AJG - Earnings call transcript Q1 2022 | Arthur J. Gallagher & Co.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon and welcome to the Arthur J. Gallagher & Company First Quarter 2022 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 meaning of the securities laws. subject to and differ are cause that statements results actual materially. forward-looking to uncertainties risks could These Please refer filings to contained on in the forward-looking cautionary statements company’s its XX-Q and XX-K, and X-K statements. for detail the more risk factors

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

J. Patrick Gallagher

Thank for you. for you quarter everyone joining thank our Good us XXXX afternoon, and first earnings call.

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

we and in growth, segments growth XX%, the our XX%. combined around globe. row, Management EBITDAC on growth earnings were posted an first and own achievement a organic testament XX% ethical company Risk world’s than of adjusted growth Brokerage per XX% net XX%, more adjusted share our quarter, And professionals of for in For earnings the outstanding of growth its a and a nearly most XX,XXX XXth to year named the revenue,

of proud performed As quarter. extremely tell, how the team you am I can during the

first on So, Brokerage let me our performance. quarter give detail more some segment you

adjusted remarks. growth for revenues outstanding margin brokerage EBITDAC comments EBITDAC all-around an in XX%. have our and quarter by And XX%. his the rollover Adjusted Brokerage some our will March just During pretty with million Rollover Day we XX $XXX Of Doug X.X% expectations about points, Net revenues were expanded quarter, on that, was organic, the revenue excellent. basis earnings acquisition. mostly which December prepared is growth growth was reported the XX%. by was was further consistent Reinsurance driven team. IR of

walk with me world the the organic, you breakdown X.X% starting and around Let operations. PC our

business strong driven posted domestic retail This placement organic and in binding businesses. continued First, organic business, services, XX% XX% our renewal terrific in new posted than our by brokerage more operations, organic and XX%. organic of wholesale domestic X% MGA programs open includes premium increases. our Risk retention, and

and business London was New our Outside first year. levels premium legacy UK XX% consistent the business and business including increases New premium prior Gallagher renewal Re stable premium continued ‘XX operations, drive production. better renewal new continues and strong XX% posted saw new was U.S., specialty Canada our than benefit from XX%. business, higher of retention increases. and increases up more quarter organic retail, than business, by finally, XX% nearly XX% organic. was helped and In organically Australia And our retention renewal business with fantastic to Zealand and organic organic. new combined Within driven great was

first our than Moving employee up expectation. consulting better to than and more was benefit X%, over IRD business, quarter X March our organic brokerage point

our expectations with and X% life insurance other by in operations various quarter driven HR and Our the of our was line benefits core international product pharmacy the organic welfare and health consulting, and in sales. was upside our

our X% PC excellent organic benefits, organic XX% in within So, operations, quarter. an

fourth and both controlling after premium premium PC with increases rate the Overall, were quarter to ‘XX change market. of for Next, line coverage of differences. X%, Recall, few consistent global quarter on make exposure. I’d includes first the the like comments mix a renewal renewal

renewal liability were were brokerage and retail, In X%. XX% offset premiums casualty premium seeing UK binding and driven workers’ Zealand, X.X%, around premiums rate were with increases increases And up we and break operations property, by were wholesale me that let So, Canada, comp RPS, mid up and in auto. open commercial about world. and increases renewal X.X%. increases. About double-digit liability casualty in up XX% up specialty the U.S. professional down around single-digits increases package. including retail, Australia somewhat the professional quarter first strongest by in Within in In London saw business, our New

And rate as our loss be to noted tended geography reinsurance, attributes Moving in on faced client we renewals showed increases loss to history, by loss-free January, and programs that based increases. in price X/X client-specific varied modest rate experience. even while

while first flattish topic tend classes, Our dominate on of is more Japanese being increases renewals, pricing saw in report the to pricing review Re inflation X was season. discussion. despite focused We April which April key casualty property-related Gallagher renewal a

can April website our information. for market access on our more reinsurance You report

wholesale reinsurance retail, almost are So or still everywhere. increasing premiums whether

year. cautious and expect the remainder likely away continue courts underwriting throughout And these costs renewals mix the comes conditions difficult we lead market reopening compensation quarter, in QX and is are see a PC U.S. similar And elevating in QX in pricing. to at monetary property shift loss when the to continuing time renewals in due forward, from Looking cat to increases XXXX. uncertainty, geopolitical of policy conflict second to rising global this full our stance is this workers’ their tightening. year we Carriers reinsurance will premium will increases Ukraine in very

rate in it like change seat, dramatic push to carriers see near-term. continue for the don’t a looks our and from will So

robust the to job ‘XX more business, employee Moving favor. services And to attract, and employers benefits That’s benefit I are look X jobs that our consulting than labor lays groundwork looking their our retain HR million workforce. and motivate for There brokerage in available working as the million market in XX in people unemployed see our U.S. consulting work. for more demand than openings for conditions in domestic and imbalance

