AJG - Earnings call transcript Q2 2019 | Arthur J. Gallagher & Co.

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Operator

Good afternoon and welcome to Arthur J. Gallagher & Company’s Second Quarter 2019 Earnings Conference Call. Participants have been placed on a listen-only mode.

Your lines will be opened for questions following the presentation. Today’s call is being recorded. Instructions] [Operator

Securities laws. comments to conference statements and questions, meaning the the given including within materially undertakes discussed uncertainties the from during these today the or Company are of response those obligation filed call Actual to statements. Commission. statements this in in the may securities discussed Exchange made on of reports results certain no update Company’s described call, this with answers and may differ the subject Some to forward-looking risks These constitute and forward-looking

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

my to President Company. Mr. Patrick Gallagher, now of J. is begin. may J. pleasure Gallagher Chairman, Arthur introduce Gallagher, & CEO and It you

Patrick Gallagher

you quarter today us Howell, heads Good you, joining well as operating for everyone. of me With for call. the our second Thank divisions. our is CFO, earnings as Thank afternoon, our Mike. Doug XXXX

quarter, growing and acquisitions. three, Today, value. do number And each unique improving one, productivity our shareholder to culture. of Number on our key and Doug as strategy drive touch I’m going growth. Number and quality. organic through the we mergers four two, to components our Number four, maintaining

all on really priorities strategic our team and be of the some have do We four terrific more couldn't again pleased. delivered momentum. Once I

risk Let segments. highlights our me for combined core give you management brokerage and second some financial quarter

million points, mergers basis growth, in revenue. margin revenues, of EBITDAC with of and XX annualized completed growth all-in we organic XX estimated adjusted XX% X.X% about $XXX expansion

the outstanding team. quarter for Just another

by Let segment. results our me break down

geography quarter all-in. organic in broker change quarter. the was some X.X% Our base and segments supplementals between were There second

quarter. X.X% like more organic a nice really supplementals about contingents base and organic and of think combined of for X.X% So

All contributed. of globally our divisions

better were X%. than benefits operations of had domestic a great Our that, organic operations bit retail quarter our a PCA with below. slightly about brokerage operations and

quarter, posting supplemental above U.S. business Our and X% and program that. wholesale than growth more excellent base with organic contingents had an revenue

post Internationally in our very the combined Zealand. organic brokerage and and operations broad about Australia based X% UK, to New Canada, strength

wherever business. in our results fantastic I Just look

that. Moving on our and X% rates second indicated a are internal internal of rate race surveyed, during casualty a XX% bit row environment, below approaching producers bit our higher increasing the about in to data and of quarter international - colonies indicating domestic mid-year property the pricing. Almost trend our increased with survey a

seeing XX% indicated attention our is of about What year. that than level last indicated producers caught my they surveyed more of XX% that few increase though were race very up had

in operations Let greatest property me up auto, are to detail about give the down a up U.S. flat a Rate I territory umbrella. and in is will with the more X% by commercial points geography. you compensation our remain X%. some rates negative retail start while workers other across increases Most about overall lines few casualty

low RPS double wholesale U.S., impacted or for property on large to price in digits up X% with rate the in Staying X% especially our operations many increases lines, pure related within accounts. is loss

flat. Additionally, about increases casualty lines price comp are and and medical liability while closer are some experiencing malpractice, general X%, umbrella to professional average

Let me move to is the X%. UK. Overall up about pricing

X%, operations, UK However, almost X%. and wholesale is while our UK is by retail our specialty operations a different in in environment about increasing pricing pricing retail up

Most in lines to practice liability in rate in Career ENO addition other and flat. for seem the rate DNO, are up to lines casualty Canada, medical more be oriented to pricing as is high-single-digits. the and In property. property malpractice general such increases auto X.X% pushing and closer with casualty

for seeing few similar very is Australia, X%, Zealand, have in to New up around is been which years. past finally, what the pricing And we

