Good afternoon, welcome to Arthur J. Gallagher & Co.'s First Quarter 2023 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. The company does not assume any obligation to update information or forward-looking statements provided on this call. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to the Information Concerning Forward-Looking Statements and Risk Factors sections contained in the company's most recent 10-K, 10-Q, and 8-K filings for more details on such risks and uncertainties. In addition, for reconciliations of the non-GAAP measures discussed on this call, as well as other information regarding these measures, please refer to 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 very much. Good afternoon, and thank you for joining us for our first quarter 2023 earnings call. On the call today is Doug Howell, our CFO, as well as the heads of our operating divisions. We had an excellent first quarter to start the year. For our combined brokerage and risk management segments, we posted 12% growth in revenue, 9.7% organic growth. GAAP earnings per share of $2.52. Adjusted earnings per share of $3.30, up 12% year-over-year. Reported net earnings margin of 21%. Adjusted EBITDAC margin of 38%, up 29 basis points. We also completed 10 mergers totaling $69 million of estimated annualized revenue. We were recognized as the World's Most Ethical Companies for the 13th time. An outstanding quarter from the team. Let me give you some more detail on our first quarter performance, starting with our brokerage segment. Reported revenue growth was 12%. Organic was 9.1%. Acquisition rollover revenues were $61 million. Adjusted EBITAC growth was 15%. We posted adjusted EBITAC margin of 40.4%, right on our March IR Day expectations. A fantastic quarter for the brokerage team. Let me walk you around the world and provide some more detailed commentary on our brokerage organic, starting with our retail brokerage operations. Our U.S. PC business posted over 7% organic. Core new business was up year-over-year, even growing over the tough renewal compare in D&O lines, while retention was similar to last year's first quarter. Our UK PC business also posted more than 7% organic due to strong new business production, stable retention, and the continued impact of renewal premium increases. Our combined PC operations in Australia and New Zealand posted organic of 10%. Net new versus lost business was consistent with prior year, and renewal premium increases were ahead of first quarter 2022 levels. Rounding out the retail PC business, Canada was up 6% organically, reflecting solid new business and consistent year-over-year retention. Our global employee benefit brokerage and consulting business posted organic of nearly 7%. New business remained strong and client retention was excellent. We saw growth across many of our practice groups with particular strength in HR consulting and pharmacy benefits. Shifting to our wholesale and specialty businesses. Risk Placement Services, our U.S. wholesale operations, posted organic of nearly 8%. This includes 16% growth in open brokerage and about 5% organic in our MGA programs and binding businesses. New business production and retention were both consistent with last year's first quarter. UK Specialty posted organic of 17%, benefiting from a strong start within aviation and the addition of new teams focused on North American risks. Finally, reinsurance. Gallagher Re posted 12% organic, reflecting new business wins, great retention, and a hardening property reinsurance market. Outstanding results from the Gallagher Re team. Pulling it all together, brokerage segment all in organic of 9.1%. That's a bit above the top end of our first quarter expectation and a fantastic sales quarter by the team. Next, let me provide some thoughts on the P&C insurance pricing environment, starting with the primary insurance market. Overall, global first quarter renewal premiums, that's both rate and exposure combined, were up more than 9%, consistent with the 8%-10% renewal premium change we had been reporting throughout 2022. Renewal premium increases remain broad-based across nearly all of our major geographies and product lines around the globe. For example, workers' comp is up low single digits. General liability is up mid to high single digits. Umbrella and package are up in the low double digits. Most lines are trending similar to previous quarters. Two exceptions. First, public D&O, where renewal premiums are down a bit, and second, property, where renewal premium increases are accelerating. Pardon me. For example, fourth quarter property renewal premiums were up 15%, through the first three months of 2023, we have seen increases of 15%, 20%, and 17% respectively. Our clients continue to feel cost pressures here due to rising replacement values, increasing frequency and severity of weather-related events, and hard reinsurance conditions. We are not seeing signs that these lost costs and profitability pressures are likely to abate in the near term. As we head into our largest primary insurance property quarter, we are focused on helping our clients navigate and mitigate these premium increases. Moving to exposures. Pardon me. We are seeing continued strength in our customers' business activity. First quarter midterm policy endorsements, audits, and cancellations combined were better than first quarter 2022 levels, greater than the eighth consecutive quarter of year-over-year increases. Shifting to reinsurance. During the heavy Japan-centric April renewals, reinsurance carriers continued to focus on increased pricing and tightening terms and conditions. This was across a broader range of territories in most all lines of business, in even harder conditions compared to January first. The casualty treaty market saw orderly renewals and a sufficient supply of capital to fulfill the demand from underwriting enterprises. The property market continued to experience its recent challenges due to more limited underwriting capital. There were some green shoots in the ILS issuance, although pricing was typically less attractive to cedents than the traditional markets. Overall, there wasn't much new capacity entering the property market. Regardless, our teams navigated the hard market, and customers again managed to secure satisfactory