Good morning and welcome to Arthur J. Gallagher & Company's call to discuss the acquisition of Willis Towers Watson's Treaty Reinsurance brokerage operations. Participants have been placed on a listen-only mode. Your lines will be open for questions following the presentation. Today's call is being recorded. 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. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to the cautionary statements and risk factors contained in the company's press release regarding this transaction, as well as the company's 10-K, 10-Q, and 8-K filings for more details on its forward-looking statements and related risks and uncertainties. In addition, for reconciliations of the non-GAAP measures discussed on this call, as well as other information regarding these measures, please refer to our most recent SEC filings and other materials in the investor relations section of the company's website. It is now my pleasure to introduce J. Patrick Gallagher, Chairman, President, and CEO of Arthur J. Gallagher & Co. Mr. Gallagher, you may begin. Thank you. Good morning, everyone, and thank you for joining us this morning on such short notice. On the call with me today is Doug Howell, our Chief Financial Officer. During today's call, Doug and I will be referencing the presentation that is posted on our IR website, the PDF right below the link you clicked to join this call. We are elated to announce the acquisition of Willis Towers Watson's treaty reinsurance brokerage operations this morning. We described the Willis Reinsurance business on a previous call as a jewel, and it certainly is that. The operations are top-notch, complementary to our growth strategy, and the people are just fantastic. The leadership is excited to join our team, and together with our thriving Gallagher Re operations, we will combine to create a world-class array of resources and capabilities. We're excited to welcome all of our new colleagues to the Gallagher family of professionals. You are going to love being part of this culture. Let's go to the presentation. I'll start by giving you an overview of the transaction on slide four. In total, we're acquiring $740 million of pro forma revenue, $260 million of pro forma EBITDA, and we are paying an initial gross consideration of $3.25 billion, a really fair price. Moving to slide five, broadening our reinsurance brokerage offerings has been a long-term strategic objective for Gallagher. Combined with Gallagher Re, we will significantly increase our size and scale, but more importantly, enhance our global reinsurance brokerage value proposition through increasing our product breadth and service offerings, adding a wide range of analytic capabilities, further leveraging our industry-leading alternative risk and ILS businesses, strengthening relationships with our major insurance carriers, and we're adding a great management team that leads an organization with a strong sales-based culture, which is very similar to Gallagher. Moving to an overview of the Treaty Reinsurance business on slide six. The business has a client list of more than 750 insurance and reinsurance carriers, operates in 24 countries, and places more than $10 billion of annual premium. You'll see the Treaty business is 45% North America, 40% U.K., and 15% around the rest of the world, notably Australia, Singapore, Japan, Germany, to name a few. It is not just geographic reach that comes with the transaction. We will add reinsurance expertise in areas like property catastrophe, agriculture, cyber, healthcare, A&H, reinsurance capital markets, retrocessional, etc., etc., etc. Another exciting part of the team joining us are the 500-plus professionals focused on data and analytics ranging from actuarial and capital modeling to catastrophe risks and insurance-linked securities to strategy and financial advisory. Just a plethora of expertise across the franchise. Ultimately, we think combining Willis Re's treaty brokerage operations with the best startup I have seen in my career, Gallagher Re, should drive tremendous value for our clients, carrier partners, and shareholders. Overall, an exciting transaction for Gallagher and our stakeholders. I will stop there and turn it over to Doug to discuss the transaction terms and financials in more detail. Doug? Thanks, Pat, and thanks everyone for joining today again on short notice. This is an exciting acquisition and a leap forward for our long-term strategy. To vault into the top three reinsurance broker overnight is just fantastic. Today, I too will base most of my comments on the presentation that we posted on the website, and then we'll quickly turn to M&A. All right, let's turn to slide four. As Pat mentioned earlier, the acquired operations' pro forma revenues are $745 million with pro forma EBITDA of $265 million. That $265 million contains only about $5-$10 million of synergies. This isn't an expense takeout deal. It is a very healthy business already running at nearly 35% EBITDA margin, so very profitable. The gross initial consideration is 12.3 times EBITDA or $3.25 billion. When factoring in about $100 million of net assets and working capital, the effective multiple