So up close Excel. growing. the X% is and casualty are still world when property up This to sum are it to exposures we around rates

fully talented Our helping and is challenges of staff increasing an production clients the engaged prospects rate environment. mitigate

brokerage, we should and add new talk completed meet and I weeks colleagues. house acquisition In merger acquisitions, me able our million annualized the was which was the aerospace brokerage quarter, UK growth. XX let about estimated and of about ago just with in three stack Next, revenue. polling $XXX to

acquired couldn't revenues joining us industry leader top and overnight. two our brokerage network high and team. these give in XX% about more for about Together excited account a notch this us and I aerospace them UK be mergers an quarter, business make of

million more our tuck-in historical of new to The average us, growing professionals. joining five about other I XX for revenues is family our of strategy. and very like welcome acquisition I all partners thank merger and in annual a warm extend our Gallagher to mergers consistent with would

sheets million and our of $XX mergers have is million pipeline, about relationships. opportunities, term these As annual illustrates than merger acquisition I of will know entrepreneurs with by and run more of either still small but pipeline sales these prepared. tuck-in None or I upon XX all it with close, strong skills not agreed very look at being excellent transactions We revenues. XX of client our that and seen than full revenue associated brokerage have more $XXX

our I like risk move segment. would management to Next, to

so in difficult the Second but estimate growth quarter respectable. still our with comparison we at for year, year second very last is posted In-line the Day Investor provided quarter we Recall June. it XX% may X%. this in was organic over

about expanded leads business carrier business the are year-over-year are new while counts offerings our grow. U.S. encouraging businesses generating momentum. wins, our counts as positive clients insurance and claim In as continues increasing specialty up our claim Call X%,

$X.X clients. are by our clients. areas and claim on last In innovative out totaling technologies investments of insurance billion driven paid analytics these positive we year that alone, claims over in fact, in carrier outcomes has been delivering behalf our Growth for

be to due fees performance Australia can Outside weaker the the bonus in strong lower was which U.S. growth year-to-year. from was while UK lumpy

mid-single-digit second stronger some the to in in should range. expecting think forward, half growth organic Looking full-year due XXXX, the client of are the for new and we wins be we organic

like culture. I'd on touch unique to Gallagher's Lastly,

culture Our rock with on divisions world. clients, the our from every the and foundation with other solid about and interaction is around based with they across colleagues underwriters we each and have really

our Our it's distinctive franchise for program. are and whether culture why through mergers acquisitions hires, we to makes us and people join constantly right our internship looking new the

year to two men the for thrives is our Next conclude to program an future rigorous Summer month, Internship unique This essential young will culture Program. XXth and we ensure of in nearly month for XXX our investment our Gallagher come. many years women

bodes for another year. over it I which Doug. half, first now and will excellent to stop great well a Okay, turn Doug?

Douglas Howell

Thanks, afternoon, everyone. Pat and good

that a quarter said, really amplify a terrific Pat results, As excellent in halfway the M&A. earnings on first move usual posted another top quarter. will us great to release. website. will commentary our made conclude combined puts on Pat comments the It through cash the I my that spot I it document and with from CFO a we and bottom-line comments year. few will of And Today, I

upper great earnings the three A brokerage of segment their release. right, All growth on nearly X%, X%. at organic quarter page to

year, we forward, see it tough than this a had look so compare year. last more we that third as quarter we a X%, creates X% really strong As like

brokerage points basis expansion. delivered of adjusted for margin And for margin XX the quarter, about we

XX points. this in organic seems environment, X% basis of yield that forward, should about Looking right about

of and posted this the quarter and is we considering and Risk second at with X% especially the That Management, as said, IR margins. posted great Day our XX.X% XX% by quarter. right organic XX.X% we growth what Pat team, organic we adjusted XXXX adjusted forecast over in-line June margins in performance and

our of Looking towards second and we management the organic risk X% are half segment, over still margins and north XX%. seeing

at top earnings turn release. of Page corporate the to the for their X the table As segment of

due came Relative June Day, little provided commentary. earnings midpoint when to the flows. the a of some we will Energy to Clean to at arrangement a add the little stronger I CFO cash expense IR give that in interest higher, flavor lower our

higher a expense of option million an we benefit onetime the about due to and little to ex-taxes, $X refund corporate two $X some transactions. million. exercises, then FX each three JLT tax Acquisition more little aviation lower due items, expenses, about a a adjustment And had to

were and on making Let's days to coming turn said Go day, non-cash we our that had the just we we estimates of the most to document items estimates Relative in items except little closed depreciation X. CFO show because June were the our is the we website. touch XX a Page simply initial business IR that on when much just X. conservative pretty like earlier founded commentary in-line, now gave June the that is aviation IR to it the our for amortization That better.

