Good afternoon, and welcome to Arthur J. Gallagher & Co.'s fourth quarter 2021 earnings conference call. Participants have been placed on a listen-only mode. Your lines will be open for questions following the presentation. Today's call is being recorded. 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 10-K, 10-Q, and 8-K filings for more details on its forward-looking statements. In addition, for reconciliations of the non-GAAP measures discussed on this call, as well as other information regarding these measures, please refer to the earnings release 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 afternoon. Thank you for joining us for our fourth quarter 2021 earnings call. On the call with me today is Doug Howell, our CFO, as well as the heads of our operating divisions. We had an outstanding fourth quarter. For our combined brokerage and risk management segments, we posted 18% growth in revenue, 11% organic growth, net earnings growth of 11%, adjusted EBITDAC growth of 17%, and we completed 18 new tuck-in mergers in the quarter. That's on top of closing our Willis Re merger. All told for the year, our merger strategy added more than $1 billion of annualized revenue. That's just fantastic. Needless to say, I'm extremely proud of how the team performed during the fourth quarter and the full year. Let me give you some more detail on our outstanding fourth quarter performance, starting with the brokerage segment. During the quarter, reported revenue growth was an excellent 19%. Of that, 10.6 was organic. Another sequential step up from the third quarter and the fourth consecutive quarter of improvement. Net earnings growth was 8%, adjusted EBITDAC growth was 17%. We expanded our adjusted EBITDAC margin by 13 basis points in line with our December IR Day expectations. Remember, that's lower because of the natural seasonality of the reinsurance acquisition, margins would have expanded nearly 90 basis points. Another great quarter for the brokerage team. Let me walk you around the world and break down the 10.6% organic, starting with our P&C operations. First, our domestic retail business posted 13% organic, driven by excellent new business, higher exposures, and continued rate increases. Risk Placement Services, our domestic wholesale operations, posted organic of 15%. This includes more than 30% organic in open brokerage and 5% organic in our MGA programs and binding businesses. New business was better than 2020 levels, and near double-digit renewal premium increases helped too. Outside the U.S., our U.K. business posted organic of 12%. Specialty, including our existing Gallagher Re business, was up in the high teens and retail was up 7%, both fueled by new business and retention in excess of 2020 levels. Australia, New Zealand combined, organic was more than 8%, also benefiting from good new business and improved retention. Finally, Canada was up more than 13% organically and continues to benefit from strong new business trends, stable retention, and renewal premium increases. Moving to our employee benefit brokerage and consulting business. Fourth quarter organic was up about 7%, a couple of points better than our December IR Day expectation. We saw some nice sequential improvement over the course of 2021, up from the 2% organic we delivered in the first quarter, thanks to a rebounding global economy, declining U.S. unemployment, and increased demand for our consulting services as businesses look to grow. Next, I'd like to make a few comments on the P&C market. Overall, global fourth quarter renewal premium increases were above 8%, broadly consistent with the increases we saw during the first three quarters of 2021. Moving around the world, renewal premium change, which includes both rates and exposure, up about 8.5% in U.S. retail, including a 13% increase in professional liability, 8% in property and casualty, and 4% in workers comp. In Canada, Australia, New Zealand, and the U.K., retail renewal premiums up between 7%-9%, mostly driven by increases in professional liability and property. Within RPS, wholesale open brokerage premium increases were up 13%, and binding operations were up 6%. Shifting to reinsurance. January 1 renewals showed price increases that varied by geography and client loss experience. Loss-free programs saw rates flattish to up 10%, while loss impacted accounts and cat-exposed property business experienced rate increases that were in many cases double that. Rate tended to be based on client-specific attributes and loss history, and I consider that to be a healthy outcome. Whether retail, wholesale, or reinsurance, premiums are still increasing almost everywhere. Looking forward, I see a difficult P&C market conditions continuing throughout 2022. That's because our risk-bearing partners remain cautious on rising loss costs. For property coverages, replacement cost inflation and the increased frequency and severity of catastrophe losses are causing underwriters to rethink rate adequacy. On the casualty side, social inflation, low investment returns, and the potential for increases in claim frequency as global economy, economies further recover are all potential negative drivers of future underwriting profitability. On top of higher loss costs and lower investment returns, reinsurance costs are also increasing. I think carriers will continue to push for rate and don't see a dramatic change in the near term. We shine in this type of environment by helping our clients find appropriate coverage while mitigating price increases through our creativity, expertise, and market relationships. I'm equally as upbeat on our employee benefit consulting and brokerage business. As you know, the first quarter is seasonally our largest employee benefits quarter, and is looking like the team had a strong annual enrollment season. Early indications are pointing to an increase in new client wins over prior year, consistent client retention, and a slight increase in covered lives. With improved business activity and increased demand for goods and services, businesses are trying to grow their workforce, but the labor market remains extremely tight with more than 10.5 million job openings domestically and 6.3 million people unemployed and looking for work. This lays the groundwork for robust demand for our consulting services in 2022 as employers look to attract, retain, and motivate their workforce. So, we finished 2021 with full year organic of 8%. That's really nice improvement from the 3.2% organic we reported