Earnings call transcript: Arthur J. Gallagher Q4 2024 beats EPS forecast

Arthur J. Gallagher & Co . (NYSE:AJG) reported its Q4 2024 earnings, surpassing analysts’ expectations with an adjusted EPS of $2.51, compared to the forecasted $2.06. The company’s revenue reached $2.68 billion, slightly below the anticipated $2.71 billion. Following the earnings announcement, AJG’s stock rose by 1.41% in after-hours trading, closing at $299.03.

Key Takeaways

• Adjusted EPS of $2.51 exceeded forecasts by 22.3%.
• Revenue fell short of expectations at $2.68 billion.
• Stock price increased by 1.41% post-earnings.
• Full-year revenue growth of 15% with organic growth at 7.6%.
• Significant expansion in technology and service capabilities.

Company Performance

Arthur J. Gallagher & Co. demonstrated robust performance in Q4 2024, with a notable 12% increase in revenue and a 17% growth in adjusted EBITDA. The company’s focus on expanding its data and analytics capabilities, along with enhancing consulting and claims management services, contributed to its success. The insurance market’s growth, coupled with strategic mergers and acquisitions, positioned AJG favorably against its competitors.

Financial Highlights

• Revenue: $2.68 billion, up 12% year-over-year.
• Adjusted EPS: $2.51, a 15% increase from the previous year.
• GAAP EPS: $1.56.
• Adjusted EBITDA margin: 31.4%, up 145 basis points year-over-year.

Earnings vs. Forecast

Arthur J. Gallagher & Co. reported an adjusted EPS of $2.51, significantly surpassing the forecast of $2.06 by 22.3%. However, revenue fell slightly short of the expected $2.71 billion, coming in at $2.68 billion. The EPS beat marks a strong performance relative to previous quarters, highlighting the company’s effective cost management and strategic growth initiatives.

Market Reaction

Following the earnings announcement, AJG’s stock price increased by 1.41%, reflecting investor confidence in the company’s financial health and growth prospects. The stock’s movement aligns with broader market trends, as investors respond positively to the earnings beat despite the revenue shortfall. AJG’s stock remains within its 52-week range, indicating stability amid market fluctuations.

Outlook & Guidance

Looking ahead, Arthur J. Gallagher & Co. projects organic growth of 6-8% for its brokerage and risk management segments in 2025. The anticipated closure of the Assured Partners acquisition in Q1 2025 is expected to bolster the company’s revenue further. AJG plans to continue investing in technology and expanding its service centers, aiming for continued margin expansion.

Executive Commentary

CEO J. Patrick Gallagher, Jr. emphasized the company’s strong cultural foundation, stating, "Our culture is unstoppable and that is the Gallagher Way." CFO Doug Hall noted the impact of rising rates on customer coverage choices, while Gallagher highlighted the company’s competitive edge, saying, "We’re pulling away from [smaller brokers] more and more with our capabilities."

Risks and Challenges

• Potential impacts from global economic uncertainties.
• Integration challenges with recent acquisitions.
• Market competition from numerous smaller brokers.
• Regulatory changes in the insurance industry.
• Health inflation affecting cost structures.

Q&A

During the earnings call, analysts inquired about the impact of California wildfires, lower contingent revenues, and the company’s reinsurance performance. Executives addressed concerns about health inflation and detailed the strategy behind the Assured Partners acquisition, emphasizing its potential to enhance AJG’s market position.

Full transcript - Arthur J Gallagher & Co (AJG) Q4 2024:

Conference Operator: Good afternoon, and welcome to Arthur J. Gallagher and Company’s 4th Quarter 2024 Earnings Conference Call. Participants have been placed on 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. 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 could 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 ks, 10 Q and 8 ks filings for more details on such risks and uncertainties.

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, Jr, Chairman and CEO of Arthur J. Gallagher and Company. Mr.

Gallagher, you may begin.

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.: Thank you very much. Good afternoon and thank you for joining us for our Q4 ’twenty four earnings call. On the call for me today is Doug Hall, our CFO, other members of the management team and the heads of our operating divisions. Before I get to my comments about our financial results, I’d like to acknowledge the tragic wildfires in California. Our heartfelt thoughts are with all of those impacted including our own Gallagher colleagues.

Our company and industry has such an important role and responsibility helping families, businesses and communities rebuild and restore their lives. And like many times before, Gallagher and the industry will rise to the occasion. Okay. On to my comments regarding our financial performance, we had an excellent Q4. For our combined Brokerage and Risk Management segments, we posted 12% growth in revenue, our 16th consecutive quarter of double digit revenue growth.

7% organic growth, reported net earnings margin of 13.5%, adjusted EBITDA growth of 17% and adjusted EBITDA margin of 31.4%, up 145 basis points year over year GAAP earnings per share of $1.56 and adjusted earnings per share of $2.51 up 15% year over year. The December capital raise for the acquisition of Assured Partners creates some noise in these headline numbers, but I will peel back the impact in his comments. Regardless, another fantastic quarter to close out another terrific year by our team. Moving to results on a segment basis, starting with the brokerage segment. Reported revenue growth was 12%.

Organic growth was 7.1%. Base commission and fees were 7.8%, in line with our expectations, which got offset a bit by slightly lower contingents. Adjusted EBITDAC margin expanded 168 basis points to 33.1%, which includes interest income related to funds raised for the acquisition of Assured Partners. Excluding that interest income, margin expansion was 109 basis points. Let me give some insights behind our brokerage segment organic.

With our PC Retail operations, we delivered 6% organic overall. The U. K, Australia and New Zealand were all in the high single digits. U. S.

Retail organic was around 5% and Canada was down a couple percent impacted by lower contingents. Our global employee benefit brokerage and consulting business posted organic of about 10%, a really strong finish that includes the catch up of the large life case sales that shifted from earlier in 2024. Shifting to our reinsurance wholesale and specialty businesses, in total organic of 9%, which overcame some expected market headwinds in our global aerospace business. So very strong growth whether retail, wholesale or reinsurance. Next (LON:NXT), let me provide some thoughts on the PC insurance pricing environment starting with the primary insurance market.