CFO commentary the we Next, turn Page X. to are in Again, document.

towards fourth Looking out third and the the quarter.

with expenses for and consistent interest, costs M&A June. estimates what in we corporate Our still provided are

One the our like months. energy, in estimates And a not fire natural several last quarter, utility for couple have year. clean plant are three host extreme or we feeling of posted the prices. seeing offline are weather for had quarters. taking for As range next or while gas second we better we the is midpoint impact we There our of are reasons widening than that, we the

June to tax lower this lower $X So the said credits million produce we $XXX credits. million have we range at of us million. year. scenario by the there side That leading XX, of of $XXX carry about on-track a still drop was forward And to end are nearly over

low clearly to So terrific position mid in well the very we paid XXXX. cash we have into are a to are late taxes

we get One comment before cash operational and M&A. to

about $X.XX tax release that You severance earnings we charge for a will talked or quarter. this our see $X.X in million after

some office efficiencies real support back bring productivity and layers. our left We seeing are to to opportunities

to costs of similar all improving layers, standardization, quality. have focused started on centers what transformation and further automation our with a lowering did office and centralization, use We middle we of journey our excellence

IR journey. took the views the detailed The we step some in more day. I early excited that have transformation update first quarter September a needless charge are about we say our of to opportunity. this But is

available for out about balance cash billion around plus some year capacity using million expected sheet. we June and free debt at finally, to to and That cash any $X.X on of And full-year our for before M&A about the XX, flow the $XXX M&A have stock. of our bring remainder cash more

truly So okay, excellent half. first truly quarter. comments. my A those are A excellent

another year. for spot great successful a in Pat. Back you to are We

Patrick Gallagher

do questions. Mike, And Doug. for you to open want Thanks, up

Operator

our from Call line questions. Credit with now [Operator comes Thank you. question Zaremski open Suisse. Mike Instructions] for is And of first

proceed. You may

Mike Zaremski

afternoon. good Hey

Patrick Gallagher

Good afternoon Mike.

Mike Zaremski

quarter First half around your of rates approaching question terms that, the higher. could surveys track the where that good can the another higher least are commission about internal commentary and one maybe pricing and you topic was forecasting? Pat, for also moving that can said last a have in of kind versus X%. to is what record at your of sensitivity Maybe fee rates see you are of organic? beta the survey comment suggested of and your comment And you remind after Maybe right earnings they the on in same do about, you hits terms what the is on us just just your producers

Patrick Gallagher

it’s Mike. a Well, questions lot Okay. of

and me best. get and through my in Let jump try them do

I XX% First of move than rates seeing was it X%. think are even those of the they all, higher surveys said

rates figure So comp X% meantime. workers soft approaching the number that in being that are with

But prepared in this remember, put and I remarks. have my

to clients. for that, do our is what that mitigate job we is Our

at So about quarter. the units if look contributed you and results X% rate take All-in for exposure organic. our a

would even historically have through to Now up first the that we told and you closer quarter, X%. it is point, was a

exposures get rates. could X% we from additional and lift So a

terms back fees, and commissions moving to that and In between P&L. the accounts forth does and of what

XXXX the our You since friends, will with General's. Attorney it recall

in We have the been United particularly here transparent, and States.

from and XX% knows good us take to us what the to can by is that to and to plus commission and contingents. and pay us by us buying fee, they everybody making pay use can choose are So either supplementals commission or vehicle they we allow exactly choose do choose a

still the fees the but are Of X.X%, team. good closer course is work commissions supplemental to and up and these and having contingents very profitable, are because, for base are benefits about they very important, five

So of tell get me them. that you half

Douglas Howell

first X% what We in that is the then, survey worth. quarter would. It didn’t but is is probably about we

Mike Zaremski

it. got Okay

if You got your just about them. And we moving are North. survey are right and then rates lastly, producers think keep when

governor touch much our initiatives improve kind putting into on maybe of Thanks. - that. guys can you could forecasts. because take thinking of are kind from market think there some going margin in I start environment currently improvement further the want Do to the of think outside to margins in how there kind you more a about of is advantage you estimates invest great is our us maybe the on