in 2020 and above pre-pandemic 2019 organic of 5.8%. As we sit here today, we think 2022 organic will end up in a very similar range to 2021, and there is a case that it ends up even better. Let me move on to mergers and acquisitions. It was great work by the team to close the reinsurance acquisition in early December. Integration is well underway and progressing at a good pace. Remember, we are a seasoned integrator. On the revenue side, much like our tuck-in acquisitions, we've mobilized our local teams from retail, wholesale, and even Gallagher Bassett to partner with our new colleagues and generate new revenue opportunities. I'm also very pleased that our combined Gallagher Re team hit the ground running and had a strong finish to the year. Financially, the acquisition added about $20 million of revenue in December, and as expected, generated a small EBITDAC loss due to seasonality. More importantly, I'm already seeing examples of cross-division cooperation and collaboration, so our new reinsurance colleagues are quickly embracing our better together Gallagher culture. Outside of reinsurance, we completed 18 tuck-in brokerage mergers during the quarter, representing about $65 million of estimated annualized revenues. I'd like to thank all of our new partners for joining us and extend a very warm welcome to our growing Gallagher family of professionals. As I look at our tuck-in merger and acquisition pipeline, we have around 35 term sheets signed or being prepared, representing over $200 million of annualized revenues. We know all these will not close. However, we believe we'll get our fair share. Next, I'd like to move to our risk management segment, Gallagher Bassett. Fourth quarter organic was 13.1%, a bit better than our December IR Day expectation. Margins approached 19% in the quarter, leading to full year adjusted EBITDAC margin of 19.1%. Another great quarter and full year for that matter from the team. We saw more new arising claims within general liability and property, and to a lesser extent, core workers' compensation during the quarter. New COVID-related workers' comp claims were similar to the third quarter, aided slightly by the late-year surge in cases from the Omicron variant. Regardless of the short-term variability in new arising claim activity, we feel really good about the business. Looking forward, continued strong retention combined with new client wins in the fourth quarter should drive 2022 organic into the high single-digit range. It was another fantastic year for our franchise, and I'm extremely proud of our team and our collective accomplishments. Together, we produced 8.6% organic growth in our combined brokerage and risk management segments, completed 38 mergers with more than $1 billion of estimated annualized revenue, more than 110 basis points of adjusted EBITDAC margin expansion, and we were recognized as one of the world's most ethical companies for the 10th year in a row by the Ethisphere Institute. All this in the face of a pandemic. What a fantastic year. More than ever, our success is due to our bedrock culture. Our culture helps us deliver better results for all of our stakeholders, including our customers, our colleagues, our underwriting partners, and of course, our shareholders. Every day, all of our teammates get up and work diligently to maintain our culture, to promote our culture, and to live our culture. That truly is the Gallagher way. Okay, I'll stop now and turn it over to Doug. Doug? Thanks, Pat, and hello, everyone. As Pat said, a terrific quarter to close out an outstanding year. Today, I'll start with our earnings release and touch on organic margins and our corporate segment shortcut table. Then I'll move to our CFO commentary document, where I'll talk a little bit about how we're now providing our typical modeling helpers for 2022, add some commentary on the Willis Re acquisition, and our latest thinking on clean energy. I'll then finish up with my comments on cash liquidity and capital management. Okay. Let's flip to page 4 of the earnings release to the brokerage segment organic table. All-in brokerage organic was 10.6%. A nice step up from the 9% we posted last quarter, and the 6%+ we posted in the first half of 2021, leading to full-year organic of 8%. Looking forward, as Pat said, we see full year 2022 similar to 2021 or even better. Now turn to page 6 for the brokerage segment adjusted EBITDAC margin table. Headline all-in adjusted margin expansion for fourth quarter was 13 basis points, right in line with our December IR Day expectation. But recall, that expansion has the adverse seasonal impact of closing Willis Re on December 1. Without that, adjusted margins would have expanded 88 basis points, also right in line with the forecast we provided in December. For full year, adjusted margin expansion was 123 basis points. Excluding Willis Re, it was up 142 basis points. It's important not to forget, that's on top of 420 basis points of adjusted margin expansion in 2020 and 75 basis points in 2019. That's absolutely incredible execution before, during, and as we emerge from the pandemic. Moving on from 2021, looking forward, as the pandemic limitations continue to ease in 2022, we will naturally see some costs returning in areas such as travel, entertainment, and perhaps some other office consumables. Incremental full-year 2022 costs from these three areas could be as much as $25 million. Even then, our full year spend on these categories would be below pre-pandemic levels, showing that we're holding savings. Also, we are back to making targeted investments to drive long-term growth. In 2022, we are planning for increases in marketing, advertising, consulting, professional fees, and certain IT investments. These costs, combined with higher insurance premiums, say, for E&O, D&O, and work comp, would total around $35 million. Like we said at our December IR Day, we should be able to absorb those costs and hold margins if we post around 7% organic. If organic is over 7%, even shows some margin expansion. By 2023, we should be back to that pre-pandemic view that margin expansion might occur at a 4% or so organic level. To be clear, all of these comments are before the impact of the acquisition of Willis Re. On a pro forma basis, those margins can run a bit higher. Math would say it would naturally provide some lift to our consolidated brokerage segment margins in 2022. A couple things to keep in mind as you build your quarterly models for our brokerage segment in 