Arthur J. Gallagher & Co. Q2 2022 Earnings Report

Arthur J. Gallagher & Co. EPS Results

• Actual EPS: $1.70
• Consensus EPS: $1.68
• Beat/Miss: Beat by +$0.02
• One Year Ago EPS: $1.17

Arthur J. Gallagher & Co. Revenue Results

• Actual Revenue: $2.04 billion
• Expected Revenue: $2.04 billion
• Beat/Miss: Beat by +$170.00 thousand
• YoY Revenue Growth: +5.70%

Arthur J. Gallagher & Co. Announcement Details

• Quarter: Q2 2022
• Date: 7/28/2022
• Time: After Market Closes
• Conference Call Date: Wednesday, July 27, 2022
• Conference Call Time: 9:21PM ET

Arthur J. Gallagher & Co. (NYSE:AJG) is a global insurance brokerage and risk management firm headquartered in Rolling Meadows, Illinois. Founded in 1927 by Arthur J. Gallagher, the company has grown from a regional broker into an international professional services organization that arranges insurance, provides consulting and designs risk-transfer solutions for commercial, industrial, public sector and individual clients.

The company's core activities include property and casualty insurance brokerage, employee benefits consulting and administration, and a range of risk management services. Gallagher offers advisory services such as claims advocacy, loss control, and risk assessment, and supports clients with wholesale and reinsurance placement capabilities. These services are delivered to businesses of varying sizes as well as to public entities, with an emphasis on customizing programs to industry-specific exposures.

Gallagher operates around the world, serving clients across North America, Europe, Asia-Pacific, Latin America, the Middle East and Africa, and has expanded its footprint through a long-standing acquisition strategy to broaden its geographic reach and service offerings. The company is publicly traded on the New York Stock Exchange under the ticker symbol AJG and is led by J. Patrick Gallagher, Jr., a member of the Gallagher family who serves in the company's executive leadership.

Arthur J. Gallagher & Co. Q2 2022 Earnings Call Transcript

Key Takeaways

• Q2 highlights: Combined Brokerage & Risk Management revenue rose 22% (10.7% organic), net earnings grew 35%, adjusted EBITDA was up 23%, and adjusted EPS increased 19%, with Brokerage delivering a 10.8% organic gain and a 32% EBITDA margin.
• Global organic growth was broad-based: U.S. Retail +11%, U.K. +8%, Australia/New Zealand +11%, Canada +14%, benefits +9% (excluding a large life case), and the Willis Re acquisition delivered about 7% organic growth.
• Full-year outlook has improved, with Brokerage organic growth now expected above 9% and Risk Management around 10% in Q3/Q4 despite tough comparables, while adjusted EBITDA margins for Risk Management remain near 19%.
• Market dynamics stay favorable as global P&C renewal premiums rose 10.5%, reinsurance pricing hardened (property up 15–40%), and midterm endorsements and cancellations showed no signs of weakening.
• Clean energy investments carry ~$1 billion of tax credits and are forecast to generate $125–150 million of incremental cash flow in 2022, supporting future cash generation.

Presentation

[Operator]

Good afternoon, and welcome to Arthur J. Gallagher & Company second quarter 2022 earnings conference call. Participants have been placed on a listen-only mode. Your lines will be open for questions following the presentation. Today's call is being recorded. If you have any objections, you may disconnect at this time. 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. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to the cautionary statements and risk factors contained in the company's 10-K, 10-Q, and 8-K filings for more details on its forward-looking statements.

[Operator]

In addition, for reconciliations of the non-GAAP measures discussed on this call, as well as other information regarding these measures, please refer to the earnings release and other materials in the investor relations section of the company's website. It is now my pleasure to introduce J. Patrick Gallagher, Chairman, President, and CEO of Arthur J. Gallagher & Company. Mr. Gallagher, you may begin.

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

Thank you. Good afternoon, everyone. Thank you for joining us for our second quarter 2022 earnings call. On the call for me today is Doug Howell, our CFO, as well as the heads of our operating divisions. We had another excellent quarter of financial performance. For our combined brokerage and risk management segments, we posted 22% growth in revenue, 10.7% organic growth, net earnings growth of 35%, adjusted EBITDAC growth of 23%, and adjusted earnings per share growth of 19%. I'm extremely proud of how our nearly 41,000 colleagues around the globe performed during the quarter and the first half of the year. Let me give you some more detail on our second quarter brokerage segment performance. During the quarter, reported revenue growth was 25%. Of that, 10.8% was organic.

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

We did have a tailwind of about 1 point from an infrequent large loss case that I'll touch on in a minute. Rollover revenues were about $240 million consistent with our June Investor Day expectations. Net earnings growth was 36%. As expected, we posted adjusted EBITDAC margins of 32%, an outstanding quarter for the brokerage team. Let me walk you around the world and break down our organic, starting with our P&C operations. Our U.S. retail business posted 11% organic with strong new business, retention, and continued renewal premium increases. Risk Placement Services, our U.S. wholesale operations, posted organic of 8%. This includes more than 15% organic in open brokerage and 4% organic in our MGA programs and binding businesses.

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

New business was consistent with second quarter of 2021, while retention was down just a bit from last year, as we noted in our June IR day. Shifting outside the U.S., our U.K. businesses posted organic of 8% with excellent new business overall and another double-digit organic growth quarter within specialty. Australia and New Zealand combined organic was more than 11%, driven by strong new business, stable retention, and higher renewal premium increases. Canada was up more than 14% organically and continues to benefit from renewal premium increases, great new business, and great retention. Moving to our employee benefits brokerage and consulting business. As I mentioned earlier, we were helped this quarter from a large life case.

