J. Patrick Gallagher Jr.
Chairman, President & Chief Executive Officer at Arthur J. Gallagher & Co.
Thank you, Laura. Good afternoon, and thank you for joining us for our second quarter 2021 earnings call. On the call with me today is Doug Howell, our Chief Financial Officer, as well as the heads of our operating divisions. We had an excellent second quarter. The team delivered on all four of our long-term operating priorities to drive shareholder value. We grew organically. We grew through acquisitions, improved our productivity, all while raising our quality and maintaining our unique Gallagher culture. For our combined Brokerage and Risk Management segments, we posted 17% growth in revenue, 8.6% organic growth, but it's over 10% when adjusted for timing, which Doug will spend some time on in a few minutes. Net earnings margin expansion of 107 basis points, adjusted EBITDAC margin expansion of 30 basis points, and we completed eight new mergers in the quarter with more than $70 million of estimated annualized revenue. Most importantly, our Gallagher culture continues to thrive. Just a fantastic quarter on all measures. Now before I discuss how each of our businesses performed in more detail, let me comment briefly about the termination of our agreement to purchase certain Willis Towers Watson brokerage operations. We were excited about the opportunity. I would have loved to complete the transaction.
There are a lot of great people at Willis, and they would have been a great addition to our team. But here's the key point. With or without this, we remain very well positioned to support our clients, compete for new ones and ultimately drive value for all of our stakeholders. We're in the greatest business on earth, our culture is stronger than ever, and I'm excited about our future. Okay. Back to our quarterly results, starting with our Brokerage segment. Reported revenue growth was strong at 16%. Of that, 6.8% was organic revenue growth, a little better than our June IR Day expectation and closer to 9% adjusted for timing. Our net earnings margin moved higher by 53 basis points, and our adjusted EBITDAC margin expanded by 23 basis points, highlighting our continued expense discipline. Another excellent quarter from the Brokerage team. Let me walk you around the world and break down our organization by geography, starting with our PC operations. First, our domestic retail operations were very strong with more than 8% organic. New business was excellent, nicely above second quarter 2020 levels. Risk Placement Services, our domestic wholesale operations, grew 12%. This includes nearly 25% organic in open Brokerage and 6% organic in our MGA programs and binding businesses.
New business and retention were both better than 2020 levels. Outside the U.S., our U.K. operations posted more than 9% organic. Specialty was 10% and retail was excellent at 9%, bolstered by new business production. Canada was up an outstanding 16%, fueled by rate and exposure growth on top of solid new business and retention. And finally, Australia and New Zealand combined grew nearly 4%, benefiting from good new business and stable retention. Moving to our employee benefit brokerage and consulting business. Second quarter organic was up about 4%, which is also ahead of our June IR Day commentary and another sequential step-up over first quarter 2021 and the second half of 2020. As business activity improves, we're seeing more favorable growth in our core health and welfare, fee-for-service and retirement consulting businesses, which is encouraging -- it's an encouraging sign for the second half of the year. So when I combine PC at 9-plus percent and benefits around 4%, total Brokerage segment organic was pushing 9% but with timing reported 6.8%. Either way, another really strong performance.
Next, I'd like to make a few comments on the PC market. Global PC rates remain firm overall, and at the same time, we are seeing increased economic activity across our client base. Customers are adding coverages and exposures to their existing policies, and monthly positive policy endorsements are trending higher than pre-pandemic levels. And overall, second quarter renewal premium increases were similar with the first quarter. Moving around the world. U.S. retail was up about 8%, including double-digit increases in professional liability. Canada was up 9%, driven by increases in professional liability and package. New Zealand was flat and Australia up 6%. Moving to the U.K., retail was up about 8%, with most classes of specialty business over 10%. And finally, within RPS, wholesale open brokerage was up 12%, while our binding operations were up 4%. So clearly, premiums are still increasing across nearly all geographies. Looking forward, it feels that the current renewal environment will persist for some time.
Carriers that cut back capacity in some of the less profitable lines of business like property, professional liability, umbrella and cyber have yet to budge on terms or conditions or haven't reverted back to offering more limits or lower attachment points. And elevated natural catastrophes, continued impacts of the pandemic, social inflation and low investment returns are all continuing to pressure rates. And on top of this, the potential for increased claim frequency as economies recover and carriers are making a strong case, the rate increases are likely to persist for some time. We, too, see the global PC environment remaining difficult for our clients, and that is likely to remain for the foreseeable future. Moving to our benefits business. Our customer base is returning towards pre-pandemic levels a little more slowly than headline-grabbing sectors like retail, leisure and hospitality. So we are expecting even better organic in the second half. Further, our HR consulting units are very well positioned to deliver solutions as clients and prospects pivot away from controlling costs to growing their businesses and attracting, motivating and retaining their workforce in 2021 and beyond.
So as I sit here today, I think second half Brokerage organic will be better than the first half and could take full year 2020 organic towards 8%. That would be a terrific step-up from the 3.2% organic we reported in 2020. Moving on to mergers and acquisitions. We completed seven Brokerage and one Risk Management merger during the second quarter, representing over $70 million of estimated annualized revenues. I'd like to thank all of our new partners for joining us, and I extend a very warm welcome to our growing Gallagher family of professionals. As I look at our tuck-in merger and acquisition pipeline, we have more than 40 term sheets signed or being prepared, representing around $300 million of annualized revenues. Our platform continues to attract entrepreneurial owners looking to leverage our data, expertise, tools and market relationships to grow their businesses. And we expect that our U.S. pipeline will grow in the second half of the year given the potential changes in capital gains taxes. So 2021 is setting up to be another successful year for our merger strategy. Next, I'd like to move to our Risk Management segment, Gallagher Bassett.
Second quarter organic growth was pushing 20%, better than our June IR Day expectations of mid-teens, and our adjusted EBITDAC margin exceeded 19%. We benefited from a revenue lift related to our 2020 new business wins, increased new arising claims within core workers' compensation and an easier pandemic-era comparison. Looking forward, the rebound in employment, economic activity and our solid new business should lead to third and fourth quarter organic nicely in double digits. For the year, we expect organic to be just over 10% and our EBITDAC margin to remain above 19%. So what an exciting time to be part of Gallagher. And that's because of our 35,000-plus employees and our unique Gallagher culture. It's our culture that keeps us together during the depths of the pandemic. And as we open offices around the globe yet preserving the flexibility we mastered over the last 16 months, I'm hearing the excitement about being back together. Ultimately, it's our employees that wake up every day and decide to do things the right way, the Gallagher way. That's what makes us different. It makes us special as a franchise. It attracts the very best people and merger partners and ultimately clients. I believe our culture has never been stronger. So with two quarters in the books, 2021 is shaping up to be an excellent year. Okay. I'll stop now and turn it over to Doug. Doug?
