AJG - Earnings call transcript Q3 2021 | Arthur J. Gallagher & Co.

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Operator

Good afternoon and welcome to Arthur J. Gallagher & Co.’s Third Quarter 2021 Earnings Conference Call. Participants have been placed on a listen-only mode.

Your lines will be open for questions following the presentation. Today's call is being recorded.

objections, disconnect any this have you you at may time. If

statements. within this the questions, including statements to the risks comments are of forward-looking conference laws. may Please on X-K meaning factors uncertainties These securities made the contained that forward-looking materially. and to company's could its filings cautionary the XX-K, results Some actual to subject cause response during and for call, in statements detail more of statements forward-looking differ XX-Q in answers to constitute the refer and risk given

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

J. Patrick Gallagher

afternoon. for Good thank you. you call. for joining our quarter earnings And Thank third XXXX us

call today fantastic as our is Officer, our Financial heads Chief the as well divisions. me the quarter. We had operating with third Doug a Howell, On of

of that bringing pushing the the nearly and in And year-to-date XX% Reinsurance you $XXX revenue. new be brokerage annualized organic adjusted you year's XX% $X quarter merger Willis we management our risk in revenue, XX%, of EBITDA sale if that organic, growth counts pending would life five large growth Net XX% in For mergers segments growth control frequently. XX combined merger, million growth our earnings XX% and nearly we closed billion. last in representing of completed number and posted if for discussed we've add

culture, raising to all So Gallagher quality, level, a upon our terrific improving execute and productivity, our growing quarter organically, the our measures. high importantly, unique most growing a building on through acquisitions, constantly team very continues at

Willis our brief Let agreement update a to on me Re. purchase provide

Justice. competition received in the UK, six the clearance close, are in by we required to front, we ongoing, final we clearance good approval regulatory final that's including is CMA jurisdictions shape. the That of review believe jurisdiction. or the in the transaction, On The five jurisdiction Department but reviewing U.S. is where the

there's be point, for on a done to still Although, believe work we're this quarter we at fourth track closing.

hundreds work integration be ensuring at and well the clients On to our professionals hard front, service of are we Re will Gallagher we positioned when Willis close.

professionals colleagues history going of M&A expertise this our clients. holiday to acquisition year XX allows forward be Integration our our path. is season. It's welcoming Our X,XXX leverage the to joining and integration new in all really looking about to as us. to Gallagher be a will It's combined proven our DNA. We're organization exciting for family to incredible think us and that talent

with EBITDA at results, adjusted year's September the from Okay, last large excellent Doug XX% X% back that and comments team. third margin our another growth, segment. brokerage of our the Day XX%, nearly was of Reported at starting quarterly was controlling revenue upper to end revenue at the and for growth our expectation IR excellent organic growth on XX%. to brokerage outlook, we needless quarter quarter sale. quarter life fourth earnings provide XX% Net and will but was product say grew some our

Let starting geography, and walk our organic world with me around by you our down break the operations. PC

in were XX%. combined binding our in includes operations strong increases. our business grew Risk good programs very X% with driven were organic, with new organic continued than MGA wholesale operations retail domestic results placement domestic by This exposures and rate and businesses. higher than brokerage more XX% in more XX% services, our open First, organic

retail by Canada retention. also was finally, and XX% X% X%, were business. point up benefiting UK excellent than Australia operations organic. good on Outside levels. And nearly XX% from new Zealand X%, production. XXXX new than solid supported business double-digit U.S., New was the stable so retention and or new more and posted grew the combined a business back up of and a both to more business New our both Specialty relative was

consulting Moving to our business. employee benefit, brokerage and

quarter Third a year's organic and and high for about organic we line life for have nice September the the the with X% up sale, up really the second quarter was product insurance X% organic controlling IR commentary, been for first. X% up Day our would last in from step single-digits large reported organic represents

So encouraging XXXX. revenue we for and of were year and momentum really positive the experiencing sign the remainder

quarter. to that XX% brokerage X% excellent segment, solidly total an range, simply organic So in

comments Next, product a positive all increases lines. premium I'd overall, Global X% renewal to and quarter Overall, similar remain the year. and this about firm rates make PC were like is during first market. nearly increases third at few to half on PC the of pricing

increases comp retail up about increases liability. up world, Canada, premiums X%. workers' nearly the premiums Zealand is with driven double-digit up in while U.S. in X% retail double-digit was commercial to by around flat. closer about around liability casualty, professional up professional Moving Australia New Even about up And X%, X% in casualty to and increases In X% and UK was auto including X%. and XX% liability combined professional

and were up open XX% were wholesale brokerage more Finally, operations X%. within premiums binding up RPS, than

midterm existing add to the are positive their leading improved chain other endorsements Delta to as economic and adjustments even policies. coverages variant favorable despite and and exposures our disruptions policy Additionally, activity, policy supply customers

still So premiums almost increasing are everywhere.