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

Excluding this, our benefits business organic was about 9%, in line with our Investor Day expectations and driven by increased HR benefits consulting work and solid growth in our international and health and welfare businesses. Finally, our December reinsurance acquisition is right on target. After controlling for breakage prior to closing, second quarter organic was around 7%, just fantastic. Integration continues to progress nicely on budget and ahead of its original timeline. Reinsurance continues to be a really good story. Headline brokerage segment all in organic of 10.8% and upper 9% after controlling for the large life case. Either way, an excellent quarter. Next, let me give you some thoughts on the current P&C market environment, starting in the primary insurance market. Overall, global second quarter renewal premiums, that's both rate and exposure combined, were up 10.5%.

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

That's higher than what our data showed for increases in renewal premiums in both the fourth quarter 2021 and first quarter 2022. When I look at our renewal premiums by line for nearly all coverages, second quarter increases were equal to or higher than first quarter. One exception to this was professional liability, mostly D&O. By geography, renewal premiums were up double digits nearly everywhere. Again, that's a combination of both rate and exposure. Next to no slowdown in premium increases during the quarter. Additionally, we are not seeing any significant signs of economic slowdown. In fact, second quarter midterm policy endorsements, audits, and cancellations continue to trend more favorable than a year ago.

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

Thus far in July, midterm policy endorsements continue to move higher year-over-year, and renewal premium increases are consistent with second quarter. But remember, our job as brokers is to help our clients mitigate premium increases and find suitable insurance programs that fit their budgets. Moving to reinsurance. As we noted in our 1st View report published by our reinsurance professionals earlier this month, there are very real signs of hardening in the reinsurance market. Property reinsurance pricing is up across the board, and most notably for U.S. hurricane and Australian property risks, are up anywhere from 15% to more than 40%. On the casualty side, reinsurance placements experienced more modest price increases and were a little bit less challenging. Regardless, a firm or hardening reinsurance market will naturally show up in primary market rate increases.

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

There are many other reasons for our carrier partners to maintain their cautious underwriting stance outside of reinsurance market conditions. Inflation, geopolitical tensions, and economic uncertainty, to name a few. These all translate into difficult P&C market conditions continuing for our clients across retail, wholesale, and reinsurance for this foreseeable future. Moving to our employee benefit brokerage and consulting business, U.S. labor market conditions remain broadly favorable. Even with a decline in U.S. job postings in each of the last two months, there remain more than 11 million job openings. That's more than double the number of people unemployed and looking for work. We expect strong demand for our HR and benefits consulting services to continue as businesses prioritize attracting, retaining, and motivating their workforce.

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

The timing of the large life case and covered life changes in the second half of 2021 will cause the benefits business to post lumpy quarterly organic results this year. That doesn't change the still favorable underlying environment. Let me wrap up on the brokerage segment organic. A great first half and looking like the second half will lead us to a full year 2022 organic over 9%, which would be an absolutely terrific year. Moving on to mergers and acquisitions. During the second quarter, we completed 8 new tuck-in brokerage mergers representing about $50 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.

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

As I look at our tuck-in merger and acquisition pipeline, we have more than 40 term sheets signed or being prepared, representing nearly $350 million of annualized revenue. We know not all these will close. However, we believe we will get our fair share. Next, I would like to move to our risk management segment, Gallagher Bassett. Second quarter organic growth was 10.3%, a bit better than our IR day expectation due to a strong June. Adjusted EBITDAC margin was 18.9%, which is in line with our expectations. For the year, we continue to see adjusted EBITDAC margins near that 19% level. We again saw increases in new arising claims across general liability, property, and core workers compensation during the quarter. Encouragingly, property and liability claim counts are back to pre-pandemic levels.

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

Core workers comp claim counts have yet to fully rebound to 2019 levels, which represents a nice opportunity for further growth. Looking towards the second half of the year, we think organic revenue growth will continue to push 10% due to growing claim counts and new business. I'll conclude my remarks with some thoughts on our bedrock culture. As I resume traveling to our Gallagher offices around the globe, I can report to you that our culture is as strong as ever, and that's a reflection of our people, our nearly 41,000 colleagues working together for a common goal to serve our clients. As I've said before, our people underpin our culture, a culture that we believe is a true competitive advantage and drives our outstanding financial results. Okay, I'll stop now and turn it over to Doug. Doug?

[Doug Howell, CFO at Arthur J. Gallagher & Co]

Thanks, Pat, and hello, everyone. An excellent second quarter and terrific half. Today, I'll touch on organic, margins, and the corporate segment using the earnings release. I'll then make some comments using our CFO Commentary document posted on our website. I'll end then with my typical comments on M&A, debt, and cash. Okay, starting with the earnings release, to the brokerage segment organic table on page three. Fantastic headline all-in brokerage organic of 10.8%. As Pat said, we did benefit by about a point or so because of a large group life case bound in late June. With or without that, a great quarter by our sales team. As for the rest of 2022, during our June Investor Day, we said third and fourth quarter would be somewhere around 8% due to a tough benefits compare.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