2022. First, consider seasonality. Due to our benefits business and now our larger reinsurance business, first quarter seasonality, or first quarter is our largest revenue and EBITDAC quarter of the year. Second, perhaps slightly more nuanced, since we're not seeing price and/or exposure increases in benefits and workers' comp to the extent we are in other areas of P&C insurance, first quarter organic might be a point or so below your full year pick simply due to the mix. The math would then suggest second, third, and fourth quarters could post over your full year organic pick. Again, that's just a nuance to help you with your quarterly model. Moving on to the risk management segment and the organic table at the bottom of page 6. You'll see 13.1% organic in the fourth quarter and full year organic in excess of 12%. What a great rebound from the depths of the pandemic. As Pat said, it's looking like revenue momentum continues into 2022 with full year organic growth, revenue growth in the high single digits, which is really terrific given 2022 will naturally have more difficult compares than 2021. Moving to the Risk Management segment EBITDAC table on page 7. Adjusted EBITDAC margin of 18.6% in the quarter and more than 19% for the full year. A fantastic result. Just like our Brokerage segment, a nice step up from pre-pandemic levels of 17.5%. Again, that demonstrates our ability to maintain a portion of our pandemic period savings, even as we make some further investments in technology investments. Looking forward, as you heard at our December IR Day, we will continue to make investments in analytics and tools to enhance the client experience and drive better claim outcomes. Even with those, holding margins close to that 19% is achievable for full year 2022. All right, let's turn to page 8, to the corporate segment table. In total, adjusted results, 2 pennies better than the midpoint of our December IR Day forecast, mostly as a result of strong clean energy earnings. We did have a couple notable adjustments this quarter. First, Willis Re transaction-related costs, as discussed in footnote two, were $22 million after tax. Second, as discussed in footnote three, similar to third quarter, we had non-cash deferred tax adjustments related to international M&A earnouts, which is the most of it, as well as some other small tax and legal settlement items, together about $19 million after tax. Now let's shift to our CFO commentary document we post on our website starting with page 3. As for fourth quarter, you'll see most of the brokerage and risk management items are close to our December IR Day estimates. Also on that page, we are now providing our first look at items related to the brokerage and risk management segment. A couple lines we're highlighting. First, FX. The late 2021 and early 2022 weakening of the U.S. dollar against our major currencies is creating about a 4-penny headwind to EPS next year. Second, integration costs. You'll read in footnote one, the integration estimates provided here only reflect expense associated with Willis Re. As Pat mentioned, integration is well underway, and we are still comfortable with our ultimate pick of about $250 million of total cost for integration. All right, let's turn to page 5 of the CFO commentary, the page addressing clean energy. The purpose of this page is to highlight we are transitioning from over a decade of showing GAAP earnings to a 60 period where we harvest cash flows. You'll see in the blue column that we reported 2021 GAAP earnings of $97.4 million, a really nice step up, 39% over 2020, and we generated $40 million of net after-tax cash flow. Also, a nice step up from 2020. The real headline story here is in the pinkish column. Cash flows take a significant step up in 2022. Looks like we'll be harvesting $125 million-$150 million a year of cash flows and perhaps even more in 2023 and beyond. Now, there is still a possibility of an extension in the law, and we are well-positioned to restart production if that happens. If not, we have over $1 billion of credit carryovers. If we use, say, $150 million a year, that's a seven-year cash flow sweetener. Flipping to page 6 on the rollover revenue table. The reinsurance acquisition is off to a solid start, and we are encouraged with both its December results and early indications from the 1/1 renewal season. It's looking like our pro forma revenue and EBITDAC of about $745 million and $265 million, respectively, are holding up nicely. The reinsurance acquisition is off to a terrific start. All right, as for the cash and capital management and future M&A. On December 31, available cash on hand was about $300 million. With strong operating cash flows expected in 2022 and potentially a nice bump in cash flow from our clean energy investments, we are extremely well-positioned to fund future tuck-in M&A using cash and debt. Over the next two years, we could do over $4 billion of M&A without using any stock. You also see that our board of directors announced a 3-cent per share increase to our quarterly dividend. That would imply an annual payout of $2.04 per share. That's a 6.3% increase over 2021. Finally, one calendar item. We are planning on our regular mid-quarter IR Day from 8:00 A.M. to 10:00 A.M. Central Time on March 16. Again, that will most likely be virtual. During that, we will allocate some time to socialize our planned migration to re-reporting adjusted GAAP EPS results, excluding the impact of non-cash intangible asset amortization. We'll discuss the detail of all the adjustments, including representing historical results on the new basis. Okay, that's it. From my vantage point as CFO, we are extremely well-positioned for another great year here in 2022. Before I turn it back over to you, Pat, I'd like to thank the entire Gallagher team for a terrific quarter and fantastic year. Pat? Thanks, Doug. Operator let's go to questions and answers, please. 