AJG - Earnings call transcript Q2 2020 | Arthur J. Gallagher & Co.

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Operator

Good afternoon, and welcome to Arthur J. Gallagher and Company's Second Quarter Earnings Conference Call. [Operator Instructions] 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 meanings of the securities laws. subject to and differ are cause that statements results actual materially. forward-looking to uncertainties risks could These Please refer for to in its the cautionary statements. statements and XX-K, forward-looking and risks XX-Q X-K filings more on company's detail factors contained

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

Patrick Gallagher

is the afternoon. Good second earnings on you. Doug quarter heads Thank CFO, XXXX today Also Howell, well delivered deterioration as economic of you at for our continue for We first. our and as Despite divisions. joining us are caused highest call. safety by our an call to Thank levels excellent quarter. executing our while we teams the health the second the operating place COVID-XX,

We We're business. selling are clients. new our servicing

the local resources these our customers. really still ever, navigate is Gallagher are these and strong at Gallagher and support globe their our We I look as our than the capabilities delivering while brokerage, constant to like More tireless insurance apart. bedrock business. our and generate working together merger our the to risk management and acquisition our way. even That times physically our opportunities would thank focus services on consulting times when to they truly challenging culture global new professionals customers continue around keeps XX,XXX and teams and professionals help for very best

through Risk excellent net financial control our and performance, delivered mergers expense actions, quarter our adjust Management acquisitions growth quickly us remotely, and we our organically to quality. expense and and in increase last improve over grew centers our Moving the together in our decade productivity and the revenues base, have with our raising second earnings. utilization Brokerage second work combined quarter to that the always investments our efficiently demonstrates of our workforce while This enabled and excellence, of EBITDAC

earnings Let me earnings results points up growth additional environment. a our quarter as basis a expanded for XXX X.X% margin X.X% foreign team when up revenue and was XXX a bit positive segment. and to with responsible our down margin Brokerage provide efforts, Reported the on our expense better was we even by drove will revenue up starting X.X% details net control organic primarily and pointed Doug that, very XX% EBITDAC execute adjusted difficult exchange. further, Net growth. adjusted at break basis points, in some which and was leveling strong EBITDAC was Of Clearly, XX.X%. XX%.

nonrecurring cities. business, you of bites in generation, midterm delivering Starting business increases levels. quarter Still were than the were our we offset of levels, quarter cancellations some bit a held seeing retention Let exposure All-in, still our a retail rate up tale unit are quarter, positive, a lower first of a growth US, X%. around the and operations, policy drop sound declines, similar first up about bit over domestic but and each in in not strong business net trends wholesale small well but two me modifications during brokerage our units very about a new give the of organic world. P&C

and strong from mid-teens new Our open brokerage benefiting organic growth business had rate. business

binding Our sports MGA X%, about businesses amateur backwards program like construction. resulting from a slowdown were transportation, programs in and

had improvement and lower program We and in activity an over over alone, by April seen businesses were seeing driven in June and Zealand much Canada at lower where look the activity UK organic higher are in we were X% to X% tailwind when rates. not New the and MGA strong showing flat, than excellent delivered May. we However, quarter Australia as our closer more The new and from organic, business at – rate.

are organic. our a So just little bit weighing more declines exposure on

X% our a global operations overall, quarter, environment. difficult in strong So PC result reported really organic about in a a

as Moving basis. X% saw to an anticipated, weakness, our on benefits some business, second organic quarter we down about

much work we in decrease to New renewal are consulting lives but not decreasing declined a headline and special numbers. seeing unemployment business, lives on as project addition as covered the covered in

bring So organic would to X.X% June we here it when close came be Day. in pretty second thought at and our the our together, I where Investor in benefits the PC quarter

metric far so quarter. similar better forward, we're than third think expense Accordingly, Looking based organic to saves trending we be today, is quarter. what we in on second brokerage every monitoring July, will seeing are second quarter and nearly the the

than able be continues the but we As and economy well. and a are third is the quarter, where or cost we we economic organic the move equal should into today. recover, a to to deliver quarter, containment to as uncertainty, even be governmental if fourth that Still feels better of would bit continue lot like forecasting

conditions with line XX%. the I me or By on greater remains bit restrained most increases, property go geographies the business, leave tighter segment, a up of the deeper continued somewhat PC move capacity. around environment. PC let and more terms higher Before the strongest, price reporting to pricing and pricing Brokerage globe, X% than