As we sit today, we're still seeing third quarter around that 8%, reflecting about 1% of that tough benefits compare, and we're becoming more bullish on fourth quarter. Call it nicely over 8% in the fourth quarter. That would lead to full-year brokerage segment organic growth of over 9%. Today, we're forecasting full year organic growth better than what we were seeing at our June Investor Day. Next, turning to page 5 to the brokerage segment adjusted EBITDAC margin table. Headline all-in adjusted EBITDAC margin of 32%, right in line with our June Investor Day expectation. Recall what we've been saying all year. Because of the roll-in impact of the acquired reinsurance operations, which has substantial quarterly seasonality, and because there are still expenses returning as we come out of the pandemic, those in combination create quarterly margin change volatility.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

As a recap, we posted adjusted margins up 50 basis points in the first quarter, down 97 basis points here in the second, and we're forecasting down 100 basis points in the third, then back up 100 basis points in the fourth. Because we are seasonally largest in the first quarter, those results would roll up to around 10-20 basis points of full-year margin expansion. These quarterly margin changes are right on what we've been saying all year. When I think of the impact of inflation, I just don't see much here in 2022 on our expenses. As we discussed in June, headline inflation doesn't significantly impact 80% of our expense base. We have mitigation levers to pull on that other 20% if it comes to that. Even with rising CPI, we remain comfortable with our 2020 margin outlook.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

Looking towards 2023, all that quarter margin change volatility should go away with the pandemic behind us and reinsurance fully rolled into our books. Moving to the Risk Management segment on pages 5 and 6, Pat hit the highlights, 10.3% organic and 18.9% adjusted margins. An excellent quarter. This unit continues to show momentum with rebounding claim counts and a large new business win coming on next quarter. It's looking now like organic revenue growth of around 10% in each of third and fourth quarters 2022. Now remember, that's on top of 17% growth in third quarter 2021 and 13% growth in fourth quarter 2021. That would be a terrific outcome to overcome such a difficult compare. Moving to page 7 of the earnings release to the corporate segment shortcut table. Interest in banking is within our June Investor Day range.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

Adjusted M&A costs and clean energy, those combined also within our range. Corporate, after adjusting for some favorable tax items, slightly better than our June IR day range. Call it about a penny due to favorable FX remeasurement gains, given the strengthening in the dollar. Let's leave the earnings release and go to the CFO Commentary document. On page 3, these are our typical brokerage and risk management modeling helpers. With the rally in the U.S. dollar since our June IR day, please take a look at our updated FX guidance for the remainder of 2022. This late June strengthening also caused an extra penny headwind here in the second quarter versus our IR day guidance. Next, you'll see our current estimate of integration costs. Most of this is related to Willis Re.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

The punchline is no change to our original estimate of $250 million for integration charges through the end of 2024. As I mentioned last quarter, the team is making excellent progress and is executing at a faster pace than our original plan. Integration efforts around people, real estate, back-office transition services are targeted to be mostly done by late 2022. In fact, our new reinsurance colleagues are now moving into our combined Gallagher locations around the world, and there's an excitement that's coming together. As for technology and system rebuild, we still see having that done by the end of 2023, early 2024. Continued good news on the reinsurance integration front. Next, please take a look at the amortization of intangibles line. Recall, we now adjust that out of our non-GAAP results.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

Also, take a look at footnote number 2. That will help you reconcile this number to what we're showing on the face of our GAAP financial statement. Next to the change in estimated earn-out payable. This quarter, some component of the earn-out payable adjustment has become more pronounced. The punchline is found in footnote 5. The note admittedly is a little accountingese, but it's saying that the large non-cash gain in our results this quarter is mostly due to increases in interest rates and market volatility. When these increase, the value of our earn-out liability declines, thus creating GAAP income. This gain does not reflect any meaningful change to our expectations of the acquired brokerages, nor does it change our view of what we'll ultimately pay in earnouts.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

The accounting is a bit like the change in interest rate assumptions in pension accounting, except for this change in earnout liability goes to the P&L, not through OCI as does pensions. In our view, this is a no nevermind, but can dramatically impact comparability, so we adjust it out. Turning now to page four, our corporate segment outlook. No changes to third and fourth quarter estimates. Flipping to page five, clean energy. This page is here to highlight that we have around $1 billion of tax credit carryovers. With the sunset of the program late last year, we're now in the cash harvesting era of these investments. You'll see in the pinkish column that the 2022 cash flow increase should be $125 million-$150 million, and perhaps more in 2023 and beyond.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

At this rate, these investments will be a really nice seven-year cash flow sweetener. The possibility of an extension of the law still exists, so we have idled our plants rather than decommissioning them. Costs us a little to carry them, but it lets us remain well-positioned to restart production if an extension happens. Turning to page six. The top of the page is the rollover revenue table that we've spoken about in detail. We appreciate all those that have incorporated this disclosure into their models. Moving down the page, the bottom table is an update on our December reinsurance acquisition.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

You'll see that these numbers are almost spot on to our June IR day estimates. Delivering $730 million of revenue and nearly $260 million of adjusted EBIT here in 2022 would be very close to our pro formas when we inked the deal. That would be a really good outcome. Moving on. As to cash and capital management and future M&A, at June 30, available cash on hand was about $450 million. Our operations continue to perform very well, and we expect strong operating cash flows. You know, add to that the cash flow sweetener from our clean energy investments and additional borrowing capacity, it adds up to more than $4 billion of tuck-in M&A capacity here in 2022 and 2023 combined. Those are my comments.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

An excellent quarter and first half, and we're extremely well-positioned for another terrific year. Back to you, Pat.

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

Thanks, Doug. Darrell, I think we're ready to open it up to questions.