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 a 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 for questions. Our first question is from Mike Zaremski of Wolfe Research. Please proceed with your question. Hey, guys, this is actually Charlie on for Mike. Organic growth in the back half of the year has been outstanding and has been accelerating. Pricing, while positive, seems to be decelerating and GDP is decelerating as well. Can you provide some color on what makes you comfortable with guiding us to organic growth at almost two times your historical level? Well, we think that the rates are gonna hold. It's just that simple. Market falls out, it won't. Market holds the way it is, it will. I see all kinds of reasons for it to continue as laid out in my prepared remarks. But beyond that, you've got a situation where underwriters are not backing off from their need for rate. We're seeing that every single day. We're into the renewals, obviously now deep into the first quarter, and we're not seeing rate relief in any way, shape, or form along the lines of what I talked about in my remarks. I still think there's a lot of pent-up exposure unit growth that's still to come. We think that there's inflation sitting there. We think that there's a need for our benefit consulting advice more and more. We think that wholesaling markets are becoming tough in order to find placement. We think there are more accelerators when it comes to that than there is maybe a slight half a point pullback in what the underwriters are asking for in rate. That far overshadows it. Got it. That's great color. On M&A, I guess, I know you said the integration is going well. Does the reinsurance transaction have any impact on M&A decisions this year? Is there any chance you don't spend your entire free cash flow because of it? Listen, I said we think we have $4 billion to spend over the next couple of years. I think that's almost $2 billion next year and a little over $2 billion the final year. We have plenty of free cash to fund acquisition. Our pipeline, it does get a little slower in the first quarter. There are people that push more to have something done by year, and we have that happen every year, but we're pretty excited about what we're seeing in our pipeline right now. Thank you. Thanks, Charlie. Our next question is coming from Greg Peters of Raymond James. Please proceed with your question. Good afternoon, everyone. Hey, Greg. I know I can't do it, Doug, but I'm wondering if you can say pre-pandemic ten times really fast. Pre-pandemic. Obviously, I cannot. I couldn't. I'm just teasing. I had a question about the M&A, and you know, I was looking in the CFO commentary on page 3, and of course, Pat, you always give us you know, a view on term sheets outstanding, et cetera. Two-part question. When you give us term sheet numbers, the number of term sheets that are out there, and then ultimately to close, can you talk about how that ratio, the close rate has changed over the last two or three years? Secondly, you know, on page 3 of the supplement, Doug, you give us the quarterly weighted average multiple of EBITDAC for tuck-in, and it's definitely trending up. I'm just curious about your views there. Yeah. Great. Let me take the first part of your question. When we get to an actual term sheet, we're usually moving down, especially in our tuck-ins, we're usually moving down a path where we're gonna do a deal. One of the things about our reputation is that we'll close. Having said that, over the last two to three years, there's considerably more competition. You could take a $5 million deal today, and if it's gonna get spreadsheeted, there'll be a dozen. Like, you're thinking of a dozen bids. You know, we are really trying hard to make sure that all of our new partners are excited about what the future provides being part of Gallagher, which quite honestly, we think is substantially better and more exciting than our private equity competitors. You know, that doesn't diminish the fact that they're good competitors, and they're smart people, and they're well-funded. I don't have a number for you specifically. I can't say, "Oh, yeah, we closed 32% of the ones that we finally get to." We don't keep the records that way. I don't do that. Anecdotally, I'll tell you that we should close more than half of the ones that we get to where we have a signed term sheet. Well, I take that back. We should close 90% of the ones where we have a signed term sheet. 10% will slip out of the net. Where we're preparing term sheets, we should close about half of those. In terms of the multiple, Greg, yeah, the multiples ticked up a little bit, not as much as what our multiple has, so there's still a terrific arbitrage there. You have to realize the growth rates that drive those multiples have gone up quite a bit too. I think there's justification for higher multiples. You know, if we're still buying in that, you know, 8-10 range when it comes to tuck-in acquisition, it's a pretty good run rate versus our trading multiple of 15, 16, 17. Got it. Yeah. I guess a follow-up question. You know, it's been a rough start to the year for the market and for the insurance brokerage stocks and your stock too is traded off a little bit. It feels like at times some are speculating that, you know, the best for their brokerage space is in the rear- view mirror. Yet the rhetoric from you, Marsh and Brown & Brown, you know, are, you know, directly polar opposite, seem to map out a pretty optimistic future. So, I guess I'm just trying to gauge what your perspective is on the market, considering that the stock market certainly doesn't seem to appreciate what you guys are doing at this, you know, moment in time. Well, Greg, this is Pat. You've known me for 20 years, and there's never been a time in that period where I've been as bullish as I am today. Yeah, I know. I mean, everything is going our way. Let me try not to spend 20 minutes answering your question here, but let's start with the fact that we've never been stronger. Vertical capabilities are absolutely critical. Data and analytics are absolutely critical. When you take a look at the volumes that we now have, that we can do the data and analytics around, we can tell you what's happening by day with rates and renewals and what have you. 10 years ago, we flew blind totally on that. Customer asked, "Why do I even know I've got a good deal with the rate environment going like it is?" We can show them what's happening to the rates by line, by geography, and why they have a good deal. That type of question is getting asked right into the middle market. And over 90% of the time when we compete, we compete with a smaller competitor. That's why these people are selling to private equity. That's why these roll-ups are working. I'm telling you, it's unbelievable the opportunity we have right now. I see this as the greatest buying opportunity in the last five years. Yeah. I just in your answer, and it was part of your comments, you talked about the difficult risk-bearing market, you know, and driving further rate. I, you