meaningful don't economies Global supply inflation, loss attachment PC replacement ahead look of global as increases increased rising is further the excess carrier do slow In this see Long-term in and in conditions. to claim in before seeing down losses be social or robust. billion in likely become all terms As points recover $XX coming for costs. while. market inflation see quarter, persisting disruptions. even difficult natural the quarters, and in remaining any appetite near-term, third markets quite a more appear rate a cyber And with and chain capacity, I changes over we not underwriting, increases cost frequency the we factoring incidences, catastrophe of

I will to future. dramatic push investment continue for All the of see foreseeable suggested for combined returns these rate. just change factors with don't carriers a low

it's clients in help environment. very many expertise creativity, market a and the as mitigating to PC job relationships. find our hard spots, brokers through global is remember, But So our best still even difficult increases our coverage price while and

services with from control lower about opportunities. more and business think benefits, prospects we most challenging unemployment, labor will grow And one in in driving the our to rebounding As are and away rapidly plans revenue our to them clients. is improve memory, solutions continue help employee customers well-positioned the of expense lives tactics creative for strategies that demand let’s to environment our increased consulting covered consulting markets shift for and activity, to deliver our businesses business. our their And extremely

reported think similar up To would organic So year range. brokerage XXXX improvement quarter brokerage put really we to full as I think could perspective, the towards be be we organic year that X% nearly will XXXX. fourth in and growth decades. organic sit in organic that segment segment And a third end a from X%. will the be here similar our two would in quarter nice XXXX today, very I in X.X% organic best take That full

new mergers Gallagher joining about like annualized $XX to to And earlier, for our revenues. very to brokerage professionals. of million I a representing I acquisitions. on I’d and quarter mentioned our five of all thank partners mergers extend warm we the growing estimated completed welcome us. Moving during family

prepared, than being term representing around As have of we sheets signed million at our are more look I XX tuck-in annualized revenues. M&A pipeline, $XXX

finish will So another up the like successful strong without even re-insurance it’s we for merger XXXX our looking year merger, strategy. wrapping

I would segment, Management Risk like Bassett. our Next, to to move Gallagher

XXXX expectation. were once was September again XX%. strong too. IR XX.X% benefit than business new from wins. in Results Day late Third continue organic came Margins margin Adjusted better quarter and growth XXXX to above our even EBITDAC early

arising improvement within the further addition liability compensation just core general In and to workers’ quarter from an claims new exceptional team. in

is should over us economy, above excellent situation Looking quarter puts organic XX%. quarter global track improving comparison in business and recovering fourth organic margin our the more full forward, challenging, year on EBITDAC double-digit nicely somewhat That result production an employment while for and XX%. new fourth

nine over with our last accomplishments. and I months, be look our but thoroughly help, team can’t impressed back to I As the

Gallagher us down comes And ongoing successes appreciation times, working power backbone across our again table. of Gallagher in to time challenging values pandemic Gallagher’s and deliver the and our into our each to I’m evident their proud to and continue months, focus. unique clients, steady to That’s are this tapping shared have way. our brings to these globe, individuals a for to due on unwavering course other’s Those during these and client have expertise to on our we the value culture are is our It of teams pandemic. throughout that to In the And it’s time continuing clients trust of commitment and for on in clients way, talented count Our the the organization. our as who kept the Gallagher an the the during together clients. past founded is culture. unique Gallagher the our us. values

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

Doug Howell

Pat, Thanks, everyone. and hello

commentary I’ll and margins, my the Pat comments in third document walk with management. capital you a then release, said, cash, and typical As liquidity up touch finish a I’ll predominantly Today, on CFO organic our quarter. fantastic items on earnings few and through

Okay.

move organic a Page own, nice X.X% X%, the sales, the and either running second. release to table. to and its quarter the posted of said, X% Pat last step from first Let’s to due the outstanding up all-in really X in in earnings the organic Brokerage the as XX% of we way, year on Headline segment live but closer

organic seeing again fourth that I’m now, level. a sit we quarter double-digit As pushing