Douglas Howell

if put Mike, wage think environment. we XX in Well think good points can is I that of that X%, that the inflation this basis so bottom I onto grow is pretty line, I there think

that between run strategies, are have doing expansion are our our we in tools, ourselves our doing niche margin developing We between sales Company data lots create of that investment here with marketing as points We to management of initiatives can a we X%. brand. if basis our we we that have the that XX think hitting interns

Patrick Gallagher

to The too said these make clients people out hit every out with rate other Mike and them. our increases as their I don’t figure how thing my try remarks, in sure go to day that

what all see the market real increase soft market of back market. hard Now looks you X% XXXX go got like. hard to market first all on to to way me no comment let hard

are from can there that They the - they the you client of is tweak in impact of getting bunch mitigate the across cover, a compensation. line do that. So up they to is the X% workers things reduction can sitting of a drop can

pleased a get not would while bullish rate I'm a tailwind, extra that I the we bit environment. So of on have

Mike Zaremski

you. Thank

Operator

your from Thank line Fargo. Wells next Elyse state of with Greenspan the question you. And comes Please our question.

Elyse Greenspan

but Thanks, guys good in a the the organic Doug kind I posted in of it the the I good you the last growth you half year. question quarter, then had [indiscernible], bowl to tough you on of here your you evening. better first the guys at guys year in a get set alluded bit fourth little tough does first My the a obviously quarter. comment know know know in comp year, you comp third X.X%

think of evening that XXXX? for end be out we full-year X.X to should where about of So should and the kind the up kind

Douglas Howell

Yes.

five between think I So X.X. and

Elyse Greenspan

margin guys know XX that in assuming was basis great of you is I your wanted I you added mentioned that reinvestment quarter, charge is behind just that this [indiscernible] that the a in is above the to and help above for the for the XX expansion. know this terms process target. get added savings points or thought then of Okay that that basis then CFO quarter terms commentary, of growth disclosure. did margin severance is organic something there, maybe you X% above printing I'm could taking related points And that just

Patrick Gallagher

put would margin been thought XX maybe for between is in and four of couple three days there, we just get just IR commentary we way writing less will bit I as So we a you quarters its expand referring it’s basis bit on points if have a page and at couple into to than hit least the a we of that in to we little questions we about so you that have in of our little if fours of will get had kind and we have always expansion. of last third X% margin have the said That - CFO what saying down organic, X% there. two tough the

or So been in putting it doesn’t less anything signal than have saying. writing more what just we

the think question it’s half does opportunities a we second The play but our take an your the severances long-term raises and in maybe show us in is Elise, got of I restructure little second year. for terms up of of more That opportunity, to some quarter a coming positions. of of us the have half

this isn't So severance that move on related that. with to the million total XXX margin a big But that. to I think will help $X at time. XXX still people This of

Elyse Greenspan

commentary, seems for on like second you the forward from deals on in of Okay, Page Poland in acquisitions I'm the closed really It terms the JLT. And the quarter, is and also X. that roll great. assuming and CFO then Stackhouse stemming

something of But year? terms less come have is Let's JLT QX year. into in I of other would and next either make them Stackhouse with some there seasonally third into the the that more quarter we quarter in them Poland have quarters know, the revenue quarter. versus and of the revenue fourth QX or don't have third the

Patrick Gallagher

heavily the quarter. is JLT into Yes, weighted fourth

Elyse Greenspan

Okay.

Okay. Thank very much. you

Douglas Howell

Thanks Elyse.

Operator

Ryan question. from Thank line you. Please proceed our of comes Autonomous with next Tunis your And question Research. the with

Ryan Tunis

my Good surprised second the only half half of one that evening. in first little I’m higher producers surveyed guess actually bit thanks. I is. moving Hey, fee a of XXXX. your rates

Douglas Howell

No, no, is That no. not.

Let me go -. Because back to remarks. my prepared

Patrick Gallagher

Yes. I Mike. don't think we said that,

I the think at somebody else repeated maybe front.