know, listen, you're looking at a global picture, so, but I look at, you know, reported results. Travelers was out with an 88% combined ratio. Berkley just came out with an 88% combined ratio tonight. It seems like the risk bearers are the results are beginning to improve. You know, so I guess it lends the question, what are we missing when you say it's a difficult risk-bearing market? Well, let's start with inflation. You know, you've done all your actuarial work at a 2% inflation rate, and now it's 6%. Oh, yeah, that was a blip on the radar. It was gonna be gone by now. I guess that's not gonna happen. Secondly, let's look at loss costs. What does it cost to build a house today? Well, we got it done for $200 a sq ft a few years ago. It certainly isn't that now. I could go on and on and on. I mean, the level of nuclear, the number of nuclear settlements. The other thing too is, I've been saying this now for years, I think it's more true than ever. Our underwriting partners are very, very smart, and they've got incredible data and analytic skills. They know where they're making money in that 88% everywhere around the world every day, and they know where they're not making money. You walk in and start talking about a deal that you want to broker at something that's going to be substantially less than they know they'll get or deserve, they're just not buying it. I think, Greg, there's also some things, you know, ex cats, ex reserve releases. I think the prospect of just inflation, just of a reserve coming in, let's say, just 10% more than what the original estimate was. That's a huge difference on a combined ratio. I think I'm not challenging the health of the insurance companies. I think if they've got their rates where they think they need them right now. I don't know if there's a case that would say that they're too high. I think the case would say more so that they're too low. I just don't see when the courts open up, you're going to see more, unfortunately, casualty losses that are just the current picks while the best information they have right now are just too low. I think there's not a case for cutting rates by any means. There's a case for continued increase in rates. Everything that we look at is saying it'll be interesting when the Yellow Books get filed. Well, this is not a hard market as it was in the, you know, middle eighties where everything goes up. You know that work comp was flat through most of this adjustment. Work comp is now up. As work comp comes up a little bit, professional liability is going through the roof. Cyber is almost unbreakable. You sit there and you look at this. These carriers are looking for line by line, geography by geography, and from our perspective, daily placing accounts, we are not seeing them lose discipline. Got it. Thanks for the answers, and congratulations on the quarter and the year. Thanks, Greg. Our next question comes from Yaron Kinar of Jefferies. Please proceed with your question. Thank you, and, good afternoon. Hi, Yaron. My first question. In the earnings release, there's a comment that if the pace of economic recovery accelerates beyond your expectations, you could see expenses increased more than the current estimate. I just want to confirm or pick at that a little bit. Expenses may rise in that situation, but wouldn't organic revenue also accelerate in that case? Yeah. Essentially what I'm trying to get at is margins don't get compressed with that, right? Right. That's not a margin comment. That's just an. Yeah. Expense load comment. Okay. I guess all else equal, if the economy does accelerate beyond your expectations, margins would actually come in better than expected? Well, you know, listen, we think that there's a case that we could do better next year on organic than we have, we did this year. If the economy accelerates, exposure units grow, the pent-up demand for goods and services increases, supply chains get back to normal. Yep, your implication of that question is right. Okay. In the CFO commentary, page 3, I think you have a comment there on full year margins and brokerage being approximately 34%. They were at 34% in 2021, right, or 33.9%. There should still be some upside to that. Is that just a rounding issue? All right. Two things. First of all, don't you think 34 is pretty darn good? I mean, when you look across the brokerage space, we're pretty proud of that margin. I'll tell you, I've been here 18+ years, it wasn't that way that long ago. You got to be pretty proud of that number compared to the industry. Second of all, yeah, it's 34%. The reason why we don't round it even more is because we don't have a crystal ball. We also have FX adjustments that could come true, you know, could change that number slightly as with our international business over the next year. What we're saying right there, just like we said in the commentary, at 7%, we've got a decent chance of holding those margins. We really think we do. At 8%, we could see a little bit more. Over 8%, maybe a little more than that. I wouldn't read a rounded 34% with all those factors as being an indicator that we're pegging exactly 33.9 like we have this year but 34 is greater than 33.9. Then when you roll in the reinsurance operations, you could get a little bit more lift than that. I would say I would not read too terribly much into it. Okay, good. I'm glad that's confirmed. Finally, any update on Willis Re, the revenues and margin? I think the initial guidance you offered for 2022 was still based on the 2020 numbers, kind of used as a placeholder. Yeah. We feel really good about the team. We're on board just over a little bit over a month, almost two months now. As we said in our prepared remarks, the team's coming together extremely well, with a good strong January 1. We brought $745 million of revenue and $265 million of EBITDAC, and that's still looking good. Okay. Thank you very much. Thanks, Yaron. As a reminder, if you would like to ask a question, please press star one on your telephone keypad. Our next question comes from David Motemaden of Evercore ISI. Please proceed with your question. Thanks. Good afternoon. Hi, David. Good afternoon. Just a question on the brokerage organic in 2021, the 8%. Wondering if you could just walk through the different drivers behind that in terms of exposure, pricing, net new business, how much those contributed to that 8% and how you see those elements shaping up in the 2022 outlook. Okay. First, let's break that down. There are the components of