[Operator]

Thank you. The call is now open for questions. If you have a question, please pick up your handset and press star one on your telephone at this time. If you are on speakerphone, please disable that function prior to pressing star one to ensure optimum sound quality. You may remove yourself from the queue at any point by pressing star two. Again, that's star one for questions. Our first questions come from the line of Elyse Greenspan with Wells Fargo. Please proceed with your questions.

[Elyse Greenspan, Managing Director at Wells Fargo]

Hi. Thanks. Good evening.

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

Hi, Elyse.

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

Hi. My first question, Pat, you know, in June, I had asked you about a recession. You said you guys were not seeing it, and if you were gonna see any impact on your business, it wouldn't be in your results until 2023. I recognize, right, that we're sitting here six months in advance, you know, of hitting next year. You know, as you think about how things can play out from an economic slowdown, you know, we have inflation, still good property casualty pricing. How could that all shake out from an organic growth perspective, next year just as you see things today?

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

I think it's not all that different than the discussion that we had in June. We're seeing literally, we look at this daily, an interesting pattern of our underlying clients' businesses doing well. They're still recruiting people. Our benefits HR folks are as busy as they can possibly be. We watch for adjustments both in terms of audits and endorsements, and those are all positive right now. To put that in perspective, we do have a baseline on that during the pandemic, and it was, I mean, that was obviously substantially upside down. We do have a good feel for that, and we feel good about it. Inflation, as Doug said, really has an impact on about 20% of our expenses.

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

I think that's probably good research on the team's part in terms of what's really subject to that we'll be watching. As you know, we're going into budget time in the next six weeks or so, and there's a lot of discussion around this. So don't hold me to it, but I think that we're in a pretty good spot. I think our mix of business bodes well. You know, I think that the way our expenses shake out, an awful lot of those expenses are variable. I think that's good. A lot of upside for our salespeople this year, obviously. I think that with rate increases, with interest rates up, it's a pretty good environment for a broker.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

Yeah, let me pile on that a little bit, 'cause we did a little whiteboarding on that. Like Pat said, we're not seeing daily indications of our customers' growth slowing at this point. Now admittedly, that's looking at current and recent past activity. I think your question is really more about a future slowdown. When we looked at that, you know, what kind of cooling might we see, whether it's a recession or just a slowdown in the economy because obviously not every recession is the same. We did a lot of work on that. We see, if it happens, and I say if more like a normal recession, maybe more like 1990, 1991, and again on what happened maybe in 2000, 2001, before 9/11.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

We do not see next year being a clinch like the subprime, you know, financial shock recession of 2007 or 2008, or the pandemic recession for a few months of 2020. It's also important to note that these more normal recessions in the early 1990s and early 2000s both lasted about eight months. We see it more like that. It's an important point to remember that brokers, we earn a very large portion of our revenues based on the amount of premium placed. If it goes up because of rate or because of exposure, frankly, we're a little indifferent on that. For us, we think that, like, taking a look at nominal GDP is the bigger factor for our revenue, much more than real GDP.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

Absolute sales, payroll, like Pat said, and property values are what, you know, premiums are placed on. You say, well, what costs in next year? What will premium rate increases do? You heard us say that we don't see them slowing over the next year or so. Really our spread between new business and lost business, you know, we're proficient brokers, so it's selling more insurance than we lose every year. When we put all that together for next year, you know, the brokerage business during a normal recession, during an inflating premium rate environment can still post terrific organic results. That's how we're seeing it now.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

I talked to you about on the expense side during June, that we think that we have some mitigating factors for that 20% that might be highly exposed to the inflation component of that. It's a long answer to your question between Pat and I on it, but we think 2023 could still be a year of terrific organic growth.

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

Well, let me lob in another thought, too, Elyse, we didn't talk about in June. If you go back to 2007, 2008, you go back to the financial crisis, we learned again, which we have through many tough times, that our clients will stop paying their people before they stop paying their premiums. That's a pretty good business to be in regardless of the economy.

[Elyse Greenspan, Managing Director at Wells Fargo]

Thanks, thanks for the real thorough answer. My second question is maybe more short term. Doug, you said the fourth quarter brokerage outlook is a little bit better, right, than at the June Investor Day. What's the reason for that?

[Doug Howell, CFO at Arthur J. Gallagher & Co]

I just think sustained rate increases and, you know, our teams are doing a great job of selling more than they're losing. I think that just the environment seems to be better. You know, we're starting to see data come out of what's happening with second quarter rates versus first. There might have been just a little bit of rate drop in the first quarter, and that seems to be back on a positive slope now. You know, you see that kind of in first quarters when you go back over the last few years, that maybe rate increases aren't quite as big as they are in later quarters, because you get.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

For the carriers, they get the full year of the unearned premium in the books by being maybe a little bit more competitive in the first quarter. Second quarter bounce back up again. I think that we've had a chance to look at what's in our pipeline. I would say it's on all fronts, we're just feeling more optimistic about where we're seeing the second half.

[Elyse Greenspan, Managing Director at Wells Fargo]

One last one. You guys gave the M&A color, so it seems like you still have a good pipeline. Do you think there could be any timing shift in when deals get closed if people are concerned about a recession? I mean, if they're just potentially waiting to get a better multiple or, you know, have you not observed that in the past, or do you not expect that to happen this time around?

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

No, I think brokers are opportunistic, smart people. If I had a business to sell, now is when I'd sell it.

[Elyse Greenspan, Managing Director at Wells Fargo]

Okay. Thanks for the color.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

Thanks, Elyse.

