Good afternoon, and Welcome to the Arthur J. Gallagher & Co. first quarter 2022 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 can 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 Chief Executive Officer of Arthur J. Gallagher & Co. Mr. Gallagher, you may begin. Thank you. Good afternoon, everyone, and thank you for joining us for our first quarter 2022 earnings call. On the call with me today is Doug Howell, our Chief Financial Officer, as well as the heads of our operating divisions. We had a fantastic start to the year. For the first quarter, our combined brokerage and risk management segments posted 30% growth in revenue, more than 10% organic growth, net earnings growth of 28%, adjusted EBITDAC growth of 34%, and adjusted earnings per share growth of 26%. We were named a world's most ethical company for the 11th year in a row, an outstanding achievement on its own and a testament to our nearly 40,000 professionals around the globe. As you can tell, I'm extremely proud of how the team performed during the quarter. Let me give you some more detail on our first quarter brokerage segment performance. During the quarter, reported revenue growth was 32%. Of that, 9.6% was organic, which is just excellent. Rollover revenues of $380 million were pretty consistent with our March IR day expectations and mostly driven by the December reinsurance brokerage acquisition. Doug will have some further comments on rollover revenues in his prepared remarks. That earnings growth was 27%. Adjusted EBITDAC growth was 35%. We expanded our adjusted EBITDAC margin by about 50 basis points, an outstanding all-around quarter for the brokerage team. Let me walk you around the world and break down the 9.6% organic, starting with our P&C operations. First, our domestic retail business posted 11% organic, driven by terrific new business, strong retention, and continued renewal premium increases. Risk Placement Services, our domestic wholesale operations, posted organic of 10%. This includes more than 20% organic in open brokerage and 6% organic in our MGA programs and binding businesses. New business was better than first quarter 2021 levels, and retention was consistent with prior year. Outside the U.S., our U.K. business posted organic of 14%. Within retail, fantastic new business and continued renewal premium increases helped drive 10% organic. In our London specialty business, including our legacy Gallagher Re operations, saw 17% organic. Australia, New Zealand combined organic was nearly 10%, driven by strong new business, stable retention, and higher renewal premium increases. Finally, Canada was up more than 12% organically and continues to benefit from renewal premium increases in great new business production. Moving to our employee benefit brokerage and consulting business, first quarter organic was up over 7%, more than a point better than our March IR day expectation. Our core health and welfare organic was in line with our expectations of 5%, and the upside in the quarter was driven by our international operations and our HR consulting, pharmacy benefits, and various other life insurance product sales. Seven percent organic in benefits, 11% organic within our P&C operations, an excellent quarter. Next, I'd like to make a few comments on the P&C market. Overall, global first quarter renewal premium increases were 8%, consistent with the fourth quarter of 2021 after controlling for line of coverage mix differences. Recall that renewal premium change includes both rate and exposure, so let me break that down around the world. About 10% in U.S. retail, including double-digit increases in property, professional liability and casualty, somewhat offset by workers' comp and commercial auto. In Canada and New Zealand, renewal premiums were up about 8.5%, with professional liability seeing the strongest increases. In Australia and U.K. retail, renewal premiums were up mid-single digits, driven by increases in casualty and package. Within RPS, wholesale open brokerage premium increases were up 11% and binding operations were up 6%. In our London specialty business, we saw first quarter rate increases around 7.5%. Moving to reinsurance. As we noted in January, our 1-1 renewals showed price increases that varied by geography and client loss experience. While rate tended to be based on client specific attributes and loss history, even loss-free pro rata programs faced modest rate increases. Our April Gallagher Re first review report is more focused on Japanese renewals which tend to dominate the April first renewal season. We saw pricing increases in property related classes while casualty pricing was flattish despite inflation being a key topic of discussion. You can access our April reinsurance market report on our website for more information. Whether retail, wholesale or reinsurance, premiums are still increasing almost everywhere. Looking forward, we expect our mix shift away from workers' compensation renewals in Q1 to U.S. property cat renewals in Q2 will lead to premium increases in second quarter, very similar to full year 2021. We see these difficult P&C market conditions continuing throughout the remainder of this year. Carriers will likely continue their cautious underwriting stance due to rising loss costs and increases in reinsurance pricing. This comes at a time when the conflict in Ukraine is elevating geopolitical uncertainty, courts are reopening and global monetary policy is tightening. From our seat, it looks like carriers will continue to push for rates and don't see a dramatic change in the near term. Moving to our employee benefit brokerage and consulting business, I see domestic labor market conditions in 2022 working in our favor. There are more than 11 million job openings in the U.S. That's 5 million more jobs available than people unemployed and looking for work. That imbalance lays the groundwork for robust demand for our HR and benefits consulting services as employers look to attract, retain, and motivate their workforce. We finished first quarter with organic of 9.6%. Given our first quarter result and the current insurance market conditions as we sit here today, we think 2022 organic should end up even better than 2021. Moving on to mergers and acquisitions. Starting with some comments on our recent reinsurance acquisition. Integration is progressing at a fast paced and is ahead of schedule. Alongside the speed that we are executing comes the pull forward of some of the future integration costs, which Doug will cover in his remarks. Also, we had a strong first quarter with the legacy Gallagher Re team growing 30% and our new reinsurance operations delivering toward $340 million of revenue and over $170 million