cover. Those interested in more detailed commentary can find our April first view market report on our website. Looking forward, there is good reason to expect a cautious underwriting stance from carriers for the foreseeable future as they contemplate recent weather events, replacement cost increases, social inflation, and ongoing geopolitical tensions into their view of loss cost trend. We expect insurance and reinsurance pricing increases to continue throughout 2023, and while it's early, likely into 2024. Excuse me. We also remain optimistic on our customers' business activity during 2023. We have yet to see any significant shifts in our daily indications of client business activity thus far in April. We are also seeing encouraging employment levels for our benefits clients, suggesting the economic backdrop for 2023 remains broadly favorable. Recent data shows the U.S. unemployment rate declining, continued growth in nonfarm payrolls, and a very wide gap between the amount of job openings and the number of people unemployed and looking for work. I see demand for our products and services around attracting, retaining, and motivating workforces remaining strong. As we sit here today, we continue to see full year 23 brokerage segment organic in that 7%-9% range, and that would be another fantastic year. Moving on to mergers and acquisitions. We had an active first quarter, completing 10 new tuck-in brokerage mergers, representing about $69 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. Also in April, we officially welcomed the former Buck colleagues. Combined with our existing employee benefits brokerage and HR consulting business, we will enhance our offerings and be better positioned to deliver superior human capital solutions for all of our clients. Moving to our pipeline, we have nearly 40 term sheets signed or being prepared, representing more than $350 million of annualized revenue. Good firms always have a choice of who to partner with, and we'll be very excited if they choose to join Gallagher. Moving on to our risk management segment, Gallagher Bassett. First quarter organic growth was 14.3%, ahead of our expectations due to continued growth from recent new business wins and some revenue from first quarter New Zealand cyclone and flooding. We also saw core new arising claims increase in the low single digits during the quarter for existing clients across both workers' comp and liability. First quarter adjusted EBITAC margin was also strong at 19.2% and it up a bit ahead of our March expectations. Looking forward, we see full year 23 organic around 12%-13% and adjusted EBITAC margins holding at or above 19%, that would be another excellent year. I'll conclude with some comments regarding our bedrock culture. I'm very pleased that just a few weeks ago, we were recognized as the world's most ethical company for the 13th time. We're honored to be one of only 135 companies globally to receive this award from the Ethisphere Institute. Our 45,000+ colleagues embrace and celebrate the unique values that we have instilled in our company. The 25 tenets articulated in the Gallagher Way continue to drive our global team's success today, we believe that our unique culture is a key differentiator and a competitive advantage. It's a strong culture of client focus, excellence, and inclusion, it continues to drive us forward. That is The Gallagher Way. Okay, I'll stop now and turn it over to Doug. Doug? Thanks, Pat, good afternoon, everyone. As Pat said, an excellent start to the year. Today, I'll begin with some comments using both our earnings release and our CFO commentary document that we post on our website. I'll touch on organic margins and provide some modeling helpers for the remainder of 2023. I'll finish up with my typical comments in cash, M&A capacity, and capital management. Okay, let's flip to page two of the earnings release. All-in brokerage organic of 9.1%. Call it right at the top end of the range we foreshadowed at our March 16th IR Day. A nice finish from our London specialty operations and a little upside from reinsurance benefits. One call-out on that table. Contingents didn't grow organically this quarter for three reasons. First, there's a little geography between supplementals and contingents. Call that about $2 million. Second, there was a bit of positive development in Q1 2022 from the prior year 2021 estimates. Call that $3 million. Again, that's back in first quarter 2022, causing a little difficult compare. Third, we're not expecting one of our programs to pay as large of a contingent here in 2023 because of underlying loss ratio deterioration. Call that maybe towards $1 million. Regardless, base organic at 9.5% and all in at 9.1%. That's a fantastic quarter by the team. Flipping to page four of the earnings release to the brokerage segment adjusted EBITAC table. We posted 40.4% for the quarter. Before FX, that's up 56 basis points. FX adjusted up 14 basis points over first quarter 2022. That's right in line with our March IR Day expectations when we discussed that first quarter 22 expenses were lower than our expected run rate simply because we are still in the Omicron portion of the pandemic, and that our tuck-in acquisitions are just not as seasonally weighted, thus they don't roll in at 40 points of margin here in the first quarter. If you levelize for those two items, our margins expanded approximately 110 basis points. Maybe looking at it like a bridge from first quarter 22 will be helpful. Investment income gave us 90 basis points of margin expansion. The normalization of Omicron T&E expenses and inflation on all T&E cost us 80 basis points. The seasonal impact from roll-in M&A uses about 40 basis points. Organic gave us 70 basis points of expansion, and some additional wages and IT investments used about 25 basis points. Follow that bridge, and the math gets you close to that 14 basis points of FX-adjusted expansion in the quarter. Looking forward, it's still early, yet with a fantastic first quarter combined with Pat's upbeat commentary, makes us more bullish on hitting that full-year brokerage organic in the 7%-9% range and posting adjusted margins up 60 to 80 basis points. two small heads-up on that. First, getting to that 7%-9% organic for the full year might be a little lumpy over the next three