So, quarter we organic X.X%. finished of first with

we and current than should as think today, the here better results quarter first organic market insurance our we up XX% Given conditions, even end ‘XX. sit

recent of Alongside the is speed which the our some a Moving reinsurance are are we on growing XX% had some of and the Doug that first EBITDAC. and we acquisitions, legacy new of Also, pull-forward acquisition. is fast future executing quarter operations and a mergers million comments at team Integration with on remarks. his melding reinsurance schedule. ahead to the comes delivering progressing integration with pace And costs, over strong revenue reinsurance our of together extremely Re in colleagues $XXX cover million and our in Gallagher $XXX towards will well. starting

really So, continues to be story. it a good

$XX of Gallagher completed professionals. quarter, a to welcome and million of very first the brokerage our representing extend I’d we estimated joining new During to of mergers, thank us about like for warm tuck-in revenues. annualized partners new X family our growing all

and of at merger have around We our XX nearly will look acquisition being pipeline, of not tuck-in all representing or million we sheets term know close. these revenue. I $XXX annualized signed As prepared,

we our we share. believe will However, fair get

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

new First than have claims. expectation March, quarter late a the some higher-than-expected better and litigation a EBITDAC been in Day we Adjusted COVID was had to XX.X%, quarter. IR our due margin wins organic strong growth would but settlement business and XX.X%, XX.X% was

general Moving in during forward, a again workers’ margins quarterly extent, saw to we our expectation. claims think the compensation arising to remaining increases closer lesser core property, across and liability, XX% will the quarter. new ‘XX We be

quarter. saw New claims above arising what fourth the we well during COVID were

rebound counts, room have pre-COVID on fully core However, which levels. to tend a impact to greater results, claim to still have

we counts new around revenue organic and to organic per the see opportunity values, possible we outstanding set me because growth and Way. for year. results growing ample believe of the existing from I finish are able company, forward, on one business Gallagher clients, quarter one as the our expect our remainder thoughts XX% And let are financial united with Looking some made for bedrock to of act culture. claim be by

all hear company Ethisphere, reflects we world’s our integrity a truly working most collaboration clients together around as were world. and named of times. to humanitarian the exactly is colleagues. we And to people way team stories colleagues relief possible one our service to to of our best win. we care my to want ethical the matching to all clients. donation As each there then mentioned a they colleagues’ by because give what need the the that global again I Ukraine. day, generosity team is earlier, That give of Every to at people our Gallagher one other March, In the communities. genuinely wins, special When deliver and their Thanks provide we all announced a once back effort possible I our

over with my Gallagher are $X first to donate way. for colleagues We supplies to that world, able around impacting aid. the together and water, stand food, the am communities like I and is Gallagher million proud necessities

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

Doug Howell

hello, and Pat Thanks, everyone.

during relative but into estimates, XX we but $X.XX. etcetera quarter. cash, to commentary financial of the $XX will get today’s looks the a first to quarter and X segment variance March. rollover our document, consensus consideration revenues overstates I comments We an do EPS within provided this said, Day. take don’t you to heads-up brokerage CFO rollover you impact you large start also of organic on number shows our by Page on That We Today, modeling will to the relative fantastic Re consensus is get performance our overstating clean in year. Pat rollover recap to has margins, energy, model. quarter CFO revenues to As have first, consensus commentary the that million your guidance and by a the my typical in I of like we see a acquisition, March table Willis a will added there document approximately provided this and consensus analyze revenues we numbers IR regarding this we as comment versus hope typically When

segment housekeeping wins of organic shift nice to and new the Okay. the the team strong our we teams. brokerage by organic us, a had X.X%, quarter, terrific earnings a release, let’s Page some to benefits business on With really the that behind finish table finish consulting X. All-in P&C to by Brokerage

million strong see this also which Ukraine-Russia about growth a about conflict will revenue, hit supplementals. both small, was The $X.XX contingents of is $X You in impact quarter. and

impact looking maybe quarters. Looking million its like next also, $X revenue forward, the it’s over three small spread another

start our organic discussed, year upper given X% growth our the to current Given market, full strong here as be ‘XX. Pat of outlook and X% could in nicely pushing favorable towards we

that remember, favorable expansion points, from a to for all-in offset XX expectation. Next, quarter full margin of roll-in a full we that deliver expansion. said Headline points expenses we around positioned given what little EBITDAC year let’s But the in first Day of reinsurance our ‘XX, incentive Repeating was to to margin it as expectations. of March, to return Page March acquired of out stronger come discussed by first our basis pandemic reinsurance adjusted to revenues. during IR has more table. impact volatility of we the quarter in adjusted the as compensation line expansion Recall we right adjusted part margin turn with well organic segment will That’s there a change includes year also be impact Brokerage we and return in XX quarter-to-quarter. come XX growth out margin seasonal and X due pandemic and are basis here expenses the roll-in

to me down up that what quarter back So, are but here flips that larger and seasonally basis around math, that points to in in to quarter first be to expansion full then of margin around each the walk XX expect expecting we points. we points, fourth third second then year given margins basis XXX through in XX be points first margins let quarter, said gets expansion. March, quarter, the basis and basis The us XXX of we XX

behind in change fully out pandemic and margin Looking quarterly way should the that our reinsurance volatility us away ‘XX go books. towards with

Okay.

the of Let’s on Management segment move bottom Page on X. the to Risk the and organic table

new You quarter That’s with first it’s the just in claim organic of counts, XX.X% ‘XX. by growth And will strong organic rebounding business and team. the for of looking the XX% like about see terrific quarter. continued each revenue rest

to due quarter adjusted will was the posted EBITDAC about of unusual Management basis litigation by our see Risk page, that XX.X%. segment On you That an XXX margin compressed settlement. late points next

expect As Pat margins forward, for remainder the we to said, would closer to ‘XX be moving XX%. of

first X the March adjusted quarter in Page most with line release our to and Moving earnings Day segment items estimates. the of IR were corporate shortcut table,

in employee from and our to remeasurement given the did corporate larger line, late benefit strong the also a we FX exercises performance related benefit an the tax gain stock quarter. option of stock Within

see of also a You couple non-GAAP adjustments.

income costs our to relates deferred Willis first related transaction professional second tax associated state the revaluation of fees and tax a with to Re. the The Alright. buying balances. And benefit was

document. commentary helpers. Page to go risk has now X our modeling and CFO management Let’s the typical brokerage

to integration. We get more have updated our a outlook in will minute. that for I