level, up up UK, to X%. London at liability, professional and Australia umbrella X%. with increases By casualty is are the about at X% X% The up X%. rate X% up by that Specialty increases is including between flat and is New Zealand twice and X%. to about seeing the greatest Canada XX%, Next US down is workers' over comp least lines and than price Other followed geography, X%, more

across lower and more board, are deductible, units, to of but due the out coverages. So PC clients is higher premium reduced client pricing up modest exposure changes limits opting

in within quarter. firm increase already to July an continuing market the and to continued third from indications see rates Looking forward, early I increases point

find loss rate It environment. I began, a but outpacing still the a hard partners fair for family us, is joining mergers I for Gallagher a second and quarter rate brokerage yet more we and certainly risks to as strong welcome extend to professionals. because a warm pandemic mergers for case today, this new our acquisitions, the Jumping even I'd completed costs can underwriters to all at in four our not just were during difficult like a multiples. of home. market push market to see Before growing most thank of and more very

far picking normal, need the with market conversations mergers the quarter and than number potential up of quarter. Difficult and in are third further expertise for were so the highlighting second lower pandemic conditions While tools. partners merger is data-driven the

looking their to data current is an clients, to tools their and businesses careers. and platform for our excellent use Our employees' entrepreneurs advance grow support fit their

pipeline, term are prepared, look sheets being return signed we more million at around M&A we optimistic experiencing to Based we merger have or I are in of revenue. normal our about or $XXX activity this year. representing later of the July, we will so XX As on activity levels

management our to Next, segment. to move risk I'd like

dramatic encouraged April and somewhat due it, off claims. in and We in the claim I'm in Day, of an we organic with Second line IR a improved higher pullback arising revenue provided unemployment X.X% half revenues was the new the This quarter June July our reflects was COVID-related about activity, down down reported guidance increase offset claims reduction a at about in to X.X%. the by into lows. of worst and business think with counts quarter and that latter overall the in

However, new claims arising well below still are levels. pre-COVID

which also terrific little with a EBITDAC job year expectation. Adjusted segment. Our held our in was line lower also to quarter in on margins risk It to management last the cost takes $X.X did right Brokerage our a million ship turn versus only team this containment. longer relative and is

adjust EBITDAC quarter expect year our then we greater to quarter fully while least client loads quality maintaining improvement full actions team a expense fourth adjusted to to the second and just So and base quarter, our expense to as by and would service fantastic XXXX, leading EBITDAC the job even improve claim relative equal see adjusters across at realized, are rebalance in to levels. third our

combine Brokerage comments more even my grew or EBITDAC matters. turn are during grew about net to is every can grandfather But culture. let our Management started XXXX, before break consistently either Culture times. culture, and the XX%. tough, revenues in our time, adjusted to the associated I culture best excellent Since That's bedrock truly important culture. and economic Culture I despite our it X.X% Gallagher and challenges, Risk adjusted company Doug, core the promote we in expected and we challenging our talk about when our in live earnings together. When some unprecedented quarter. leader with band but our together, segments over have finish times on So Culture prevails. an me teams apart important our

is support second-class team respect an together. from are No We Our one We no is is citizens. important. another. There other. one each island. Everyone and learn

other the puts you as which XX those Gallagher believe us of side and document it since times. believe Gallagher of shapes This it it through we live then statements our before. you'll public have that We guiding the every of guides because years words, those way. day, tenets it's ago, followed came and even For stronger new values than we emerge us. challenging in XX than we on core more were just to will recognize matters our I the culture, few in a and we these

now to stop and I'll turn Doug? Doug. over Okay. it

Douglas Howell

good remarkable bottom and truly growth Pat top said, Pat line Thanks everyone. line afternoon, Like solid performance. and

document deep last I'll of to and thanks in of unique adjusted Today, Brokerage our and more to spend on and high-quality these you the comments digging and nearly second even on while give cash, some my Many for go and X to All XX% using the combined over thoughts expense globe Our commentary service our all clients on earnings around the finish that colleagues right, our times. the quarter time M&A let's continuing savings, need deliver is cost our with all EBITDAC release, insights Risk X. management efforts, up control CFO liquidity. then most Pages year.