declines to about 11.9 times. You'll also read that there's a three-year earnout based on revenue growth. If the maximum earnout is reached over the three-year period, our effective multiple would be closer to 10 times. Once again, a very fair purchase multiple for such a high-quality business, yet still below our trading multiple, so it's immediately accretive. As we plan on financing the initial consideration using the cash we have here on hand, that does include the $1.4 billion of net cash raised from the follow-on common stock offering and the $850 million of 30-year debt, both of those raised in May. The balance will be from additional free cash on hand plus free cash generated before close and, if necessary, short-term borrowings on our line of credit. We don't see financing risk on this transaction. Importantly, this does not impair our ability to continue our proven tuck-in M&A growth strategy. This financing mix also allows us to maintain a prudent leverage ratio and maintain our commitment to solid investment-grade ratings. We estimate these pro forma acquired operations are about 5% accretive to our 2020 adjusted GAAP earnings per share, excluding clean energy. If we also exclude the non-cash amortization expense from the calculation, it improves to nearly 10% accretive. This is just really terrific. Let's leave page four. Pat touched on pages five and six, so let's flip back to page seven. The pie charts tell an important story. While this is a strategically important addition to our scope of operation and adds a really nice diversification, it doesn't dramatically impact our geographic footprint. We are already operating in many of these countries, so we have on-the-ground experience there. You'll also see that when you look at the relative size of the pie charts, this acquisition adds about 12% more revenues, but it doesn't move the geographic or mix of business that much at all. From an employee account perspective, the additional 2,200 colleagues that we note on slide six is only another 6% compared to our more than 35,000 professionals today. This is a very manageable transaction for us. Let's now move to page eight. Given the business is highly homogenized and we're already in the reinsurance business operating on the IT system we'll be using when we come together, the size, nature, and scope of this business makes a really manageable integration plan. I'll say it again, I don't see a significant integration risk on this. This on page eight, this top chart shows we're expecting to spend around $250 million in total over three years to integrate these operations. This consists primarily of two items: retention agreements and the second item, cost to migrate the reinsurance business onto our re-platforms, in total is $250 million. As I said before, we're not assuming significant expense synergies in our estimates, but naturally, over time, as we consolidate real estate, migrate to common system, and improve processes, essentially Gallagherizing the back and middle office over the next couple of years, we should generate some savings that would help fund additional growth initiatives as we invest in the business. Moving to the bottom of page eight, you'll see this business is highly seasonal. Please consider this as you build your models. Finally, in the presentation, pages nine to eleven are just reconciliations we provide to get you to the 2020 adjusted EPS before clean energy, and those are what we use as the baselines for our accretion calculations. Two other points before we go to Q&A. First, the closing of this transaction is dependent on regulatory approvals across multiple jurisdictions and other customary closing conditions, but we currently anticipate closing during the fourth quarter of 2021. Second, given today's announcement, we have pressed pause on our recently announced share repurchase program. Let me recap. This is an exciting and compelling acquisition. It accelerates our long-term strategy, adds talent and capabilities, is profitable and growing, and is nicely accretive to our adjusted earnings. With that, I'll turn it over to the operator for questions. Thank you. The call is now open for questions. If you have a question, please pick up your handset and press star one on your telephone at this time. If you are on speakerphone, please disable that function prior to pressing star one to ensure optimum sound quality. You may remove yourself from the queue at any point by pressing star two. Again, that's star one if you would like to ask a question. Our first questions come from the line of Elise Greenspan with Wells Fargo. Please proceed with your questions. Hi, thanks. Good morning. My first question is, are you buying exactly what you were going to buy in the prior transaction? I think the revenue was off by $5 billion, but I'm not sure if that's just additional breakage or if what's actually being bought is maybe a little bit different than the prior transaction with Willis AR. There's a couple of different things. Hong Kong and China have been added to the mix where they weren't in the mix last time. Second of all, there is lesser FAC business that we're acquiring on this