in EBITDAC. Our reinsurance colleagues are melding together extremely well. It continues to be a really good story. During the first quarter, we completed five new tuck-in brokerage mergers representing about $32 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 40 term sheets signed or being prepared, representing nearly $250 million of annualized revenue. We know not all these will close. However, we believe we will get our fair share. Next, I'd like to move to our risk management segment, Gallagher Bassett. First quarter organic growth was 15.2%, better than our IR Day expectation due to a strong March, some new business wins, and higher than expected COVID claims. Adjusted EBITDAC margin was 17.3% and would have been 18.5%, but we had a litigation settlement late in the quarter. Moving forward, we think the remaining 22 quarterly margins will be closer to our 19% expectation. We again saw increases in new arising claims across general liability, property, and to a lesser extent, core workers' compensation during the quarter. New arising COVID claims were well above what we saw during the fourth quarter. However, core claim counts, which tend to have a greater impact on results, still have room to rebound fully to pre-COVID levels. Looking forward, we see ample opportunity for organic revenue growth from existing clients, growing claim counts, and new business and expect organic to be around 10% per quarter for the remainder of the year. Let me finish with some thoughts on our bedrock culture. I believe our outstanding financial results are made possible because we're able to act as one company, united by one set of values, the Gallagher way. As I mentioned earlier, we were once again named a world's most ethical company by Ethisphere, a truly global effort that reflects our colleagues' care and integrity to each other and our clients. Every day, I hear stories of our colleagues working together as one team to give our clients exactly what they need all around the world. That collaboration is possible because we genuinely want to deliver the best possible service at all times. When one team wins, we all win. There's the way our people give back to their communities. In March, we announced a special matching donation to provide humanitarian relief to the people of Ukraine. Thanks to the generosity of my Gallagher colleagues, we're able to donate over $1 million for necessities like food, water, supplies, and first aid. I'm proud to stand together with my Gallagher colleagues, impacting communities around the world, and that 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 fantastic first quarter and start to the year. Today, I'll get to my typical comments on organic margins, clean energy, cash, etc. I'll also do a financial recap of the Willis Re acquisition. First, a modeling heads-up regarding rollover revenues this quarter. We typically don't comment on consensus estimates, but this quarter looks like there is a large variance in brokerage segment rollover revenues relative to the guidance numbers we provided within our CFO C ommentary document during our March 16th IR day. When we get to page six of today's CFO C ommentary document, you'll see we've added a table that shows consensus overstates rollover revenues by approximately $40 million versus the number we provided in March. That has an impact of overstating consensus EPS by $0.06. We hope you take this into consideration as you analyze our performance relative to consensus and to your model. Okay, with that housekeeping behind us, let's shift to the earnings release to the brokerage segment organic table on page three. All-in brokerage organic of 9.6%. We had a really strong finish to the quarter. Some nice new business wins by the P&C team and a terrific finish by our benefits consulting teams. You'll also see strong growth in both contingents and supplementals. The Ukraine-Russia conflict impact was small, about $5 million of revenue, which is about a one penny hit this quarter. Looking forward, it's looking like it's small also, maybe another $5 million revenue impact spread over the next three quarters. Given our strong start and given our current favorable outlook of the market, as Pat discussed, we could be pushing nicely towards upper 8%-9% full-year organic growth here in 2022. Next, let's turn to page five to the brokerage segment adjusted EBITDAC margin table. Headlined all in adjusted margin expansion for first quarter was 49 basis points, right in line with our March IR day expectation. Recall that expansion includes a favorable seasonal impact from reinsurance roll-in, offset in part by a return of expenses as we come out of the pandemic. It also has a little more incentive compensation given our stronger first quarter organic growth and full-year expectations. Repeating what we said during March, we are well positioned to deliver around 10 to 20 basis points of full-year adjusted margin expansion. Remember, as we discussed here in 2022, there'll be margin change volatility quarter to quarter. That's due to expenses returning as we come out of the pandemic and the roll-in impact of acquired reinsurance revenues. Let me walk through what we said in March. 50 basis points of expansion here in the first quarter, then expecting second and third quarter margins to each be down around 100 basis points. Then that flips, and we expect fourth quarter margins to be up around 100 basis points. The math, given that we are seasonally larger in the first quarter, gets us back to that 10-20 basis points of full-year margin expansion. Looking way out towards 2023, that quarterly margins change volatility should go away with the pandemic behind us and reinsurance fully in our books. Okay, let's move on to the risk management segment and the organic table on the bottom of page five. You'll see 15.2% organic in the first quarter. That's just terrific by the team. With continued strong new business and rebounding claim counts, it's looking like organic revenue growth of about 10% each quarter for the rest of 2022. On the next page, you'll see that our risk management segment posted adjusted EBITDAC margin of 17.3%. That was compressed by about 120 basis points due to an unusual late quarter litigation settlement. As Pat said, moving forward, we would expect margins for the remainder of 2022 to be closer to 19%. Moving to page seven of the earnings release in the corporate segment shortcut table. Most adjusted first quarter items were in line with our March IR day estimates. Within the corporate line, we did also benefit from an FX remeasurement gain and a larger tax benefit related to employee stock option exercises given the strong performance of our stock late