Overall, the global PC insurance market continues to grow with 4th quarter renewal premium increases that’s both rate and exposure combined consistent with the past 2 quarters. Thus far in January, renewal premium increases are ticking slightly higher than 4th quarter and are above 5% driven by increases in casualty lines like umbrella and commercial auto. Breaking down 4th quarter global renewal premium changes by product line, we saw the following. Property and professional lines were about flat workers’ comp, up 1% general liability, up 4% commercial auto, up 9% umbrella, up 10% and personal lines, up 9%. So we continue to see increases across most lines and geographies.

Carriers are behaving rationally and pushing for increases where it’s needed to generate an acceptable underwriting profit. It’s a great market for us to operate in because we can further differentiate ourselves with our leading tools, data and expertise. Remember, our job as brokers is to help clients find the best coverage that fits their budget while mitigating price increases. We’re becoming more successful securing lower pricing for our property customers, especially cat exposed property, which enables them to buy more limit or reduce their deductibles, resulting in more coverage for the same spend. Shifting to the reinsurance market.

Overall, oneone renewals were orderly and reflected an environment that generally favored reinsurance buyers. Growing demand for property cat cover was met with sufficient reinsurance capacity despite 2024 being an elevated year with more than $150,000,000,000 of estimated insured natural catastrophe losses. This resulted in property price declines that were greater at the top end of reinsurance towers and similar to January 24 renewals, reinsurers continued to exercise discipline on terms and did not revert to attachment points that exposed them to greater frequency. Reinsurance buyers of specialty coverages saw modest price declines across many lines of coverage, but again no softening in terms and conditions. Shifting to casualty, while there was adequate reinsurance capacity, reinsurers remained cautious on U.

S. Casualty risks due to elevated loss cost trends and potential reserve efficiencies. Looking forward, wildfire losses and casualty reserve increases seem to be the stories here in January and time will tell how each of these ultimately impacts the market. Regardless, Gallagaree had a fantastic oneone with some nice new business wins and should continue to excel in this environment. Moving to some comments on our customers’ business activity.

During the Q4, our daily revenue indications from audits, endorsements and cancellations remained in net positive territory. The same is true for full year 2024. While the activity is not quite as high as 2023, the upward revenue adjustments this past year are very close to full year 2022. So we continue to see solid client business activity and no signs of a meaningful global economic slowdown. Within the U.

S, the labor market remains strong. Since April 24, the number of open jobs has remained relatively steady and at a level that is still well above the number of unemployed people looking for work. Employers are looking for ways to grow their workforce and control their benefit costs and at the same time face wage increases and continued medical cost inflation both are headwinds that our professionals are helping to navigate. Regardless of market conditions, I believe we are well positioned to take share across our brokerage business. Remember, 90% of the time, we are competing against the smaller local broker that cannot match our niche expertise, outstanding service or extensive data and analytics offerings.

So with some nice momentum in net new business production across our brokerage business, a PC market still seeing mid single digit premium growth and a strong U. S. Labor market, we continue to see full year 2025 brokerage segment organic in the 6% to 8% range. Moving on to our Risk Management segment, Gallagher Bassett. Revenue growth was 9% including organic of 6%.

Heading into 2025, we should continue to benefit from excellent client retention, increases in our customers’ business activity and rising claim counts. Adjusted EBITDAC margin was 20.6 percent in line with our October expectations. Looking ahead, we still see full year 2025 organic in that 6% to 8% range and margins around 20.5%. Shifting to mergers and acquisitions. During the Q4, we completed 20 new tuck in mergers at fair prices, representing around $200,000,000 of estimated annualized revenue bringing the full year to $387,000,000 For those new partners joining us, I’d like to extend a very warm welcome to the Gallagher family of professionals.

And of course, the big news in December was signing an agreement to acquire Assured Partners with $2,900,000,000 of annual pro form a revenue. It’s a compelling opportunity to build upon our commercial middle market focus, deepen our niche practice groups and further leverage our data and analytics, allowing us to provide even more value to clients. It should also expand our tuck in M and A reach and create more retail and specialty revenue opportunities across Gallagher. What is especially exciting is that the combination involves 2 highly innovative, entrepreneurial and sales based cultures. Although we will continue to operate as 2 independent companies until close, we have started discussions and are very impressed with the talent, professionalism and excitement of the Assured colleagues.

We anticipate we will receive necessary approvals and complete the acquisition sometime here in Q1. In addition to the pending Assured Partners acquisition, we have about 45 term sheets signed or being prepared, representing around $650,000,000 of annualized revenue. Good firms always have a choice and it would be terrific if they chose to partner with Gallagher. With a strong close to the year, let me reflect on our full year financial performance for brokerage and risk management combined. 15% growth in revenue, 7.6% organic growth, 18% growth in adjusted EBITDAK, 48 mergers completed with nearly $400,000,000 in estimated annualized revenue and we signed a definitive agreement to acquire Assured Partners.

These are terrific metrics. And as proud as I am of the excellent financial performance this year, I’m more proud of the way our culture has stayed true as we continue to expand. Our culture is about our colleagues guided by the Gallagher Way and the rock solid foundation they form based on every interaction we have, whether it’s clients, carriers, future merger partners or with our Gallagher colleagues around the globe. Frankly, our culture is unstoppable and that is the Gallagher Way. Okay.

I’ll stop now and turn it

Doug Hall, CFO, Arthur J. Gallagher & Co.: over to Doug. Doug? Thanks, Pat, and hello, everyone. Today, I’ll quickly recap some sound bites from our quarter and replay our early thoughts on 2025, most of which Pat just touched on, then use the rest of my time to unpack the impact of the Assured Partners financing activities on our results during the quarter. Then I’ll wrap up my prepared remarks with my usual comments on cash, M and A and Capital Management.

Okay. Highlights from our Q4 you’ll see in our earnings release. Terrific base commission and fee organic growth of 7.8%, solid supplemental growth of 4.7% and while contingents went backwards a bit this quarter, we don’t see that as a trend by any means. As I look to 2025 brokerage organic, Pat relayed that we’re in a favorable environment with rates still needing to increase to cover higher loss costs, trillions of global premiums growing and inflating and our sales and service offerings outpacing our competitors, which should increase both new business and our retentions. So as we sit here today, we still believe our full year 2025 Brokerage segment organic growth should be in that 6% to 8% range.