[Operator]

Thank you. Our next question comes from the line of Yaron Kinar with Jefferies. Please proceed with your questions.

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

Good evening.

[Yaron Kinar, Analyst at Jefferies]

Hi, good evening. Congrats on a good quarter.

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

Thank you.

[Yaron Kinar, Analyst at Jefferies]

First question, the large life case that you mentioned, what's the margin profile on that? Is that accretive or dilutive to the overall brokerage business?

[Doug Howell, CFO at Arthur J. Gallagher & Co]

It's about the same. It doesn't have the leverage as you would see in some of the other incremental amounts.

[Yaron Kinar, Analyst at Jefferies]

Okay. Was FX, did that have an impact on margins or only on revenues?

[Doug Howell, CFO at Arthur J. Gallagher & Co]

Well, we adjust that out of our margin profile, so it'd be just on the revenue side.

[Yaron Kinar, Analyst at Jefferies]

Okay. Another one. I know you said you haven't fully closed the books on clean coal, holding out hope that maybe you do see some extension come through in D.C. I guess, with the Democrats kind of coming to agreement in the Senate this week or actually today, I think, is it so premature to say what you've learned from that or if there's maybe an increasing chance of that clean coal credit continuing or extending?

[Doug Howell, CFO at Arthur J. Gallagher & Co]

Well, it's a 742-page draft bill that we're gonna do a lot of word searches on it. I'm not seeing our position in that. If you get into the kind of vote-a-rama in the Senate next week to see what other senators might want to include in the package or look at it, I think that you know, we're never out of it until we're not. Even if it doesn't come through in this package, it could be later in the year, too. It doesn't cost us that much to carry the plans. Our utility partners have been very understanding about this. They're not pressing us to decommission. Or look, if we have to carry it for another 6 months, we will.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

If it happens, it'd be great. If not, we're in the cash harvesting era, just like we thought about, you know, for the last 15 years. We're at that point now. Harvesting the cash is pretty nice.

[Yaron Kinar, Analyst at Jefferies]

All right. To be continued. Good luck with the rest of the year.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

Thanks, Yaron. Thank you very much.

[Operator]

Thank you. Our next question comes from the line of David Motemaden with Evercore. Please proceed with your questions.

[David Motemaden, Senior Managing Director at Evercore ISI]

Hi. Thanks. Good afternoon. I appreciate all the detail just on the midterm policy endorsements, audits. I guess I'm wondering, you know, just on the employee benefits business, maybe you could talk about what you're seeing there on HR consulting and benefits consulting, specifically with the pipeline. Any changes there? Any signs of weakness at all that you're seeing?

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

No, I'll tell you, it's really interesting to see. As you can imagine, I think we talked about this when the pandemic hit, that business shut down in a quarter. Now, what an interesting turnaround for our clients. Now, their biggest problem is attracting and retaining. There is this demand, frankly, at a level that exceeds what we saw pre-pandemic. I think in that case, things were kinda going along well, you know, everything was kinda fine, and then everyone tried to, you know, come down to the lowest amount of employee base they could. Now they're coming back. Their businesses are back. As we said, when we looked at our adjustments and endorsements and audits, our clients' businesses so far are robust. That's a demand that creates a demand for more people.

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

I mean, I can't get specific with you by exactly which practice group. It's the entire consulting part of our employee human resource and human capital business is doing extremely well this year.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

Yeah. Let me add to that. During the pandemic, people were all about cost containment.

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

Right.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

They cut down their costs, and they would cut any discretionary costs. It's regardless of what happens with this recession and all the Fed actions. I think I just don't believe that it's gonna have a dramatic impact on unemployment. I think that employers are really thinking about attracting, retaining, and motivating their talent. I just don't see any type of 8-month or year-long recession putting a dent in the employment numbers. Employers are still gonna have to make sure they're out there competing for talent, and that's where we really provide value. I don't see this like the pandemic or in 2008 again. We see it a lot if it happens like 1990 and 2000, and there was still a war for talent back then too.

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

Let me give you an example, David. This is one that kind of floored me in the last month. I won't mention any names, but we have a sizable client that has engaged us on a multimillion-dollar contract to improve and help them with their communication with their employee base. This is a significant client, obviously, but they are willing to spend multiple millions of dollars in an outreach to existing employees to make sure they understand why they've got it so great being part of their organization. Communicating what are in the benefits plans, why they take care of them, how they're educating, what the career path is, what the growth of the company means, all those things that go into a solid communication plan, how cool is that?

[David Motemaden, Senior Managing Director at Evercore ISI]

No. I mean, that is exciting. Yeah, it definitely doesn't sound like at least now you're seeing really any sign of a slowdown. I guess maybe just switching gears, if I think about, you know, if we do see a slowdown and, you know, next year. I guess one thing that I've noticed the past couple quarters in the press release, sort of in the fine print, there's been mention of office consolidations. I believe you spoke, Doug, I think last on the June call about the agile workforce strategy.