Turning the table. Brokerage adjusted margin EBITDAC to segment now Page X

for basis Underlying after Okay. was controlling sale points. around the live margin XXX

that. to Let to me through the map get you you take

our First, basis we headline about September forecasted margins IR were points, where Day. at down right XX

back the controlling flat. for us to live large would bring So sale

our utilization emerged of Second, relate a in merit small that more and amount pandemic right medical higher of pickup a we We plans, came as in consultants, on $XX million of costs, comp small the forecast. of returning We mostly expenses and advertising T&E September, resumption structure forecasted use our we from of call returning expenses increases, into to time. performance self-insured expenses and about

expansion feels to of these you for in points XX% range. XXX right also brings margin underlying that controlling about So about to that that X% on basis organic expenses

if $XX our the expense fourth period here show Looking quarter. And XX pre-pandemic XXX points say, X% fourth quarter. in should to savings organic basis forward, the we return think in about we of you would assume say million of expansion math

and sale that the over nearly XXXX that’s year return points. to points the be costs full headline in team. out expanding how by growing our in the growing XXX over at improvements means Add margins the a it, we XXX over last end, live outstanding And you the that of margins chance pandemic. No story demonstrates is basis decent years. the have growing margins So the by really simply really year XXX two of basis basis embedded come would we’d matter it’s at we That business. do work look how than points more even

EBITDAC a XX.X%, the Adjusted our of excellent large which period Year-to-date, ability X. our to margins segment are Management is Moving result. to an quarter in pandemic Risk maintain of savings. at our XX.X% EBITDAC the on Page portion table margin underscores

basis result we in fourth XXXX, story. fantastic quarter for the can margins hold of about margin XX% above in the relative XXX would year. Looking full we and margin a expansion to another forward, That points think

our CFO shift acquisition Page of $X IR see the our Day third to I IR X, valuation It’s Brokerage small you’ll million IR are work commentary estimates. of quarter segment earnings that a out catch-up Now change. to on finalized below XX One a document September would release. on most Day close recent we items about We September our X the small adjusted simply posted is exception because estimate on estimate. Page we on our causes Starting website. expense our amortization

were retransaction table. debt and issued to package. early came Aon segment our terminated the doesn’t September benefit mostly extinguishment Page in in to Willis related that here in IR line. quarter section higher estimate basis, to of non-GAAP our to Acquisition May $XX banking a we Corporate line, to The on Day gray. and it non-GAAP in IR adjustment and bit the reported Willis EPS. than third So cost that basis in related line basis. a remedy related on line blue X results actual reported There estimates on a adjusted in Interest the in in adjusted an the Flipping but charge is million both adjusted the

on a costs be in see at of the as transaction related additional IR well. these those plan our should Day. have costs here costs what sense December fourth adjustment quarter non-GAAP the Again, presenting will some We might we of

And than for corporate line and much tax came higher permanent it’s a controlling a in to better the allowance country transactions. On item. small clean after $X terrific areas estimate. in certain quarter, adjusted in M&A on line, finally, of basis the one-time international less Thanks What a energy. cost warm an of prices. a non-cash and simply million our September, for wind couple of natural valuation a gas That’s related a

to million year increasing on $XX are of the $XX We to range third our full million back the net upside. quarter earnings

Okay.

M&A. capital management and cash As for and

of no of tuck-in here in opportunities, At on fund was the Willis September and our facility. credit that – cash credit and line reacquisition quarter. about cash the XX, Willis that and top of borrowers fourth $X.X flow we fourth acquisition the say, heard to billion hope of our pipeline on on plan you we merger have As to we that’s to Ray. strong a close the quarter have cash, during hand Pat We outstanding our generated use

Before performance year-to-date over it deserves mention. I Pat, back I our turn to

margin have our margin and XXX nine points, risk on being additional year measures, of net and XX in us flows organic all segments are year. management great up quarter energy nicely us basis million nearly EBITDAC up expanded this basis positions produced adjusted Setting for to combined annualized seven coming the cash nearly on with clean $XXX points new mergers growth in to A brokerage track year. XX terrific months for estimated revenue, substantial investments for five XX another growth. years. Our completed earnings We revenue, expanded XX% X% this

back Okay. are Those comments, my Pat. you, to

J. Patrick Gallagher

Thanks, Doug. Hillary, And we to can questions. go

Operator

now Our is Research. is Wolfe call The for Zaremski open from Instructions] questions. [Operator question. you. your of state Thank Mike first question Please

Mike Zaremski

evening. Hey, Good Great. how you? are

J. Patrick Gallagher

Terrific.