Douglas Howell

what the of receiving rates about producers that attention second indicated approaching at indicated quarter up is they X%. XX% rates XX%. my surveyed about survey increase of But during more XX% are than our our caught producers renewals,

bigger in property last indicated people few geographies be And - indicated tougher year. would schedules. nobody with that that So a

Patrick Gallagher

XX% of the is so. survey There results

Ryan Tunis

Okay. some rates What the percent in I down of bit to wanted Understood. of better clients to you increased a I just higher the guess response your see or buying little I to deductibles? more come either insurance though the to pricing. offsets back guess or

Patrick Gallagher

Yes, back are at given. of is we of I being that And to looking get do orders how kind this thing say flat. marching them I would most that are the

ideas. So north don't to want on come X% pay with to I of want to to me don't and pay certainly property. XX% X%

you So what do suggestions have?

now, much not going through going your XXX have Now it see up and to go about is you property, the or instances, not another and of a will much you why get if deductible to X% savings already why the do, X%, for can there taking flow property we got variable some is is are deductible in grand. in X% some that of books you right much which is

get terms are of an costs. doing they going a number bit which will clients are eye you but really out little of It's the of to different. I do they and that. explaining that trying good be you the keep that dynamic our pricing with one a the people are two, the keep part cup, drop of by of large exposure we want give on percentage suggestions. and And and to going can't the is it. weigh job getting I bigger number a our And back and to And they

Ryan Tunis

write there Got workers wondering what pricing are a I but, And if you of competitively to little more go then guess seeing detail is down if could much the over you. impact more sort is that to is clearly experience on bit side. past had I that because It's are you was underwriters good years. in comp, just the few just so pricing into trying I - understand you have that the because - of through, more flowing of it the guess

Patrick Gallagher

price. mean, more I been think and United use of you tactic, want pricing I line to it's your a competitors. against your more the One They when across to it, want off reduce it's you right. successful have are Alright of States. is to going it

Douglas Howell

And seen -. some we loss favorable have development cost

Ryan Tunis

you. Thank

Patrick Gallagher

Thank you.

Operator

Thank of with you. from And line with Josh comes Deutsche our Shanker your Bank. next question proceed question. Please

Joshua Shanker

evening Good everybody.

if six, wondering, are I'm and where is there months consistent that expensive You they see than were the now public private were market. materially acquisitions, with competitor beginning between But and the seven traded at targets understand cost I a the demand their hire your the or our prices to difference acquisition of businesses, more they for year. stocks acquire are publicly and ago? potential you market they generally

Douglas Howell

nice… that know, say all, of would Well, is if stock don't Certainly, I I expensive. first our have I

Joshua Shanker

No.

it you can up number, is just, XX%. the On

Douglas Howell

So like like to we that. but

little So seeing tuck-in up acquisitions. I a our pricing are think we move that bit,

you our up ones, still multiple And , doing low the plus trading is on about pushing are little larger on total That they in XX. if to bit eights still eights. throw that a multiple. We four turn then a the our

it shareholder us go lot So we think folks. out of to great and value a still creates merge with for

I specific there I seven seeing I was don't over So is question, in the your see think change that. really are think a last you pricing three last that yes, up months, four or the material which years,

Patrick Gallagher

you be remember, is don't a a million what which pipeline. strategic perpetuate selling The what take to to smaller, perpetuate $X tell cut, XX% think million, will getting difference of I our changing, to to haircut, right if between private is are our saying, most you a I transaction $X XX% which going feeds going interesting. acquisitions is million, into it $X But team agency, your can a like so. get differential, my $X really, million, And younger taking to I mates, and is I'm think owners to I'm by and

which sellers there So And are I that bringing table. did a advisors again, long potential for the think especially might well. the are this a long, is The time. more this height, saying, a opportunity seen years I to is good look, ago. But the move prices XX multiples you banks is up haven't think And large out in we deal want for as while lot us. there, to of

we can people discerning. day We That And of fit makes our look. going want to culture. very only we opportunities have pipeline from on of our be lots to We only longer, XX% want one. is that got due-diligence look - are

Joshua Shanker

And if to going that to and four at this point? buying account are stock would you pipeline, issue no I Is were Are willing guess we be a keep going still you you you issuing there for at to ago a share back. longer acquisition of without we that you shareholders chance to stock a the and good look know methodology, any you said three where we to is? along changed saying lot made stock it it's want have your it come what commitment this back out years or we issue

Douglas Howell

I that clarify Yes, think that.

on borrow total think a we I That such two XXXX, issued when actually have the flows had ability only shares. of a since and we think net that. I cash ample to have million

in last our of years. X% four than outstanding less plus the So shares

you are right. yes, So

that. We have done

a we can issuing don’t our do would cash I little stock use are $X.X stock, strong, year think without to but think we deal billion I that this think flows hesitate a I of of we million to to need get $XXX million in year or an quarter would first end next down do do that. $XXX we of or a probably we the year if the stock acquisition,

eight you working if that think very in are still creation. hard still on not - good use is But to issued some would but the shares mean we I range we do I deals haven’t to. times value a smaller to the are directly not that sellers, shares, then we buying had

Joshua Shanker

thank Okay for luck of answers. year. the for you the Good the remainder

Patrick Gallagher

Thank you Josh.