[David Motemaden, Senior Managing Director at Evercore ISI]

I guess could you maybe just talk a little bit more about what you're doing on the real estate front, and if you know, maybe that could be a bigger benefit or a bigger lever to pull if we do get into a tougher revenue backdrop. Maybe if you could put some numbers around potential saves, that would also be helpful.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

Yeah, I think when we talked about it early, you know, when we were coming out of the pandemic, we thought there could be $30 or $40 or $50 million of annualized savings coming from real estate. I think we're still on target about that. I think we're harvesting maybe about $8 million a year on that effort, and there's a couple big office footprints that are coming up here in the next, in the next year that I think that maybe we'll be a little bit more on that, over this next year. What are we doing? We're going to an office footprint that'll.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

That basically is covering 50% or so of the number of employees that we have, where we're bringing technologies to bear so that they're agile within the work, so they're not dedicated locations. For those employees that have to come in every day, clearly, they have a designated spot. We're finding that the employees are responding to it very well, especially in cities where there's a substantial commute. I see us continuing to do that. I don't know whether it would be a more rapid exercise if we had a normal recession over the next year. I think the pace that we're making change is the pace that the organization have. I, you know, you gotta.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

Either you wait till the lease expires and then downsize, or you get out of it, and you end up paying the rent to the rest of the term. I think a paced and measured approach to that is where we are, and I don't see that changing if there was a normal recession happening over the next year.

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

I'll tell you, again, on the anecdote side, you know, these plans were afoot, Doug leading the charge on this, prior to the pandemic. I don't know about your experience, but my experience in telling people that this isn't their workstation anymore or that office is. It's not a good experience. People being able to go home and get their job done and come back in the office where we do believe the social connections are important, and we're not eliminating our footprints, but allowing them to plug in a plug-and-play way on the days that they should be there for customer contact, for employee meetings. It's kinda like the pandemic was a real helper.

[David Motemaden, Senior Managing Director at Evercore ISI]

Yeah. No. Sorry. Go ahead.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

If you leave the offices too big, it can kinda look like there's no vibe going on in the office. We do a lot of things to make sure that we can track the workforce or the footprint to respond to the workforce. It's like going into a restaurant and every other table's empty. It doesn't feel like there's much of a vibe. Same number of people in a smaller restaurant, you walk out and say, "Wow, that was really a happening place tonight." We're trying to make those experiences when people come into the office more collaborative, more near one another, and it's actually working. We were just in London not too long ago, and there's a real bounce in everybody's step when they come into a full office.

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

Yeah, Doug's just trying to do the age thing on me because I go to a full restaurant, I can't hear.

[David Motemaden, Senior Managing Director at Evercore ISI]

Yeah, no, agree with all of those changes. Yeah, it sounds like $20 million-$30 million of a benefit, but it sounds like that's, you know, maybe a bit more gradual unless things change.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

Yeah, I mean, over a couple of years, two and a half years, we'll get it.

[David Motemaden, Senior Managing Director at Evercore ISI]

Great. Thank you.

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

Thanks, David.

[Operator]

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 Greg Peters with Raymond James. Please proceed with your questions.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

Hey, Greg.

[Greg Peters, Managing Director at Raymond James]

Good afternoon. Hey, good afternoon, everyone. You provided a pretty robust answer about the recession or a potential recession and its effect on your brokerage business. In your answer, you kind of didn't really talk about its effect on the risk management business. Maybe, or if you did, I missed it, because I was more focused on brokerage. Maybe you could pivot and just tell us about your whiteboard sort of conclusions on the effect of a potential recession on the risk management business.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

I don't think there was substantial employment changes in a normal recession. With Gallagher Bassett being so tied to the number of people employed in places where there might be slips and falls, et cetera, I think that I'm not saying they're immune to it in this next normal recession, but I think that they're pretty resilient in that right now. Same thing with the benefits business. There's still a competition for talent. I think that you heard Pat say that there's 11 million open jobs right now for. And there's 5 million people out of work or something like that. I personally believe that this next, if there's a slowdown, it's about drying up excess demand versus supply. Scott pays claims on what the supply is, not the demand.

[Greg Peters, Managing Director at Raymond James]

Right.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

You know, we sell stuff on supply, not demand. I think that his business

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

Yeah, Greg, you heard us say that of all the lines of cover right now that are adjusted by Gallagher Bassett, work comp is still the one line that's not, and it's our core business in the U.S., is not back to pre-pandemic claim counts. It takes a while to build that back. That's, as Doug said, directly connected to the employee headcount. If employee headcounts get slashed, that will have an impact on Scott's business if they stay stable. What we're seeing on the benefit side is aggressive hiring, aggressive attempts at retention, and I think, you know, we're in pretty good shape.

[Greg Peters, Managing Director at Raymond James]

I was just, you know, as you were providing the answer, I was recalling an old adage. I never really tested it out to know whether it was true or not. You know, as there was an onset of recession, workers' comp claim counts would actually increase as more employees fearing the worst would slip and fall in advance of actually, you know, facing the grim reaper. I don't know if that's something that is.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

I think that's an old wives' tale.

[Greg Peters, Managing Director at Raymond James]

Yeah. Yeah. Exactly. Okay.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

One thing on that, one thing to add, that as workers' comp premium rates increase, and we're not, you know, we're not fully into big jumps in workers' comp, but if we get a harder market in workers' comp, that will push more people to self-insurance, and that leads to pretty good growth for Gallagher Bassett too. When they look at self-insurance as an alternative. If we go into a recession, but workers' comp rates go up as medical costs inflate, et cetera, you might have more people looking for self-insurance with Gallagher Bassett paying the claims.

[Greg Peters, Managing Director at Raymond James]

Is it your view that the work from home versus work from work is one of the contributing factors to the lower claim count in workers' comp, at least from what you're seeing at Gallagher Bassett?

[Doug Howell, CFO at Arthur J. Gallagher & Co]

No, not really.