Mike Zaremski

results. Imagining great. great – Yes. Maybe

disclosed, kind So it of and between Willis a stranded gap maybe Gallagher guys shared issue. the or disclosed estimated just And earnings services Willis quickly and the have I on call costs kind soon. there’s you this should of There’s AJ maybe also some, earnings time your will eventually is, levels operation kind any is is sharing baking of I expenses the curious improve provide guess, whether that guide color of guess, of can I you that all. for in the over and on change you

J. Patrick Gallagher

Good question.

right? We million million kind believe EBITDA, about worth I worth bought Here’s this you like the nine we some thing. me, $XXX looks months million $XXX around report, – the it do in if of on reporting $XXX of morning’s of think And EBITDA. math excuse

than be good be was that – why they numbers differences. that take guess their the was or on see the number basis. ours. than on their it costs Their might higher us higher the would to would ours. fact running a a So But it are to standalone not I run cost little loaded there’s for would business can business some fully

Mike Zaremski

Okay. living Yes. I’m That’s what too.

guidance shared but your – an is that over in in services, So terms time baking the will of expense current fall?

J. Patrick Gallagher

No.

back that think can well us ultimately it TSA what they service I gets for million. for service can $XXX it and that we what to under and the

Mike Zaremski

coming a about the the more of as the are – back claims side think that on your from from less color than it’s and it’s Thanks. you pricing. guess, in a the inflation property curious, That question. or five? remarks. Okay. environment. feels maybe seems there’s correct terms kind pricing it’s environment I emanating some worker’s I But loss I comp Did it coming side on back. I kind been deceleration, pricing expected because uncertainty I’m plus casualty gears a well, or it’s what’s if color any like just moving And there’s of worker’s to just maybe long-winded think, generally like comp prepared I hear guess saying was the know of moving

J. Patrick Gallagher

to rate, speaking compensation and Interestingly is and casually a rate down quarter-over-quarter, so in a losses Thanks, and a or worker’s Yes. the just about up slightly properties up a now. properties Casually, is business. about book our continues cat Yes. enough, in over five. book half I’m spike of Mike. little about point a all with our down point

say, this billing by our things these but So a and prediction yesterday. at of are call, for that is actually okay, any moderate market. quarter-to-quarter not what’s airtight, that By the ready get this way, look by-product, sort for happening by year, of geography, as in statistics the we when next we

I’m Overall X%. be continuing up So very to is about these numbers. in confident rate

Doug Howell

Yes.

Just it’s we this whole had back you at XXXX, to our of third look portfolio rate to add quarter third that, X.X%. and up if quarter X.X%, up XXXX,

you would I this is granted X%. a up this last exposure points up Marine little and in up this unit quarter third year. on X.X% exposure Commercial there this quarter up quarter. it Now was XX XX.X% quarter there’s X%. and – X.X%. X.X%. up there’s look up this third up was was quarter. last Property units, was adjustment it’s When up it’s Liability that. X% Package, year, auto year casually was It’s X.X% flat X% at XX.X%,

than you when were last across we third look point. were in So a full higher by all quarter year quarter year this third almost

Mike Zaremski

color. Interesting. Thank the you for

J. Patrick Gallagher

Mike. Thanks,

Doug Howell

those And numbers. global are

Operator

from your question. question of Our Wells next state Elyse Please Greenspan is Fargo.

Elyse Greenspan

up Investor discussed evening. on a Hi, topic recent Doug. is in thanks. following that My Good Day, we first question your

thinking the the this related of rollout the the of you clean tax it cash based like and there of laws the chance, it maybe like still would sounded Is changes year. plan were for still on sounded in some potential was discussing end conjunction to earnings at energy, from quarter earnings? September we’re sunset changed type it anything metrics? So first with And guys discussion to Has XXXX is but a there?

Doug Howell

Yes.

We’re I track a it necessarily still don’t with cash. call on going convert it. project to if know that’s I’d

held and for what approach. of Let’s but look a that. we’re there there’s professional non-GAAP then careful pension, how stock-based adjusting out whether cash number publicly taking of brokers But call there And approaches are report modified about it’s other depreciation, and a be a I subtleties amortization compensation. at different services their the EPS

projects nothing December to the that, we’re better ongoing, hope a through at So Day. IR to you report update our today, but working give I

Elyse Greenspan

you roll plan year. early out, to March were sometime if the But be April it next would in

Doug Howell

think I Yeah, so.

