Earnings call transcript Q2 2023

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Operator

Good afternoon, and welcome to Arthur J. Gallagher & Companies Second Quarter 2023 Earnings Conference Call. Participants have been placed on a listen-only mode.

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

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

call. statements this the questions risks including to obligation looking this of comments and could does actual of update results The uncertainties materially. provided to conference securities statements may looking any or the laws. the made forward to Some not forward response during that forward assume statements call are company differ meaning in answers constitute within given looking information on These subject to cause

Please risk refer uncertainties. and on the recent to statements the details information concerning and XX-Q factors company's forward looking XX-K, X-K and more risks in filings for sections contained such most

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

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

J. Patrick Gallagher

Thank you our for you call. earnings joining and thank afternoon, quarter XXXX for second us much. Good very

the heads On divisions. our today with our Doug of operating as well call CFO, as Howell, me the is

fantastic had quarter. We second a

revenue products management large in don't brokerage over year's if growth, combined posted would XX.X% we number recall, be last organic. For our you for life XX.X% and did, XX% and segments, If include we growth, and our risk organic levelized income XX% we sale. interest our headline

XX share net $X.XX, margin EBITDAC earnings margin XX.X%, earnings adjusted of GAAP earnings basis XX% up of per share points. reported year-over-year, adjusted up of $X.XX, XX.X%, per of

month the finish We $XXX our million IR upside the Day had mergers quarter XX a estimated of completed fueled totaling annualized also June view. versus that revenue. to terrific We

On our quarter teams not be clients. with globe around performance detail value on our the brokerage some me all to our performance our could how segment. second for deliver quarter segment our give more you a basis, more incredible continue I and let second with pleased starting

interest $XXX Reported about product growth million. X.X% when expansive was were adjusted for posted margin was about levelizing include and income we XX%. we life if XX of revenue XX% and growth basis large rollover EBITDAC Organic Adjusted EBITDAC expansion sale. Acquisition XX% was revenues or points. XX.X% the

me will detail Let with then you on around figures not Again, some include brokerage Howell interest more the walk organic. our commentary operations. provide retail do Starting income. brokerage our following

US PC Our posted business organic. XX%

over second year New last business was year's while similar year quarter. production was to up retention

business Canada UK organically, posted and production. Our business PC due renewal modest X% similar versus retention was reflecting somewhat solid up XX% new continued increases. strong new business, premium year to organic more that last

ahead than retail were our renewal business, excellent wins premium the operations organic. increases Zealand quarter Core New XXXX levels. business in second XX% out PC posted and Australia, Rounding combined were more new of

Our That a consulting global headwind organic life benefit three-point brokerage employee business includes from and posted of product about year's sale. X%. last

Excluding our single the would and groups about many with of compare, low health X%, up welfare practice continued showed tough been digits, consulting have core organic and strength.

specialty building businesses, XX% outstanding the organic, excellent by quarter and upon Gallagher wholesale, reinsurance, Re team, results. our quarter to Shifting first posted their another

our Replacement This in about services, and XX%. growth open wholesale of MGA operations brokerage organic XX% organic businesses. our includes X% U.S. and binding in posted programs

retention from finally, of production and excellent firm new XX%, benefiting And specialty environment. posted UK fantastic rate business a organic and

the the provide environment, market. thoughts pricing some starting primary on insurance me PC insurance let Next, with

quarter That's the of renewal XXXX XX%. premiums, XXXX. include Global ahead changes, in rate both we XX% up second the to exposure premium quarter change X% throughout were of were renewal which and reporting first

X%. XX%. all XX%. geographies. General most product Workers up across made about are up lines. is up comp broad-based We're of also is and than X%. about across up up Umbrella Property were are and package increases our Renewal seeing more major premium liability about is increases

And most higher exceptions. to relative are with two quarters previous trending or similar lines

where is down First premiums lower year-over-year. D&O, and second, company which slightly cyber, public are year, renewal versus has flattened last

But these don't X% represent all impact. in perspective, lines our and revenues of year-to-date two much brokerage around this have combined to put thus an of

So be the needed rational, market I profit. generate where to still rate continues an pushing believe to for it's underwriting acceptable

our risk Remember best ensure though, while management brokers budgets. to price clients programs mitigating as is job fit increases their our the coverage to help their find

organic. increases premium our So not up show all of these renewal in

reinsurance outcomes with continuing Shifting renewals most in lines the renewals similar Overall, to June resulted to reinsurance harden. and July global saw what market. January the to during reinsurance we

experience exposed especially the Property continues most cat hardening, to trees.

were Within price XX% regardless, renewals to many the appetites, and due the to reinsurer January their than U.S., cat to start increases retentions. Florida causing in orderly seasons range, well-defined XX% early were increase more property an

were While property our of we all most seasons. capacity risk isn't for to abundant, ultimately able place

price As for risk-specific factors. demand more casualty product reinsurance on resulting quarter dynamics, in increases versus based the renewals, second stable showed or supply

of are carriers severity forward, events, social posture given current to frequency profitability. and likely cautious inflation, Looking impact weather can prior and and their increases which all year continue the of cost replacement underwriting accident

activity throughout costs, Add the other easy inflationary to XXXX. pressures, to Despite make insurance our that lines most and strong. case here XXXX continue increases on remains customers' in it's and cost these to for business rising pricing perhaps and

client of positive and second These indications positive have audits. adjustments daily far the policy quarter, business endorsements July. in our continued showed During thus

of data for At a continued and unemployment the and growth remain. openings time, non-farm between Recent job in market imbalances unemployed rate the the payrolls the amount U.S. of wide work. declining, gap very looking same shows labor number people and

XXXX rise. impact medical medications. more accelerate claims, high-dollar are to to frequent these costs anticipate due of increased and costs the trends into and therapies the on services, specialty of We And new cost

HR and strong. So I offerings see demand remaining for our other consulting benefits

quarter the would of be an I range, fantastic the sit when more brokerage end And this second in X% posting we we more range. all So, with year. that excellent bring the towards another full-year organic today, as X% that confident are here together, books, in to with upper

Moving on very active mergers We had and second to acquisitions. a quarter.