[Greg Peters, Managing Director at Raymond James]

Okay. Two other questions. From your previous answer regarding where your real estate footprint, should I infer that about 20,000 or so of your employees are in full work from home? If you said your property is targeted, your

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

No.

[Greg Peters, Managing Director at Raymond James]

real estate footprint is

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

No. Gallagher Bassett has moved to a more virtual environment, and people are embracing that and really like that. The brokerage business is allowing agile work. We're working to be agile and to be flexible, but these office footprints can actually handle everybody coming in at the same time, and we are encouraging people to come in.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

Yeah, I think, Greg.

[Greg Peters, Managing Director at Raymond James]

Got it.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

The number of people that actually are designated as purely work-from-home employees might be in the 8,000-person range.

[Greg Peters, Managing Director at Raymond James]

Okay.

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

A big part of that, GB.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

Right.

[Greg Peters, Managing Director at Raymond James]

I'm sorry, what was that last answer, Pat?

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

A big part of that is Gallagher Bassett.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

Right.

[Greg Peters, Managing Director at Raymond James]

Okay. The final just detail question, and I'm sure you've probably provided this before, but I just forget. Is there any cadence to how the cash flow comes out from the energy business as we think about the annual sort of. Is it heavier in the first quarter where you're harvesting it, or is it spread out evenly, et cetera?

[Doug Howell, CFO at Arthur J. Gallagher & Co]

It probably more closely correlates to the days that we do our estimated tax payments because we can anticipate using those credits, and therefore, we would pay less in estimated tax payments.

[Greg Peters, Managing Director at Raymond James]

That's, like, done on a quarterly basis, correct?

[Doug Howell, CFO at Arthur J. Gallagher & Co]

That's right.

[Greg Peters, Managing Director at Raymond James]

Got it. All right. Thanks for your answers.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

Thank you, Greg.

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

Thanks, Greg.

[Operator]

Thank you. Our next question has come from the line of Mark Hughes with Truist Securities. Please proceed with your questions.

[Mark Hughes, Analyst at Truist Securities]

Yeah, thank you. Good afternoon.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

Hi, Mark.

[Mark Hughes, Analyst at Truist Securities]

Pat, the renewal premium number you gave us at 10.5%, was that for the global P&C market?

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

Wait a minute, Mark. I don't think I gave you one, renewal premiums. Take a look.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

Yeah. Well, I understand what you're asking about the global second quarter renewal premiums. That's both rate and exposure, we're up 10.5%.

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

Yes. Yes.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

Yes, that's right. That's higher than.

[Mark Hughes, Analyst at Truist Securities]

Yeah. That was 8% on the first quarter. Do I have that straight?

[Doug Howell, CFO at Arthur J. Gallagher & Co]

I'd have to pull out the script on that, but it.

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

I do think that's right.

[Mark Hughes, Analyst at Truist Securities]

I'll say this slightly tongue in cheek, but also seriously, do you know if West Virginia Senator Joe Manchin, does he like the clean coal business?

[Doug Howell, CFO at Arthur J. Gallagher & Co]

Well, I think he does. I mean, we've got a lot of interest in it. The real question is he willing to sponsor a change in this, as a part of a compromised plan. We'll find that out over the next week or 10 days or 10 months, right? I don't think-

[Mark Hughes, Analyst at Truist Securities]

Yeah

[Doug Howell, CFO at Arthur J. Gallagher & Co]

He'd be opposed. Is it really? It's a pretty small program, to be honest. I think that if they're trying to get a deal done, is this something that he's willing to champion? Maybe not, but we'll see what happens when we get into next week.

[Mark Hughes, Analyst at Truist Securities]

In the MGA business within wholesale, the 4% organic, do you think that'll continue at that level, or is there anything unusual this quarter?

[Doug Howell, CFO at Arthur J. Gallagher & Co]

No, I think it's pretty. It's just the nature of some of those programs at MGU.

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

Yeah, that should hold.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

should hold, if not be better.

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

That stuff is pretty subjective, Mark, to the economy. You know, it's bars opening, restaurants opening, contractors starting with a wheelbarrow. Houses that get hit by hail a lot.

[Mark Hughes, Analyst at Truist Securities]

Yeah. Okay. Did I hear you comment on workers' comp pricing? I know you talked about claims frequency and a lot of other factors, but how about pricing in the quarter?

[Doug Howell, CFO at Arthur J. Gallagher & Co]

Flat on rate amounts.

[Mark Hughes, Analyst at Truist Securities]

Okay

[Doug Howell, CFO at Arthur J. Gallagher & Co]

It's growing. It's actually showing some nice mid-single digit type growth numbers right now.

[Mark Hughes, Analyst at Truist Securities]

Rates are flat.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

That's right.

[Mark Hughes, Analyst at Truist Securities]

Yeah. Yeah. Okay.

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

It seems to be aligned.

[Mark Hughes, Analyst at Truist Securities]

Thank you very much.

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

Seems to be aligned that our carrier partners are happy to continue to grow and are satisfied with the results.

[Mark Hughes, Analyst at Truist Securities]

Yep. Understood. Appreciate it.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

Thanks, Mark.

[Operator]

Thank you. Our next question has come from the line of Meyer Shields with KBW. Please proceed with your questions.

[Meyer Shields, Managing Director at KBW]

Great. Thanks. Just a couple of quick ones. First off, when we look at supplementals and contingents, as a percentage of core commissions and fees, they're down year-over-year. Is that reinsurance?