I think basis we’ll We then that basis. Day, on to represent basis clearly we’d the historically first finish this and this IR on have year quarter. an and next go back go that everything spring,

be say adjust you we all you that that first wouldn’t that before – you your quarter well-prepared models let’s release. Let so can we it did

Elyse Greenspan

it And guide we’re outlook X% it’s start next expecting organic what like then sounds which But a still within terms Within mean, know in to I was expect this ways hard precision. you year. brokerage, little little year you’re benefits away to the the is of to that in. year have weak for around for and I growth, come a

parts XXXX tailwind you be for just a guess just understand as I it me brokerage slowed seeing – businesses of the expect should kind be sits to a But within would you there bit. a today? and can little that you’re your moving how that help So or maybe tailwind

Doug Howell

Well, two things. I think we’ll have

wholesale that are into here some you binding did compares our when new tougher I we better think our But results XXXX have they’re do some businesses, we startups have than programs, recovering good think XXXX. I businesses business. business having recovering because are – our that we’re in this get the slightly

consulting Rate that coming think covered more all. work slowing starting I structure. seeing the not see lives increase, increases, back we’re down at to into you’re

in So places I – year. think would on enough tougher there next those compares there’s offset that other those other the

Elyse Greenspan

Okay. Thanks for the color.

Doug Howell

Elyse. Thanks,

J. Patrick Gallagher

Elyse. Thanks,

Operator

your from question. Our Please of is of question Bank Shanker next America. state Josh

Josh Shanker

my you Yes. very much taking question. for Thank

the going close one close you’re way Re X. XQ sort a managing renewals? organizations given unfortunately on proximity to of XXXX the be to and given What’s other each against one, Willis a So, that is such Re competing Gallagher January

J. Patrick Gallagher

really little, overlap. is Well, there what’s almost is this nice no about acquisition very if

there business. are no was they few there We not at much areas the little head very Capsicum, which very are There of This in startup, conflict. are became on a competing where to successful each complimentary renewals is treaty but Re. course, major really here Gallagher touch, a might all across book be head that or

their Re so being imagine competitor what acquired, just to people And about much being could numbers about numbers, if be you out? none to with you’ve to Gallagher been got in and could course, a of able to our that you reading were worried mean larger And this name, we calling the going is clients who come on? of that that does sort exists. brand and are what Virtually that how the they’ve

time, team side startup, is all you’ve ground this Gallagher one depth. pay what they can a the top Re a and is a as parties built excited. capabilities, a for Gallagher So four got are a had as for has at branding a all they’ve of years improved, from Re, stuff three, go, very just tremendous to very excited. over Capsicum as and line expanded decent that exercise. hundred people margins the They still develop much Willis’ They it that’s from outstanding growth. or five years, additional hit running old. brings is capabilities individual the in imagine, Re new, and It with are it over existing January got terrific Willis Re because The you people driving

a And almost to strong going conflict be with combination no whatsoever. very it’s so

Josh Shanker

numbers, at. sort million look larger to $XX say come these and there sizes, of out $XX list I Thank talk obviously some revenue different you let’s brokers obviously XX lists any the term million in there’s of at biggest going million per when look on you. $XXX And acquisition, you but of annualized million on ones about sheets, $XX they’re through,

you the fit larger that In cultural that point most the tuck-ins spirit? that same And in found be forward. for are terms the good their cultural this – brokers fit have part have as of the a culture do entrepreneurial not Gallagher own for going they have smaller at of fit, may

J. Patrick Gallagher

don’t but America put perspective. XX,XXX there’s size, say it’s Josh Bobby There’s know to this and here agents that’s I if of in and firms, not a organization brokers in people. I’d let’s according matter Reagan’s

Now, number XXX lists $XX on did business year. insurances last million

when So be to got you what’s million. that at to look you purchased, available XXX you’ve take $XX

get got our at You’ve XX,XXX, brought representing that. are to brokers day out Street and And efforts you chance to diligence get by the the at And have up still remains get time time. every number competitors people large that ones a them. our we talking SIM we come than are due our from less to level. them, know And of chance this right them is to done one culture. all are that the and to when table Not a

larger and with we’ve say amount. You ones I no, wouldn’t they’re by in some were are years size we with to acquisitions because fit dollar bigger. been don’t that fit away bigger the wash thrilled don’t done they’ve some and get past And fit. culture the thrilled There the

by $XX yes, and entrepreneurial they million Now extremely acquisitions or of our count, you the at well as most less culture. fall level, our fit into item know,

Doug Howell

the on $X which Yes. average term XXX, clarify, we’ve outstanding makes sheets million broker Josh, about there. just XX size to got

Josh Shanker

Yes.

is been It’s Your mine. than a couple better of math long days.