we addition mergers. of and I to acquisition, like of us represent I'd annualized XX In a very tuck-in all for professionals. Buck Combined, estimated growing revenues. million in completed mergers new moment, of these discuss warm $XXX about thank a extend XX family partners Gallagher our joining to the brokerage to which new will welcome our

Moving to which in completed April. early the Buck merger, was

start. a Our off combined integration efforts great is the have business begun and to

While are it's still about together our pleased prospects. and with early, teams how extremely the combined working excited I'm

that strong these but will or $XXX We fair than we share. we Looking we will all ultimately very signed merger ahead, get pipeline, prepared, a million not representing believe of nearly close, being more annualized term revenue. know sheets have XX including our of

to management on our risk Moving Gallagher Bassett. segment,

to expectations our from Second growth was quarter recent continued business wins. growth XX.X% rising and ahead counts claim organic new of due

captives. wins ability large These carriers, is to and including corporate deliver entities, have and client industry-leading utilize broad-based segments, ultimately public client globe. clients been and all the offerings, in for of superior of enterprises, in verticals our insurance across tailor client each our technology, Growth various our across affirmation great outcomes

upper and Second June XX.X% the very end strong was our quarter EBITDAC of adjusted of margin expectation. at

XX%. XXXX organic That margins around XX% Looking EBITDAC forward, year and see we pushing outstanding would year. full be another adjusted

Ireland, was around proud. the And This New Bedrock makes comments say the regarding visiting road is with traveling our Republic. I culture And that I'll globe, I to the some me quarter, past UK, Zealand, employees Czech culture. our thriving, the on incredibly for conclude and which can month, a

culture rigorous program Some class the XXth strong to remains of two-month Gallagher those Internship. future, Summer than unique of conversations is people XXX This investment the our essential young more included in years in come. our for our ensuring an

new we name conduct is expertise, I'm make excellence, As new and ethical trusted confident partners that Gallagher worldwide. so that Gallagher and continue will And each the uphold way. addition fold, colleagues merger into the Gallagher welcoming the the that

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

Douglas Howell

conclude remarks margins Pat. modeling we prepared document by few I'll organic and cash, using management. I'll And the M&A my year capital a CFO I'll helpers on the including our post Then walk how our provide Thanks, on comments remainder of on and website. typical with that segment, playing the some out. commentary see capacity, comments we through

Okay.

brokerage be interest and last XX% year's would income, three flip large release. for to levelizing All-in live product X.X%. further Let's of page over when of if include That we organic little a XX.X% earnings the sale.

IR our a our better what at finish Day due That's and June to especially specialty. divisions, of we of a fantastic in retail all London forecasted bit than quarter across U.S. the

also You'll were than up organically. more contingents that XX% see

because is in organic and more it our at with Together, supplementals, growth. can time-to-time. look combination is much to up flip way fee base commission XX% with in from contracts line better a Probably

quarter So it, no a at by fantastic matter growth which team. you way organic the look

about booked and change see we recall because a for quarter around that tough quarter. brokerage X% important fourth XXX have accounting. organic a estimate quarter headline to It's our fourth QX in forward, for third XXXX, deferred to we revenue related will X% compare in Looking

Controlling We again for a you our X%. just IR Day, June new be XXXX towards matter here, and there's year reminder fourth so quarter last highlighted update it's this at organic would that, as your nothing models.

second the higher full-year range. include remain With income. we for like these now prospects brokerage X% half. Again, not at all on X% we According, do our end percentages that said, is that believe, the organic organic bullish looking to interest of

of adjusted XX.X% adjusted EBITDAC the table. of the for quarter. second five about FX page basis That's to margin margin. We to posted XX Flipping their points segment EBITDAC XXXX's quarter earnings over up adjusted release brokerage

Day XX mostly than And the in that our better came to expanding of due basis growth. the June points incremental organic expectation IR

about bridge basis from which Buck, The which uses basis technology of out about expansion. role investments points Looking total on T&E of some million, some called organic made incremental Q $X points. then impact margin continued And expansion. gave gave us at XXXX, XX income called XX and about to basis basis $X us a million like points. mostly Incremental we is out it around XX of used M&A, interest points XXX inflation in also

to gets Follow that FX that the expansion close basis of in math adjusted XX the points and bridge you quarter.

XX next basis points each quarters. two expansion outlook, of As for we expect of for a the about margin XX to

the XX year for basis bit to percentages those Or year for -- or of see XX optimistic than margins. basis relative XX be adjusted the more margin For points. of prior levelizing a FX and and impact and we now points increases so expansion both Buck. four Again, would are year, April XX to to role that the June views, our

when that during Day about we our margins. talked how provided IR We vignette on a June model to

for me you give starting your FX levels points. XXXX recomputed Let current margins,

for been XX.X%. around it not XXXX, QX, XXXX, as In margins around EBITDAC we XX.X% impact, nearly would XX.X% reported. call much versus quarter fourth have And as

earnings the release. risk if at I second excellent table now to the management the you organic had organic move an bottom Also, the to XX.X% of So quarter, and growth. page of finish the segment five

As from continue Pat XXXX. mentioned, we wins to the second from business new of benefit half

see on wins. organic reflects in larger of which quarter quarter Looking new fourth XX% forward, and XX% about last third we business the year's the lapping

As on for margin That to XX.X%. expectation. margins, when posted management and risk June our end the you upper six XX.X% of EBITDAC XX% to adjusted page flip table, was the

Looking forward, see of we quarters XX.X% the each in last above margins two of XXXX.

and approaching digital year lead organic Gallagher to That full-year margins for So, a record Basset. would XX%. double

Now, of the the short-cut release let's turn in table. page seven to corporate earnings segment

cost re-measurement right In did related we quarter. range IR though experience during quarter Even a head Day. $X wins. the we at the a in provided and total, of further June adjusted of That couple came pennies our the second FX us million midpoint