Brokerage quarter. You'll EBITDAC adjusted this see both margins segments the Risk Management expanded and

March Brokerage mergers XXXX. Management $XX the and about versus costs after by XX, segment, to about that impact In segment adjust Risk roll-in million. for you amounted of $XX the closed year reduced operating when compensation million Our savings prior

That's our base during by So Day. in to quarter. April we again our that end the second million provided and about of at in able $XX total, expense we were at estimates the top adjust June IR our

We million. travel, our professional and other utilization fees, reduced consulting on the Let by quarter, This year, production supplies, towards lower roll-in $XX because savings employees think me $XX occupancy relative I about actions, of than plan saved savings. be and is technology quarter, by saved to reduced $XX about staff workforce breakdown prospects. million these $XX We to adjusting costs second million to labor and entertainment mergers. look about advertising reduced the million, is medical $XX you bit beginning and about saved $XX and of a When We $XX give see clients million. will outside last million office and third consumables million. to in range for a I our again simply travel lower

We costs see levels plan. medical pre-pandemic did utilizing are to June, our advertising of in we reversion employees And our increasing our again. a

then similar depends or more As all our organic. thus, flattish, postponed that for savings we is organic with of restart areas of producers plus as in savings on are our wouldn't the level we'd happens quarter. X% plus likely we're professional expect traveling consulting like may investments, and much the some But fees. we to as and If what quarter, organic, a see see at if X% and fourth third technology,

Okay.

our to to one Let's you provided offset the X, There's our consistent highlight, IR we commentary that to the Page basically two On with CFO most straightforward are items document what June items which we in fairly of on and posted go another. Day. website. IR

and the about little $X.XX; or The segment corporate in $X.XX, in $X.XX but about just segment favorable, interest acquisition exchange to in is still this X so again, rates three, came about was foreign our $X.XX the read Day, a quarter. footnote line than favorable. but favorable. in guidance you'll that second, in to corporate FX. IR the call it quarter, the foreign of slightly $X.XX in Brokerage came relative bit at Brokerage bouncing unfavorable First, June less The simply to to around due our amortization, Page in we the that Flipping unfavorable, in line the midpoint came about exchange provided banking segment was offsetting table,

off below and electricity due was consumption gas of the a use strong lower activity the lower energy natural of but COVID. gas started due still the clean we Hot range could are the of mild in to later to quarter, midpoint economic more July Finally, temperatures, $X.XX generation weaker and second end half dampen prices likely third year. seeing has natural the on

lowered effectively M&A let should lower us years have the up $XX after million million me wrap on liquidity. and earnings. cash All range allow to bit $XX on many That's $X not full But our some we net year forget billion tax balance So tax we of from to credit pay sheet. forwards a taxes that to carry have government right, a receivable the comments our cash, let's to with come. for

June strong quarter, the were slight receipts after during and a early cash customer rebounding slowdown May in in Our April.

July, pre-pandemic levels. to in far, back tracking we're So

we at this concerns time. see any So don't

than As on we million nearly of consisting have revolving on available credit $XXX of our over of $X.X have more facility. to hand today, of cash and $X access billion liquidity, billion we

for acquisitions the four were during complete As mentioned, tax-free we couple did a exchanges. Pat as M&A, quarter,

Xx, stock to So our multiple arbitrage trading average even a below with nice an used of but own was multiple. then, little a paid our we there

heating More pipeline really importantly, up. is our

have a could and strong So to a we year. early the next strong finish year start

on A are for by continue containment. Those team and revenues growing them the great to Okay. my quarter comments. executing cost

year. full you, to Pat. pull economy the keep off excellent another we an Back Let's should clench from

Patrick Gallagher

Doug. Operator, and let's questions to you, answers. Thank go

Operator

The you. Elyse Instructions] is open in call first Thank [Operator Fargo. questions. Our Wells from is coming Please proceed. for with now question Greenspan

Elyse Greenspan

Hi, good evening. My first –

Patrick Gallagher

Hi, Elyse.

Elyse Greenspan

maybe Pat Doug, I guess, how is, on Hi, expense the are or for first question, My you? this saves. is

guys questions margin the you a guess I is, expanded first by but So your X.X%. have brokerage here, one I few

if little So right, bit the is around revenue what XXX in X% saw you of a if and lost my we on I margin organic think out growth, save maybe adjust gets numbers the points basis math improvement.