new, lost, opt-in, when customers opt in for more coverages, opt-out, when customers opt- out 'cause they wanna control their budget for insurance spends, and you got the impact of rate. The fact is that we believe we're if you break that 8% down, let's just say that a third of it comes because we're just selling more business than we have before versus what we're losing. I think there's probably a third of that number that's coming from exposure, and a third of its coming from rate. You've kinda got all three of them there. What's interesting on a multi-year impact is that we can help our customers come up with creative ways to mitigate the rate increases. As their exposures grow, which we see is happening more and more over the next couple years, it's harder to opt out of exposures. If you had 20 trucks and now you gotta insure 22 of them, you can't just not insure two trucks. If you have a 20% increase in premiums, maybe you take a higher deductible or you take less limits on it, and you can kinda opt out of the rate increase. As we see exposure units fueling that organic growth going forward, top that off with rate increases, that mix of, I think would toggle probably more to exposure, more to net new wins, and maybe less impact from rate as we continue to grow. You know, when you push 10% of organic growth, it's gonna be exposure unit driven. Awesome. That's great color. Thanks for that. I guess maybe just also, Doug, you mentioned the cadence, you know, maybe the first quarter being a little light. You know, I don't wanna get, you know, too, you know, too granular here. There's a, you know, it's a long year. You know, it sounded like that was really driven by employee benefits and workers' comp and just seasonality there. When I think about the 7% organic in employee benefits, that seems pretty strong, definitely better than it was in December. Are you expecting a deceleration off of that up seven, and that's partially why maybe the first quarter would be a little bit lower than the full year, or is it more workers' comp driven? Well, I actually said that if you pick. I'm just saying you have to make the pick. If you're picking 8% next year, and I said it's about a point lower in the first quarter, that 7% is probably the number that you'd get to. If you pick 6%, I don't think that it would have that big of an impact on you. What I said in my comments is it's about a point lower than the full year average. That's, you know, that's what I would say. Just cautioning that that business doesn't grow as fast as our P&C right now. Okay. That makes sense. And then if I could just sneak one more in, you know, on the $4 billion of dry powder for M&A you guys have over the next two years, without issuing stock. That's a lot. It's a lot for tuck-ins. You mentioned earlier competition's also increasing. I guess I'm wondering if at some point you would consider allocating some to capital return through share repurchases. Is that something that's come up at all? You know, something that you think you might institute over the next year or two? Absolutely. That's something. If we have excess capital, we'll wanna make sure that we maintain our solid investment grade rating, right? We'll absolutely look at share repurchases and dividends. Great. Thank you. Thanks, David. Our next question is from Elyse Greenspan of Wells Fargo. Please proceed with your question. Hi. Thanks. Good evening. My first question is related to clean energy. Doug, I think you said that there's a chance that the laws could be extended. I just wanted to get a sense of the timing you thought there. Then I thought in the past, you guys had perhaps implied if, you know, you continue to be able to generate credits, you would not go the route of rolling out some kind of tax amortization EPS. Are these now independent events? Meaning if you're able to generate more credits on the clean energy investments, you will still roll out, you know, some EPS estimate that is, you know, cash in nature and backs out intangibles among other items? I don't see us backing off of going towards that metric regardless of what happens with an extension or not. In answer to your question, we're going that route. We've done a lot of work on it. We think it's consistent with what other brokers are doing, and we're pretty comfortable with going that route. What happens with an extension? I think it's gonna be in the spring. We think that Congress has woken up to the fact that this technology provides a terrific benefit to our environment. We hope that they see their way clear to finding a spot in a bill to include it. If that does happen from a cash, from a credit generating perspective, then you would perhaps be on track to generate credits at a cadence that you were generating them at in 2021, just depending upon when you can get back on track with that? Yeah, you kind of broke up a little bit on that question. Can you just say it again, Elyse? Sorry. I was saying if you are able to regenerate credits from your clean energy investments this year, would you expect it to be at the same cadence that we saw in 2021? Yeah, I think so. Listen, we posted $97 million of after-tax earnings on it. The peak would be $80 million more than, not $40 million, not $50 million. There will be some plants that won't start up. They were planned to be decommissioned, marked the whole location as being decommissioned. I wouldn't see it as being as high as it was. We had a terrific year, one of our best years ever. I just don't see that happening again if it restarts. Clearly you'd have from the restart date, too. If we don't get a. Regardless if it's retroactive, these have been idled. They're sitting there. It's not like we can go back and produce credits in January, February, and March, if it doesn't get passed until April. Okay. With Willis Re, in the M&A sheet, I saw that you guys put it in with the Q4 bucket. I'm assuming based on the commentary, is the embedded revenue from Willis Re just at that $745, and then if there's growth off of that would be additive to the M&A build? I'm assuming on a go-forward basis, you'll just give us the revenue from Willis Re just on your quarterly calls like you did today? Yeah, I think. Listen, make sure I can restate. If you go to page 6 of the CFO commentary, we provided a grid that shows the fourth quarter acquisition activity. I understand your question there. How much of that line adds up and then subtract out the $745. The $745 is in that line, including what other acquisitions