That’s unchanged from what we said in October. As for brokerage margins, a little noise on Page 5 of the earnings release. Please see the footnote. You’ll read that the margin was aided by about $20,000,000 of interest income earned on cash we’re holding to closed Assured Partners. Adjusting for that, our margins would have been 32.5%, up 109 basis points over last year.

That’s nicely above our October expectation of margin expansion in the 90 to 100 basis point range. Looking ahead to 2025, we are still viewing margin expansion like we have like we’ve said many times before. We see margin expansion starting around full year organic growth of 4%. At 6%, maybe we could see 50 basis points and at 8%, perhaps 100 basis points of expansion. Of course, those ranges can then be impacted by changes to interest income on our fiduciary assets and then the rolling impact of M and A.

By our March IR day, maybe we will have a better read on where interest rates might go and also the impact of Assured rolling into our numbers. But at this time, we don’t see either having a significant impact on those ranges. So really no change to how we’re thinking about margins in 2025. As for risk management, another solid quarter posting 6% organic, admittedly a couple of $1,000,000 below our October expectations, all stemming from a smaller quarter of construction consulting revenues in the Northeast and the Northeast that can be just a little bit lumpy. So adjusted margin expansion of 20.6% was in the quarter was also in line with our October expectations.

And then looking forward, we’re seeing full year 2025 organic also in that 6% to 8% range with margins again around 20.5 percent for the year. So a great quarter and full year by both our brokerage and risk management teams and both have a strong outlook for 2025. Turning to Page 6 of the earnings release and the corporate segment shortcut table. For the interest and banking line, we are a bit better than our October forecast because we just were not into our line as much as we thought at that time. For the adjusted acquisition lines for M and A and Clean Energy, both were close to our October expectations.

Then when you look at the corporate line of the corporate segment, that was better than our expectation due to unrealized non cash foreign exchange remeasurement income, which was partially offset by a return to actual tax catch up of about $4,000,000 So let’s move from our earnings release to the CFO commentary document that we posted on our IR website. First, an overarching statement. Please take some time to read any headers or footnotes throughout this document to understand what information has or hasn’t been updated for the Assured Partners deal. So let’s move to Page 3 for our modeling helpers. Across the board, Q4 2024 actual numbers were fairly close to what we provided back in October.

As for 2025, we provided a first look of what we forecast. Again, none of these numbers include any impact from Assured Partners. Turning to Page 4, a first look at our corporate segment outlook for full year 2025. The only impact of Assured is the interest is found in the interest and banking line. It includes additional interest expense from the $5,000,000,000 debt raise.

Looking to Page 5 of the CFO commentary document to our tax credit carry forwards. As of year end, about $770,000,000 that will be used over the next few years. So still a nice sweetener to fund future M and A. We would not expect those numbers to move much because of the Assured financing nor the rolling of Assured’s taxable income. That’s because of the interest shield and also the amortization of the $5,000,000,000 deferred tax asset that we’ll get with Assured Partners that should save us about $1,400,000,000 of taxes over the coming years.

Flipping over to Page 6, the investment income table. This table includes an assumption of 2 25 basis point rate cuts in 2025. It includes interest income from cash we’re holding to pay for Assured assuming a late March close, but it does not include interest income from Assured’s fiduciary assets after closing. When you shift down on Page 6 to the rollover revenue table, the pinkish columns to the right include estimated revenues for brokerage M and A that we closed through yesterday. Then below that table, we’ve added a separate section for Assured Partners revenues, again assuming a late March close, which of course is highly dependent on regulatory approvals.

Then just a reminder, you also need to make a pick for other future M and A. And then further down on that page, you’ll see the Risk Management segment rollover revenues for $25,000,000 are expected to be approximately $5,000,000 for each of the first two quarters. All right. Moving to Page 7. This is a new page to help you see the impact of the Assured Partners financing on our Q4 ’twenty four revenues, EBITDAX, net earnings and EPS by segment.

The 3 items just to keep in mind. There was additional incremental interest income on the cash that we were holding to fund the acquisition. There was additional interest expense we incurred on the newly issued $5,000,000,000 worth of debt and then the additional shares outstanding from the December equity offering. You’ll see that for Q4 it all nets out to nearly nothing, but it does cause a little noise in our numbers. Also the call out box on the right of that page provides some information on shares outstanding because of the Assured Partners’ equity rates for our Q1.

This includes the full impact of the shares we issued in December and the exercise of the Green Shoe in early January. Finally, if you flip to Page 8, you’ll see that this page is just a repeat of what we provided in the December Assured presentation for ease of reference. There’s no new news on this page. Finally, let’s move to cash, capital management and M and A funding. Available cash on hand at December 31 was more than $14,000,000,000 of which approximately $13,500,000,000 will be used to fund Assured Partners.

Since year end, we received another $1,300,000,000 as the underwriters exercise the green shoe. So considering this and our strong expected free cash flow, we are in an excellent position to fund our M and A pipeline of opportunities. Here in 2025, it’s looking like we could have $3,500,000,000 to fund future M and A, then it jumps up to nearly $5,000,000,000 in 2026, all while maintaining a solid investment grade rating. So an excellent quarter and an excellent year to have in the books. As I reflect on 2024, I have to say that we had a pretty terrific year.

For the combined Brokerage and Risk Management segments, we posted adjusted revenue growth of 14%, organic of 7.6%, overall margin expansion of 94 basis points and most importantly, we grew our EBITDA 18%. Those are terrific numbers and reflects what Pat said. That’s our unstoppable culture. So those are my comments. Back to you, Pat.

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.: Thanks, Doug. Rob, you want to open it up for questions?

Conference Operator: Sure, Mr. Gallagher. We’ll now open the call for questions. Our first question comes from the line of Mike Zaremski with BMO Capital Markets.

Unidentified: Please proceed with your question.