CFO Moving our our outlook and that -- modeling June commentary. to the year. were document. see second of three, our the On commentary to results you'll rates the move And we've reflect the FX line of in current usual see looking page quarter half most updated let's with helpers you'll for now, second provide ahead,

robust and of banking a outlook on document assumed four M&A higher corporate and second our costs credit here segment giving other the line to balance interest we've weak modest than a the line for page activity. half, Moving as in much CFO our our punch change is not slightly expense commentary corporate

of CFO credit shows on forwards. the tax carry Then commentary, five page our that

helps we XX, which a million, and June flow about have fund of that the us our next few As years M&A. will be used $XXX future and over sweetens cash

yesterday. document, quarter Buck to M&A that. in numbers revenues Remember, Shifting million nearly M&A include through of commentary contributing of table page only estimates rollover this CFO in the the six with half for closed on $XXX

also you for for M&A So a interest future should assume, need to pick price. we increase expense a you of make if the you portion purchase borrow and

use little them. a tax mergers three page and earnings a free quarter. other can like do we be release, of That bottom normal than for that's at of higher One lumpy, but doing the call stock of out this back we exchange did the amount

It's us tax firm our are full fully that partners also the attractive it's defer because of the to looking and shareholders. aligns it long-term with selling our the sellers consequence to new attractive to

available As $XXX for future June At well-positioned. hand million. cash M&A, than we on XX, was remain more very

cash borrowing investment strongest in all half our and Our incremental grade we ratings. the the for flows maintaining of room strong have are second the while year

year We to continue of XXXX without $X and billion $X our see more using in capacity another full M&A or billion upwards any equity. XXXX

line, performance. deliver all in to quarter record better team, CFO outlook XXXX full year and as through more position sitting another Bottom improve, great outstanding we're the organic, margins, financial continues the my M&A better So year, year spot from by another a on a halfway pipeline. our robust measures to

you Okay, back Pat. to

J. Patrick Gallagher

Thanks, for Operator, go open let's and ahead questions. Doug. up

Operator

open call with The your Instructions] of Please line our question now for you. with coming Now, is proceed questions. from UBS. [Operator Weston for Thank questions. the first Bloomer

Weston Bloomer

or Hi. curious around Good points guess month XXX was could strong about maybe can I on you question, basis nature? we Curious back said, geographies, contingent if good is what evening. performance? of of spend and brokerage for above you'd what My what the extrapolate a half organic what or I drove of or the growth about first within ago. out supplementals that businesses really lines or whether maybe year the of that

Douglas Howell

The look due June. for towards look what the U.S. then probably think and to second we that best for at the adjusted terrific also Yes, nine eight and the to quarters just had in to the nine year, for they I feel year. the half a extrapolating our upside rest the of think the U.K. two way was back specialty, we of

positive here June the there and is our success in uptick there So, of And is in but seeing that we're globe, on some across sales. good movement our those too. numbers are a noticeable retention light

J. Patrick Gallagher

they're comp say, Also, advice. would The of and looking stand strong ahead guys. at for I a clients that and above basic really we United growth in getting to and weary blocking property workers' in especially and market is darn tackling, the shoulders the little least opportunity casualty. pretty are good our States and we're with fine areas competition, hard great And stand

Weston Bloomer

believe Re. for question XXX's in Great, thanks. And of said million do go I back you kind sheets I've second on model. maybe revenue. I M&A. from believe XX my $XXX term Gallagher seen If I that's the highest away

there you're more shift So pipeline? could deals broadly larger in the market just is maybe could strategy you well? in just maybe on expand, seeing you in M&A the like any expand what Or your as any or

J. Patrick Gallagher

they're is, one we company. deals we've dozens telling talked in first possibly a and renewing quite they're they And of the think remember, have it's now that deals I talking they're the more competitors. comes had the think we matter I more years. when people, And often. don't people and a where people No are tackling relationships our ready do, got for making well, friends They to into what straight-up industry be that The pleased and seeing that talking point our blocking it's sell. to with us. have of have in We it we're out about prospecting. dozens constantly of get working to all, to done And this typical calls, individual we've to just

Douglas Howell

the I cost. that about some interest stress they a of see giving on that maybe our to the been some industry. increase side concern of appeal that in think borrowing think the rates There's some firm, PE And I of Yes, in there's selling capabilities.

PE seeing so, more folks And now trying being a to roll-up. sell really we're that are than in a strategic interested with into

Weston Bloomer

Got double-digit. Yes. was it. Thanks. It

$X think per million I in term. revenue

So got a there. excited little I

Douglas Howell

Me too.

Weston Bloomer

what Is you your one, the the the And think then that year guidance? of quarters. into last half when roughly you'd we benefiting bps XX fiduciary, highlight just on have back about baked around

Douglas Howell

of the basis popping I points half just it think year quarter and see in second XX gives Yes, third up. think something job quarter like I you only in the that fourth in of margin points QX, here I in the rates maybe think XX the expansion this, because basis have biggest the us might been

Weston Bloomer

you. Thank Great.

J. Patrick Gallagher

Weston. Thanks

Operator

comes next from question. Fargo. the The your with with question Elyse Wells line of Greenspan Please proceed

Elyse Greenspan

how a Hi, thanks. seeing Pat, current willing year. to of asked Good provide on evening. on an little My more outlook I first just question, than typically know your things when you're bit the

now, perspective, how of think right you from things thing shaping growth an based the think about business do XXXX a on brokerage So from how you you up? do think how organic

J. Patrick Gallagher

of Elyse, it's reasonable. the not I'm are look down, shifted. terms very going And searching cycles inflation, of seeing we're those lawsuit, lot rate. think and inflation. When you those healthy one the have What seeing asking to through we're very, called and now very that's had any in coming to a social see Property in in We've spot. the implications for a coming I reserves about troubling. is And going for get roof back hesitation look difficult not it's do cyber And in you're I talking reasonable. into probably think and down XXXX. inflation underwriters you and been you It's like for. tips a inflation over D&O year. then they year.

about they're know our tell making and insurance money, partners feel very, they're us And where I very they're So companies are our need. telling money, I'll what smart making They their you, not where very strong are about. they numbers.

are deals No reasonable that at get that. reasonable one's volume. walking market a price. a can open, on see get done So people the off in gates just It's you I let's don't wide backing saying,

with is across board, inflation. living it a honestly. broker, understand actually They're and the good clients Our for inflation