J. Patrick Gallagher

I get that.

Doug Howell

it. get I

Josh Shanker

me. Thank you correcting for

Doug Howell

here in million ones range too. that nice $XX some are there in But Sure.

J. Patrick Gallagher

of And them if than last probably And a to before matter fit probably sold hard years try in you’re that’s XXX two et kinds join age, top five when more at we look get the The things, we multiples, those all of to team. the that tax culturally, they of and appetite, those, right. combined. law, have cetera. And years

Josh Shanker

Wonderful. Thank you.

J. Patrick Gallagher

Thanks.

Operator

question next from of your Mark question. state Hughes is Our Please Truist.

Mark Hughes

Yes. afternoon. Thank you. Good

J. Patrick Gallagher

Mark. Hi,

Mark Hughes

is sounds it payrolls in way it just Is doing driving appetite Worker’s the part a higher of to change comp characterize, better, what’s any on carriers? certain that? this a you like

J. Patrick Gallagher

of I above. think all the

economy of well, recovering. the you have you’ve think I got, all, first

Bassett in our Gallagher numbers. So, we that see

see can economy count You claim in the growth.

line driven that And they social have just being do have And worker’s right and comp, more that’s what I got many have comp, carrier give see that’s quarters makes inflation, why difference, in talking really need many, what’s You rate. done. right? ratios to about we loss they going we’re you report and because the didn’t to and think need partners work thing move, see. know the hard our work day, that the a I every during when They but on a flat here, credit. they and market, you by And

So me eight then the to around swoop. at it is really they’re that to ball, to this because they’re XX behind out find trying points not and interesting get waiting back one

So, it’s for on being I of need recovering top a their incredibly more numbers, a and sign, both think well, premium more good line. and economy their of in the

Mark Hughes

X, forward, in or the then What’s Doug, the is those I’m guess think recurring the commentary, not Page to is estimated acquisition do the million described sure non And change a pre-tax, if two million. I’m numbers? the good going distinction what think? being I CFO you between press $X dense in release, as I on here, your in P&L but I’m $XX looking payable at number

Doug Howell

Okay.

So of accretion earn-out liability. the the natural you’ve got

they’ve about we’ve we We on earn-out. million discount somebody if – an and X% So, back got buy $XX around that got per at year.

goes to perform got $XX accretion that difference well the Yes, So, in kind they’re be of to that to put ultimate worth million, up expecting the a as change that to million on XX% piece. you’ve an of the could of $XX to is? up again, you’ve So an say $XX to let’s $XX got the if accretion range. pump then million that expectation. but piece, think at And paid out. X% one over-performing. We’ve you what payout going do liability accretion going total That the as we be change that’s and million, what’s got day earn-out really think they

that the we odd a quarters. there that different that acquisitions for our that liability. as you’re What We they’re that going looking it’s better, perform. think to take are accounting that when those that So some were increase And better seeing we says two have perform pieces. we going to have to charge did that like are have acquisitions

So…

Mark Hughes

And is that adjust that out?

Doug Howell

do We that adjust Yes. out.

Mark Hughes

Okay.

$X EPS it million take correct like for the go to reported million? is $X Or the it million, a… that. So to to correct Does does or it $X

Doug Howell

It’s adjusted the it’s earn-out adjusted acquisition the Well, change a is only out, amortization. EPS, not adjusted out and payable. not the for EPS for for

Mark Hughes

exactly. Yes,

Okay.

Doug Howell

normal The change say payment. ultimate it’s the then, in accretion liability the of

Mark Hughes

Yes, I probably think it. I’d appreciate

Doug Howell

thanks. right, All

Operator

David Our state Evercore Please next question. your is ISI. question from Montemaden of

David Montemaden

good Hi, afternoon.