Mike Zaremski, Analyst, BMO Capital Markets: Hey, good evening. First question surrounding the cadence of organic growth next year, loud and clear, 6% to 8%, no change. I guess, yes, for both segments. I guess, I’m more specifically focused on the the brokerage segment. But in terms of the cadence or seasonality, anything you’d like to call out?

2 of your peers called out kind of weaker seasonality in 1Q. We do know that reinsurance is overweight in the beginning

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.: of

Mike Zaremski, Analyst, BMO Capital Markets: the year too and maybe downwards pricing there could cause some year over year tougher comps.

Doug Hall, CFO, Arthur J. Gallagher & Co.: Let me go back to that. Let me start with the end of that is there have been some price changes on the reinsurance, but our customers are buying more reinsurance. So when you look at the total spend for us but that our customers are spending, we’re really not seeing a decrease. And like Pat said in his comments, we had a terrific new business quarter also. Going back to the first part of your question, yes, reinsurance is typically stronger in the Q1.

And so you could see some seasonality of better organic growth in the Q1 than what develops out for the rest of the year. I’ll studying a little bit about that as we do have a substantial amount of our health and welfare and medical benefits that we do in the Q1 that mitigate maybe a higher reinsurance on it. And then throughout the year, our retail is performing well. Our wholesale is seems to be getting stronger and stronger. Our programs are doing well.

But yes, you would see a little seasonality because of reinsurance in the Q1 in our organic growth.

Mike Zaremski, Analyst, BMO Capital Markets: Okay, got it. But you’re saying actually it could be higher, not lower even if reinsurance pricing is down, okay, because of demand. I have

Doug Hall, CFO, Arthur J. Gallagher & Co.: a chance to talk to you again in our March IR day and we should have a better feel of the seasonality for that too.

Mike Zaremski, Analyst, BMO Capital Markets: Okay. Awesome. My last question is on new share investment income. I’m thinking through post the deal close, if you’re able to comment. So my understanding is that the company you’re purchasing kind of didn’t fully leverage its fiduciary income and that it had a lot of kind of it was direct pay relationships between the businesses paying directly to the insurance carriers and you guys might be able to optimize that working capital to gain more fiduciary assets.

Is that if that’s what I’m describing is correct, can you offer kind of a timeline and how that works in terms of kind of getting those asset balances onto your balance sheet?

Doug Hall, CFO, Arthur J. Gallagher & Co.: Yes. Yes, your recollection is correct. And I think that if you go back, I don’t know, 10 years ago when we went through our exercise of consolidating bank accounts from around the world, this will be obviously mostly in the U. S. We did have some good success of picking up more fiduciary cash into our accounts and I think that will be invested.

So we do see that as an opportunity that will be better together on that metric. So yes, there should be versus their run rate, I’m guessing together we’ll be better on that going forward.

Mike Zaremski, Analyst, BMO Capital Markets: Doug, is there just any is that kind of a 1 year process or that’s like takes many years?

Doug Hall, CFO, Arthur J. Gallagher & Co.: Listen, 18 months we shouldn’t be talking about anymore. So I think we’d get it done. Hopefully faster.

Greg Peters, Analyst, Raymond (NSE:RYMD) James: Okay. Thank you.

Unidentified: The next question is from the

Conference Operator: line of Gregory Peters with Raymond James.

Unidentified: Please proceed with your question. Good afternoon, everyone. Hi, Greg. I guess I’d like to start with California. Given the substantial potential loss to the insured market, Curious if you could give us some perspective of how it might touch your operations.

I’m interested in the business going in inside RPS, if there’s any impact on the wholesale market that you’re seeing. If you could just talk about your perspectives of that as we watch this disaster unfold, that would be great.

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.: Well, first of all, Greg, it’s Pat. We reached out to thousands of clients already to make sure that they had the knowledge of how to file claims and what have you, how to get a hold of us if they’re having difficulty in filing those claims. We are presently tracking, I forget the exact number today, but we have hundreds of claims that we’re helping our clients with already. I think that you’ve got a situation that is it’s going to continue to unfold for us. We’re a big player in California.

We’re a big player in Los Angeles. Not huge in personal lines there, but it’s going to keep us incredibly busy for a number of months. And then in terms of the impact of that, luckily, again, we’ve been able to stay in touch with our people. We have had our folks have in some instances were evacuated. We did not lose anybody and don’t have many of our folks that have lost any of their homes.

So I think we’ll be well in a strong place to help our clients, but I can’t give you much more than that right now in terms of how it’s going to impact our day to day activities out there.

Unidentified: Okay. And then I guess my follow-up question is switch gears. You mentioned in your comments about the lower contingents. Just curious, given the profitability we’re seeing in the industry, I would have imagined that supplementals and contingents would be up. And I think your guidance for 2025 suggests that they should go back up again.

But maybe you could spend a minute and give us some color on what happened with contingents in Europe and then color on your outlook?

Doug Hall, CFO, Arthur J. Gallagher & Co.: Yes. Great question. Great. Thanks for asking. Like I said, I ended in my comments, this isn’t a trend and what you said there is right.

We would expect it to bounce back up again. Frankly, it’s simply because as we get the final year loss ratio estimates in from the carriers, they’re coming in just a little bit higher than what maybe we had been anticipating throughout the year. And to put this in context, we see this as about a maybe a $7,000,000 shortfall to what we’re thinking back in October. A third of it is 2 thirds of it is spread across hundreds of contracts. And so if the loss ratios are ticking up just a little bit, it might that probably costs us $4,000,000 of it.

And then another third is we had about 3 contracts and programs in Canada that just really kind of came in here in January with really not very great results. So that’s what but if you look at it on an annual basis, when you combine supplements and contingents, I think if I do the math here mentally, I think it’s about 8% even with a small blip in the Q4. So it’s still a terrific year. But I wouldn’t over read that there’s some systemic shift in what contingents and supplementals are going to be going forward. So I would expect those numbers to grow over the blip this year considerably.

Unidentified: Just a clarification on that answer, Doug. Is there a specific line of business or sort of across a broader business set?