So looks I think next year strong. very very,

Elyse Greenspan

the Doug, margin level year, this was an see organic the then XXXX And next of year organic margin year? improvement know, the at a of as looks for improvement I revenue saw higher bit same we we perspective. level Would XXXX more from growth bar little that like this

Douglas Howell

than Well, at I X%. don't don't you'd reaction think back, I that if the think it see margin is get to know better would, and expansion. expansion quarter -- to that I XX you runs necessarily my the by got one X%, up, that of some Buck impact of up but of have margin I business business basis points we more at be going be guess underlying X%. it'd that do margin. roll And you'd a time would I lower going

nine question thought asking margin would in depending basis and it'd XX organic we year. which that be six me, points out of this points us be expansion of XXXX you're to organic, give similar could Give So, us what XX, get might of on think XX, there it. I very you in points, XX might be

Elyse Greenspan

price a you of balance And pricing basis making loss when when are over think nominal on increases, year then, are you're that casualty XXXX, expecting trend? property this or the like talking exceed about continue you will that about you that to comment in

J. Patrick Gallagher

us think Elyse. Well, mean, that. the very wanting and telling carriers that's are I they I the much battle need isn't

and think that get I that be the finding yes, it. So, we're can would we objective

rate of ahead So, to try at do loss think that the to and keep going structure they're trends definitely that. I to moving they're going look

Elyse Greenspan

see what last have from could reinsurance January at pricing XXXX? some we one. thoughts one X, on And initial Do you

J. Patrick Gallagher

comment Elyse. early No. that, too for It's on me to

interesting understand, down, market pricing January I bigger very as had nightmare. firm. January month, finished time, chance not look at books think, very, The a obviously, the was their to to we a very, as still January, was July, better settle after X that but just

was little in said but we bit still as remarks, our So July prepared more orderly, difficult. a

one. So, another give me quarter on that

Elyse Greenspan

Thank you.

J. Patrick Gallagher

Elyse. Thanks,

Operator

just comes question questions. from use Please next with Zaremski Mike line of Our the Capital BMO Markets. your

Mike Zaremski

we better course, the new than rate to this of too? Investment good income, expected afternoon. guess, take well, or Hey, company's expected should is the another I was like growing run

Douglas Howell

be XX the I I change basis that in points. it's margin the investment actually Listen, from will on income impact was think our think numbers,

This and of about XX margin XX quarter, be basis think would third we in it fourth. the basis points the about expansion points in

the dollar quarter. So, in seeing not me, dollar and see I that the just would you're to actual second amounts that amounts would that to are quarter you similar in fourth say the third

Mike Zaremski

to you trying all are firing And just some here. holes guys on I'm cylinders, Okay. poke

Let's see I if can.

and outlook. been will So, and GDP has I growing slow and that? just stats inflation, does some, as there it's any has pressures like, look realistic. your there, that be least mean, U.K. currently? business look much high the -- there's Margin there look How on at wage comments in

J. Patrick Gallagher

that And we've to One, we is there fire, of Those Our you the trading spent and under years I were efforts branding do partnerships and of lot putting together incredible credit our not in really paid for ourselves were money those Heath. had two we on Giles, there U.K. about on give fire. together. We firms team on did Rugby when retail as Gallagher a Oval, branding ways. those names. on the that talking dividends. field. in we spent business terms started know, brought We the And as

we our -- more advantage London say of taking Belfast I next offices And who U.K. just can business in They're are in June. visited people kicking was retailer good ass, was and in I know our are part people taking having I I bounce this. for names in they're for There's of across in and the every and a quarter. that. now and entire a getting Dublin they're step. just And fun

Mike Zaremski

sneak I'm because for, to I in going just Okay. mean, a one. quick And just Elyse asked

But year, the reinsurance on because you year In think be it's reinsurance some -- to to a the like a not side? next up, I'm how a due think And curious through? sounds similar if it cost wouldn't terms pricing like of it there is that don't step saying passed be sounds do you down. trying momentum taking this the you the of big kind to of step deal, environment, much you're a something could so be

J. Patrick Gallagher

being they with cover base, reserves dollars dollars. that cost saying I'm you're by carrier rebuild for a you past to our clear. to million their a increasing years two be CEOs going plan Let's ago, we're a to and not if have their inflation told million that and, spend that house starts

reserves. secondly, are touched needed they're process haven't they of Then These sure haven't we values values a still those in at a making for get be that our decade. to touched. been looking So right. They

now a So got value increase. you

units You've to, They're on fact, look a as And cover, that guys, Then say, that growth. cost of They're for telling got done. add get need cost. and it. that'll as have Go the well, this you part deal to to the points. our retail get exposure do of reinsurance. not hold clients, line reinsurance, clearly this which long we is out it we is separating XX in

remember, for Now, that. now, the right some are there's because scouring break market we no little that's job. But in do-for-ten, our

Mike Zaremski

you. Thank

J. Patrick Gallagher

Thanks, Mike.

Operator

James. the from Raymond of Peters with Please your comes question Greg proceed next Our question. with line

Greg Peters

wanted Hey, to result, XX.X%. talk Doug. have good business. look when about you Because organic the and Hey, at afternoon, Pat moment you I just new a for

XX%. You double digit. look renewal pricing Pat, was of pricing a through at bunch you clearly When where went lines,

this And you budget. a your having about and comment made so, also clients

that the business, much versus year? versus organic clients growth exposure, at Just has all and last in curious, how of the changed new rate existing balance is

J. Patrick Gallagher

shaping. ahead I'll then about how back on talk the cuff. come actual Doug market see Doug. the I I'm Let more in the Go because And numbers, off

Douglas Howell

compared business half. new is, is rate up there. and point this loss a year our is business the was up exposure percentage Rate net where versus a it then in about that's total by to Greg, So, points two

up -- impact our is our more So, you it's new here from rate increased that up. the see is can than actually net

J. Patrick Gallagher

let to into production is this we're business Now, much from, that actually start income. $XX,XXX, call our up closer average kind one, about. has better $XXX,XXX. that, the That's think, that as of you're we Greg. measuring job, on business Number it than item receiving let's talking stuff some it new ever me commission The bringing $XX,XXX We income know $XXX,XXX color new per to of to increasing in. moved in I add doing a

probably So chance we're a pretty actually time or happy local their very well. broker finding those broker we're with a relationship long have been giving for us doing with very, clients a their either and larger that

take in that We we machine. I year new are the new a percentage trailing business look accomplish try business. every at a revenue And to when of

been trailing. right Our We're of our And goal right as new in nice. as just for has And our terms of those new XX% always XX%, XX%, on cetera, that. you're continues, pushes growth you XX, are about us having And when XX% of there. revenue more you getting start that we business. trailing as track with XX, in business, et levels, trailing very long continue retention very, goals

You're getting very nice upside.