And guess just business that am correctly? or something So there's about improvement I thinking good then am away pretty missing your margin from some I the I just there? base in just

Douglas Howell

it right. have about you No,

didn't I think that's quarter. we give We right. raises this had – no,

So it that to would have at little right a bit, but you're dampened the X.X% looking way.

Elyse Greenspan

could I color the in ongoing – – had of remember of that an said I that kind June and post-COVID I on I that you just fourth some provided that If Okay. see about third exists persist some think believe, I just today? the sure to the And make guys from then still save given you potentially terms you provided good guidance of Investor your we saves, in the quarter. figures, wanted basis? half you could updated Day,

Douglas Howell

Yeah.

weeks when we have probably at ago, it think would that X about I been right. looked probably

our further in also least effectively we and this underwriting technology and more do we in also order crisis, look pre-pandemic. our cost we are our and will be what And a how That offices, to than how Do are we It deliver a what them. advertise? to we also How and our now, and advertise leverage partners how do maybe how when matters you clearly we result we right us are and to that I then goes attract to of be capabilities, we service we much market? think we much anymore? That develop And is how at how we to need in at the And what ways how will what finding business. in compete will – highly determine they retain entertained a spend do virtually. service prospects train, travel, configure communicate clients' much where expect on want little to really it then correlated work-from-home we drives dictate end the think lot lot I and resources market. talent. in impact the learning locate advice investments takes it technical a as we folks. But mentor

to And then employees I our welfare back as truly health our that thing your will good the and being utilizing benefits, influence they we hope this have get Nothing to savings. one exams us also, in getting medical experts prevented need plans. delays that medical that their getting treatment. employee and cost ultimate the services So We doing dollars say saved comes everybody need. in million be from quarter. And to several

over office adjust we hire the adjust footprint of back the $XX could to it quarter express, bring we were postage all that I we externally. estate after get be external the maybe resources maybe term, when using occupancy million as number. that together, real saving could long million some $XX Yes, we a we So cost, to

a prospects it little want it wasn't business. us as really depend guess, and but how far partners on bit So a will clients' off our to do underwriting

Elyse Greenspan

helpful. Just the And worse which trending the seems the quarter lags right, Pat, on QX, Okay. with side, of QX? in third quarter on business you is could there a helping Investor see brokerage the are it that then the than said we've is be hearing than third then the Is some transpiring. quarter? the As that mix June in more that's be so from that color peers some Day. better in factored businesses, second little your how some And bit think line you I quarter to incremental organic third bit pricing? little organic That's a been the

Patrick Gallagher

very you Elyse, know, is a big July month us. first for Well, all, of as

a So had very a we good bellwether. very, And it's July. strong

things in the the way it don't if we we feel completely think phrase table I sit we and September, so exactly today, today. August fall here just And as off

Elyse Greenspan

helpful. Okay, that's

all the shared think I color. you

Patrick Gallagher

Elyse. Thanks

Operator

Credit our Mike with proceed. question is Please Suisse. next Zaremski from And now

Mike Zaremski

Hey, good afternoon.

Patrick Gallagher

Mike. Hey,

Mike Zaremski

Hey.

First where if was go of to kind – leverage work level question, its something if you agencies a in kind down to terms larger? or for the you or Could two temporarily kind materially then of became of could and way with go levels, chunkier higher a there something a rating year available? of

Douglas Howell

Yeah.

think to I receptive they'd be that.

with I think we've brokers. seen other that

to seem have push ratios at Do that? to I probably would be they debt the So willing to appetite that. that that we all, but be would won't very think willing to much We that. listen our do accommodate reasonable could they

Mike Zaremski

then, same the kind Okay. And space taking Is large a one? that lines merger terms for of along to it to account And of taking broker the kind if or into find that's making another as to potentially a of place. account mid- – more hiring the as the of RFPs inroads maybe they've in look of like when winning of is the consolidated kind clients so merger? renewal more it result Or RFP up more new next year because comes the process, is place both? after it's for the

Patrick Gallagher

this Well, Mike, Pat. is

I subject. was genesis. of Petrus Foods mean think XXX on the touched with I care to let you for me Bassett XXXX, that a Gallagher started claims company at our go take to basically, But good in very back time. a Fortune