we did during the fourth quarter. For the vast majority of it. Okay. I'd have to do that add up while we're on the phone here. No, that's fine. That's helpful. One last one on margin. Actually, let me The mar- Let me restate that. We have a separate line for the reinsurance acquisition. I just didn't have my glasses on here. We have other fourth quarter acquisitions in the line above it. Take a look at that. All right? Okay. Sorry. Thank you. The margin guide, you know, that you could see some expansion above 7%, I guess that was unchanged, you know, from December, right? We should expect if you're gonna get to around 8% or so organic this coming year in brokerage, we should expect a modest level of margin expansion, correct, when we take all of your expense commentary throughout the call into account. Yes. That would be what you would assume. Okay. Thank you. All right. Thanks, Elyse. Thanks, Elyse. Our next question is from Greg Peters of Raymond James. Please proceed with your question. Great. Thanks for allowing me to ask a follow-up. I wanted to spend a minute and ask about your supplement and contingent line in the brokerage business. You know, if the profitability of the carriers starts to improve, when we expect supplements and contingents to also grow, maybe a little bit faster than just the base organic that you're expecting? Or maybe more broadly, just what are the drivers of growth in supplements and contingents outside of acquisitions? The answer to your question is yes. The driver is very simple, profitability on contingents and revenue growth, premium growth on supplementals. Yeah. Both of those should be impacted nicely by inflation, growing premiums, and profitability and the added value that we bring through our SmartMarket, through our Advantage products, where we really can help match our customers' need to the carrier's appetite for risk. We're getting continued momentum on that, Greg. You've been around a lot. We're continuing to add value in the relationship with our carriers, and they recognize it. Your statement there is right. It should continue to grow. As business becomes more profitable, we should all benefit from that. You know, I remember, and this is dating me, but I remember when you started SmartMarket. I guess since you brought it up, can you give us, you know, an update of how that business looks today versus, you know, where it was a year ago or two years ago? Whether it's in terms of number of clients, the amount of premium that it's accounting for or whatever metrics you're using. Well, first of all, yeah, I can do that, Greg. The proof has been in the pudding with SmartMarket. You were there when we started it. To be perfectly blunt, there was some skepticism for all kinds of reasons around whether or not data and analytics being sold to insurance companies was really worth it. Okay, that question's been answered. It's very well accepted. It's now being utilized in RPS, being utilized across our Gallagher Global Brokerage operation, including locations outside the United States, Canada, the U.K., etc. It's getting very broad acceptance across more than probably 15-20 carriers today. Yeah. Think about if you think back to our IR days that we talked about, you hear us speak normally about our U.S. business and the things that we've done in our U.S. business and in terms of carrier relations, in terms of our, you know, CORE360 platform, our use of offshore centers of excellence. Then how we're bringing that to Canada, Australia, New Zealand, the U.K. retail, now into some of the other retail locations as we take minority positions, perhaps in Europe. This is an example of how a seed planted and developed here in the U.S. can be spread around the world, and then vice versa. There are techniques around the world that we bring back to the U.S. Greg, you're right at the nub of yes, this is something we're proving out and rolling out around the world, and that's why when we talk about retail around the world, it all looks the same with different nuances by country. It's been a very good for our people to tie closer to the insurance companies, and we're generating about $25 million of income from that. It's been a win-win for everybody. Great. Thank you. Thank you for the color there. I guess the last question I would have, you know, Doug, I've used your quote before about in reference to margins. I think you previously had said on a conference call, "Well, trees don't grow to the moon." So, you guys have a 34%, and I'm rounding up, you know, EBITDAC margin in your brokerage business. When do we begin to top out? I mean, everyone's reporting margin expansion. At some point, you know, you would think that there might be some downward pressure on fees or commissions or something that might, you know, cause some downward pressure on margins. Well, I think there's a difference between nondiscretionary margin expansion and discretionary margin contraction. You know, I think that, you know, scale has its advantages. There are limits to scale. It all is a product of organic. I think this call would be very happy if we could somehow post 9% organic growth for the rest of our lives and have just incremental margins. That's a pretty good story. You know, right? It's just not about the tuck-in margin strategy or acquisition strategy. You're right, they don't grow to the moon. More importantly, what is the client demands from us that we require us to continue to make investments? It's not there at 100% yet, but you know, clients are becoming more demanding, and in order for us to compete and post that stellar organic growth, we need to make investments in the business. I don't have an answer for you. When we do- Yeah. You know? Yeah. Well, I like the idea of putting 9% organic and margin expansion in my model for the next five years. Go get them, tiger. All right. If you think that's what I said, good luck. Our next question is from Mark Hughes of Truist. Please proceed with your question. Yeah, thank you. Good afternoon. Just a quick question, the risk management business. What's your latest view on kind of broader outsourcing trends among the major P&C players, the potential shifts to using third parties like your risk management operation to do that in a more comprehensive way? Just a quick update would be interesting. Thank you. Well, thanks for the question, Mark. I just kinda think you're going to see a continued move in that direction. It's been going on now for almost a decade. I don't think it's any