Doug Hall, CFO, Arthur J. Gallagher & Co.: It’s across the line, right? I mean, it’s I wouldn’t say there’s anything there. So we have hundreds of these contracts. So we get a lot of this information coming in here right around the 1st week or 2 of January.

Unidentified: Thank you for your answers.

Doug Hall, CFO, Arthur J. Gallagher & Co.: I guess another way of saying on the $600,000,000 number, it’s only to have maybe $3,000,000 or $4,000,000 of what I would say loss ratio I think our picks have been pretty good throughout the year?

Unidentified: I would say so.

Andrew Kligerman, Analyst, TD Securities: Yes. Thanks.

Conference Operator: Our next question comes from the line of Andrew Kligerman with TD Securities. Please proceed with your question.

Mark Hughes, Analyst, Chua Securities: Hey, good afternoon. Good afternoon. Hi, how are you? Hi, how are you? First question is around the Risk Management segment.

Thinking back to last year, you had guided to 9% to 11% organic growth for this year. And now for next year for ’twenty four, that is. And now for ’twenty five, you’re guiding to 6% to 8%, which I still think is fabulous. But what’s kind of changing that your guidance isn’t quite as robust as it was to start last year?

Doug Hall, CFO, Arthur J. Gallagher & Co.: Yes. Here’s the thing is, I think that this business, if you recall, we can get some pretty large contracts that come in. It is a little bit more elephant hunting, so to speak. So this year, I think that we’ve got some nice new business in the pipeline coming into 2025. And And so I think if you go back in the history of Gallagher Bass and the risk management segment, we have periods like this where it will grow mid single digits, something like that, and then they’ll have a couple of nice large contracts.

We still see that happening. There are some of our government programs that we do down in Australia have some nice opportunity. And then more and more, we’re proving to the carriers left and right that we can actually deliver better claim outcomes on that business. And as a carrier decides to use us for their claims payment process on work comp and general liability, we’re not storm chasers, remember, then but it is a little bit more of a lumpy business as we get some pretty nice sites.

Mark Hughes, Analyst, Chua Securities: I see. So like you never know, you could probably find another elephant this year, right?

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.: Yes. That’s right. Our prospect list is always filled with elephants. They’re just hard to get their hands every once

Doug Hall, CFO, Arthur J. Gallagher & Co.: in a while.

Mark Hughes, Analyst, Chua Securities: Got it. And then I’m just kind of curious about your operations in India, the Center For Excellence, where I think you have about 12,000 employees right now. And as you look out through this year, do you need to add people given the Assured Partners transaction? Can you keep it steady? And is technology making it such that you really don’t need to hire that much?

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.: Well, I think you got both ends of that correct, Andrew. We’re going to be using technology quite a bit. And as we use technology that does make that group there much more efficient. And yet at the very same time our organic growth and our acquisition growth puts a lot more demand in the structure. And so at about 12,000 employees, I think that at this time next year, you’ll see us up additional 1,000.

Doug Hall, CFO, Arthur J. Gallagher & Co.: Yes. The other thing too is think about this, the value that it brings is when work goes into our service centers, remember those are our folks that they were not they’re not working for anybody else, they work for us. It causes standardization. It causes process improvement. I got to tell you that gives us a head start by years years when it comes to implementing technologies and AI into the work that’s already been standardized.

And truthfully, as we develop AI technologies that replace some of that work there, all of those folks have opportunities to because our growth that they don’t lose their jobs. It’s just they move up higher in the value chain on it. And so it’s really a juggernaut in my opinion in terms of our ability to offer some of the very best service in the world.

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.: And the judge, unless you standardize that service, A, you can’t automate it. But B, when you do standardize it, it makes you better and better at the service for our clients. Just take certificates of insurance. We’re going to issue $3,000,000 $4,000,000 of them pretty much error free. There aren’t any real brokers that can claim that.

Mark Hughes, Analyst, Chua Securities: I see. So maybe the bottom line takeaway is you may add 1,000 or 2 employees, but it’s still scalable. You’re still getting better margin from that. Is that the right final takeaway?

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.: Yes. You’re right on the money.

Mark Hughes, Analyst, Chua Securities: Thank you.

Doug Hall, CFO, Arthur J. Gallagher & Co.: It won’t surprise me that in like for like in 5 years, we’ve doubled that number.

Mark Hughes, Analyst, Chua Securities: Got it. Thank you.

Unidentified: Our next question is from the

Conference Operator: line of Elyse Greenspan with Wells Fargo (NYSE:WFC). Please proceed with your question.

Elyse Greenspan, Analyst, Wells Fargo: Hi, thanks. Good evening. My first question is on the brokerage outlook for 2025. So you reaffirmed the 6% to 8%. Doug, I think when we last spoke in October, you said maybe benefits is a 5, reinsurance is a 9.

I want to confirm that’s where you still see it. And then you also had said you would provide, I think, by line in a little bit more detail at the December day, right, which did not happen. Could you give us a sense even away from benefits and reinsurance, just how you see all your businesses trending organically in the 6% to 8% 25% brokerage guide?

Doug Hall, CFO, Arthur J. Gallagher & Co.: I think, yes, confirming everything you’ve said, Simon, I think Pat did a pretty good job in his script of telling you how those businesses are growing right now. I think those are good guesses for next year at this point.

Elyse Greenspan, Analyst, Wells Fargo: Okay. That’s helpful. And then my follow-up question, how do you see how is your pipeline of transactions, right? You guys also did a good number of bolt on deals to end the quarter. And in terms of the AP pipeline, I know when you guys announced the deal, you highlighted the fact that there was very little overlap on pipelines.

So would you expect, I guess, once that deal closes at some point at the end of the Q1, I guess, that kind of just the quarterly level of M and A activity could pick up from bringing on that from bringing the 2 firms together?

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.: So Elyse, this is Pat. I’ll answer that. I think that first of all, we have to continue to operate these enterprises separately till we’re closed, but we do know that there’s very little overlap at all. And Assured Partners has been very, very good at tuck in acquisitions. And as you saw in our when we were making the announcement, there has not been that much overlap between things that we wanted to put on and things that they actually bought.