Brokerage and point. in FX updated rate, our see segment tick-up a slight have percentage expected tax you call will X.X it We

and now non-GAAP In treated now addition, brokerage amortization This both is the item yellow. are management lines the risk adjustment. in highlighted as means being in a

missed our reporting that’s this and are change Page of how the the IR on EPS. a On vignette on quarter first under This you X did CFO that reporting If this segment March Day, change we is method. commentary, adjusted how revised – outlook. our corporate we

GAAP will there anymore fourth clean of expense, no page purpose second, change we are cash substantial Page that we is $X investments. now to X carry-forwards in is a billion of You bit little quarters. era for to harvesting no cash turn these flows. to of but highlight is see than rather energy, and When now our other have outlook overhead you the of There credit earnings in and the third over this

You increase in we column cash a a will that possibility that million happens. perhaps year still if And so really harvest of an see that in the extension restart to million cash be more We remain to a production at beyond, should be of and the the cash able substantial. flow rate, and $XXX X-year flows should ‘XX sweetener. ‘XX in positioned $XXX is well pinkish flow nice there law, to

little quarter table math this the million opening. $XXX December on our Page Okay, late EBITDAC yellow, behind the guidance box, earnings an my March and rollover the of is our if versus provided of table. FX go end, Revenue day our Top IR is during CFO year in the X in Russia, was $XXX both revenue reflects the March $X.XX million. Recall our expense is the impact further rates. quarter bottom a back our way than difference ASC very movement very change August quarterly The projections, during expectations update we table Day small second, there on and acquisition. ownership small all our related to numbers Reinsurance for that first, some touched original ‘XX also at you In flipping timing to to I Ukraine consensus we impact release items: each meetings. our next in was that the to the in from update accounting IR the refinement to two quarter and Then further The revenue is other FX. document. commentary first and XXX and highlighted of each this

technology is originally As we good The pace XXXX integration we late ‘XX. end are planned. comes efforts of holding for even original the or services, it at our for to through done of of charges news progress we $XXX rebuilds, done around as will total people, it end is to by transition estimate the etcetera faster million mostly versus most close. to be a is estate, than of integration, ‘XX real news originally by back mid that ‘XX a thought. of early the late Integration be making office around When targeted ‘XX better are think

what that that integration more and ‘XX, So ‘XX. see deep spreading will is into into costs we means lumped then ‘XX

isn’t it You to but back of will our X commentary, up view. it’s important quarterly on in-total CFO changing remember, ‘XX bump Page of the estimates see integration the our

that to really a So, story. continues be good

operating from well debt. future nice tuck-in on With XX, expected in future our available cash in M&A positioned cash million we no about ‘XX credit. on to are management borrowing capital and using and line March investments, a fund cash, of outstanding bump for flow energy and extremely clean our flows As was cash M&A, $XXX hand and cash at strong

We to more our see of without billion using any at M&A continue capacity ‘XX $X the end than through stock.

comments. my those are So

off for We’re entire to ‘XX. From Gallagher A positioned CFO, my vantage for great as team quarter. the start to Pat. great another to you a Back year. terrific point you, we’re thank huge another in

J. Patrick Gallagher

we’re questions, please. Darryl, up Doug. open think to I you, ready for Thank

Operator

your come Thank proceed you. of from Newsome first [Operator Piper Please with Instructions] Our with questions Paul questions. Sandler. line the

Paul Newsome

Patrick. Good Congratulations morning. the Good afternoon, quarter. on

J. Patrick Gallagher

Thanks, Paul.

Paul Newsome

I factors an sort to be organic of the is you on a could decelerating about was pace. at a the prospectively basis macro that into go business. from decelerating effect going guidance about for your that’s might what growth Maybe ask talk having

Doug Howell

So listen, and I guiding this think we quarter, posted that upper call X.X% X%. deceleration. I X% we’re to think a wouldn’t that I

fourth it’s but I deceleration, reality, a the in I to have. if know think as were we that I I’d quarter, third towards the get looking compares there pretty word But think use and a more is don’t little where close. difficult

J. Patrick Gallagher

Paul, we around and eight call, book, this over renewal the flat, the Well, fact, are exposure should the I X%. units including, add, about in our before to stats quarters, X.X% across at the looked last rates

comes to I would say of I mean up wholesale varies point. So to what it down But it not any Doug’s we’re X%, a X.X%, seeing, is drop-off kind to it.

Paul Newsome

second rates. on my Knock relates interest wood, to question

are wondering interest earnings what that in as, seeing as change the finally rising your any M&A. are your well well. interest affects competitive for seeing as I with frankly, how rates wonder I We changing if some M&A rates. was environment on thoughts we’re

I So questions. in two that’s sneaking essentially guess

Doug Howell

point on up our our so versus get would income rolled into of more That tick $XX the income a interest about funds million Let bit rise little showing would think keep reinsurance completely be in we books. for fiduciary we’ve investment that we year investment far. a hand. me take rates what a We another X might been that as

our sensitive that to means we’re what pressures interest not other of rates inside terms In model. terms of of in in internally all operating just that organization, our

J. Patrick Gallagher

a has equity got for been from paying if I the money. free I do But for it, And our competition driven competitors to start know, that lot face acquisitions of bodes for by mean Paul, well think us. it we let’s private they

Paul Newsome

makes That sense.

too I can... – with that seen as interest this rate haven’t You soon see

J. Patrick Gallagher

Cash, no, seen haven’t we anything.

Paul Newsome

Great, thanks guys. Appreciate the help.