Greg Peters

Those Yes, that's good. are good numbers.

new posting business we're quarterly going start to net guys are I on wins basis. tracking think I've worms, you to opened up of the because want a can a

J. Patrick Gallagher

and Go that. you give I'll ask.

Greg Peters

comments, right? low don't MGA business about that the underperforming, mid I organic. type it I you want kind Yes. talked of employee of single-digit In on of is. relative of an being the That Maybe kind also poking single-digit, call Pat, benefits You talked holes, to your to about out. but guess theme the stood group, business

a and them comments? maybe your called So about you businesses, spend could two in because out minute talk those you

Douglas Howell

X%. Well, case business the benefits first. large It's life adjusted let's talk the for about

think of pretty maybe have space. line talked other employee the brokers in with I that's benefit about their in what some

going That business now have to that say out compared increases to wouldn't of the lost doesn't cost right going what's it's whack it's I necessarily So have. on.

an see there's that lot, does inflation impact. on large, going but think to going I and be a have medical We're inflation coming that up. by medical cost in to

you also. double digits days seeing that When you go loss in inflation XXXX double inflation, business growing the medical was cost almost digits, back early in were to and XXXX, here through my

the will you have out an So longer. inflation can't that impact for too of keep much space that because

So that would happen.

cause On a damn those appetite, the But just change digit there's state organic ranges programs the little in there's change there's in some you being in that of bit the program business, environment. if stress this or in are pretty that still, business. carrier can sometimes still understand a our single a in that in case, good

J. Patrick Gallagher

And eggs. Yes. to with clients add cost -- dealing time now, right I'm me look, a I've Greg, hard to having not And expanding benefit be are are inflation offerings. looking got our let wage people that. say, they buying as

benefits, they're fact, their balance can to everything their increased they regular same to income. mitigate they doing and need the costs to time give being in at In able people what while

employee time is, maintaining, same as know While at the their base. you difficult how this

really a And a our consulting coming the effort are terms our welfare, great of through tough the are of job. doing is spectacular. in business that time. it Outside and that consultants, are people orders So health our

that. So it's really a balance of all

And agree Doug. I with

matter and it's we think on fee. to of the down. we our know, do change, make you design with trying inflation costs where their getting of that, its Plan cover, I them as inflation for cost in helping the then their living, mitigate compensation a lastly, to lot doing And that people deal that. a in a of that's everything. that And

XX% in doing last thing when giving facing the of rate purchase compensation is costs So you're GBS, health you're a underlying costs, increase. inflation the insurance,

pretty think five I think by is I -- points damn getting good.

Greg Peters

Fair enough.

around integration data. provided history? is Maybe outlook you its of strong business why data that know final and know checkered sort Talking second. challenges. is you think my integration. a the spend last some some Buck about a question. It's a to maybe some you relative I past And provided the had I just business for this question. and and the Just that success has of the That's

J. Patrick Gallagher

the large The part do yesterday be I'm as Then finding onboarding excited And had board involved deals really out home. times. team about, in what team in quarter first our excited tell And the that's not our that's the we there and what, synergies right. every of I'll of board and traded all, integrating been meeting a you about am They've in, talking reporting the Greg. -- to could you're quarter. business. management to five more be I our a we that

then You but name you're your wake not changing again. changing it up and owners are is and the changing,

who's second. on first, on You don't who's know

onboarding those look, your big you found effort part our been people, of last A place. here has to of tell

like of care Now there's nothing than more hear And take that. let's go consultants clients. to

been And resonating. in time I've UK. I here. with folks spent to those them. So a has them spent that big the message It's with time

getting And people quarter mind of we're are outstanding. orders retention in the Our boggling. one is

I'm cross fine. do quarter really selling. synergies to you I one great add not be going in. of to think then -- some that. Seeing We That's So takeouts. cost think there. And already. there's And just And that it's that's I'm some

Greg Peters

the Well, you answers sense. answers thank your for make and

J. Patrick Gallagher

Thanks, Greg.

Operator

the Montemaden Evercore David from with your question. is of proceed line Next Please with Our ISI. question

David Montemaden

sale follow-up just X% that life But the group sound Hey, will just on extra is second you it quarter. in think acceleration the XXXX? expectation? half that deceleration, But on the and thanks. start Or first move something, like up expected. does it higher to Is is that I is is something down good is to seven which comp. in still a wanted benefits organic just for the was

J. Patrick Gallagher

out, business modeling just a looking organic few explaining a on it. there. wouldn't huge accepting mean, with lot is the spent ago. now street why was time I'm David, I there's X% at Yes, outstanding years hard I'm a rates. I here Doug of be that all, acceleration looking I now a

It's a is you akin on what renewal of Gallagher reinsurance in their Given that's more look is trends the Bassett's And side. these that buying insurance many part than big that we there's rather what people what self buying getting the client. insurance, with PC at not instances, to X% loss terms fact of a growth fund. the help lot with and of do in earned biggest are discussion cost or trends, increases people

don't to at I very this you So happy some give want to to XX%. going you're not idea that see happening. X%. I'm acceleration That's