So there we view their pipeline as very, very accretive to what we’re doing and not a lot of overlap. And I think that’s going to be fantastic. They’ve got a great team doing this stuff. We’re impressed with what we’ve seen in due diligence and the like as to what they’ve done, what they’ve bought and the pricing they’re getting for that. And I think you will see us increase substantially the number of deals.

Now they’re small deals. They’re very good at tuck in bolt ons and small privately held firms in and about many of the parts of the country that we’re not in.

Elyse Greenspan, Analyst, Wells Fargo: And then the $1,300,000,000 Go ahead.

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.: I’m sorry, go ahead.

Elyse Greenspan, Analyst, Wells Fargo: I was just going to say the $1,300,000,000 from the Green Shoe right that wasn’t contemplated right because the financing was there without it. So is that just extra cash that you have for the pipeline the capital that Doug was talking about in his comments?

Doug Hall, CFO, Arthur J. Gallagher & Co.: Yes. That’s right.

Elyse Greenspan, Analyst, Wells Fargo: Okay. Thank you.

Unidentified: Thanks, Luis. Our next question

Conference Operator: is from the line of Mark Hughes with Chua Securities. Please proceed with your question.

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.0: Yes. Thank you. Good afternoon.

Doug Hall, CFO, Arthur J. Gallagher & Co.: Hi, Mark.

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.0: Doug, the guidance you gave for the Q1 contribution from Assured Partners, is there any seasonality there? Or is that just the timing of the deal?

Doug Hall, CFO, Arthur J. Gallagher & Co.: Right now, we’ve assumed that’s just the timing of the deal. We will they will have some seasonality, especially in their benefit business and then anything that might be a public entity type business might be skewed to July. So you’d see a little bit of seasonality, but what you see in there is a pure straight line assumption of it.

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.0: And then, Pat, in the wholesale business, you gave the wholesale and reinsurance together, I think, up 9%. Any detail you can provide on wholesale observations on the E and S market?

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.: Let me take a look, Mark.

Doug Hall, CFO, Arthur J. Gallagher & Co.: Yes. I think I’ve got I think that you’ve got to look at our UK specialty at maybe around 7%. You look at U. S. Specialty, maybe on the 10%.

REE is pretty small in the quarter. It’s just not a big quarter for us. So if you look at those two numbers, when we get that maybe that gets us back to that 9% number there.

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.: Understood. Thank you. Thanks, Mark.

Conference Operator: The next question is from the line of David Motermontin with Evercore ISI.

Unidentified: Please proceed with your question.

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.1: Hey, good evening. I had a question for Doug. Just trying to unpack the brokerage organic this quarter. And I don’t want to nitpick too much, but you guys were looking for 8%. And I’m just wondering, so was the entire differential just the contingents and the Life sales came back as expected and it was just totally offset by the contingents?

Yes. Just hoping you can unpack that a little bit.

Doug Hall, CFO, Arthur J. Gallagher & Co.: Yes. You’re right. The base commission and fees at 7.8%, that business contingents and supplementals have been running kind of consistent with that together. So the difference of the $7,000,000 had put it up into the upper 7% range somewhere pretty close to the base contingency. So you’re right you’re spot on in your observation there.

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.1: Okay, great. Thanks for confirming. And then I wanted to follow-up just on I guess I was surprised the RPC (NYSE:RES) stayed at 5%, just given the property price was flat versus up 4% last quarter. So I’m wondering if maybe it’s mix, but I’m wondering if there’s anything else from sort of like an increased purchasing or buy up dynamic that you guys are observing as the property market, as the property rates moderate here?

Doug Hall, CFO, Arthur J. Gallagher & Co.: Well, we see that across that. Yes, I think we’ve always said it’s been a long time we’ve talked about this. As rates are going up, customers opt out of certain coverages, not mine being by raising deductibles or reducing limits on it. Sometimes they’ll drop some coverages. So as rates are if rates are remember rates are still increasing.

I think it’s important for everybody to realize that kind of across the board we’re still in a rate increasing environment. They’re buying more insurance. And the reinsurance you’re seeing that from the carriers that they’re buying more and then the customers they are buying more coverage on it. So they’ll opt in.

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.: Insurance to value is a big deal Tim. Much more pressure on ensuring to value.

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.1: Got it. Thanks. And then maybe just to sneak one else in, one other one in. Doug, I think you had said last call that the underlying brokerage business is running at like a 7% to 8% organic growth just on an underlying basis, but then the 25% range is in the 6% to 8% range. So I guess I’m wondering is that 6% just sort of conservatism?

Like what sort of scenario would sort of get that get you guys out of that 7% to 8% range?

Doug Hall, CFO, Arthur J. Gallagher & Co.: Well, listen, I think right now that we said way back in October that next year felt a lot like this year and we’re kind of in that mid-seven percent range somewhere this year. The range around it sitting and looking out over the next 11.5 months, I guess that it’s 6% to 8% is consistent with what we’ve said before. So we think we’d like to stick with that. I think our team is working pretty hard to always be better than the midpoint of the range, obviously. But it’s the market is changing.

We’ll see what wildfires do. We’ll see what casualty reserves will do. We’re still digesting that. I will say on the wildfires, maybe you know this, I still don’t know how the extra living expenses have been factored into the wildfire estimates for the cat loss on that. And then you can’t open up the news any day without somebody taking a casualty reserve string.

So those things will cause carriers to take a really hard look at what they’re doing with the rates. So within 2% is a pretty good guess as we look for the year. And is it nice being in that range versus years ago when we were pretty excited about 1% or 2% organic growth?

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.1: Yes. No, completely agree. Thank you.

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.: Thanks, David.

Unidentified: Our next question is from

Conference Operator: the line of Katy Sakis with Autonomous Research. Please proceed with your question.

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.2: Hi, thank you. Good evening. I guess my first question is thinking about the last call, I think, Doug, you’d mentioned that you expect brokerage organic growth in 2025 split between the components to come from about half new business and then perhaps a quarter each to rate and exposure. Has your perspective on the components of that brokerage organic growth guide changed in the context of the Assured Partners acquisition?