J. Patrick Gallagher

Thanks, Paul.

Operator

you. Thank

Our from the question question. of is come your Please with Mark with Truist. next line proceed Hughes

J. Patrick Gallagher

Mark. Hi,

Mark Hughes

you brokerage, Pat. you the but Doug? you afternoon. us Good the in Willis I Could if back that handy, have Hello, inputs, Re, margin do Yes. given you’ve the give suppose out

Doug Howell

out it second. can I you a here in dig here for

J. Patrick Gallagher

the you We’ve got do it question? somewhere, Mark, table have at another

Mark Hughes

Anything management comp what’s talked opening if, Yes. terms you GL either you influences fact, in GL property, your in anything? GL. in of an that being uptick pickup the view about risk the claims. a are see seeing going to happen helped tell Pat, of in you by or comp courts in workers’ and that you’re Does cycle,

J. Patrick Gallagher

Mark, coming There very One hasn’t market. looking in And past, up it’s things Comp almost driver over is not X know, two really. interesting is years, comp a down. is moved. and comment you not it’s now rate the has on, I’d been hard as what big been

as frankly, So benefit is going it’s increase think economy Gallagher natural And it’s XX interesting fill an million is Bassett. just to jobs, the back up track a our becomes pick claim start outcome. some to I in when been – the those line. when really of robust. natural we activity we And more economy clearly when can that We humming,

claim incredible. get tort, it’s have I what Number reads well, volume. look hurt, like don’t everybody I every inflation but this on see it our number week and call to social to as sure astounded I’m more That’s around by, one. at when two, be You continue people we

doesn’t drives move what late is think the surprise for I party the but have bring surprise threw much is they clients who our just beneficial and more concerned got levels guy get you you’re also folks proving mean number a you think probably what that a seeing a GB. outcomes is, that use settle $XX,XXX, the if, last you not it’s or GB but never of so all at him. any the saw And to one, And big that. I settlement have in anecdotal keep claims to predicted in deal. table, not $XXX,XXX case for be it to like that, But said, And this would settlements It better. and continues look I pay all, does to cautious frankly, let’s mean invest that about do our some party. evening. of I us because is on I might for on week past, so us asking with it think – the to capable we that in fact, that our I are services, company that

of a now them used if happening? you’re all to And to So looking you’re sudden, tends year. starting year, years X what’s claims, you to a pop. of go, at a get every it, lot of getting X but one a X man, I’m

for long-term. makes think claims those pays difference. the bigger who and bodes I Now a bigger And that well

Doug Howell

the Mark, give a you to have then that, answer that. come I can the follow-up back I’ll with if – you on

Mark Hughes

ask there on reinsurance X Okay. property. I is how was the renewals, just seeing, to rate increases much June dislocation going of kind you in are the so what cat

J. Patrick Gallagher

would not the the much the what’s my remarks, prepared depending on the go experience. on driving depending And side. ahead. back to that I Doug, That’s on Really renewals. reinsurance carrier, dislocation And carriers say,

Mark Hughes

Okay.

Doug Howell

Yes.

the Second of between is the year. in of that looking all, as On XX% we’re because allocations around of margin, margins changed units, what’s think Re. context you’re Willis the that And brokerage since business in right? the some I last there Mark, high variability at around somewhere without just margin,

last relative quarter, year I growth. better off because we’re that bonus considerably know This we our were where accrual with to ahead we started on organic

impact, of would that compression little bit I So consider a timing. that but has a margin

are we raises mid-year, in And so give first quarter. rolling first quarter. out recall, We our versus raise impact in the

raises comes and the returning to cost when into business. your develops back grow year, organic then the As you throughout into it

if expenses $XX bonus. apples-to-apples basis million million let’s of up, that’s it an down, are say break that you on $XX So year-over-year

professional be that would that left and take can of $X T&E and over. probably spending, fees travel that and increased of million raise impact then That’s probably be that $X third it You is it you client entertainment. would million about of get third third we’re – call call to down

being say, $XX other of piece at between at then when the the will of T&E, So of raises timing million it, is million let’s call $XX and for into spread million that you way and of ourselves it, some we that it, entertainment and the it’s work we look pieces fees. look year-over-year, professional the help? up, year $XX expenses Does

Mark Hughes

I Yes. the detail. appreciate

Doug Howell

the there, And segment, margin Yes. in year, the in of quarter really this in is up first of up target points And we’re to ‘XX. me we Sure. this And quarter let I of hit we’d at that helps is for XXX we that. supplement so throw – first year post, back XX XXXX. XXX XX were being while basis up points at XX.X% where but our basis too not quarter we’re so be If out in doing looked this over supplement that I basis EBITDAC the posted you went we we’re XXXX, points. CFO XX.X% Brokerage we posted we XX%. commentary the put X-year full

So basis margin last points it’s business XXX is year, X points. XXX And the each expansion our over rolling in. year years, a of truly, reinsurance basis

put than little our quarter, this different when better and full operation year brokerage all not margins. it’s a seasonally you that While combined

year, pretty XXXX. that’s the when pretty XX and full good good. for we versus we’re darn in targets we story believe this darn And running margin points hit margin around of change is the year, our somewhere XX So if

Mark Hughes

Appreciate it.

Doug Howell

Sure.

