% cash tax rate, as we think about modeling it for cash flow in the outer years, should we just glide-path that up to the GAAP tax rate over time, or is it more of a cliff after the outer years? Thanks.

Speaker #3: We might be able to continue to generate 100 or 200 million dollars of tax credits after those run out. We'll see what happens. The laws.

Speaker #3: And the rules but I think that we'll be in a position to be able to take a look at tax credit opportunities across a variety of fronts.

Speaker #3: And globally also.

Speaker #6: Okay. Thank you.

Speaker #7: Two things on that. I think the amortization will continue to refresh itself as we continue to do more M&A, so I think you're going to see that.

Speaker #7: Thank you. Again, all of you for joining us this afternoon. We delivered another excellent quarter and continue to execute against the same strategy that has guided Gallagher for decades.

Speaker #7: It's the equivalent of an interest yield due in your capital asset pricing model. So, if you think about that, that will refresh itself. When it comes to the tax credits, tax credits are becoming—we're darn good at those.

Speaker #7: We have stronger organic growth, a powerful active M&A strategy, successful integration across our recent acquisitions, and a culture that continues to differentiate us. Most importantly, to our more than 73,000 colleagues around the world, thank you.

Speaker #7: These are not loopholes. These are government-permitted credits, and we're good at it. I think we've got many years left to run through the $628 million of credits that we have sitting on our balance sheet, but we do have other projects that we're looking at that might keep that number up.

Speaker #7: Your talent, dedication, and commitment to clients are what makes this company great and that is the Gallagher way. Thank all of you for being with us and have a nice evening.

Speaker #7: We might be able to continue to generate $100 or $200 million of tax credits after those run out. We'll see what happens to laws and the rules, but I think that we'll be in a position to be able to take a look at tax credit opportunities across a variety of fronts.

Speaker #7: And globally also.

Speaker #5: Okay. Thank

Speaker #3: Thank you again, all of you, for joining us this afternoon. We delivered another excellent quarter and continue to execute against the same strategy that has guided Gallagher for decades.

Speaker #3: We have stronger organic growth, a powerful, active M&A strategy, successful integration across our recent acquisitions, and a culture that continues to differentiate us. Most importantly, to our more than 73,000 colleagues around the world, thank you.

Speaker #3: Your talent, dedication, and commitment to clients are what make this company great, and that is the Gallagher way. Thank you all for being with us, and have a nice evening.

Q2 2026 Arthur J Gallagher & Co Earnings Call

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