Doug Hall, CFO, Arthur J. Gallagher & Co.: No. Yes. Pat summarized it pretty quickly. That’s what we’re still seeing

Conference Operator: happening right now.

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.2: Okay. Sounds good. And then, it looks like international retail brokerage growth kind of continues to cool off a little bit. How are you guys thinking about the environment for organic growth abroad this year versus what looks like perhaps a little bit more stable growth in the U. S?

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.: Okay. I think you got to really look at that by geography. I mean there’s parts of the world that are just really, really growing incredibly well. We sat our Board meeting and did a deep dive into some of our Latin American businesses, not huge in part of the whole overall enterprise, but incredibly nice growth there. And so there’s it depends.

Canada, a little bit of a slowdown this past quarter. We talked about that. But as you look across the whole patch, there’s it’s hard to put a finger on it, which is why we try to give you a guidance in terms of the overall how it should shake out. But we definitely have some geographies that are doing extremely well and just have continued future growth that is going to be fantastic.

Doug Hall, CFO, Arthur J. Gallagher & Co.: Yes. Katie, one of the things I’m kind of looking at what we said this quarter versus what we said back in October. We didn’t have an opportunity to update you in December. What we said back in October, we didn’t have an opportunity to update you in December. But UK Retail especially still in high single digits and we said that it was 6% before.

UK Retail, I think we said 8% and this quarter we’re saying closer to 9%. Canada may be the one that’s poking its head out to you a little bit. We said it’s more flattish and now we’re down a point or so. And then Australia, New Zealand, we said it’s about 10% maybe in October. And we’re still in the very high single digits on that.

So I don’t know if it’s necessarily it might be just that Canadian piece that pops out that’s causing you to have that perspective.

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.2: Appreciate the additional color there. Thanks guys.

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.: Thanks, Steve.

Unidentified: The next question is from

Conference Operator: the line of Meyer Salas with KBW. Please proceed with your question.

Andrew Kligerman, Analyst, TD Securities: Great. Thanks. I like how everyone’s blaming the Canadian.

Doug Hall, CFO, Arthur J. Gallagher & Co.: Doug, you mentioned I’ll take it personally, Max.

Andrew Kligerman, Analyst, TD Securities: Yes. I’ll try not to. You mentioned obviously accurately that there’s a ton of adverse development that we’re seeing in general liability. And I was wondering whether there’s any direct impact when you’ve got, I don’t know, more frequent claims or more attorney involvement in terms of how Gallagher Bassett grows revenues?

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.: Well, I mean clearly, it play back activity helps us, Meyer. I mean there’s no question about it. But when it comes to severity, we don’t participate in our clients up or down in terms of severity. We do everything we can to manage the final outcome and we contend and we believe we have the data and analytics to prove this that if you hire Gallagher Bassett, your outcomes meaning your final settlements will be superior. And that does not mean that we’re taking advantage of the claimant.

That means that we’re handling the claimants actually better than you see in the general market. So it’s if you’ve got some severity out there and that creates frequency, frequency definitely helps Gallagher Bass. We get paid essentially on a per claim basis as does economic growth because with economic growth comes more employment. And remember most of Gallagher Bassett’s revenue is a good portion of our workers’ compensation driven.

Doug Hall, CFO, Arthur J. Gallagher & Co.: Yes. I think one of the things all of those forces actually should cause clients to look at Gallagher Bassett even more. The way we can do new nurse case management, the way we have our managed care offering, the way that we can understand where there are opportunities to use different physicians. We also understand the attorneys because we deal with them so often. So when claims get more complicated, it produces Gallagher Bassett actually can show more value the customer.

And I think that’s the environment we’re in. They’re paying $12,000,000,000 $13,000,000,000 $14,000,000,000 of claims and they get pretty good at that.

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.: Well, and remember, by and large, about $0.60 to $0.65 on every premium dollar turns into a claim. That’s the function of the industry. We’re seeing that, of course, in the West Coast. And so if you’re going to have an impact on your costs, you better pay attention to that portion of the dollar that goes out the door in claims. Again, we think we do that at a level that’s better than the competitors both TPAs and carriers.

Conference Operator: Okay. No, that’s very helpful. Very thorough. Switching gears,

Andrew Kligerman, Analyst, TD Securities: I was just looking for an update on the multiples for M and A because we’ve seen not only your acquisition of Assured Partners, but a lot of the other big brokers out there have made big acquisitions. I don’t know if that speeds up or decelerates competition for tuck ins.

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.: Well, this of course is all speculation on my point. But remember, and we try to share with you pretty much every quarter what we are buying at. And you’re not seeing our tuck in acquisitions and the activity that we do on our smaller deals anywhere near the treetop levels of multiples that have been running up over the years. I do think that the Assured Partners acquisition, we have a very smart seller. I think we were an opportunistic buyer and I definitely think there’s a signal there.

Andrew Kligerman, Analyst, TD Securities: Okay, perfect. Thank you so much.

Conference Operator: Our next question is from the line of Rob Cox with Goldman Sachs. Please proceed with your question.

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.3: Hey, thanks. And apologizing for asking another question on brokerage organic. But when you consider the 6% to 8% organic growth range, could you give us some insight into what level of renewal premium change you’re thinking about within that? Because I’m wondering if you’re assuming sort of some of the acceleration that you think may be happening in the casualty market or if you don’t need that to achieve the 6% to 8

Doug Hall, CFO, Arthur J. Gallagher & Co.: percent? Yes. I think that estimate is not assuming that there’s tailwinds produced by the fires of the casualty strengthening. We’ve kind of see that in the current environment we had. Like we said earlier, we think that net new business over loss will contribute about half of that number.

We think that exposure will be about a quarter of it and rate will be about a quarter of it. So there’s not a big assumption for rate in here, nor is there a really big assumption for exposure unit growth. I mean, this is just what we’re seeing in our net new business wins right now. We’re showing pretty well out there in the field. And here, go back to what we said before, when there’s not as much chaos in the market, we get to show our tools and capabilities shine brighter in those environments because when it’s chaotic in the environment and customers are listening to big rate increases, they’re just trying to get their insurance placed.

