J. Patrick Gallagher
Chairman, President and Chief Executive Officer at Arthur J. Gallagher & Co.
Thank you. Good afternoon. Thank you for joining us for our fourth quarter 2021 earnings call. On the call with me today is Doug Howell, our CFO, as well as the heads of our operating divisions.
We had an outstanding fourth quarter. For our combined Brokerage and Risk Management segments, we posted 18% growth in revenue, 11% organic growth, net earnings growth of 11%, adjusted EBITDAC growth of 17% and we completed 18 new tuck-in mergers in the quarter, that's on top of closing our Willis Re merger. All told for the year, our merger strategy added more than $1 billion of annualized revenue. That's just fantastic. Needless to say, I'm extremely proud of how the team performed during the fourth quarter and the full-year.
So, let me give you some more detail on our outstanding fourth quarter performance starting with the Brokerage segment. During the quarter, reported revenue growth was an excellent 19%, of that 10.6% was organic, another sequential step up from the third quarter and the fourth consecutive quarter of improvement. Net earnings growth was 8%, adjusted EBITDAC growth was 17%. And we expanded our adjusted EBITDAC margin by 13 basis points in line with our December IR Day expectations. Remember, that's lower because of the natural seasonality of the Reinsurance acquisition, margins would have expanded nearly 90 basis points. So another great quarter for the Brokerage team.
Let me walk you around the world and break down the 10.6% organic, starting with our PC operations. First, our domestic retail business posted 13% organic, driven by excellent new business, higher exposures and continued rate increases. Risk Placement Services, our domestic wholesale operations, posted organic of 15%. This includes more than 30% organic in open Brokerage, and 5% organic in our MGA programs and binding businesses. New business was better than 2020 levels and near double-digit renewal premium increases helped, too.
Outside the US, our UK business posted organic of 12%, specialty, including our existing Gallagher Re business was up in the high-teens and retail was up 7%. Both fueled by new business and retention in excess of 2020 levels. Australia, New Zealand combined, organic was more than 8%, also benefiting from good new business and improved retention. And finally, Canada was up more than 13% organically and continues to benefit from strong new business trends, stable retention and renewal premium increases.
Moving to our employee benefit brokerage and consulting business. Fourth quarter organic was up about 7%, a couple of points better than our December IR Day expectation. We saw some nice sequential improvement over the course of 2021, up from the 2% organic we delivered in the first quarter, thanks to a rebound in global economy, declining US unemployment and increased demand for our consulting services as businesses look to grow.
Next, I'd like to make a few comments on the PC market. Overall, global fourth quarter renewal premium increases were above 8%, broadly consistent with the increases we saw during the first three quarters of 2021. Moving around the world, renewal premium change which includes both rates and exposure, up about 8.5% in US retail, including a 13% increase in professional liability, 8% in property and casualty and 4% in workers comp. In Canada, Australia, New Zealand and the UK, retail renewal premiums up between 7% and 9%, mostly driven by increases in professional liability and property. Within RPS, wholesale open brokerage premium increases were up 13% and binding operations were up 6%.
Shifting to Reinsurance, January 1 renewal showed price increases that vary by geography and client loss experience. Loss-free programs saw rates flattish to up 10%. While loss impacted accounts and cat-exposed property business experienced rate increases that were in many cases double that. So rate tended to be based on client-specific attributes and loss history. And I consider that to be a healthy outcome. So whether retail, wholesale or reinsurance, premiums are still increasing almost everywhere.
Looking forward, I see a difficult PC market conditions continuing throughout 2022. That's because our risk-bearing partners remain cautious on rising loss costs. For property coverages, replacement cost inflation and the increased frequency and severity of catastrophe losses are causing underwriters to rethink rate adequacy. On the casualty side, social inflation, low investment returns and the potential for increases in claim frequency as global economies further recover are all potential negative drivers of future underwriting profitability. And on top of higher loss costs and lower investment insurance, reinsurance costs are also increasing. So I think carriers will continue to push for rate and don't see a dramatic change in the near-term.
We shine in this type of environment by helping our clients find appropriate coverage while mitigating price increases throughout creativity, expertise and market relationships. I'm equally as upbeat on our employee benefit consulting and brokerage business. As you know, the first quarter seasonally our largest employee benefits quarter and is looking like the team had a strong annual enrollment season. Early indications are pointing to an increase in new client wins over prior year, consistent client retention and a slight increase in covered lives. With improved business activity and increased demand for goods and services, businesses are trying to grow their workforce, but the labor market remains extremely tight with more than 10.5 million job openings domestically and 6.3 million people unemployed and looking for work. This lays the groundwork for robust demand for our consulting services in 2022 as employers look to attract, retain and motivate their workforce.
So we finished 2021 with full-year organic of 8%, that's really nice improvement from the 3.2% organic we reported in 2020 and above pre-pandemic 2019 organic of 5.8%. And as we sit here today, we think 2022 organic will end up in a very similar range to 2021 and there is a case that it ends up even better.
Let me move on to mergers and acquisitions. It was great work by the team to close the Reinsurance acquisition in early December. Integration is well underway and progressing at a good pace. Remember, we are a seasoned integrator. On the revenue side, much like our tuck-in acquisitions, we've mobilized our local teams from retail, wholesale and even Gallagher Bassett to partner with our new colleagues and generate new revenue opportunities. I'm also very pleased that our combined Gallagher Re team hit the ground running and had a strong finish to the year. Financially, the acquisition added about $20 million of revenue in December and as expected, generated a small EBITDAC loss due to seasonality. More importantly, I'm already seeing examples of cross division cooperation and collaboration. So our new Reinsurance colleagues are quickly embracing our Better Together Gallagher culture.
Outside of Reinsurance, we completed 18 tuck-in brokerage mergers during the quarter, representing about $65 million of estimated annualized revenues. I'd like to thank all of our new partners for joining us and extend a very warm welcome to our growing Gallagher family of professionals. As I look at our tuck-in merger and acquisition pipeline, we have around 35 term sheets signed or being prepared, representing over $200 million of annualized revenues. We know all these will not close. However, we believe we'll get our fair share.
Next, I'd like to move to our Risk Management segment, Gallagher Bassett. Fourth quarter organic was 13.1%, a bit better than our December IR Day expectation, margins approached 19% in the quarter, leading to full-year adjusted EBITDAC margin of 19.1%. Another great quarter and full-year for that matter from the team. We saw more new arising claims within general liability and property and to a lesser extent co-workers compensation during the quarter. New COVID-related workers comp claims were similar to the third quarter, dated slightly by the late year surge in cases from Omicron variant. Regardless of the short-term variability of new rising claim activity, we feel really good about the business. Looking forward, continued strong retention, combined with new client wins in the fourth quarter should drive 2022 organic into the high-single-digit range.
So it was another fantastic year for our franchise and I'm extremely proud of our team and our collective accomplishments. Together, we produced 8.6% organic growth in our combined Brokerage and Risk Management segments, completed 38 mergers with more than $1 billion of estimated annualized revenue, more than 110 basis points of adjusted EBITDAC margin expansion. And we were recognized as one of the world's most ethical companies for the 10th year in a row by the Ethisphere Institute. And all this in the face of a pandemic. What a fantastic year. More than ever, our success is due to our bedrock culture. Our culture helps us deliver better results, better results for all of our stakeholders, including our customers, our colleagues, our underwriting partners, and of course, our shareholders. Every day, all of our teammates get up and work diligently to maintain our culture, to promote our culture and to live our culture. That truly is the Gallagher way.
Okay, I'll stop now and turn it over to Doug. Doug?