in the quarter. You'll also see a couple of non-GAAP adjustments. The first relates to transaction costs and professional fees associated with buying Willis Re. The second was a state tax benefit related to the revaluation of our deferred income tax balances. All right, let's now go to the CFO Commentary document. Page three has our typical brokerage and risk management modeling helpers. We've updated our outlook for integration. I'll get to that more in a minute. We've updated FX, and you'll see a slight tick up in our expected brokerage segment tax rate. Call it a half a percentage point. In addition, the amortization lines in both brokerage and risk management are now highlighted in yellow. This means the item is now being treated as a non-GAAP adjustment. If you missed our March IR day, we did a vignette on how this changed and on this change and how we're reporting adjusted EPS. This is the first quarter reporting under that revised method. On page four of the CFO Commentary, that's our corporate segment outlook. You'll see there is no change in our outlook for second, third, and fourth quarters. When you turn to page five to clean energy, the purpose of this page is to highlight that we have over $1 billion of credit carry forwards, and we are now in the cash harvesting era of these investments. There's no GAAP earnings anymore other than a little bit of overhead expense, but rather now substantial cash flows. You'll see in the pinkish column that the 2022 cash flow increase should be substantial. We should be able to harvest $125 million-$150 million a year of cash flows and perhaps more in 2023 and beyond. At that rate, a really nice seven-year cash flow sweetener. There still is a possibility of an extension in the law, so we remain well-positioned to restart production if that happens. Okay, flipping to page six of the CFO Commentary document. Top table is the rollover revenue table. Recall that we update this each earnings release day and also each quarter during our late quarter IR meetings. The next box highlighted in yellow is the math behind the $0.06 impact of consensus versus our March guidance that I touched on in my opening. At the bottom table is an update on our December reinsurance acquisition. Revenue this quarter was $337 million, and EBITDAC was $172 million. The very small difference to the numbers we provided during our March IR day reflects two items. First, the quarterly timing related to further refinement in our ASC 606 accounting for both revenue and expense. Second, some further movement in FX rates. In the end, if you go all the way back to our original August 2021 projections, there is very little change to our first year of ownership expectations other than a small impact from Russia, Ukraine and FX. As for integration, the good news is that our original estimate of around a total of $250 million for integration charges through the end of 2024 is holding close. The even better news is we're making progress at a faster pace than we originally thought. Integration efforts around people, real estate, back office transition services, et cetera, are targeted to be mostly done by late 2022 versus mid- to late 2023 as originally planned. When it comes to technology rebuilds, we think most of it will be done by the end of 2023 or early 2024. What that means is that we will see integration costs lumped more into 2022 and 2023 than spreading deep into 2024. You'll see the bump up of our 2022 quarterly integration estimates back on page three of the CFO C ommentary, but it's important to remember it isn't changing our end total view. That continues to be a really good story. As for cash, capital management and future M&A, at March 31, available cash on hand was about $450 million and no outstanding borrowings on our line of credit. With strong operating cash flows expected in 2022 and 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. We continue to see our M&A capacity at more than $4 billion through the end of 2023 without using any stock. Those are my comments. We're off to a great start in 2022. From my vantage point as Chief Financial Officer, we're positioned for another great year. A huge thank you to the entire Gallagher team for another terrific quarter. Back to you, Pat. Thank you, Doug. Daryl, I think we're ready to open up for questions, 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 comes from the line of Paul Newsome with Piper Sandler. Please proceed with your questions. Good afternoon, pardon me. Congratulations on the quarter. Thanks, Paul. I was gonna ask about the guidance for organic growth is at a deceleration pace. Maybe you could talk about sort of the factors that go into what might be decelerating prospectively from a macro basis that's having an effect on your business. Well, listen, I think we posted 9.6% this quarter, and I think that we're guiding upper 8% - 9%. I wouldn't call that a deceleration. I think that there's a reality looking towards where we were in third and fourth quarter as the compares get a little more difficult to have. But I don't know if I'd use the word deceleration, but I think it's pretty close. Well, in fact, Paul, we looked at the stats before this call, and over the last eight quarters, the renewal rates across our book, including, I should add, the exposure units, are about flat around 8.5%-9%. I mean, it varies up to 9.5%. It comes down to 8%. But I would say any kind of a wholesale drop-off is not what we're seeing, to Doug's point. All right. Knock on wood. My second question is to interest rates. We're finally seeing some rising interest rates. Was wondering what your thoughts are on how that affects your earnings as well as frankly, M&A. I wonder if we'll see any change in the competitive environment for M&A with interest rates changing as well. I guess that's. I'm sneaking in essentially two questions. All right. Well let me take the investment income for our fiduciary funds that we keep on hand. We would think that a one point rise in interest rates would be about another $40 million a year of investment income versus what we've been showing so far. That might tick up a little bit more as we get reinsurance completely rolled into our books. In terms of what that means in terms of other pressures inside of our organization, we're just not all that sensitive to interest rates internally in our operating model. We do know, Paul, I mean let's face it, a lot of the competition from our private equity competitors for acquisitions has been driven by free money. If they got to start paying for it, I think that bodes well for us. Yeah, that makes sense. You haven't seen any of that yet. I assume it's just too soon with interest rates