So management business risk account the we've XXs. the in large been since

capabilities consolidate to stronger opportunities. good three expand us giving fact years, I business. and that much, I Now our on stronger, we've said, past yes, number we going side more well, business have chances are on top as both as over clearly and And stronger well that think claims much that feel the players our side. as the that really service gotten to the the to about is brokerage as in the of X And gotten

Mike Zaremski

back And a Great. terms margins. lastly, Okay. in given just phenomenal quarter just Elyse's question, to of

of it was the like, kind there Doug, margin feeling points improvement sounds to and like there Doug, about savings. your of answer employees recur it back basis it. saying doctor's beyond XXX margin usual of just that of more expense – that people going entertainment feeling back again over the to comfortable were sounded improvement beyond So you gets And was comfortable, could in And kind sounded it to business terms offices. like unless

fairly of so it's I continue? such – guess expense save we – it's, sounds positive because sell-side it just haven't I it's could improvement that underlying as enough up like kind a during estimates, trend times. come great And muted organic net what margin is it's think, growth of just know,

want sure to I So make understanding. we're

Douglas Howell

right. All

What quarter, be So might won't think third going that we somewhere. things $XX today. future? talked million because to up supplementals back did of to do closer strength another fourth margin is savings. is back probably there this our we way a first they're of million of to think sit contingents all, million. to might structure. in about we $XX In which we $XX In that the bit We our the give We costs that But that's the let's are $X go we're we margin and coming drove be $XX have million the lot the in Elyse there into a expansion some of back quarter, quarter, term, to have some back. a learning million some think two The little about business. Longer expansion. give

be will that, with see is, meeting day I or some a we they five have experts the in half think okay are expectations accept much there for do a willing our sale, virtual a plane, the of customers versus getting good a that a niche can not things industry And stay people our put to expect a changed that showing for really so on finding face-to-face differently opportunities success We're they traveling face-to-face. four-month our real for experts point our and presentation. more will they at hour way? Or to hour here because are an period. clients' this for question to us up in And could

there that some to be savings going on is survives. So that

of the term. got hard to little near X%. a at margins we've a margin we below expand expansion point it X% if of are said with expansion, margin And it's always in So contingents. in and We out it's strength okay supplementals

for X% it expand post and be point next a to hard year. growth X% would percentage margins a think organic I the pretty

be that think – over I would in X% we'll them. us X% us get X%, can there, over Get X%, difficult. expand we hold or

see don't what margin think pretty the but that is that we on there's opportunity organic expansion But yes, darn a in good – organic changing term, I – X% me, quarter. the much provided or this So X% past. in from there, excuse I near

Mike Zaremski

Yeah, I thank agree. Be well, you.

Douglas Howell

right, thanks All Mike.

Operator

Our next question Stefano with is Please Deutsche Phil Bank. from proceed.

Phil Stefano

I of we've this any Yes. contingents mind, hoping should world, catch-ups extent kind we actual will least thoughts that to supplementals a maybe forward I've In a to have seen I contingents you that quarter what was flat give could you into the versus on them. the normalize quarter view little or than in second more expected. at try any my and out? in first guess supplementals what or XXX were there bit be and

Douglas Howell

Yeah.

first there's – quarter. bit think in little a get the of these I the paid of small, probably little A lot things a bit second catch-up in quarter.

commission hundreds have and contingent hundreds and supplemental of contracts. like even We contracts hundred several

positive in some have quarter second bit, a targeting on million will probably we might development our be but announcement. So couple bucks a little

a estimates. job good making team of the So does really

– future I think cost And ratios are value right pretty the in because pandemic, now. what our happens that well. loss of we deliver there in and hanging the it's

we've got supplementals, that and I earning pretty contingents our I series we're of and think contracts. think a fair earning our

the will that I yes, – hold well carriers carriers. with think up the

the in of out this. ordinary So see don't anything I

Phil Stefano

normal guess, the million quarter my moving quickly a ways? beat $XX forward. can together, I million to those we pivotal all of like quarter, this the $XX could then you back to where shelter-in-place for to much. the mind, come COVID on year in a the want does just all and things give Can expect we fallout and And maybe million a But back in I how this quickly? it million sense closes? Look, too don't the us expense knows back quarter, economy XXXX depend the $XX is who idea and go $XX thinking gap or Or saves, bringing and that be to really relatively fourth looks what that third Okay. about