secret, you know, that we've been at the forefront of that, starting literally before the Chubb- ACE combination. We were doing work on behalf of Chubb on their risk management portfolio. Prior to that, in fact, we were doing all the outsource service for Arch as they began their program of growth in the United States. Right now, the outsourced work that we do for insurance companies is a very big part of Gallagher Bassett's revenues. I would say it's probably our largest opportunity looking at the future over the next 5-10 years. There are some very substantial companies, I can't name them, you understand that are seriously looking at this. Quite honestly, it makes a heck of a lot of sense. We've got trading partners that when I mention to them that Gallagher Bassett pays more claims than you do, and again, I can't mention names, they'll go, "No, you don't." I go, "No, actually, we do. And I'll bet you we invest twice as much in data and analytics and in our RMIS systems than you do." "No, you don't." "Well, we'll actually stand toe-to-toe with you and show you that." What that ends up driving is the ability, we believe, to prove that our outcomes are superior. Those superior outcomes come from all kinds of advantages, both of scale, but also of expertise. Once you start talking to management at these insurance companies about the fact that you've got pent-up return on investment, you've got ROE opportunities, and we can do that, I honestly believe that there will come a day when people ask, why did insurance companies pay their own claims? Very good. Thank you. Thanks, Mark. Our final question comes from Derek Han of KBW. Please proceed with your question. Good afternoon. Thank you. Your comp-ben ratio is quite good in the quarter, which kind of benefit from some of the actions you've taken in 2020. I was hoping that you could kind of talk about how wage inflation is impacting that number. Just curious if, you know, the impact is more pronounced among producers that you're trying to hire versus the support staff. Well, one of the things I'm very proud of, Derek, is we're probably the only significant broker that still is very comfortable paying our producers on a formula that pays them a percentage of their book. That's very competitive with the local brokerage community. Think about it this way. Where do you want to sell from? What platform? A platform that gives you the kind of data and analytics that we've got, that has the relationships that we've got, that has the global reach that we've got, or would you like to do it from the Jones Agency in Alsip, Illinois? Hope there isn't one there. The fact is, we're happy to have you come aboard and pay you a percentage. Really a big part of our benefits and comp expense for producers is self-generated and self-regulated. On our middle office layer and our back-office layer, as you know, we've made substantial investments in standardizing our process and using our offshore centers of excellence. As a result of that, 17 years ago, we made a decision that we could raise our quality and reduce our costs, and it's actually helping us a little bit of an inflation hedge. I'll tell you, we've been taking care of our employees. We gave a sizable raise pool this year. We gave raises even in the depths of the pandemic. Bonuses, we've been fair. These people have earned them. They've earned their raises. The raises are not as a result of because we feel like we've got to hold our people. Our culture holds our people. The raises what recognize their contribution to what we've been doing. It's Jim said it the best is you can't have low cost without high quality. We've worked for years on raising our quality, and it's reducing our cost. It's also making our folks more effective. We have 20,000 people that do service plus another 6,000 in India that get up every day and want to do a great job for our clients. We pay them well. Our retention is as good today as it was pre-pandemic. I think that our workforce is well positioned from right now. We're proud of our workforce, and we've recognized our workforce, and I think they deserve to be recognized on that. Despite that, our volumes are helping us, and our scale is helping us. Our technologies are helping us control perhaps the numbers, but those people that are here get paid very well. Well, also, you hear now everywhere, agile work from home. We've been agile in how we've worked with our workforce for the last 25 years. Pre-pandemic, probably 50% of Gallagher Bassett's entire field force was at home. This is not new territory for us. We listen to the employees. We want people to stick around. As Doug said, our retention rates and our turnover rates are no different than they were pre-pandemic. The Great Resignation hasn't hit Gallagher yet. Okay. That's really, really helpful. Thank you. Just going back to your expectations on the brokerage organic growth of 8%+, are you embedding any kind of slowdown from potential rate hikes or maybe kind of beaten by supply chain constraints or maybe labor constraints? I know you sounded very confident about achieving that, but I kind of wanted to get a sense of what could derail the 8%+ organic growth. Well, I'd say I'm sorry, I'm too much of an optimist, but I look at the stimulus bills coming out of Washington, D.C., the kind of money that's going to flow into infrastructure. Every contractor in our book of business is going to be loaded up with work. Every single personal line account all the way through small commercial to large commercial has got significant increases that they need in the cost of their property portfolio. Payrolls are up, as you mentioned earlier, Derek, from just the whole employment situation and all of that. There's not an industry that I can think of that benefits more than the insurance brokerage business from a nice little touch of inflation. Hold all tickets. Great. Thank you for all the answers. Thanks, Derek. Thanks, Derek. Well, thanks, everybody. I appreciate you being here today. Thanks for joining us. As you all know, we delivered an excellent fourth quarter in full year 2021. I'd like to thank our colleagues around the globe for such an outstanding year. Our results are a direct reflection of their efforts. We look forward to speaking with you again at our March investor meeting and have a good evening. Thank you very much. This does conclude today's conference call. You may disconnect your lines at this time. Thank you for your participation, and have a great evening.