J. Patrick Gallagher

Mark. Thanks,

Operator

you. Thank

questions. Peters Raymond of proceed the questions James. with Greg next come from with Our line Please your

J. Patrick Gallagher

Greg. Hi,

Greg Peters

Hi, number us say on I good to your piece of included, of the sure that comments, party. afternoon, action can in your I’m listening would us, surprise everyone. a Pat, Keep take myself mind. a

potential macro about risk a at know comment you’ve I the what And tried the ask pretty Paul out showing isn’t. to mapped be are recession. to at oncoming I’m a about if a over the from a of in other doing different economists data – outlook come So going are of you speculating the and least an cards? for you guess a a you is from remainder think question, yet, might I at that way. level number There robust of just that for management When something risk, your like out to not obviously, corporate from the the But reports it there type year. think I’m going perspective. perspective, it enterprise curious that, that I’m data to prepare are

J. Patrick Gallagher

going and of all, predict know how Greg, them a here go first up. expenses we react lived things I’m do units not those. Exposure sit very negative. recession, important, of and recession. before. I more ever in Unfortunately, think very, Well, happen when not we’ve to a that shopping are to And you’re And through even a couple are companies broke, not they drop, go become important, that can to

I Now well. show our when shopping think market, goes middle up for strength, the in in we particular,

you you’ve got picture. units. exposure it’s lesser And of falling a up our pretty the and But on a hold robust we negative off, got not when depth end economy audits with own So you’ve that recession, there. depending

that say how look really sure to business here’s relative we of We what to to approach, We’ve the – we at their So and to margins, every where performs. we for we book when you is our one talk about pay like us production what things have make are a of prepare significant our doing take are. I talk quarter. got basically about model about we do it our risk we on management

this are sinking. and is if we in all So, the business together

benefit had don’t we’ve I too not far, back of if recessions, previous in inflation. go Now the

fact, has impact. you’re talking know X% the X% So quarter I inflation if know in whether points. that opposite and may, exact to first GDP recession the cause X was a don’t X down. I help will point, be inflation, But that

payrolls know, up. you go As

a and people. am what I We to got are and there pushing everything restaurant. serve saying at they inflation They if stopping mean a about to problem every seeing are other on are they wants got our my those book, to you. do and how them. out am team going And up. never it? coming have go is that’s I service going I Well, just a and there to rates whacked. day a somebody it’s customer they bid, rates to go me contractors they deliver and Everybody to without is I don’t that. And all to going now hold we huge that or saying, made can mid-level business people Bell’s is up. I’ve demand, and can’t anticipated the They when payrolls Bill’s I person, getting mean, bid. bid

So sales will up. go

our well holds there. is think in recession. up And there a offsetting factors pretty I business So darn

Doug Howell

so We get And daily cancellations, a Yes, audits month a audits, that not trail rearview And at that historical. off of again, metric, That’s endorsements, a things. of biggest I’m all. that this at couple mirror seeing positive that’s we’ve daily but look the seen. feed. was as we

early thing they’ll first and I’m any payrolls signs a will do to phone of a So the not seeing because adjust up the is customer expected they’ll recession ring happen down. their

we’re So seeing not that.

deal. unit every look rate in at the day seeing not We’re our exposure We and renewals our also. it monitoring

we situation that a got resilient that. proven think not is where that just it a do throughout becomes COVID we lot the model And But to we’ve a we more we’re pretty seeing levers proven I have difficult. happen. pull should So growth get of into what can that we’ve we’ve

business top So for have a comes revenues we on inflation that there. pull recession. think can us do the going to help us order that’s help in it levers we We is when think is that through the to But the line we to get resilient. model

J. Patrick Gallagher

an And you, incredible me model also, again. ‘XX, XXXX, ‘XX, and this let this is of in back just remind support

before You’d be. their be a paying bill. them. how our That’s clients going are think important gosh, good stop spot we paying stop to they their That’s people insurance it’s will oh, my to to

Greg Peters

Indeed. change And versus Thanks energy more little Pivot previous in we color at ‘XX. talked that you other perhaps your clean cash quite that? the been wondering detailed on commentary free And there the what the the various Doug, things. what to like parts excluding would suggest that. and now a of wanted for on just about about some you expectations? guidance I bit commentary I a you CFO and integration guess how look Has question think expense ask was looks to I’m cadence your flow, and helpful. because

Doug Howell

down. Let’s see it break can if I

I’ve start – million energy is in already net and at to Cash of Let’s M&A of noncash Also, being that. that provides number, look of it that $X it and got as of right? about ‘XX we billion half you’ve left number $XXX talk have Integration net a given being in ‘XX. already when you cash. integration. for integration, clean we half it with over So

that bonuses sign-up equity the so are expenses noncash that. delivered and integration against that plans, as amortizing we recall mostly a that’s item You

And and on that that. cash during M&A out portion that help ‘XX billion Does give washed of is maybe $X this all all in it? So for think an I that say would offsets say integration about you – energy clean won’t amount the I basically thought expectation energy ‘XX. would over it cash. the excessive a the consume that of clean way, – our you the

Greg Peters

past. of pieces similar feels It does. voice the all that but me answers mail, like that me little given there. thanks in should I know for reminding you’ve that be your like It

Doug Howell

is Listen, here, count it the generates I lot there say it like around and make a just I it coming of It’s in. don’t of money, a cash. lot I

Greg Peters

for guys the Thanks, it. answers. Got

J. Patrick Gallagher

Greg. Thanks,

Operator

you. Wells question. come Instructions] Thank Greenspan with Fargo. question line next Elyse your proceed Please [Operator with the is from Our of

J. Patrick Gallagher

Hi, Elyse.