J. Patrick Gallagher

David. Hi,

David Montemaden

you once did or a base business. going when we’ll it enhancing bigger it guess Willis like or profile picture back had looks has Willis the how and growth years Re grow increasing higher the a in as the that’s just, as do I been call like this company’s we we the in about forward fully base? think So, at about should have more thinking reflected see XX is I you we guess, the are a years pace similar organic growth. organic? of or previous I last around XX Hi. incorporated X%. would I the Re X% of be just for in question it growth If brokerage look it profile in on over the organic XXXX,

J. Patrick Gallagher

you anchor Doug you let let give in me fantasy. I’ll reality. Well, And

that through up into land exciting me this people had great were that call out to a with I stool pulled – years And think miserably into to start is big by of once late fact haven’t I’ve had group second May this really rug and that this the got Aon in time. we a a the June. everybody under we going team a terrific company, had. this thinking spring a that Willis player leg that on the together for on I in failed acquisition of is think be business, I a the knows tried from had

enough the lucky was somehow And to place a the on get to at in track right be this year. right time back for close this

the So to retail I’m property to enough, bit part business a interestingly It ability seesaw of a to is it reason about much frankly, a casually the that on for so basis. produce And company. excited adds it’s market it global middle our me. been adds, of

analytics, and what number What going world. are we how in Well, exciting but what’s possible? to instruction. them? carrier market gives does it to translate also their in that Where they data, seeing Now, two, number going clear And the troubling data take one and What’s plans. us accumulations? on how is on a capital that helping insight is are middle that the into

So that a me today front that’s whole joined hit the ratio when in say, still our business. not our team for another I different out it’s than but opportunity is and just to improving, look, get of

we’re that buying. of somebody the when typically competing local Now, We that how And smaller, broker that. with the compete plus should we frankly, in can or the be? XX% we’re agent be marketplace, that know time we crushing

growth, into hope to I organic a – at players. level. there’s retail that into And main this lead isn’t would is this re-insurance, even looking true, more three So, even you that would then go but

capital into in and tweaked million be largest We’re a at three that new revenue. to to become that are that going And well. there need carriers were do at looking really Gallagher going treaties that those. to market, player, new a fifth accomplishment, to be reworked great competitors, $X but yes, And we I $XXX are that a to the players. other we’re one of think things, That’s proud those [indiscernible] billion coming do

Doug Howell

there’s it organic Yes. in put, think our I will I’ll at fantasy all regular perform I that that growth. don’t think that any all,

much So, capital I that will think more knob creation. the it’s be determined. But of how of at

clients. more it's capital take the liability, opportunity to there Genesis we to we're as give with look the to I and comp I capital markets like way market, that alternative And, our come that asset can Gallagher take think knowledge pioneer think at up that to us which with going pretty combine with other create have creating capital Gallagher that programs. an really back help liability, long you really capital tail that the exciting general wholesaling with respect certain formation If the our self-insured we is bring with to we some it our, that where we capital of cap with with workers to when together creation,

ideas just then creative with up more business So, considerably think and Willis the reinsurers our Re, partnership where come I and in creative get I with globally, into ideas. close if much, you down get will culture Gallagher believe retail with a pursued. our

I help together. that will think us grow better

was any saying. fantasy So what Pat in think I don't there's

David Montemaden

much that was Doug, summer. now Re, for Thanks year guess volatility, mentioned think expectations. guess but and so on just I'm Re I really and it. wondering this there's That's just sticking Willis earlier particularly third Gallagher how answer. comment obviously your quarter and you that the levels to I some just in the I helpful. Got performance also can or interested compared has you attrition if the, on just in

to just up, wanted have that? on see retention a So if since view the holding retention been has how announcement just employee you

Doug Howell

have we're while Well, honest; really be approval. regulatory not that to through allowed going of we're some I'll

And we've up being our be I on that of can that reported right the insight anywhere don't very is I'm is where integration with but it seems It's necessary based that in the to think happen, that breakage business now that. so assumed into planning is they've our what limited. hit near And assumptions, seeing; holding advanced performance that well.

going think I holding Gallagher. holding to They lot well together. and know of that team at up it's that be credit exciting So that a got to opportunity be team they're what I give an to and it's

So what not we're in weakness seen a getting. I'm any we think that financially

J. Patrick Gallagher

through leadership has faced. I I greatest comments together team, be Yes, of going around their that the think to team that's what team our challenges one the was my be held to consider industry's management

Aon And say, an to really, the be earlier, sides. get terrific. we've acquisition, to be? on for could with not you through together headbutting doubters of and that's be your where's going lot and this to is going going and what's point worked you've conflict, thing one the to to both got where's to we're it's then it Wow, got Now, that a And happen. everybody, good going

because not be as we big, going the going happen that's to as great great, be They're join too. as to that's together. you Gallagher for going You're big but going to going to were that's and there's either. not not headbutting. to be Well, We're not going be

And the as there's since Doug's I you announcement we can't into is So attrition. right, the announcement can there's was really very get the there tell no to going been happen. that to surprise because numbers, some anecdotally, little since but attrition this why

David Montemaden

what it. I Got That's looking Thanks. was for. exactly Thank you.