[Doug Howell, CFO at Arthur J. Gallagher & Co]

It could have an impact. Yes, that would be. I think a good point on that are supplementals and contingents. There is some difference in contracts year-over-year, so it's always good to look at those two together, not individual. But together, they're up 12% this quarter together.

[Meyer Shields, Managing Director at KBW]

Okay. Perfect. Second question on reinsurance. How comfortable are you with the idea that the breakage that you factored in goes away once we get into 2023? Is that gonna be a factor anymore?

[Doug Howell, CFO at Arthur J. Gallagher & Co]

I would say it's behind us. We've done a really good job of holding the teams in. We're not having substantial attrition on that. In fact, I think we're in good shape on that. I would not expect. You know, we anticipated what we get from breakage and, you know, the team's holding it together. That leadership team has done a amazingly good job.

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

I've talked about this quarter in and quarter out. I am really, really happy with and proud of the fact that that team joined us. 7% organic growth in the second quarter after the 2-3 years that they had prior to an acquisition getting completed in December. We're 9 months into this thing, and they're generating 7% organic. That's fantastic. We were sitting there, you know, talking about breakage early on. Is there gonna be more? Let's be honest, breakage is people left us, and accounts in that business like to work with their team. People staying, producing. The other thing I would comment on is the amount of interaction and the amount of help that reinsurance is to our retail brokerage operations on a global basis is exceeding our expectations.

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

There are risk-sharing pools in the United States that we've done longer and better than anybody in the marketplace, and along comes a fresh look and fresh markets and a team that works together with us. The data sharing, the discussion of our partner markets and the sharing there, it's almost unbelievable to me on a multiple number of levels how good a fit this is.

[Meyer Shields, Managing Director at KBW]

No, that's tremendously positive. One last question. I know this is nitpicky, but the large life deal that came in June, is that something that recurs next year, or is this a one-time deal?

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

One-time deal.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

We get them from time to time, but I wouldn't say that they're annually predictable year over year.

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

Right.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

That they insult when they.

[Meyer Shields, Managing Director at KBW]

I'm sorry.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

They bind when they bind. It's not like it's saying you've gotta have this all put to bed by January one or by October one. It doesn't really drive necessarily with the calendar or fiscal year of the client. It's whenever they want to put these cases in place is when they will bind. It would not be predictable quarter-over-quarter.

[Meyer Shields, Managing Director at KBW]

Okay, that's perfect. That's what I needed. Thank you.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

Thanks, Meyer.

[Operator]

Thank you. Our next question is coming from the line of Weston Bloomer with UBS. Please proceed with your questions.

[Weston Bloomer, Analyst at UBS]

Hi, thanks for taking my questions. My first one's on just a follow-up on Willis Re. Obviously, good organic there of 7%. The investment's ahead of schedule. I'm curious how you're thinking about growth and margin improvement in that business in 2023. Could we potentially see, you know, organic come in above the 7%? How should we think about potential margin improvement? Would it potentially grow faster than the core portfolio currently?

[Doug Howell, CFO at Arthur J. Gallagher & Co]

Well, remember that margin for the year is somewhere around 36%. I think that we're very happy with that margin. I think holding that margin is the right answer for that business. It takes heavy investment. They've been under-invested for the last three or four years on that. That is not a business, if you go back to our acquisition, that was expecting substantial margin change on that. We're happy with the margins the way they are. We think they're competitive. Sure, there'll be opportunities for us to become more efficient and, you know, we do that every year. We always become more efficient. I think there's a ripe opportunity right now to hire brokers in that space that would like to join us.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

It's a hot thing going right now, so it'd be nice to take and hire folks into that business. I think it's 34% for the year is where we are.

[Weston Bloomer, Analyst at UBS]

Got it. Thank you. My follow-up is just on M&A. Curious on what you're seeing on the international M&A market. Is that more attractive from a multiple perspective or a competition perspective right now? Or is maybe your term sheet disclosure more international US weighted versus historical? Just kind of curious on what you're seeing.

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

More international weighted. It's not more international weighted, it's about the same. Multiples around the world, you can throw a hat over them.

[Weston Bloomer, Analyst at UBS]

Got it. Thank you.

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

Thanks, Weston.

[Doug Howell, CFO at Arthur J. Gallagher & Co]

Thanks for being on the call, Weston. Nice to hear from you.

[Operator]

Thank you.

[J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co]

All of you, by the way. Doug, let's not single any out here. All right, I think that's our questions for now. I'd like to thank everyone on the call again for joining us. Obviously, we're excited. We had a fantastic second quarter and first half of 2022. I'd like to thank all our colleagues around the globe for their hard work, our carrier partners for their ongoing support, and our clients for their continued trust. We look forward to speaking to you again at our September Investor Day meeting, and thank you all, everyone for being with us.

[Operator]

Thank you. This does conclude today's conference call. You may disconnect your lines at this time. Thank you for your participation, and have a great day.

Participants

Analysts

• David Motemaden, Senior Managing Director at Evercore ISI
• Doug Howell, CFO at Arthur J. Gallagher & Co
• Elyse Greenspan, Managing Director at Wells Fargo
• Greg Peters, Managing Director at Raymond James
• J. Patrick Gallagher Jr, Chairman, President, and CEO at Arthur J. Gallagher & Co
• Mark Hughes, Analyst at Truist Securities
• Meyer Shields, Managing Director at KBW
• Weston Bloomer, Analyst at UBS
• Yaron Kinar, Analyst at Jefferies