Douglas Howell

That business also be can quarter first weighted. heavily

of a So bit you little get that,

little you heavier a one-one customers. it, but if and tends not think or to consulting of you quarter an sell account a more health the side, about are have you little first grow people to because little -- --you the on recognize than most year full the only a be the bit that type welfare in benefit

programs. So some they're their on business touches the of in final January putting on the

more little So money quarter. make bit in first to we tend the a

J. Patrick Gallagher

buck I PC hear that its the have you, like an from a Why do deal? It underlying I do Can we answer the great, broker the David, margins does. doesn't and isn't looks question others. growth

is we You them And plans, their what and take every how the the them? needs. people. How the And do we help at the and it over on them our to mitigation team, the tell with get realize group outstanding. specialty to for do a time that to I now and ability get how them? PC clients pay it How what of think sure absolutely that get our X% where to of pain it's keep we And on clients best Buck want do benefits the out, pain the our And working there right we down. do to I as our its respond is We're all clients we property, care casualty, mean, side. are it's day like we're year, recognized team, firm top motivate dealing in property. do needs we when out And are can plans, self-insurance I year business. bringing puts us in we congratulations. what across every people? captive and And for plans, them. is same

David Montemaden

just Pat. on No, That's casualty thanks. And rating just that. I property appreciate guess increases. gears just switching helpful, I the maybe

think some bit rates. on was talk workers guys what I'm how those that strip are it I D&O of specifically little earlier. what comp. could just you're some -- fact I is? gave acceleration numbers But and missed casualty an like wondering in I acceleration about you hoping seeing sustainable and seeing You that you If is if seeing a we're you there. out them. guys And sounds

J. Patrick Gallagher

of What I've umbrella up for Workers flat has liabilities XX. you're said about comp, and eight. down about is the my remarks, package is up about which a in And years three. David, of been number to prepared general

of So each probably up those employment. is clearly rate. -- property looking is embedded XX% and medical comp Workers floats clearly, also inflation in umbrella costs aging about now, population. for liability is at social floats exposure social with lines probably units have that's and package is with An different and and inflation, General the need it it reasons.

Douglas Howell

Yes. want you that commercial other about. we're seeing break here the it you liability I business that's casualty is a is And U.S. of umbrella David, call to or sheet auto look I'm that when X.X% more. at telling on it, general X% X% what on to

on it second X% think X% So the I call casualty. in to word,

David Montemaden

And it. tick Got up XQ, did like? versus those it sounds

Douglas Howell

Yes.

J. Patrick Gallagher

bit. A little

Douglas Howell

Yes. six Especially commercial auto and its around XX.X. more now its

David Montemaden

business from year, then, And could you it. point? set this in of property much Gallagher level me, rates about the Got think is coming How just if that that I at brokerage. full

J. Patrick Gallagher

Doug, will number. largest our is Properties that line. give

Douglas Howell

was the specific question? What

J. Patrick Gallagher

How is property? much business our of

Douglas Howell

XX% the we About write. XXXX. XX% for about of here what full year That's

David Montemaden

thank Great, you.

J. Patrick Gallagher

Thanks, David.

Operator

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

Mark Hughes

Yes, thanks. Good afternoon.

Douglas Howell

Mark. Hi,

Mark Hughes

talked about medical you Pat, inflation.

You think going to accelerate. it's

the these costs happen? that that Given gives confidence what wonder broader days. are medical measures of pretty to you I going calm that's

Douglas Howell

any society and hard deal. sure sure the is mean, cost a say hospitals medical Their very them. I'd regard are And in Mark. the it's their so of for losses have our your are social take pandemic make big I now kind good that. if But working turnover to inflation, with with the like know confidence, you cover, their or and I'm doing it's of not And that Keeping the cost employees cost stay news practice right rates people in that increased. employees. don't this I clients. for

Mark Hughes

drug. Specialty

J. Patrick Gallagher

No, here, up on me drug out helping costs are specialty significantly. builds and specialty procedures

Mark Hughes

very you Thank Understood. much.

J. Patrick Gallagher

Thanks, Mark.

Operator

of line proceed Saki Autonomous Please with question. with The next your from question is the Katie Research..

Katie Saki

back Buck. that Hi, from here. an And what of in of follow-up to questioning expands Is have to in some acquisition the year? any over serve materialize seen on synergies. increase evening. line up or about we impact more on of the brokerage Ability to drive clients expect guys Thanks. Kind Any Good definitely little this to guys there tighten opportunity first XXXX? are clearly portfolio. Buck maybe Or expense kind seeing integration that cross I has the sells far. to your the margins of the want opportunity thinking bit a the of quarter that find on you or you half should the so

J. Patrick Gallagher

it's XXXX, think I Doug? more

Douglas Howell

say would also to our friendly it. XXXX, to statement. I XXXX under Yes. we're have feet a getting the But amendment I'd like still and

versus is just So drag in us XXs, business, right? the that Call a naturally in roll So it in slightly margins. of natural run impact somewhere it XXs that's it. looking lower forces the have the on actually better on really join And of see get as face But you at. we're to a improvement opportunities what nice themselves. we together what they the

business the take that's If can upper this into and teens move we it the mid XXs. in

that a see that time goes And us that. last we'll natural By us have think that's at I think and march independent naturally a together, They extra being think wrote business. five better standing good free margins. for there's part of improvement a becoming into their and organization. of being I of conflict underlying of in They've to different I the recent roles best. their much that And spent cut so in couple owners.

So they XXXX. they we of to, improve the first they will as quarter their creative margins margin be margins, get should our once you get through after improve

J. Patrick Gallagher

welfare. maybe excited we're in to cross And then, sure. benefit PC Their been in selling, health We We've probably but they in well, see benefit although opportunities, quite do for come about terrific benefits cross instance, Katie cross States as PC areas defined and in benefits, is cleared. as very strong, as is strength with point United but inside what to probably as that your not strong. And But strengths pension selling always we not consulting services. -- selling about do see there. we're the strong for Gallagher not they we've been they're

client. to you're to a So not look at a if talk now trying you that, a party, add new take

with benefits. buys dealing person the already who You're

me a lot Let and partner already we're who in welfare, my seeing bring of and that. health does

good there I selling. So is think cross

I think excited improvement about I'm come, margin and will that it.