Elyse Greenspan

on my that XXXX, above QX. you you to Good Hi, thanks. Maybe going the us of be first the when had for outlook back the question about year Pat, gave is evening. said organic. earlier would X% initial the full kind discussion

that is in that is QX. that as just rest Is based there heavier QX. in a maybe that there the think is comment? you something the understand the off view – changed? outlook it to being there just perhaps simple QX Or that change? business perhaps the made lighter is concentration little you close of I was it than and to that caused benefits Or better the expected the that something being of But that – the So when is and year just as just I

J. Patrick Gallagher

seeing Doug quarters. – anticipating change that’s the because significant year, in what I’m lot the that I’m three seeing operating of over in mathematical. let I’m piece actual the number answer not terms on not for next I’ll environment But the a of

Doug Howell

Yes.

in and a on the which in rate back see benefits guidance to eventually and fast we that absent quarter really the have bit workers’ in But that our medical not I also, cautiousness benefits cautious before comp going and our think January that declaring into that, I any see holding since business not year’s on frequency that is translate from But quarter And might interesting of declining I to next been in bullish think headwind. tailwind we workers’ of another it’s because coming medical about first again, we I that yet the we’re to us I And see think you’re a or again I get inflation that will a getting then think then – might furious. little it of comp, there now cautious. need it of become lift more overly position and that’s there. guidance is true there fact But was talking organic. is course, that’s March affect really too, and growth, give don’t that that heavier our just inflation as rate too. as a another quarter. seeing into

Elyse Greenspan

little this The a on billion guys the And to $XX just M&A. light Great. of question, historical so spend have right, years relative were over my second couple then around having bit to capital around million of averages. you quarter, mentioned next $X tuck-ins, maybe some

to certain where like a pretty maybe of next maybe of that’s the point Gallagher private materialize using So capital? if flows, interest, wait about deals deal kind capital, and well we have so equity excess impact as sounds pipeline. rates high interest year level until don’t a that the think it could with buybacks as since might some consider Is helps we with there just

Doug Howell

is I clarify. let’s think an to yes, – answer that

It’s already out of M&A. think comes seasonally it smallest to years is I when the last quarter first that historically X been years. that the X

and a quarter. is natural think there is there then I towards So, the in pause little a push just little first year-end

make opportunities we within a to clearly then are we even the not would materialize rebound consideration rest I for So, don’t and be and sure then of rebounds on seeing next year. an the a solid dividend. If use in go through our investment-grade there our debt stock it that opportunities for think rating then could is the place maybe is buybacks and it, that next those

is well debt, we or seeing up next is deal we look, there, those back to as that things then isn’t do sure, buy and stack controlling making the four for flow cash do what dividend we the three sure increases. that flow are or are are we So, the to thing stock how positioned with the do excess deal that will

Elyse Greenspan

last business? of recognize a close revenue laid Investor and the your to trending Okay. And client what guys that’s you Day. give full us the out and one the quarter owning you new Can just in of been one sense Willis was on had I Re, at how business retention first

J. Patrick Gallagher

remember, It’s as Lisa. are in. really I and that, Yes. we been do amazing months will the we four an finished quarter, let’s

to clients. losing five that we we close we But we not not as people, team, have will you are I months. losing are the are So, tell this call,

because very they the their place. are in renewals over business is reinsurance have about a fantastic. they competitor be to chance And the They to years of people that held together business. that was people the discussion also as us going the those glad. business was land are had less clear to table where handling reason of the clients. with marketplace. in this meet still continue the are fact that with to are not have been They the others Our Tom, myself, one open That at – there very

zero. the people are in terms door losses to minimal Our out of

it, right the will And I and so going why for back seeing it. our am retail. Everybody information is are doing what. of And terms forth and about I what care with of are are doing beginning, happy reinsurance sharing reinsurance are are of is a strong. people is very at What as I tell retailer. I about really business am would There melding. you kinds we look people pipeline And that when does said at new in to can that is seeing much data our ask, the we help now so retail. things from with they good business retailers the our also why this Well, all carriers, relative excited or really, integration you the

is business the So, strong.

continue hope to it’s would a to it us. and we for comes I We be great are when to it the going nailing what be absolutely performer think business

Doug Howell

give you flavor you it is to new. will I can I give behind Yes, net numbers that and some that – is

jersey is it, for Our new we bought And was this first it. if X% quarter, put X% net you a those organic over a or people control point. call on minus our different that plus nicely, before let’s overall quarter

have holding really to went to for way their what to terrific the battling them X to give there a organic, I out team it’s for I story. for they clients, got through it mean new So be the years business, really writing

been nicely pleased couldn’t in I what digits with So, that organic upper-single posting after through, more be are when team. you have they the

Elyse Greenspan

the all for color. Thanks Great.

J. Patrick Gallagher

Thanks Elyse.

Operator

you. Thank

Please Motemaden Evercore. questions your of proceed next from Our line David come questions. with the with

J. Patrick Gallagher

David. Hi

David Motemaden

it How evening. going is Good Hi. guys?

J. Patrick Gallagher

Great.

David Motemaden

organic points the great a the still basis XX So, to segment, expansion full the the margin growth more on basis positive hear am Brokerage like year outlook definitely obviously I but in outlook. it guess to sounds keeping side. bit wondering, XX on points organic it’s I

XX Is sort higher of that additional basis that to XX the points accruals? called think Is basis why year. So, improvement Is million making? $XX we at had Is I basis margin that back guess bonus I aren’t you XX points something it now to not you I or of expecting are addition, costs expecting expansion? the it it XX am incremental in margin than I guess out points points. more are in investments this it guys keeps basis you wondering coming why of

Doug Howell

Yes.

think a that to just really when reluctant are down I we that comes right little push it to now up it.