Douglas Howell

the I all because more means economy crystal gets little number. it bit dependent the I of Guys, think us had of I kind I don't on coming to that wish people face-to-face. Probably would they is think a you zooming come and expenses a zooming, highly back second, back that moving of I faster to economy hope back back and mean that. have I is our fast some in are the work. want to to mean, forward. ball,

Patrick Gallagher

Phil, is let me hit that Pat. too, this

to We hold That to see isn't in X client months. haven't gone up. going a

back to We travel, and long the years got in models backdoor do at be whether since this that take your we're there a for and health included. So in I stringent And lot that safety our about was pressure us. And reasons we've client. have even do business, vaccine, no of face-to-face, we're full Believe no bump will no letting clients there of going is been and a very service people. XX now entertainment, new the field get no have new business. are We're ground trip that. a writing to people to a to me, we going people see old. come work I saying on restrictions are here myself our see

Phil Stefano

You lot. got a

the anyway. I and I guys was to in look forward think zooming you outlook great

Douglas Howell

Thanks Phil.

Patrick Gallagher

Phil. Thanks

Operator

Autonomous Tunis question with is proceed. from Ryan next Please Research. Our

Ryan Tunis

going guess be I that, revenue just is X% third similar employee it's Thanks. to to you going the again? assuming organic growth benefits thinking to this. Behind what Hey. to for are thinking organic about quarter be get somewhat about

Douglas Howell

P&C a benefits be of between for quarter business lot and I the much think don't got quarter the difference our it'd business. I same as what now. third the second or we've our see

this it quarter. So about was X% back

Ryan Tunis

this what, at correct? mid-June, revenues you XX% workers' point, were said And through comp down

Douglas Howell

exposure X-ish, a being about X%, on Rates dig that that. that. you units down, down like probably out maybe talk let if here in for you work I can are something but But second, me

Ryan Tunis

only down furloughed So have trying payroll. you're understand workers convergence level of to just you're X%. what why on of is And employee comp, that's I'm some going in type not still which is ultimately, COBRA, that collecting obviously, getting thing the the workers, on at I'm of to just benefits, based

to exposures more third we So a down comp, quarter. trying like I'm that in why health we're in understand down will workers' XX on and be the wouldn't benefits think bit

Douglas Howell

Well, with have of the to might I our too. it think do that business, mix

at impact we know, high, in and when you low As And look stack at this and look we it that, up. medium industries.

a have low industries. business in lot impact that's We of very

in the now, workers' you're decreases comp benefits point, seeing at it. right medium this even the not categories, we're So seeing industries and not those in

there be a could So it. on convergence

Patrick Gallagher

part big A and to is economy necessarily onetime come in spend the help we that people. people and my on Right are more communicate themselves. robust. in as not also and drop burden to take now, communicate to stuff they're willing is well. me Then with the benefits related work that when do project They'll willing of

projects it's work the But things underlying see that project So get and quarter more business in that to return kind probably back. and prior also like welfare we'll diminished look to health that, comp. the growth like that to have does a of work

Ryan Tunis

exposure safe increases guess and declines? say to it then, it pricing that is, are I still my Pat, is offsetting follow-up Got

Patrick Gallagher

Yes.

Ryan Tunis

then essentially, on is say are So that accounts it at average, premium? flat basically renewing a to fair

Patrick Gallagher

difficult jobs key spend. our of those help one what because down a in they to navigate Or is clients environment

So will take limits down. people

it this next should $XXX need this had $XX be renewal $XXX maybe you million. Do year, expiration. You umbrella or a million million

their Your our same million, that should million. a take retention it of of do $XXX while lot we time, their around There's clients that, we the protecting insurance, helps at work to future. that mitigate cost the was $XXX

Douglas Howell

am I on jumping too.

benefits and business – about there, seeing if it our was – in but is it's the workers business X%, so we're Our quarter, X% comp down

Ryan Tunis

Pat, do something Got pricing we think like can it's recession? offset to that if sustainable Does it, exposure a you that declines. are in can so continue feel happen really that

Patrick Gallagher

me maybe Yeah, I might not do. if been now, you'd mean, bullish. XX, I I March for ask have as that

Ryan Tunis

Good Okay. show. Thanks guys.