Douglas Howell

Thanks Josh.

Operator

Goldman you. Our comes your with [Operator Instructions] Thank Please Kinar with Yaron question line Sachs. next of the proceed from question.

Yaron Kinar

Hi good think afternoon quarter. everybody. favorable couple seasonality should some we My those first is question there think is about margins around recurring seasonality? the the recurring we maybe risk in see in flatter years seasonality in management Are or so last I of third the -

Patrick Gallagher

I impacts see raise in bit coming, because trigger think clients million saw are that fall. is do a we quality performance down two organic, and should year and which most that a are into sometimes there bar we in a the on that thing some actually every be takes our year quarter, This work summer to of that. or bonus revenues our of this but couple can that the you and it the those year dollars our little

you that is probably seeing in are there. So what

Yaron Kinar

or maybe to margins look then commissions, but Okay supplemental just further the they a got aligned roughly at silly as it different? and here, question and contingent we are are

Patrick Gallagher

a supplemental, with execute we they difference the our contingent difference. leadership levels compensate don’t do underwriters. supplemental, If usually is we field contract we a not they we there is do between the do a see so Anything lot contingent. supplement with will that big do if and how Generally wanted will of the contingent right do want we to a want we two, those a to

heavily - that. So we differentiate on try not too to much

Yaron Kinar

quick then placement what is public and private over debt? for it one final rational choosing the the Got

Patrick Gallagher

you Yes I long we that at and did are two our in a public had know years if capacity later it XX have but you there just is market. of in this seems history plenty of there the they for don’t or that, point time lost be haven’t XXXX I placement it. in rational first we private to access for and might we to one said here first think

Yaron Kinar

it thank you. Okay. got

Douglas Howell

Yaron. Thanks

Operator

with next Thank question O'Neill. the And Newsome your question. Please our Paul you. of Sandler comes proceed line with from

Paul Newsome

are of afternoon being shopping Good was lot into color of having are period that to little not bit you it’s that of sort out mostly shop I changing wondering look or behavior for your think or more the case? more thanks asking seeing market characterized - if you and the could you a your by the in as environment, is retention and hard level spreadsheet guys. are customers I necessarily book to markets a

Patrick Gallagher

the Well, no that is right. case, is that

mitigation were things. is within I think good around customers dialog what they letting of different you know people is well bit strategy advance, you year a have have have are got little the outweighed is sales there ago. than this your Customers are and you couple a got things the that a then turned say what

rate. XYZ of the changed them competitive. a are is part your like we good that necessarily shouldn't And of be also with about it of shop really in broker account your and is account to others are relation very why there But the We carrier, to going to -. the job talk for terms

Douglas Howell

which single see there, do retention coming is we their But retention have read bit, down. I Listen, And would think little a down release insurance haven’t there is are I every show come just carriers that out. movement.

demonstrate we we great what that that for to in some and don't that case, ways for order customers, opportunity is those gives to have help with a that mitigate our to us have creative our us prospects in go them. In facing

Patrick Gallagher

long well ago, - shine. this too, is not that too is the Remember when very is this when capability

we we when we XX% time the are competing somebody know smaller the of than that So we compete in marketplace, are. with

four So are the butting XX% time, something heads bit. of a of the on bigger order the players

mitigate increases, and balance have what to Now, want you. you you some your at look have when got to

our really well. play Now capabilities

that much are is have well that data broader little we pocket. better We your of better any of pick and And got analytics related a got hard guys, guy got set have carrier very than we come with. much the to carriers relations, we that in for small

good good. So to environment get really our pretty it's for skills off. a us, It's show

Paul Newsome

markets you levels well. to saw guess succeed, saw least hard Carriers in I as levels last similarly, And for commission reduce changes the commission - but trying the couple I do at not -. trying, always