smart the what’s the late building talk are business. things that what’s some the do. at brand are money policies all a month with that with listen the exciting doing automation market. Day. going a you on we electronic would Gallagher X,XXX cyber, with systems. to We on when I delivery our about look into are is there we you the that lot Drive, at looking that great that to When spending look at March, then IR And of on you you and advertising involved writing quarter at program, our of going the stuff. the And we our will doing segue things are doing When the anybody you Advantage platform, look hardly on and we really that think and in the like are we – I

invest you like get might between We more at But money since more this are little to in of and you basis X% spending those we reinsurance see – XX lot organic money and of to still little are opportunity environment bit When right points, of that in pandemic the XXXX, of XXX levelizes look the margin us a points on great points, roll-in another company. expansion in if this we delivering of basis the now, expansion capabilities XX expansion all posting to posting basis points as the you growth on a to sales hardening the things, posting year. the future XX and range. between spend that force. already XXXX, is this a top point-of-sale of M&A, for would a just the When basis

So, it. that’s where are on we

call call it’s but voluntary to want must spend. spend, You spend, that it, voluntary not

David Motemaden

sense. did business makes it the sounded just the in first like No, that And international makes sense. it well guess I quarter. No, quite maybe

exposure just in think as there you seeing is and talk just could towards Europe I any sign economic demand what wondering, in there some UK, of wobbles the growth if on the pointing Pat, you are am I of the there? ground any about or indicators guess I in of are leading terms So, specifically, slowdown

J. Patrick Gallagher

Well, in my the me around again as remarks. go prepared let did I world

fire. what you When it’s it of was seeing our we economy slow. We team ago separate are little operating is weren’t kind Canada. on years closed take of seven a look terms where and if – has Canadian business separately. businesses little we at And flush together. a So, in Neuraxis the a in new was on Neuraxis

Now People that branding pumped together. are working business extremely well. is The up. is totally Gallagher

sales force. We using are

frankly, on on Then that integration. thing integrated the months. are Today, we again, to in are Our rate, excited putting that have added When our a Heath a They grown there. pipeline business we of new organic, stronger an in And same by the been. yes, UK. helped UK, will the just lot we got has they stronger but acquisition bought better we Lambert, etcetera, do recall, seven And Gallagher you timeframe, and XX% it. Giles, five about go is size much than of it’s jersey. it’s months – ever to and new time have team gets

economic clients, from events I bad and you us, going can’t is terrible. are our impact they for that you fantastic. would to our perspective a they I business. that tell tell But for bad for we us. are are Bad are team aren’t Now, where Recessions

international strong. doing because is well world like walked the we So, seems look they the America killing numbers it and really to Latin you is are as say through are just around it you right and told the everywhere. organic,

just to are thing share the tackling. strong, not of is our seeing not new And that rates being business Zealand and strong. hit ratios make blocking we are That’s Australia our business New it’s rate is just clients’ moving, is is and expansions of just by helped because everybody opportunities. our realizes and fair sure fact, and are we driven. in we all improve that want are getting I

to very it’s good So, a spot be.

Doug Howell

rest Yes. Europe. inflow I have are any We we of heavily the trickle-on primarily But by the Eastern do predict in in based can’t the remember, UK. Not means in effect. from Europe.

range been that. Europe our I in revenues. have So, point, we $XX at and from inflows one have at that we in million total looked might think don’t And

of if would billion the revenue would lost feel register And a sending you Gallagher, million think in but So, about us. it $XX it, what revenue London, to it’s as organization, any $X if of means to to stop it of at pushing wouldn’t context it all business we Europe total of all.

J. Patrick Gallagher

David, SmartMarket, and carriers, in fair things have I terms Those are what you we ratios think using it’s internationally States impacting your our Drive. those taking new with business and in United say, the our done too, are clearly, our now. the have seen hit business retention to Gallagher of things we SmartMarket, new in

out type the kind things somebody we our an competing we and is same smaller. the those really with this the don’t, in the And door time, they story. And So, having time, with XX%, and impact. difference other XX% to we can Say with We every when to are talk are at compete, folks the start. the lucky are makers. that compete one should of to going of in when are bred are XX%, force, to again, our But table a being competing available remember, that think that’s and people in go born spot. of XX% I here we that, frankly, or products when come UK to the win. of But resources obviously, sales think be the Canada I I our was of time about U.S. but

you door win, they to Our are I people go thinking tell going will out the that.

David Motemaden

know terms your by getting past, share of guys of exposure, the And the are looks and broken fair brokerage it net have organic I like new. Yes, in out drivers you pricing definitely in wins. you

you in changed about a that has past, quarter? it’s a a this third, think third, at third, I the said all

Doug Howell

fueling we apart. to a a Well, but be more that time think just more, might peel probably need rates that I little bit little

can and June third, a see XX%, than, I a probably if I now, get think more right be XX%, will like on We be XX% in But rates you third, something a give used rates to that. third, back might together something, that. and

David Motemaden

Yes.

you. Thank Great. Okay.

J. Patrick Gallagher

David. Thanks

Operator

Thank you.

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

Meyer Shields

first anticipates at year that of commentary, margin guys. a the of still million? question. dumb risk Page going is Hi $XX.X I are to the management. that all the full assuming When – is guess underperformance, quarter we XX% is – like Thanks. that it unwind based CFO mean of does X in One, some I or Is that hope look I well. that on

Doug Howell

XX% will nicely we in think for somewhere full I the be year.

I will an And quarter. So, X back post three years. we million settlement that quarters again, X once XX%, if claw we years, legal probably $XX.X we every of think this unusual for get that into

this So, really quarter, it’s that happened unfortunate it doing but business is well.