Katie Saki

lapping organic to on more one in as a on a of year then, the I'm is a performance. half out organic risk out slight comments bit sequential Oh, And you'd XX% back wraps question the much. management. year, year a so guide on down Doug, of for just slow up? on kind that you question XX% more adjusting might Thank your gross that exceptional and last seem anything sorry, outlook of to there one the for just curious, gross headwind little imply be risk call management.

Douglas Howell

a it nature business. your this look The they client large don't pretty is if might XX smaller some as roll come And get business, as let's into steady over that say, at can of that years you clients you the last do.

benefit So in acts them the second first and you're to sell and the year, to if the lap quarter, fourth you going fourth corporation you get third to sell yourself fourth. likes quarter in got in you last large U.S. of

business. up, XX% business So it's more think the organic growth you this stack larger timing When to some the of one XX% on if of XX%. causing new and end talking that's get down you of it accounts XX% the But and you quarter you're the if year, in that that. nice

the the it larger clients the a quarter, nice two or takes now or we or then to these we're quarter third they'll hit they'll some in right hit don't board And second sell I accounts. do larger year drawing have fourth on proposing on. in if know that

just it's bit naturally on quarter-by-quarter a lumpy a basis. more So little

think at this you So last sequential up a if basis. And annual I it on actually XX%, then step on you you're they would basis. about looking did encourage and year year at to at look there's what an an annual

Katie Saki

for Thanks Great. your insights.

J. Patrick Gallagher

Thanks Katie.

Operator

Please Our with line with next Shields KVW. the from comes your question Meyer questions. of proceed

J. Patrick Gallagher

there, out Meyer. You

Meyer Shields

unmute. it’s connect Sorry, there? Can I

J. Patrick Gallagher

Oh, Yes, there you're through coming now. you go.

Meyer Shields

go you client question do from client? from in what like advantage pricing of opposed commissions get needing issues a is context to affordability as How of Are in Okay, yes, perspective. shift that And in with you wondering much about to that that Same that to well, clients better legitimately cash that up. take? of I on more said or the Is of can your much I'm unmute. how maximum that? dealing the probably sort revenue something two going

J. Patrick Gallagher

we took excited, get the of a place us where growth. of That's the public one that's And because our gets what that genesis Yes. could us XX. things that's to in

do untenable called whether approaches. tensions. it's people help into be deal are it's by-line folks them number risk whether management know turn Do is a It's that a with into self-captive, the to that ways, real of, part you that? someone situations putting in larger state, We basically of a that just We a by by capabilities. of finding pool them aspect defining it's Gallagher's and whether

Meyer Shields

pay. Yes, point. underwriters I'm with all know of that how much excellent its and I actually what to Okay. digest at idea this head just at which to the more trying around need maybe insured I'm get trying for that, my rate.

Douglas Howell

customers of insurance. I spending the it think budget budget X%, of percentage And on they're way. let's on total their averages X% at look we this What have what say is insurance? some really to spend of are X%,

is much of job in to that Our So their So possible. terms a more structure customers make small cost this? of how this take as can XX% isn't

do more. out. much to some they're never day more can experience take? Let's going how they to what in and Well, is take if That's bad, But we their loss have day that. forget

J. Patrick Gallagher

the understand god, there's them. this away and all not excess they're they the Well, If to to is sell, move also, from happy self-clients are placement me. self-assumption anti-underwriter. a an away loss they more from pick They you like ripped premium remember, have my up rate, not It's Underwriters happy. at right this partnership.

if all. the look, skin get more in the game. want what on to on, take I is make at right that take think you to the you we'll more for this easier rate, that be got So map. in carrier place coverage And limits participate And we're That's the counseling able it to

we do better than anybody.

Meyer Shields

reinsurance Okay, going should be on re-insurance side. the clients that's that tremendously property property question We've XXXX? in more its got same telling The they did Is than in dramatically. Gallagher they pretty helpful. up rates XXXX buying

J. Patrick Gallagher

their the in that's learnings is helping of reinsurance our people their But one exciting Gallagher clients clients. it doesn't is that. And really, the sophisticated us with I this These a mean, with at advice local talking than I to they to of big what the more am and with a balance manage right isn't it's are and that the know to coming, just it's portfolio. the their sophisticated of And in are that property like see all time And I'd in know contractors increase They it. way with say, going this to my world capital. matter something of me frankly. terms how gives crux or they management what best buyers. buy I'm Re of the is do I'm and going again, are capital not things about impressed Gallagher they these

Meyer Shields

And the I final if Okay. one of question can. then

in inflation. Just Bassett consulting cost you're side. claimed anticipating to could you worker's that talk the about medical medical manifesting the college Gallagher cost on inflation all competition Is that itself at processing? Is

J. Patrick Gallagher

I absolutely. That's part of every month. workers' only. big mean, cap medical Sure, escalating a is

Meyer Shields

Okay.

Douglas Howell

the Use Our job benefit on that to is employee helped important. mitigate we of just do side. very like managed care very,

their growth You'll Clients will Gallagher in will that a look them is risk. inflation when expert to Bassett services services. adjusting too. hits goes Gallagher in cost clamoring total of put Bassett be that And cost medical help up, they medical Gallagher reduce in a for Bassett better at inflation to

J. Patrick Gallagher

deliver sure making we that's outcomes. the of part And best

Meyer Shields

to No, end. just the I'm just helpful. wondering take this come been has absolutely. some I'm tremendously going why If workers joy right.

Operator

Meyer. Thanks

Operator

you. Thank

your proceed question. of final Citi. with question line Michael the Our from Please Ward of is

Michael Ward

would the you. say be that's that benefits to beginning. Hey, could Thank there there too? you're you on skewed or M&A from employee wondering about pipeline guys. I P&C, Is in the that just was -- talking

J. Patrick Gallagher

a we strong there'll keep Yes, be both. pipeline good Oh, on both.

have list. in ranking, smaller moves practitioners. the of us Buck in to We'd of going Clearly board. industry. another are on to there up but love mean, I that not have the players biggest one plenty we're Now, substantially, Buck is on that

process tuck-in P&C. been acquisition forever, benefits has along with Our

not So activity of that's in a that lots And there's regard. new thing.