transaction. The FAC reinsurance business is staying with Willis. In terms of revenue breakage, I know you mentioned that in both sets of transactions. Can you just give us a sense of the breakage that you're assuming, to come to what seems like a conservative starting point of revenue? Actually, this business, we haven't assumed much breakage that isn't already in the historical numbers. We think the teams are in pretty good shape, and they were growing through it, even with losing some teams. There isn't a significant amount of breakage in these numbers. Okay. From the capital perspective, it sounds like you're using, right, the equity and the debt and then cash on hand. I know on your last conference call, we spoke about perhaps there being a good amount of deal flow of your normal transaction at the end of this year. Would the idea be if those deals materialize and perhaps we see additional debt, or how are you thinking about if it ends up being a pretty strong end of the year on your normal tuck-in M&A activity? I think that we still have plenty of firepower to complete the year strong. Then coming into next year, there's substantial cash flows that can be used at. I think over the next couple of years, there's easily well over $3.5 billion worth of M&A that we can do without significantly using any more stock. Okay, thanks. Appreciate the color. Yeah. Thank you. Our next questions come from the line of Paul Newsome with Piper Sandler. Please proceed with your questions. Good morning. Congratulations on the deal. Thanks, Paul. I'm curious as to how this will affect, if at all, strategically where you want to grow prospectively. You mentioned the FAC business. I don't know if that's something you also want to build or if there are other parts of reinsurance that are now still open for your attention. Yes, Paul, Sue Peth. First of all, yes, we will build out FAC over time, and we do a considerable amount of FAC presently in Gallagher Re. This is not a new line to us. We just did not take on their FAC, which is really directed FAC off of their retail book. That is an opportunity for us to continue to grow. This places us very nicely in the top tier of reinsurance brokers, and that opens up immense numbers of doors for us. It is one of the reasons we are so excited about it. It does enhance our capabilities, as we said in our prepared remarks, across a whole host of new areas. The buyer's market is very interested in seeing this come together as a success. I think it will be a great growth area for us, yes. Does the piece have any, how does this piece fit with what you currently have? Is it different structurally or just adding on, or is there a little bit of integration with actually the current Gallagher Re business? We think it's going to fit like a glove. Of course, we spent a lot of time talking about that as we brought it together the first time around. Both teams are very excited because in every single instance where we're doing cyber and they're doing cyber, one plus one looked like five. Where we're doing excessive loss stuff, they're doing the two teams, rather than battling, coming together on both sides, we're incredibly excited. It is a very, very good fit. Great. That's all I had. Congratulations on the deal. Thanks, Paul. Thank you. Our next questions come from the line of Greg Peters with Raymond James. Please proceed with your questions. Hey, good morning, guys. Morning, Greg. I want to go back to the concept of breakage or the teams departing and, where the base is for the earnout. Is the base for the earnout calculated based on the trading 12-month revenue, or is it—because I think there's been some subsequent departures of teams within the last 12 months. Just trying to understand where that base number is to calculate off of the earnout. Does that make sense? Yeah, I can answer that, Greg. Here's the answer. First of all, it's measured purely based on 2024 revenues, all right? So anything in the past is irrelevant. It's what do we do together in 2024. There is a mechanics that goes through this that gets us back to what the core Willis Re business would be. There's a multiple that's applied to that in 2024 that's paid in 2025. Any of the defections, any of the breakage that would happen between now and then would be contemplated in the earnout calculation that happens in three years' time. Now, let's talk about the magnitude of it. I think that if you listen to what Willis said in their earnings release a few weeks ago, this business is growing in the mid-single digits somewhere despite the breakage in that. This is a business that is managing through the breakage. I think right now there's a lot of fired-up people about being part of the Gallagher team that we believe that we can do really well on holding those folks in there throughout the closing process and become a part of our team. We have factored it in there. We have controlled for that in the earnout calculation. Most importantly, these folks are out there servicing their clients, and I think they're going to be excited about being at a new home with Gallagher. Yeah. It certainly seems like there's some potential there for you guys. It's