They’re already a bit stung by the fact that rates are up. We worked very hard to keep those rates down for them. Now we’ll be able to go in and show prospects just in a level playing field here. When things aren’t chaotic, you should be using our tools and capabilities to buy your insurance through us or let us buy your insurance for you using our capabilities. So this is an environment where we believe our new business will shine.

We think our service offering is getting better and better every day. We have insights into who what clients might be a little shaky. Let’s get out and talk to them and make sure that we get the renewal put to bed soon. So I think that this is an environment where I think that our folks can shine with the tools and capabilities that they have.

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.: I would have killed in the past as Doug alluded to when we were talking about up 1, up 2 for a 5% premium rate growth as an environment that would be nirvana 10 years ago. So I think it’s a very strong place to be. Remember our job is to mitigate that for our clients, but it’s a great place for us to show exactly what Doug was saying, which is our capabilities, in particular in the areas of data and analytics, which I want to remind the listeners, you don’t get a chance to listen to the smaller brokers that we’re competing with on a quarterly basis. We’re pulling away from them more and more with our capabilities. And these and clients, I’m talking middle market clients very much appreciate the ability to sit and talk to them about people like you buy this or you should have this type of limit because in our data we see losses at this size.

That capability is just getting it’s getting more and more attention by the buying community and it’s differentiating us every single day to a greater level.

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.3: That makes sense. Thank you for all the color. Pivoting to reinsurance brokerage, I just wanted to ask because I know your growth has been a good bit stronger than your 2 largest competitors in the reinsurance brokerage space for a number of years now. And Gallagher has a lower revenue base, but it doesn’t seem like that would be the only driver of the outperformance. So I was hoping you could remind us what’s driving Gallagher’s ability to deliver what’s been more like double digit organic growth in reinsurance?

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.: Well, I think that it’s just blocking and tackling. I think one of the things that we found there is it’s a great sales team. They’re backed up by terrific analytics, incredible capabilities in consulting on capital management. And there’s no doubt being part of Gallagher has offered them some additional opportunities.

Doug Hall, CFO, Arthur J. Gallagher & Co.: Yes. I think that as they team up with our wholesalers, our program folks and our retailers, they get to see firsthand what’s going on in the retail on the street. I think that helps them provide better insights to their primary carriers. And I think that we’re doing a terrific job of making them an integrated part of us, not just a unit within the holding company structure.

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.1: Thank you.

Conference Operator: Our next question is from the follow-up from the line of Mike Zaremski with BMO Capital Markets. Please proceed with your question.

Mike Zaremski, Analyst, BMO Capital Markets: Great. My follow-up is on reinsurance as well, just the strong results. Just curious, would it maybe a mix on reinsurance, do you potentially have a greater mix towards casualty, for specialty Europe focused then that could be helping kind of the outlook given casualty pricing has accelerated?

Doug Hall, CFO, Arthur J. Gallagher & Co.: Yes. We have a terrific casualty book of business. North American casualty is a big part of our U. S. Business, but we’re probably a little underweighted on property maybe versus the others.

So I think it’s probably more casually weighted. I don’t exactly understand their book of business, but I think that what our perception is that we’re underweight on property.

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.: Well, and also remember, where’s the pain right now if it’s a reinsurance buyer? It’s casualty. I mean, as we’ve talked about it in these calls and there’s no question about it. That’s the area that’s got some pain and our team is really, really good at that.

Mike Zaremski, Analyst, BMO Capital Markets: Got it. Maybe since it’s not 615, I’ll sneak one last one in. Just curious, health inflation for employers, at least some of the stats we’ve seen, it’s expected to rise 25 versus 24. Maybe you disagree with that. But does that provide any uplift to the organic for employee benefits?

Or I know there’s a lot of building blocks for employee

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.: benefits? Every time we get we’re one of the we are clearly a leader in our capabilities to consult, manage and place health and welfare. And it’s a huge problem for employers and it’s going up as it seems to never stop doing. And so there’s all kinds of tools that you need to have in your toolbox to handle that and we’re very, very good at that. And by the way, we’re extremely good at it in the commercial middle market where I think there’s maybe not as much competition frankly.

Conference Operator: Thank you. Thanks, Mike. Thanks, Mike. Thank you. Our final question is from a follow-up from Alex Scott with Barclays (LON:BARC).

Please proceed with your question.

Greg Peters, Analyst, Raymond James: Thank you all. This is Justin on for Alex. Just kind of going back into the brokerage segment in the commercial motor market. Just wanted to ask, I understand it seems like 90% of the time you guys are competing against independent brokers.

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.3: I was just curious in

Greg Peters, Analyst, Raymond James: light of sort of the large scale acquisitions that’s been taking place, whether or not you see sort of this 90% number to dwindle over time and just when you think about 25% in ahead?

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.: The Assured Partners people are competing with those same independents in communities that we’re not in today, which is only going to increase when you take a look at our at bats. Our number of at bats are going to go up substantially because of Assured Partners and 100% of those at bats that’s not true. 95% of those at bats are going to be against smaller players.

Doug Hall, CFO, Arthur J. Gallagher & Co.: Yes. I think the fragmented market up there’s 30,000 agents and brokers and those are companies not necessarily those with a brokerage license. So we’re competing against the other 29,950 brokers that are out there. So I mean Assured Partners will be absolutely there. It does help us go after those accounts that are in cities that we’re not in.

So this is we think it’s a great one plus one can equal more than 2 for sure.

Mike Zaremski, Analyst, BMO Capital Markets: Sure. Thanks for the color.

J. Patrick Gallagher, Jr., Chairman and CEO, Arthur J. Gallagher & Co.: Thanks, Justin. Thanks, Rob. I think we’re ready to wrap up here and I just have a quick comment and that is thank you again for joining us this afternoon. As you all know now, we had a great Q4 to finish an excellent year of financial performance. A huge thank you goes out from this table to our 56,000 colleagues around the globe.

It’s your creativity, expertise and unwavering client focus that continue to set us apart. We look forward to speaking with the investment community at our mid March IR Day and thank you all for being with us this evening.

Conference Operator: This does conclude today’s conference call. You may now disconnect your lines at this time.

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