rising, right? No. Gosh, no, we haven't seen anything. Great. Thanks, guys. Appreciate the help. Thanks, Paul. Thank you. Our next question is coming from the line of Mark Hughes with Truist. Please proceed with your question. Hey, Mark. Yeah. Hello, Pat. Good afternoon. Did you give the margin and brokerage if you back out the Willis Re? I suppose you've given us the inputs, but do you have that handy, Doug? I can dig it out here for you in a second. We've got it at the table somewhere, Mark. Do you have another question? Yeah. Pat, you talked about the risk management being helped by an uptick in GL property workers' comp claims. Anything you see in either GL or comp that influences your view of what's gonna happen in terms of the cycle if in fact courts are opening and you're seeing a pickup in GL, does that tell you anything? Or is it too early? Well, there are two things I'd comment on, Mark, really. One is it's been a very interesting hard market. As you know, looking over the past, what is now almost four years, comp hasn't moved. Comp has not been a big rate driver up and it's not coming down. It's been an interesting line. As the economy becomes more robust, and frankly, when we start to fill some of those 11 million jobs, I think that the natural increase in claim activity is gonna really benefit Gallagher Bassett. We clearly can track back that when our economy is humming, it's just a natural outcome. You don't like to see people get hurt, but we have more claim volume. That's number one. Number two, what I continue to be astounded by, and I'm sure everybody on this call reads it every week as well, when I look at our social inflation around tort, it's incredible. I think what you're seeing is, number one, case settlements at levels that never any of us would have predicted. Also what that does is it drives our clients to be much more cautious and concerned about claims that frankly, in the past, they might have said, "Eh, you know, pay the $50,000, let's move on," or, "Let's not settle that. It doesn't look like that big a deal." I mean, not to get anecdotal on you all, but it is late in the evening, and you probably saw the settlement last week for some guy got $450,000 'cause his company threw a surprise party for him. I mean, you know, I keep asking the folks for a surprise party. It just, it's beneficial to GB, and GB continues to invest, and I think capable of proving that if, in fact, you use our services with all that we bring to the table, our outcomes are better. All of a sudden, if you're used to getting a lot of claims, but one of them every five years tends to pop, and now you're looking at it and you go, "Man, oh, man, what's happening? I'm starting to get two a year, three a year," now who pays those claims makes a bigger and bigger difference. I think that bodes well for the long term. Hey, Mark- One more. Mark, I can give you the answer. Yeah. On the margin. If you wanna follow up with Pat, then I'll come back to that. Okay. I was just gonna ask, on the June 1 reinsurance renewals, so what kind of rate increases are you seeing? How much dislocation there is in cat property? Really, it's not that much dislocation on the reinsurance side. I would say back to my prepared remarks, depending on the carrier, depending on the carrier's experience, that's what's driving the renewals. Okay. Doug, go ahead. Yeah. On the margin, Mark, we'll be somewhere around high 37% margins in the brokerage business without Willis Re. You know, there is some variability around that because of allocations between the units, right? Second of all, I just think that in the context of margin, as you're looking at what's changed since last year. This quarter, I know that we're ahead on our bonus accrual relative to where we were last year because we started off with, you know, with considerably better organic growth, so that has a little bit of a margin compression impact, but I would consider that timing. We are in the first quarter, and recall, we give our raises out mid-year, so raise impact rolling in versus first quarter. As organic develops throughout the year, you grow into your raises. When it comes back to costs returning into the business. If you break it down, let's say that expenses year-over-year on an apples-to-apples basis are $25 million up, $10 million of that's bonus. You probably can call it, $6 million is raise impact, and then you get down to, you know, about $8 million left over. That's probably a, you know, take a third of that and call it increased professional fees that we're spending. A third of that would be T&E, travel, and a third of that would be client entertainment. When you look at the pieces of being up, let's say, $25 million of expenses year-over-year, the way we look at it, call it $10 million of it timing and $15 million is spread between raises that we'll work ourselves into for the year, and then the other piece of it, T&E entertainment and some professional fees. Does that help? Yeah. Appreciate the detail. Sure. Yeah. Let me throw in too is that we're, you know, I went back while you were doing that, I looked at and, you know, in first quarter of 2019, we posted 35. And this is where the supplement really helps so that we post, not the CFO Commentary, but the five-year supplement we put out there. We posted 35.6% EBITDAC margin in first quarter of 2019 and this quarter in the brokerage segment, we're at 39.8, so we're up 420 basis points. If we hit our target this year of being up 10-20 basis points for a full year, we'd be up 540 basis points over 2019. That's 180 basis points of margin expansion a year over the last three years, each year, 180 basis points. Truthfully, our reinsurance business is rolling in while seasonally a little better this quarter. When you put full year in, it's not all that different than our combined brokerage operation margins. The margin story is, we believe, is pretty darn good. When we're running, you know, somewhere around, you know, 34% margin for a full year if we hit our targets this year, that's pretty darn good versus the 28% and change in 2019. Appreciate it. Sure. Thanks, Mark. Thank you. Our next questions come from the line of Gregory Peters with Raymond James. Please proceed with your questions. Hey, Gregory. Good afternoon, everyone. I can say, listening to your comments, Pat, that I'm sure a number of us, myself included, would take a piece of the action on your surprise party. Keep this in mind. Okay. Hey, I guess you know, from a macro perspective, I'm gonna comment. You know, Paul tried to ask a question, and I'm gonna come at it from a different way. I know you've mapped out a pretty robust outlook for the remainder of the year. There are a number of