Patrick Gallagher

Ryan. Thanks

Operator

Please from proceed. is Yaron question Sachs. Kinar next Our with Goldman

Yaron Kinar

everybody. Hi, good evening

Patrick Gallagher

Hi, Yaron.

Yaron Kinar

you Doug, you quarter, highlighted there kind in third quarter without understand first can to that you're million to few quarter that offset? $XX positive up? second million, want cost Hi. $XX think a think, achieved the saves. is looking Or had Are in there. simply with the decline the just positives at the the second to My question haven't a guys that that $XX you yet to bad dial other any you you regards still I when million million is I of in $XX

Douglas Howell

Just back using a their get couple of our to we wait medical for employees plan. clarification, can't

So plans. access We our that to wouldn't guy. folks bad a medical want I necessarily our call

Yaron Kinar

use words. Fair, I sorry, apologize for the of

Douglas Howell

want don't aren't we exam. that's want out their problem the just the of okay. a because – we – I know people No, year at severity to end getting coming but all annual

spend So costs $XX million if $X that quarter, to million to us we're it. happy a a

harder is other that to to going good we call a that. other harder through? that some Do bad that the near-term number quibble guys, think in keep of so to getting I have won't wouldn't it a think on good pretty be down them. than guys create I that's I to bad, job we've travel more I come of done could

I where that in about environment. So are we think this we're

using guys the guys too wouldn't to good offset the through coming quarter. many So third bad terminology I your and in the expect fourth

days in. think we about $XX we and we're back our close. I going you $XX what's pretty so when got of it, think April, the in I come estimate $XX spending million and stick million gates money we where a it, came into million gave hit insight pretty if And between what's estimates here going about to an we've think you good and So XX to out and are

Yaron Kinar

Right.

I that again, And apologize terminology. for Okay. using

Douglas Howell

No, you – to sure wanted make just know. I I

Yaron Kinar

high you Six into Yeah. the impact. back, of felt of high-impact look you my kind months buckets, those was ended bucket this And second Like situation, the versa? medium low-impact up just what or impact, vice buckets as low back goes think you much shifted? do in much – impact, initially question how a bucket how then a to – being of

Douglas Howell

Right.

and of up when got kind were there the codes XX the them of XX thing, right low – what get the category we same medium, of much. excuse we So you probably XX there them quarter. to in the right, and Of if to moved of say, we them you in that it, look XX, SIC picked second in the then the high-impact not at three had me, high, let's medium

and this So is of pretty high coming our say, good. out three low, the gate, would into medium thing, on pick weeks I damn

that the to and job over a But longer-term the right again. our feel fairly happens are pretty are in the And near did picks of we be so whether those going we comfortable I forecasted impact businesses it. that good We'll next what term. see

a into So of nature got our insight that I business. good think we've the

Yaron Kinar

Okay, thank you.

Operator

proceed. with Our SunTrust. Mark question Hughes Please next from is

Mark Hughes

Yeah, just at of of XQ kind on we right crack another year, – on function the afternoon, expense step about go-forward think rate XQ. run – the we is When kind question. a a basis, this next do good

so think back the margin to about better. get expansion. way your And some Is of that or we it? X% year, go template right next to usual We

Douglas Howell

Yeah.

basically. think you've and back reset go got I and to us take

XX programs, organic see savings, margin you're you then were just X% continued and year, XX expanding that year point margins us a into you years. basis environment, organic our X% get of six about to natural a improvement going growth kind we back back for or we've a the you're some been us margin also XX think we points into and expansion If about, would If of these see X that last point going doing to give five basis on be to growth.

a at taking $XX $XX and So maybe year? in $XX reset million. million expenses, of would way. a compared in you're there you million quarter on XX if next $X put – because we're the if to Probably little back or you're It's push, expansion. billion, a be basis get you looking But it about right to points second

Mark Hughes

sounds P&C. Is Okay. very business, I'm of has it in XQ being And it being completely prospects the strong. read? sure on was improving. But like the better? then organic benefits very, that not if about like most you talked benefits focused are sounds Pat, on measures July that a fair

Patrick Gallagher

comments that only say more to was in say. I my referring I Mark, PC on – fair I'd it's July, to think

and I think is continue. in you're benefits seeing I that now what will think systemic,

you into data, have the what from new et or tell good have we did a sales getting you, will business. I July force Now cetera in

health the looking still are help other and both all people their and welfare So aspects. at needing and retirement around