interesting, pivoting back to you brought it up, what Willis said on their last conference call. They also, in part of their response around Willis Re, said that the margins in that business were excellent but unlikely to go any further. I looked at your adjustments for integration, but what's your view on the longer-term structural margin opportunity in that treaty business? Is 35% margin—can it go to 40%? Is 35% going to go to 30%? Just give us some perspective on that. I think holding it where it is is probably our objective. I think that the reinvestment into it—this is a business that's been caught a little bit between the boat and the dock for the last two or three years. I think there's opportunity for us to continue to invest in its growth. This is a growth story, not a margin story for us. It's a sum of the parts story where one plus one plus one can equal five. That's the story on this. I think we're happy with where the margins are right now. I think there is room for investment that will make if there's any synergies that we pull out of this. Do not think of this as a synergy story. It's a growth story. Got it. the final question this is more of a detailed question, Doug but if I look at the overall footprint and structure of Arthur J. Gallagher with this transaction, it seems like from a reporting standpoint, you might be in a position to reconsider how you're reporting your results as opposed to rolling up reinsurance just in the entire brokerage segment if you're breaking out, giving us further color on brokerage. Obviously, it's early days, but I'm wondering if you guys have any perspective on that in terms of what we consume from the outside. Yeah, listen, I think we've done a pretty good job of breaking down our brokerage business in our conference calls to give you some flavor underneath. We'll look at that. I don't see this as being a catalyst for another segment in our reporting business brokerage. Realize why you get allocations across segments. You get into accounting differences between segments. We want everybody pulling on the same set of oars. Right now, our risk management segment is a completely different business. When it comes to broking insurance, whether it's for reinsurance, whether it's for direct writers, whether it's through wholesale, I think we'll give you a really good idea of what these businesses are doing, but perhaps not be on a GAAP segment basis. Got it. Thanks for the answers. All right. Thanks, Greg. Thanks, Greg. Thank you. Our next questions come from the line of David Motomura with Evercore ISI. Please proceed with your questions. Thanks. Good morning. I just had a question just on some of the cost adjustments that you guys made to normalize the operating expenses. Could you give us a sense of how large those cost adjustments were that you made? I'm just looking at slide eight, some of the fine print that you guys spoke about. All right. I can take a shot at that. If you pick up Willis Re standalone operations budget for 2021, it's $258 million. They're ahead of budget this year for that number. When we talk about a number that's $265 million, there's very little adjustment between what they're reporting in their own numbers and what we expect to report in our numbers. What would be things that would go some puts and takes, probably a little bit more revenues coming in than originally expected in their budget, probably a little more T&E will come back in that. Those offset each other. There are some cost that we think that as we run some of these operations through our centers of excellence and through that, there's very small incremental lift on that. The answer to this is there's not a lot of difference between what their budget is and what we're reporting in these numbers here. Got it. Thanks. Yeah, I was more looking for, versus a pre or, during 2020. That actually answers the question. Thanks a lot, Doug. I appreciate it. Yeah. Those are 2021 numbers. I know we're basing it off our 2020 results because that's what we reported. The accretion against our 2021 numbers is still very good also, depending if we use consensus estimates on that. We are a little bit—it's a little odd. We're here in August, and we're basing this based on 2020, but that's what's been reported. That's what we've used. It's still highly accretive against either 2020 or 2021. Yep. Got it. That makes sense. Thank you. Sure. Thanks, David. Thanks, David. As a reminder, if you would like to ask a question, please press star one on your telephone keypad. Our next questions come from the line of Ryan Tunis with Autonomous Research. Please proceed with your question. Hey, thanks. First question. I'm sure you guys noticed it as well, but the organic growth at Willis Re, I think, was 4% this quarter that lagged the bigger competitors. What do you think was driving that softness? I think they had some defections in there that probably caused that. I think that, again, you got a feel for this team that's been for two or three years has been looking for a home. We're happy that they're a part of us, and we hope that brings some excitement. This is a team that can perform at that level. No question in my mind. Once