Meyer Shields

Okay. the reinsurance issue, the call from have That’s helpful. any know business, does I A that Russia impact on second are it numbers, on these and earn-out? small withdrawal the does but

Doug Howell

have impact. don’t milestones an year, in we Yes. might a million the technically of $XX have I have on that would If loss it, the an reach it course – that some impact yes it. over of our would of

J. Patrick Gallagher

not. that. not are – my to it That’s They is going overdo prediction will

Meyer Shields

businesses compensating? Because Okay. of other

J. Patrick Gallagher

Correct.

Meyer Shields

can the that fact about Okay. were people And able more charge? now under and an invest depress some because you a what it’s side the reinsurance talked the lot that revenue in opportunity of you past or was Willis growth more Did on to there heavily? simply Is there question then couple years. Re final one the over of some platform for stable Pat, it a strain that

J. Patrick Gallagher

were people fairly kind opportunities up, to to of the give knows to I but Willis I the is in ability us and them it to sale. work us reinsurance – clients. We and the There going of Well, not old don’t invest not because want people. them us were blunt, going tell the remember, are is more are We to disappear, competition our like Well, now our it. you not favorably, I easy going to buyers to to at at reinsurance of business ability bigger. going in stable same who join a is Nobody we was lots problem now our clients who give join way, there see they there making people That’s absolutely, very, are into, Does question. going where headlights. frozen is before, I perfectly is and sit, have the understand of Willis, they environment mean this lots charge mean to very to To are pay am well recruit they the very middle it a public. couldn’t market. very, people to the got the by in – build the want frankly, be not to time, invest. for. the

for you “Hey, to we I opportunities we now.” year us tell So, from we the and all better once again, settles yes, say, a think something there down am to months those is have it clients individuals. have So, I now go months total, think get four got feel the back – to a I and into in five for quarter, much will

Doug Howell

looking like get to that though out believe we in partners data there. for that provide that, advantage they I that the I we compelling do can will for book clients. to able more do for are information our perhaps retail them will doing attract them and with And the the broaden if of they past. thirst ability help information reinsurance I haven’t add new bring our been in real-time marketplace. maybe the believe our to it, that their existing for a them business clients to from the business are them, is they

Meyer Shields

helpful. very much. Thank is so you That Okay.

J. Patrick Gallagher

Thanks Meyer.

Operator

Thank you.

line final Our of the UBS. proceed questions. with Bloomer your come Please Weston from questions with

Weston Bloomer

the that the about because where And sales. impressive, lower that? to same, Recognizing world pipeline to what’s you that XX% go or just that first taking that making? curious but potentially expand XX% if be could the can XXXX? pre-pandemic Does back I it Is commentary margins for around and investments questions. timing guys investments how over systems Hi. extend we a you curious on a the organic baseline was we and for is and still Thanks XXXX, my XXXX? follow-up are described the point margins guess in the in are into think My was still higher X%? given that the of that

Doug Howell

to technologies have way. we investing the one in say along that Well, it of all things been these like would I is the about

I a to $X So, to in XXX, talking quarter. It’s That’s investing invest phone works do better $X another million the we a I claim just our we want help spend it, it, talking adjust impressive. back all you what $X if the competitive. is can about even much. are and on doing, what they smart risk work, this them, track advantage, I we are million mean are and really more we make down or million it’s things continuing better mean them didn’t slow GB that incremental in looked to in with market or to on that right at we a them go, your now, monitor to do. you the you, am management get

to products happens quote Drive and their these Right the are XX And type are things X,XXX across alone I a would think better, billion company. business. automation that what what better. different get policies XX go think XX they XXX? time, to million the that our make those make month. go have like do no-touch What is to – different that investments like that because a all the Gallagher illustratively doing buying They that the to when now, spend to inside and that’s system. of So, are and RPS how lines different $X if say the we XX year. that RPS system table enhancements and we the side that we of out we has powerful. on doing we a on would took a It’s do then investment incremental I on basically how about of on of cover But this XX are we we do are we $X I is then type make on policies

real our we be going pandemic. think question over we are from going of in ‘XX, where to So, the are margin that the is to is – The that. going to going much expenses to there will X% I be we if that opportunities expand to on stand to on spend at it growth, least that. how post But organic investment reason be we on are would return

Weston Bloomer

am of to Got that maybe it. any clarify. is The Re? number I for want follow-up to seasonal, around there in the reason of all the potential on Willis Was the half is strategic am I my to all color. is as question trying of that that That’s second helpful asking M&A. term then I just frame And is the annualized you Elyse’s in or – a a sheet deal? pickup second disclosure

J. Patrick Gallagher

remarks in is pipeline those The numbers Willis Re. were are our talking we about done, prepared totally Re the outside are… in Willis of

Weston Bloomer

pipeline is you lighter integrating the yes, is, Willis focus potentially I Re? What as meant on

J. Patrick Gallagher

No.

Our retail Willis folks. operations have zero the Re by distraction

Doug Howell

already. actually, pipe up And reinsurance are little some our opportunities see small on deals boutique to starting we

Weston Bloomer

to hear. Okay. you. That’s great Thank

Doug Howell

Weston. Thanks

J. Patrick Gallagher

that’s think our I Darryl, Weston. for questions tonight. Thanks all

their like I just again thank the we for our fantastic you us. XXXX. I around colleagues So, say work. to hard a to would start for thank would globe joining had Obviously, like to

being We a you look Investor Thank speaking efforts. again everybody. our June forward with with you. at Day, thanks your We directly results us, for our and people and reflect to are business

Operator

This you. teleconference. does Thank conclude today’s

rest the this You participation lines of Thank may disconnect time. your for your day. at and your you enjoy

Arthur J. Gallagher & Co. (AJG) 29 Apr 222022 Q1 Earnings call transcript