economists and other reports out there that are speculating about, you know, the potential oncoming of a recession. Obviously, the data is not showing it yet, at least your data isn't. I'm just curious from a enterprise risk management perspective, you know, when you think about that type of risk, what are you doing, you know, at the corporate level to, you know, prepare for something like that if you think that might be in the cards? Well, first of all, you know, Mark or Greg, I'm not gonna sit here and predict a recession. Unfortunately- Right We've lived through them before. I think we do know, you know, how to react to those. When you're in a recession, a couple things happen that are very, very negative. Exposure units drop, companies go broke, expenses become even more important, not that they're ever not important, and shopping can go up. Now, when shopping goes up for our strength, in particular in the middle market, I think we show well, so we hold our own there. But when you've got a robust economy falling off, you end up with negative audits, and you've got lesser exposure units. Depending on the depth of that recession, it's not a pretty picture. When you talk about what are we doing relative to our risk management approach, you know, we talk about it every quarter. We take a look at where we are. We've got significant margins, and, you know, we prepare to say, "Here's what we have to do to make sure that." You know, one of the things I really like about our model is we basically pay our production force on how their book of business performs. We're all in this together. If the business is sinking. Now, in previous recessions, if I don't go back too far, we've not had the benefit of inflation. Inflation may in fact help cause a recession, and I don't know whether that'll be a point, two points. I know the first quarter GDP was down. If you're talking 5%-8% inflation, that has the exact opposite impact. As you know, payrolls go up. We're all seeing that. I mean, I can't go a day without somebody stopping me and saying, "You know, we're getting whacked. I've got a mid-level service person, and it's a problem, and what am I gonna do about it?" Every customer is coming to Bill Ziebell's team and saying, "How am I gonna hold on to my people? Everybody wants them." You go to a restaurant, and they don't have people that can serve you. I mean, there's just huge demand, and that's pushing payrolls up. Our contractors book, you know, they bid everything out, now they gotta deliver at inflation rates they never anticipated when they made the bid. Well, if there's other business to bid, those rates are going up, so sales will go up. There's offsetting factors there, and I think our business holds up pretty darn well in a recession. Yeah. A couple things. You know, we look at daily endorsements, cancellations, audits. We get that as a daily feed. This was the biggest month of positive audits that we've seen. Again, that's a historical, you know, that's a rear view mirror metric, but I'm not seeing that trail off at all. I'm not seeing any early signs of a recession happening because the first thing a customer will do is they'll ring up the phone, and they'll adjust their expected payrolls down. We're not seeing that. We're not seeing it in our exposure unit and our rate monitoring, too. We look at renewals, you know, every day also. We're just not seeing it happen. What we've proven throughout the COVID is that we've got a pretty resilient model, that we have a lot of levers to pull, should we get into a situation where growth becomes more difficult. I think that we've proven we can do that. We think the model's resilient. We think that inflation's gonna help us on the top line when it comes to revenues for the business that that's there. We do have levers that we can pull in order to help us get through a recession. Well, let me remind you back in 2007, 2008, 2009. This is just an incredible support of this model again. You'd think, oh my God, it's going to be terrible. Our clients will stop paying their people before they stop paying their insurance bill. That's how important we are to them. That's a good spot to be. Indeed. Thanks for the color on that. You know, pivot to, you know, perhaps a little bit more detailed question and, you know, Doug, your guidance and commentary on the various parts in your CFO Commentary, quite helpful. I guess what I wanted to ask about was the free cash flow excluding clean energy. Because you talked about, you know, the integration expense and some other things. I'm just wondering what you think the cadence of that looks like now for 2022. Has there been a change versus previous expectations? You know, how you would suggest we look at that? All right, let's see if I can break it down. Let's start with $4 billion that we have left over for M&A in 2022 and 2023. Cash. Clean energy provides $250 million of that. Integration is already net in that number. All right. I've already given you a number net of integration. Also, when we talk about integration, you've got to look at it as half of it being non-cash and half of it being cash. You recall that in this integration expenses are the sign-up bonuses that we delivered in mostly equity plans. So that's amortizing as a non-cash item against that. I would say that integration won't consume an excessive amount of cash. I would say that the clean energy, maybe you think about it this way, the clean energy basically offsets the cash portion of that, and all that is washed out in our $4 billion expectation for M&A during 2022 and 2023. Does that help you give a thought on it? It does. It's. I know you've given me similar answers like that in the past. It feels like that should be your voicemail. Thanks for reminding me of all that with the pieces there. Yeah. Listen, it generates a lot of cash. It's like I say around here, I don't make the money, I just count it, and there's a lot of it coming in. Got it. Thanks, guys, for the answers. Thanks, Greg. Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone keypad. Our next question has come from the line of Elyse Greenspan with Wells Fargo. Please proceed with your question. Hi, Elyse. Hi. Thanks. Good evening. You know, maybe my first question is kind of going back to the earlier discussion on organic. Pat, when you give us the initial outlook for 2022, you had said that the full year would be about 1% above the Q1. So is it just, you know, that the, you know, and I think that was maybe based off of the benefits business perhaps being a little lighter and heavier in concentration of the Q1. But is there something that changed, or is there just I understand that the rest of the year outlook is close to the Q1. You know, is there something that perhaps caused that view to change, or is it just that as simple as the Q1 being better than you expected when you made that comment? I'll let Doug answer the actual number piece on that because a lot of that's mathematical. In terms of what I'm seeing for the year, I'm not anticipating significant change in the operating environment over the next three quarters. Yeah, I think that our cautious guidance in January and then again in March really was talking about the fact that we're not getting rate lift from workers' comp, which is heavier in the first quarter. Also, you're not really seeing rate in benefits yet. Now, it's interesting since that guidance, there's medical inflation that's coming back fast and furious. I think that, give us another quarter on that, and we might become a little bit more bullish, because I think that, and of course, that'll eventually translate into workers' comp too, absence of frequency declining or holding in there. I think our cautiousness on the benefits business might have been overly cautious, but again, we just need to see another quarter of that before we get into a position of declaring that there's true medical inflation that's gonna affect next year's growth too. I don't see it as a headwind, I see it as a tailwind or organic. Great. Then my second question, you guys have mentioned, you know, having around $4 billion of capital, you know, over the next couple of years to spend on M&A. You know, the tuck-ins, right, were just around $30 million this quarter, so maybe a little bit light relative to some historical averages. So as we think about just kind of deal flows, you know, it sounds like interest rates could impact private equity interest, so maybe that helps with the pipeline. Is there a certain point, and maybe we have to wait till next year, where if deals don't materialize, you know, since that's a pretty high level of capital, you know, Gallagher might consider, you know, using you know some buybacks as well with the excess capital? I think an answer to that is yes. Let's clarify. I think the first quarter is already seasonally the smallest when it comes to M&A. It's historically been that five out of the last six years. So I think that there's just a natural little push towards year-end, and then there's a little pause in the first quarter. So I think there could be a rebound in opportunities through the rest of the year. If those rebounds don't materialize and we're not seeing opportunities for it, then our next place that we would go is to make sure that our debt is clearly within a solid investment grade rating, and then use it for stock buybacks, next, and then maybe even consideration on the dividend. So those are the three or four things that we're seeing. How's deal flow look? Next thing is, well, you know, what do we do with the excess cash if the deal flow is there, and we'll stack that up to controlling the debt for sure, then making sure that we're positioned well to buy back stock or do dividend increases. Okay. One last one on Willis Re. I recognize the revenue was close to what you guys had laid out at the Investor Day. Can you give us a sense of just, you know, client retention and new business and how, you know, that's been trending in your first full quarter of owning the business? Yeah. I will do that, Elyse. It's really been an amazing. Let's remember as we finish the quarter, we're four months in. As we have this call, we're close to five months. I will tell you that the team, we are not losing people, we are not losing clients, our renewals have been fantastic. Tom, myself, others at the table have had a chance to meet with reinsurance clients. They continue to be very open about the fact that they're glad that there's not one less competitor in the marketplace. They're also very clear with us that the reason that the business held together over the years of discussion as to where this business was gonna land is because of the people handling their business, and those people are still in place. Our losses in terms of people out the door are minimal to zero. When I look at it, I'm really happy about it. New business pipeline is strong. What I'm very excited about is the integration that we're seeing or the sharing of information from our retail. Everybody said, you know, at the beginning, "Why is this good for retail?" People also would ask, "Well, why does reinsurance care what you're doing as a retailer?" Well, I'll tell you what, there is so much going back and forth right now in terms of data relative to the business we're doing with all kinds of carriers, with things that our reinsurance people are seeing can help our retailers, and they're melding. The business is strong. We're absolutely nailing it when it comes to what we hope the pro forma would be, and I think it's gonna continue to just be a great business for us. Yeah. I can give you some numbers behind that flavor, and I'll give it to you as net new. Our net new was over 5% this quarter if you control for those people that put on a different jersey before we bought it. Our overall organic is nicely, let's call it, 8% first quarter plus or minus a point. Organic really, I gotta give it to the team for what they went through for three years for them to be out there battling the way they have, holding their clients, writing new business. I mean, it's really a terrific story. When you're posting organic nicely in that upper single digits after what they've been through, I couldn't be more pleased with the team. Great. Thanks for all the color. Thanks, Elyse. Thank you. Our next question has come from the line of David Motemaden with Evercore. Please proceed with your questions. Hi, David. Hey, David. Hi. Hey, good evening. How's it going, guys? Great. You know, great to hear the outlook on organic in the brokerage segment. Obviously still keeping the 10-20 basis points full year margin expansion outlook. I'm, you know, I guess I'm wondering, you know, it definitely sounds like it's a bit more positive on the organic growth outside. I guess I'm wondering why, I guess, we're not expecting or why you guys aren't expecting more margin improvement than the 10-20 basis points. Is it additional investments that you're making? Is it the bonus accruals? Is it something in addition? I think you had called out $60 million of incremental costs coming back in this year. Is that higher now that sort of keeps it at 10-20 basis points of margin expansion? Yeah. I think that we're just a little reluctant right now to push that up when it really comes down to it. I think that there's a lot of things that we'd really like to do, and I'll segue into some of the exciting stuff. When