they get through this year, I think they're going to be off to the races. Got it. I had one for Pat and one quick one. I was curious if, as part of these negotiations, was there any discussion of potentially buying further assets in CRB, or was this just restricted to reinsurance? We only talked about reinsurance. That's it. Okay. Lastly, on the retention pool, how are you thinking about structuring those stay bonuses? Are you thinking you're going to have them vest randomly over the three years or more back-end loaded? It's a combination of both, where there'll be some immediate gratification on it, and there'll be some that happens over time. I think the important thing on these retentions is this. If you pick up a $750 million business inside of Gallagher, you're going to find that they probably have around $150 million worth of long-term incentives that are tied to our stock. This is heavily weighted to the Gallagher stock. I think that's important for our new teammates to catch up to where our other teammates have been for the past number of two decades. Being able to put $150 million of Gallagher stock, principally Gallagher stock, in their hands makes them part of the team. It recognizes the fact that this is a business that was started in the late 1800s. One hundred years' worth of effort's gone in this. We think it's important for them to have equity in Gallagher despite the fact that they haven't been here for the last 30 years. It's a reasonable amount of money. It's a one-time catch-up in our view. Our regular long-term incentive plans work very well in our other businesses. By the time we get through this three-year period, they'll be getting equity just like our other businesses are getting. This is a catch-up amount for recognizing their efforts for the number of years of the past. We think it's a—and it's consistent with what our other units would have in their hands. I'm sure they're going to have a lot of fun. Good luck, guys. Yeah. Thank you very much, Greg. Thank you. Our next questions come from the line of Mark Hughes with Truist. Please proceed with your questions. Yeah, thanks. Good morning. Good morning, Mark. Is there anything you could say about why Willis decided to continue to pursue this even after the agreement with Aon was terminated? I’d say, Mark, that the two teams really did think they were going to come together under the Willis-Aon transaction. As we said many times in our public discussions before, both teams were very excited about it. I think it was a clear disappointment on both teams' sides that led to a phone call between John Haley and myself that said, "This might be an opportunity to look at something different." I give him and his team a lot of credit for not just shutting that down, but realizing that there might be an opportunity for both of us. I know both of our operating groups, the reinsurance teams, are elated that this is coming together. They felt that way in the spring. I think that played a huge role in this. Understood. Thank you. Thanks, Mark. Thank you. Our next questions come from the line of Meyer Shields with KBW. Please proceed with your questions. Thanks. Just a couple of really small ones. First, if the deal doesn't close before the first quarter starts, and you miss a really important revenue date, does that adjust the price at all? A little bit in the earnout calculation. Yeah. There's a catch-up that helps us cover a little bit of our carry costs on that until we get ready to close. There is a mechanism in there. Okay. Broadly speaking, is there any concern that some of the Willis Re treaty brokerage is tied to the fact that Willis might be the primary insurance broker? Is there any threat of lost revenues because of that? No. Okay. That's easy enough. Final question just because I'm not sure I understand it. The maximum earnout, if everything goes perfectly, is that 9% of 3.25? I could do the math right now, but I think it would be 3.25. It's 20% of 3.25, isn't it? In order to hit it, the growth targets are you've got to grow—I understand what your question is. If this business, if we grow together greater than 9%, there's no additional earnout payable. Oh, okay. No, I think I just. That's really what that's saying. It doesn't start at $1. It starts—you got to have a minimum of 2% or 3% growth in it, and then it ratchets up to somewhere around once you hit 9%, then the rest of that growth comes—we don't gain share on anything over 9% growth. Oh, okay. The maximum would be $750 million that you'd be paying if they hit or exceed? That's right. Okay. Sorry. I got that wrong the first time. All right. Perfect. Thanks so much. All right. Thank you. There are no further questions at this time. I'd like to hand the call back over to management for any closing comments. Yeah. This is Pat. Thank you again, everybody, for being with us today. I could not be more excited about this. I want to once again welcome our teammates. We hope to move quickly on this close, and we are very, very excited. Thanks, everyone. Thank you. That does conclude today's conference call. Thank you for your participation. You may disconnect your lines at this time. Have a great day.