J. Patrick Gallagher

Thanks, David.

Operator

Our next question is KBW. from state question. of Meyer your Please Shields

Meyer Shields

It's owned now Re being by of you Watson hopefully and Willis in question right between Gallagher? Willis something hire by Are there owned it's Thanks. can to answer. related any being Towers sort position on and

J. Patrick Gallagher

course. of Yes,

Meyer Shields

works, Okay. got of Perfect. there's know or didn't any terms more period, don't sensitive? this rates just insurance question, an inflationary I'm know less raising I Broader just whether of curious clients are capital in in how disruption I you've when terms whatever. or your in price

J. Patrick Gallagher

man, are I'll tell I you you. kidding Oh me?

Meyer Shields

Nope.

J. Patrick Gallagher

good in I’ve room gone This is now, down slow so the for The so us. everybody. laughing team's

are the freaking course Of clients out.

You've going their got got cover their it. up they've revenue costs to adjusted before

blah, everything. up So on They're take crazy, all blah, bid like of construction got cement, risk. cost look in cost to cost they've They've our job. Supply of chains, lumber, their under, every already. going P&Ls at middle everything the of the

time and show of that agent. the us. they've what from We what's Yes, by can with been area. local nice here really, getting compete upon we of that Again, good them analyze client. type of book cover it by construction we Yes, happening then for the should smaller be a accounts can show as really And So improve the XX% competitors. sensitive. we come very in new in good can and we type they're actually them that business player their

Meyer Shields

I Does that ratios then the win guess competitors of or win follow-up, answered your up because already. smaller to your And rates which mean you that Okay. mostly go relative capability?

J. Patrick Gallagher

Yes.

Meyer Shields

all you. frame Okay, Thank this. perfect. I just wanted

J. Patrick Gallagher

Meyer. Thanks

Operator

comes Truist. state question. your of from Our Mark question Hughes Please final

Mark Hughes

Doug, you XXXX you any points will basis bogie well? costs for thanks. talked in that This good being you on next there influence comment or is on, did XXX for Are that similar. about as segment the coming organic, brokerage year going other organic that? a Yes, did that’s year

Doug Howell

break down. Yes, I think let's it

XX% Well, that depends haven't much of some our organic range. I our X%, in What like an think margins year low still this return of cost first year, that is that X% the that XX% possible to on basis XXXX. yet are quarter range will cost to year? how next Remember we next much do pretty further X%, structure. returned structure to

to quarter next XXXX in So that will also. revert

better that middle out we're pumping to to Mark, year? XX% in you to some right for going on So I'll How improve that We're budget and pushing the for answer December, put of next a little pressure out. growth still is but if there's organic planning on that the cycle a the December year-over-year. have in now. Give figure next to us till that of much year, margin bottom-line. opportunities take me I'll

Mark Hughes

on CFO much add that that Very be cash any good. out I'm your back EPS of amortization I'll to might million like cash to how recurring looking the and for number? then you EPS throw looking And shift ask just a added commentary at at comments you'd $XX of

Doug Howell

out million year. a $XXX Well,

all that back. has added in cases looked that I think we've XXX% that been at a of

effectively, that's, number. big it's tax something but a got that's You a

Mark Hughes

you of like sound want wouldn't mainstream on outside the be to doesn't it? Would you And that.

Doug Howell

Say that again?

Mark Hughes

want you mainstream, everybody same back, thing wouldn't to the the else the would is whole adding be want you if do I said net presume? I of that outside

Doug Howell

very would I helpful. think comparability be

Mark Hughes

Right.

you for Thank Appreciate Okay. it. that.

Doug Howell

Mark. All right. Thanks

J. Patrick Gallagher

Thanks Mark. And your thanks everybody questions. for

So us thank you again, all joining today. of you for

delivered said third over and you at and Investor unwavering Thank for colleagues dedication speaking the client-centric thank great and being our Day. work, globe their As with over, plus like nice XX,XXX quarter look to hard We us for have we attitude. to again December you evening. we forward a around a I'd our to and

Operator

call. conference today's conclude does This

and have lines time You wonderful at this your day. may a disconnect

Arthur J. Gallagher & Co. (AJG) 29 Oct 212021 Q3 Earnings call transcript