you look at what's going on with and you listen to our March, our mid, our late quarter IR days, we talk about all the great things we're doing in the business. When you look at what's going on with our electronic delivery platform, when you're looking at the automation that we're doing, that we're writing 6,000 policies a month, with hardly anybody involved on cyber, the Gallagher Drive, the advantage programs, the Smart Market. You look at the advertising and the brand building that we're doing and spending the money on that. Systems, we're spending money on hardening the environment and delivering more point-of-sale capabilities to the sales force. When you look at all those things, posting another 10, 20, 30 basis points of margin expansion on top of already posting 540 basis points of expansion since 2019, I think we'd just like to spend a little money this year. When you get to 2023, as a lot of this levelizes between the pandemic and the roll-in of the reinsurance M&A, you might see a little bit more expansion in that if we're still posting in that 9% range. Right now, this is a great opportunity for us to invest in the future organic growth of the company. That's where we are on it. Got you. If you wanna call that voluntary spend, call it voluntary spend, but it's not must spend. No, it makes sense. No, that makes sense. I guess just maybe, you know, it sounded like the international business did quite well in the first quarter. I guess I'm wondering, Pat, just specifically, could you just talk about what you're seeing on the ground in Europe and in the U.K. If there's any sign of any wobbles there in terms of exposure growth or demand, as I think, you know, some of the leading indicators are pointing towards economic slowdown there. Well, let me go around the world again, as I did in my prepared remarks. We can take a look at what we're seeing in Canada, and it's our team in terms of new business is on fire. When we closed on Noraxis years ago and the Canadian economy was a little flush or was a little slow, we weren't together with Noraxis was seven separate businesses kind of operating separately. Now that business is totally together. The Gallagher branding is working extremely well. People are pumped up. We're using Salesforce. Our pipeline has grown, and the 10% organic, yes, is helped by rate, but new business is much better than it's ever been. When you go to the U.K., that same timeframe, we added new. We call, we bought Heath Lambert, Giles, et cetera. Again, a lot of time on integration. Today, we'll do an acquisition of size in the U.K., and frankly, we've got that thing integrated in five to seven months. They are putting on a Gallagher jersey. They're excited about it, and our team just gets stronger and stronger there. Now, I can't tell you that economic events aren't gonna impact us. Recessions are terrible. They're bad for our clients, they're bad for us, and they're bad for our business. I'll tell you that where we are from a team perspective is fantastic. You're right to look through the numbers and say, it seems like international is doing really well because as we walked around the world and told you they're organic, they're just killing it everywhere. Latin America is strong. New Zealand is strong. Australia is strong. All of that is not just rate driven. That's the thing I wanna make sure everybody realizes is that, you know, it's not just because rates are moving. We are getting our fair share of our new business opportunities, and in fact, we're seeing hit ratios improve, and we're being helped by our clients' business expansions and just blocking and tackling. It's a very good spot to be. Yeah. I can't predict the trickle-on effect, but remember, we're primarily in the U.K. We do have inflow from the rest of Europe, not heavily based in by any means in Eastern Europe. So we don't have that. I think at one point we looked at our inflows from Europe might have been in that $40 million range in total revenues. So if you think about it in the context of what it means to Gallagher, if all of Europe would stop sending any business to London, it's $50 million of lost revenue to us. You know, on pushing $8 billion of revenue as a total organization, you know, we'd feel it, but it wouldn't register at all. You know, David, I think it's fair to say, too, what we've done in the United States in terms of the things you've seen here, Smart Market, Gallagher Drive, those things are impacting our new business with carriers, our retention, and clearly our new business hit ratios using Smart Market. We're taking those internationally now. That was born and bred here in the U.S, but those are our products that are gonna be available in Canada and the U.K to start. They're difference makers. Really, remember, when we compete, and this is one of the things about, again, kind of being in a lucky spot. 90% of the time when our people go out the door to compete, we're competing with somebody smaller. Yeah, 10%, 11%, 12% of the time, we're competing with folks that frankly can come to the table with the same type of resources or story. Every other time when I talk to our sales force, I think we should win. We don't obviously, but I think that's having an impact. Yeah. I mean. By the way, our people go out the door thinking they're gonna win. I'll tell you that. Yeah. Yeah. Definitely. It definitely looks like you guys are getting your fair share of wins. I know in the past, you know, you've broken out the brokerage organic in terms of, you know, drivers by exposure, pricing, and net new. I think in the past you said it's about a third, a third, a third. Is that, has that changed at all this quarter? I think rates might be fueling that just a little bit more, but probably need a little more time to peel it apart. We'll see if I can give you something, Jim, when we get back together in June on that. Right now, you know, rates probably used to be a third, a third, a third, and I think rates might be more 40% than 30-30, something like that. Yep. Okay. Great. Thank you. Thanks, David. Thank you. Our next question has come from the line of Meyer Shields with KBW. Please proceed with your question. Hey there. Thanks. Hi, guys. Hope all is well. One, I guess, dumb question. When I look at page three of the CFO Commentary, it still anticipates a full year margin of 19% in risk management. Does that mean that we're gonna unwind some of the first quarter underperformance, or is that assuming? Is that based on the, like, the 18.5%? I think we'll be somewhere nicely in the 18s for a full year. I think that if we post three quarters of 19%, we'll claw back into that 17.3 for this quarter. We get an unusual legal settlement