Douglas Howell

because as any use, as business whether need or it's us, brokerage it's better think it's businesses get that wholesale, together owners those those can clients get when benefit, it owners, those -- in have they If Gallagher whether the from need finds that the I as Bassett, they'll benefits, it's whether to place that they is it's Gallagher the they reason we think they smaller the us and it's is right the think Yes, they're can from retail, themselves by even just capabilities they and P&C decision serve get fundamentally, we capabilities, it's they join whether same there. the more acquisitions capabilities, of they same selling especially that capabilities.

Michael Ward

calmed Thank down just helpful. a slowed That's that you. Great. inflation then bit wage terms terms of little your And of overall as curious maybe down? inflation has in internally, in of if own sort monitoring, has

Douglas Howell

Yes.

basis. We the that the we've with papers. XXXX resignation Here's in on amount a than employee We see in about quite and that didn't pools the those employees they pools per great about and We fair thing. you raise were on of talked are read larger given our raised bit. XXXX a that in the very were XXXX XXXX

costs fair there them and very that that acknowledged to have inflation have recognized are some and have we've we our employees think that we've been given So bear, environment. the and the so the raises

that every think we'd fair sat be and of We single plan the are recognize have obviously you fair. Throughout we and it year what haven't our be see year to cooling I pools, those the our I've very been But as in raised to some at for costs inflation to numbers importance down and history, our that. been Gallagher, large, we by we've to yet down But we'd but where given see, employees really live. raises folks. of with that do next

big So, a that. we haven't seen on stress

Michael Ward

Awesome. Thank you guys.

J. Patrick Gallagher

you. Thank

Operator

Thank you.

from RBC Scott Markets. your question. with the with proceed Our of next question is Heleniak Please line Capital

Scott Heleniak

Yes.

and could the Wondering you seeing you're Just of touch what in bit and you've count what of question little seeing either casualty you're more recent at I'm quarters year-over-year, of a the on count average some interested that or kind on Bassett? there management just the you liability quick and the on if Gallagher the and at. and a on claims lines counts versus detail and handling give and claims a claims side. I you're little severity I both guess changes, risk of and comp size terms differences kind workers know

Douglas Howell

right. All

that. on So three things

point existing are at First, maybe that were claims year existing to to that's more a look that. basically be that customers gone at bit. the grew claims last flat-ish, consider COVID still little when through we customers, we this you for it, little of and Kind seeing we very out rising

success seeing also that get seeing trend business that you that safer when back organic were really in so a was Now and the and we're because safer, we the workplaces is pre-pandemic, you're as our go excellent really new retention.

that growing no and customers kind severity for you, retention. through conservatively going on claims better COVID new flat-ish up. from of the question within loss is better seeing What business So existing tells we severity of are and There's average. that

don't but it's X% overall I As a or percentage, like know X%, that. something if

Scott Heleniak

question just quarters. recent M&A to on was Okay. then compared helpful That's And another the so significant since a pipeline detail. it

how than how to or versus more few just lot Just had years? not share a you're there anything talk trend of the on, much or wanting you past deals for seeing over you on that a the can looking about of breakdown, comment if continue is, you but you at I'm is international can specific much domestic. international also look

J. Patrick Gallagher

is international pretty of as what U.S. we're steady. majority looking at The Now pipeline domestic.

Scott Heleniak

Is premium. bit on read my is a probably any finally, that? know comparing? then to renewal too early it it's or but early, little And on Okay. XX% just that's it earlier I how

Douglas Howell

Our June noticeable for there difference. July at a numbers better than looked year the and overnight numbers. our is last are I

but week step July's well Now as another last the over. happens A early as not reads in month-over-month lot your our here, activity right now of up.

Scott Heleniak

Okay. the for Thanks Interesting. answers. all Great.

J. Patrick Gallagher

You bet.

Operator

final with Thank follow-up you. Bloomer Weston from The question UBS. is

Weston Bloomer

you closing for full as Are guys of cash updates on in XQ XQ? the flow year level with or question. follow-up percent my any strong or taking you given a for the thanks they're Buck free revenue Hey, expecting as maybe the integrate was

Douglas Howell

compensation. Well our corners we that that's when because XQ is of our pay out pay incentive all smallest We April. notoriously in

smallest. So is as XQ the our

second year largest. The the is of half the

that that's do not As growth. really flows our The a those is we cash at in our it. we more percentage just tracked you EBITDA all toil closely look how than to fact numbers

credit. our As you know that that because tax of

range. a percentage somewhere is load tax usually in EBITDAC our Our is the of X%

have in that. Our so CapEx prior is don't with you a change pretty consistent year, significant

only in in and we're obviously, that. bit impacts thing a taxes, close track we'll little growth our out that really bit integration EBITDAC throw the paying So our some is. now be very then too costs of CapEx little EBITDAC on But kind to cash flows of what cash those our right different the little cash flows a than close would -- we tracked

growth see is the in you're So going what growth to so the EBITDAC flows. in much cash our pretty

Weston Bloomer

given ex the Thanks. is flow or maybe lower margin Buck, neutral there? cash integration cost maybe slightly maybe it. negative Got cash then And flow just

Douglas Howell

it's positive. Oh, spending mean, cash not integration this on flow much on I that we're that acquisition.

going So I would spend say over we're think three to I years $XXX

what's like and throws cash million off about. flows it something that's And that.

Weston Bloomer

you. Thank Great.

J. Patrick Gallagher

us. everybody. really appreciate being Thanks us with I you this joining evening for

myself performance. it that our to with probably financial you year the fully extremely every second on think XXXX and early has I pleased are improved measure. on outlook tell our reflecting quarter thinking, can We're relative team

remain on half. the we we As bullish very sit today second here

and And and most a in with day is out, you at believe direct our again our very importantly forward Thank September. speaking colleagues for financial IR all Day with a for Thanks thank in globe, do continued than much. look to to people being more our reflection XX,XXX our We success of around us. the day you you I you culture. our

Operator

conclude This today's call. conference does

this line at You may time. disconnect now your

Arthur J. Gallagher & Co. (AJG) 27 Jul 232023 Q2 Earnings call transcript