So forward I But do new cetera. what's I business good. think be think softness will employment, you with have going underlying an in et

be not would stronger quarter. third predicting I So a

Douglas Howell

are We're webinars the joint One webinars. a between P&C lot of lot Mark, – in seeing on benefits people our with our doing thing business. of we seeing, a we're

So is to learning. interest in the workplace, safety a there in We back did work, webinar.

health plans are getting customers that we in should environment. this welfare interested thinking plans XXXX and So their in are about and how look medical

So first in that as the or growth plans. trying some to year next are their could redesign to better lead quarter quarter people fourth

don't quite Third quarter, I yet. know you'll if it see

Patrick Gallagher

in perspective, them in we XX,XXX second and things win second say business quarter, mean, webinars, the said, put what material know casualty in be us with many with the out to new where, strong, you and relationships attended our even X,XXX heard Unprecedented when Doug content they're And that time you've attendance time. property as would we're on combined like sure. higher. of don't benefits compete, wondering times. we we're else return our in But out. the I all that of We And Mark, are webinars those work. just me, brokers. to competing smaller local around this believe XX% there. this is now quarter for people the putting

XX,XXX years. had XX people haven't in attend We

Mark Hughes

you Yeah, any on and that benefits employee final that? – these packages, have won't your impact perspective number of about employees furloughs, furloughs This question. hire some maybe interesting, the once lose at just point, stimulus that expire, one of the maybe cut question they'll businesses will and business. Do

Douglas Howell

Yes.

been many have actually that XXX.X, things, furloughed. the we that like of Maybe have there's technically something that One furloughed. that people don't we've

that So I what them furlough, happen we're will we're hoping after back. think bringing

Patrick Gallagher

No.

were I clients? you think, Mark, talking our about

Mark Hughes

right. That's Correct.

Patrick Gallagher

Yeah.

think a that, is that I possibility.

you think those jobs people do I and erodes. support disappear. actually Yes, unemployment support furlough that think when the I see the have could their

Mark Hughes

the risk sense the of Any there? on magnitude

Patrick Gallagher

No.

Mark Hughes

you. Thank

Patrick Gallagher

Thanks Mark.

Douglas Howell

Mark. Thanks

Operator

KBW. And proceed. now is our Please Meyer question Shields next with from

Meyer Shields

insurance their Two sense quarter? know, over second, big And picture questions could And performed gazillion I'm course reinsurance. the Capsicum One over on you update whether just hoping how then consolidation. And concerns brokerage us you. I on don't you give Pat, Thank the the CEOS. is to, talked of reinsurance on us company you wondering question. could second

Patrick Gallagher

two number me let take Well, first.

and excellent very of start-up my think I've of had were business. That excellent And acquisition continue said with of a I've this half is publicly pleased an equity team. get in been remaining over expanding final Capsicum number I just involved a the the team the an to times. is do best single first career. we that They've job to line. terrific the

remarkable. ago, And so is scratch five, today seven literally what we started dead it's from really years with –

with seen offers years awful be And buyers like positioned So of that through a us, take there ago, reinsurance been in it. well And with job. XX advantage think years very I've Capsicum opportunity. of ago, continue you And consolidation. I've I'll to. they'll who have consolidation big The of this team and guess – you. to how look out blunt down, many of I've if that. I is consolidated lot competing my is is those career, don't doing at The great an gone opportunities, XX I –

Douglas Howell

Capsicum. And we Meyer, XX% well are year-to-date over in organic growth

Meyer Shields

Thank I you That's Okay. all so much. had.

Douglas Howell

thanks All right, Meyer.

Patrick Gallagher

Okay. you Operator, evening. that's And think me a it. and we'll joining comment, I good just make let afternoon. say quick us for this again Thank

in said place year economic in appreciate you the rest this successfully a Thank strategy platform it. we for I year. for We and of really right navigate remain next to these we times over, we and an As have delivered excellent difficult being environment, with times the and afternoon. over all quarter. better hopefully, but us challenging confident that this It's

Operator

today's call. conclude This conference does

for thank you You may your disconnect this And participation. your time. lines at

Arthur J. Gallagher & Co. (AJG) 2 Aug 202020 Q2 Earnings call transcript