probably once every four or five years. It's unfortunate it happened this quarter, but that business is really doing well. Okay, that's helpful. Second issue, and I know these are small numbers, but does the, I'll call it, withdrawal from Russia on the reinsurance business, does that have any impact on the earnout? Yeah, it would technically have an impact if we don't reach some of our milestones in it, that loss of $10 million over the course of a year. Yeah, that might have an impact. It would have an impact on it. They're gonna overdo that. Okay. My prediction is it will not. Okay. Because of other businesses compensating. Correct. Okay. Then one final question on the reinsurance side. Pat, you talked a lot about, you know, the fact that some of the people there were under some strain over the past couple of years. Did that depress what Willis Re was able to charge? Is there an opportunity for revenue growth, now that simply because it's a more stable platform where you can invest in it more heavily? Well, I got to understand the question. I mean, our reinsurance clients pay us very well and very fairly, and now a stable environment is not gonna give us the ability to charge our clients more. Does it give us the ability to invest more favorably? Absolutely. Because you now have people, and our whole business is people. To be perfectly blunt, there were people who weren't gonna join them before. Why join them in the middle of a sale? Nobody knows. By the way, remember, you know, I'm not making this up. It was public. I mean, they couldn't tell the people at Willis where they're gonna sit, who they're gonna work for. That's not easy to recruit into, is it? There's lots of opportunities to invest. At the same time, reinsurance buyers are kind of frozen in the headlights. You know, we wanna see competition in the market. We don't want Willis Re, frankly, to disappear, but we're not gonna build the problem bigger. Yeah, there's opportunities for us to go back to those clients and say, "Hey, we think we've got something to tell you now." I think once it settles down and we all get, you know. Again, I'm four months into the quarter, five months in total. A year from now, I'll have a much better feel for the individuals. The thing I'll add to it, though, the thirst for information from our reinsurance partners is there. If we can bring them the information that they're looking for, that maybe they haven't been able to get in the past, I believe that that will help them attract more new clients and perhaps broaden out the book of business they're doing with their existing clients. I do believe that our ability to provide real-time data like we do for our retail business to them be a compelling advantage for them in the marketplace. Okay, that was very helpful. Thank you so much. Thanks. Thank you. Our final questions come from the line of Weston Bloomer with UBS. Please proceed with your questions. Weston. All right. Thanks for taking my questions. My first one is just a follow-up on the investments that you guys described around the systems and point of sale. Just what's the pipeline and timing for that? Does that extend into 2023? Just curious because in 2023, can we go back to a world where, you know, the pre-pandemic commentary was we expand margins if organic's over 4%. Is that baseline potentially still the same, or could it be lower given the higher investments that you're making? You're recognizing that the 34% and 19% margins are still impressive, but curious how to think about that in 2023. Well, listen, one of the things I'd like to say about it is we've been investing in these technologies all along the way. When we're talking about investing another $3 million, $4 million or $5 million a quarter, I mean it's this is a, you know, Smart Market advantage, Better Works, CORE 360, you know, CORE360. All the things that we're doing, we're continuing to invest in them, and we really didn't slow that down much. It's the incremental spend on them to make them even better and more competitive. That's what we wanna do. I mean, if you looked at our GB Go, I'm just talking in risk management right now. What they can do to adjust a claim on your phone with you track it, monitor it, help you get back to work, it's impressive. These are the type of enhancements that we have on the table. How do we make that better? How do we make Gallagher Drive better? Right now, RPS has 24 different products on their quote and buying system that's basically a no-touch system. They're doing 6,000 policies a month. What happens if we took that out to 48 policies? Our investment spend on that illustratively is about $2 million a year. What if we could get 48 different lines of cover on that, and then go to 72, and then go to 100? Those are the type of incremental investments that we'd like to make because I think they're powerful. I say this all the time. What we're doing on the RPS automation side alone is a billion-dollar business. I think we'd like to do that across 20 different things inside of the company. Where are margins gonna be in 2023? You know, I think that we're gonna be over the return of expenses from the pandemic. The real question is how much are we gonna spend on investment on that. It would stand to reason that if we post at least 4% organic growth, there'll be opportunities to expand on that. Got it. That's helpful color. My second question is to follow to Elyse's on M&A. I just want to clarify. Is all of the term sheet disclosure seasonal, or is there any of that strategic around Willis Re? The reason I'm asking is I'm trying to frame the potential for maybe a pickup in that number in the second half as you annualize the deal. No. The numbers we were talking about in the pipeline in our prepared remark are totally outside of Willis Re. Willis Re is done. Right. Those are pipeline. What I meant is, yeah, so is the pipeline potentially lighter as you focus on integrating Willis Re? No. Okay. Our retail operations have zero distraction by the Willis Re folks. Actually, we're starting to see some small little boutique reinsurance opportunities pipe up on our DLC too already. Okay. That, that's great to hear. Thank you. Yeah. Thanks, Weston. Thanks, Weston. Darrel, I think that's all our questions for tonight. I'd like to just say thank you again for joining us. Obviously, we had a fantastic start to 2022. I'd like to thank our colleagues around the globe for their hard work. We're a people business, and our results directly reflect your efforts. Thank you. We look forward to speaking with you again at our June Investor Day. Thanks for being with us, everybody. Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and enjoy the rest of your day.