Patrick Gallagher

as That be That hard really really is not let clear. a do is this market. But This guys, important hard not is happens. This is me true. market. this overemphasize a

We having wholesale we quoted, a are not are in canceled getting our fashion. accounts accounts

bit little We are through of a here. working increase

take three, is And two decade, I me not up have our down been two up saying four market. that for you the down last

up go organic their XX%, you accounts XXXX, fill out They average our lives. market. the could couldn't hard cover growth If market were was wanted. was And never That a get many of over XX. in rates the back they to

let's let's here looking get crazy So not a as hard at market. this not

Paul Newsome

thank agree more. I much. couldn't But you very

Patrick Gallagher

Thanks Paul.

Operator

from Meyer Thank comes you. with Please proceed with KBW. of question your one Shields And our question. next

Meyer Shields

question growth a impermanent quarters sure high on revenues in commentary quarter maintain with organic year Thanks. harder I you proceeding I why not having in forward. your where about understand having the some or have quarters. going to this something about organic growth high coming it last Is organic the it I'm same a in talked and difficult comps makes

Patrick Gallagher

lumpy at one actually is - you those is fees. revenues. not construction et I and We are programs, type to recurring do some its have get of business surety But annual bonds, where XX% look the or policies. commissions Yes, think might about things cetera, of base that renewable our not

every that have standard are you So our of year. XXX% policy commercial we would of what as think don't about business that a renews book

they little a be So last four bunch year, years. surety if or might on not of well for bonds, have back of bit you three a hit you

a about XX you talking does that influence. So on bucks, talking - total. are about And point when million in

So compare. you a have can tough

If you or good a revenues. XX have our XX you in have little in lumpiness will still quarter a hits

Meyer Shields

Okay. That helpful. is really

Patrick Gallagher

[indiscernible]. all is That

Meyer Shields

disclosure? workers asked looking really clients any having it. the retain sort Okay. at No that all, rate is clarify. of compensation recurring past. of decrease more I in I the in Is this to of the workers terms have impact in appreciate comp story

Patrick Gallagher

No.

Douglas Howell

down about When little huge not X%. That change. is are We bit. talking a are talking a you

Patrick Gallagher

often. and assurance No self out move people and that don't in of

you or and find to So have that policy. go paying overall, X% can a if claims, retention your a a you first get a reduction got out back and if you have Bassett hour TPA Gallagher got you large you

the road. are down You way

are the You not end the back the are pool deep of to going you and at in. shell

Meyer Shields

perfect, much. so thanks Okay.

Douglas Howell

Thanks Meyer.

Operator

[Operator the line Instructions] of your question. from And with last comes it like with Mark Please with our question SunTrust. Hughes proceed that, looks

Mark Hughes

Thank afternoon. you good

in is say I the up As organically quarter? RPS X%

Patrick Gallagher

what think was I that number yes. is the

Douglas Howell

to Yes. Mark. X%, X%

Mark Hughes

more in a the activity to Would higher? you Would might that one, go that for rate anticipate, and if growth push E&S up? perhaps see little maybe you continue

Patrick Gallagher

Yes.

You And just strategy. said if mitigation you is that the of could. part

that market down portfolio and right with And thing. better might You are And yes, our a might now maybe that and to layer at have I be stuff. to the road, then get in is you team one you very large think be at good property the wholesale it going RPS market.

Mark Hughes

fourth QX? there quarter is impact in Is the outside on like then margin stuff high an final contribution that the also outsides, question more looks from contribution. is acquisition, margin And it

Douglas Howell

don't on quarter. be if But on because billion incremental a higher would you the yes, that just revenue would in margin it entire we a know the moved one the billion slight that of - seasonality. slightly I post or There see that fourth

Mark Hughes

Thank you. good. Very

Patrick Gallagher

Mark. you Thank Alright.

Patrick Gallagher

September. strong year. to afternoon. being with for you Have Look finish this Day to the you at wrap is poised Thank deliver rest here. us evening. performance in In team comments great with have a thus another being got again a to the closing extremely again XXXX I'm of afternoon. for with the just few up IR us speaking pleased Thank far, this our you our with I Mike, and forward

Operator

Thank call. conclude does today's you. This conference

at may You this your time. lines disconnect

Arthur J. Gallagher & Co. (AJG) 26 Jul 192019 Q2 Earnings call transcript