quarters, given the large life case we sold in Q2 2022, and then the ASC 606 deferred revenue accounting in our fourth quarter. We discussed both of those with you last year, so there's no new news here. Just a reminder for your modeling. Second, the 60-80 basis points of margin expansion is before the roll-in impact of Buck, which recall naturally runs lower margins. When you include Buck, the math would show full-year margin expansion in that 20-30 basis points range. Now moving on to the risk management segment and the organic table at the bottom of page four. As Pat said, an excellent quarter, 14.3% organic growth. We did get a little tailwind this quarter because Omicron caused fewer claims arising in Q1 2022, and we also had some New Zealand cat claims activity. Most of this excellent result comes from strong new business wins in the second half last year. As for margins, flip to page five of the earnings release. Risk management posted adjusted Q1 EBITAC margins of 19.2%. That's up 177 basis points over last year. As we look forward, we're seeing the rest of the year organic in that 12%-13% range and full-year margins now finishing a bit above 19%. That would be the best full-year adjusted margin in Gallagher Bassett's six-decade history. Another demonstration of the benefits of scale, intellectual capital, technology, and operational excellence. Let's turn to page six of the earnings release. That's our corporate segment. When you take a look at pages three and four of the CFO commentary document, most all of the items are right in line with our March IR Day forecast. three call-outs on the CFO commentary document. When you see page three, you'll see a slight tick up in our expected book effective tax rate. That's entirely due to the UK rate hike to 25% that went effective April 1st. Remember, what you're seeing is a book effective tax rate. Our cash taxes paid rate is substantially lower. Call that around 10% of our adjusted combined brokerage and risk management EBITAC. That's because of the tax shield from interest, the amortization of purchase intangibles, and the incremental cash flows from our clean energy investments over the coming years. Page 5 of the CFO commentary shows those tax credits. We have over $700 million as of March 31st, and it shows that we're forecasting to use about $180 million-$200 million in 2023 with a step-up in 2024 and each later year. That's a really nice cash flow sweetener to help fund future M&A. If you flip back to page of the CFO commentary document, you'll see that we had a slight beat on the corporate segment this quarter compared to our midpoint, but some timing in that beat. You'll see full year still about the same as what we forecasted our March IR Day. Moving now to page six of the CFO commentary document. That table shows our rollover M&A revenues. It shows $61 million this quarter, which is pretty close to that $63 million we estimated during our March IR Day. Also looking forward, we've now included Buck in that table. Remember, you'll need to add your pick for other future M&A to these estimates. Let me move to some comments on cash, capital management, and future M&A. At March 31, available cash on hand was around $1 billion. Note that about $600 million was used to buy Buck in early April. Call it $400 million. This means we estimate that we have about $2 billion more to fund M&A for the rest of this year. Our early look is another $3 billion or more in 2024, usually to fund our M&A program, utilizing only free cash and incremental debt while maintaining our strong investment-grade ratings. One final reminder. Recall during our March IR Day, we mentioned that we would be classifying how we present fiduciary balances on our balance sheet and in our cash flow statement. These reclasses are purely GAAP geography, and we're doing so to better align our presentation with how many other brokers present their statements. You might notice some of that movement in the recast balance sheet on page 12 of the earnings release. To help you understand all the movements, there'll be a comprehensive table in our 10-Q that we will file later next week. All of this is to make our presentation more consistent with most of the other public brokers, and all the changes just GAAP geography. Those are my comments. Another terrific quarter. Looking forward, we see strong organic growth, a great pipeline of M&A, and continued opportunities for productivity improvements, all fueled by an amazing culture. I believe we are very well-positioned to deliver another fantastic year. Back to you, Pat. Thanks, Doug. Operator, I think we're ready for some questions, please. Thank you. This 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 Weston Bloomer with UBS. Please proceed with your question. Hi, good afternoon. My first question is on the margin expansion you're expecting for for full year 2023. How should we think about the cadence of that margin expansion as we move through the year? I think you had previously guided to 1 Q being lower relative to 2 Q and 4 Qs. Is that still largely the case excluding Buck? Can you just help us think about the moving pieces as we go through the year? All right. You're asking me about how do we feel the margin expansion quarter to quarter? Is that the question? Yeah, more or less, 'cause you highlight some of the lumpy nature in organic. I'm just kind of curious on how that plays out on the margin as well. All right. Let me see if I can dig that out for you here. Should have it right here at hand. Apologize it's not quick on this. I think that Stand by here. In the second quarter, I think that we probably have maybe the second and third quarter more flat and then a little bit more upside, maybe towards 30 basis points in the fourth quarter, I think is what I'm looking at here. Great. Is there any seasonality? One second. to Buck's margin as well? I'm sorry. Let me check that. I just looked at the wrong. I'm seeing probably 10 basis points of expansion in the second quarter, 20 in the third, and maybe 20 in the fourth. Great. Does that include seasonality to Buck as well? I think you'd previously said it was roughly run ratable. That's right. That includes Buck. Okay, great. Can you give a sense too of how quickly Buck is growing? I see in the acquired revenue table, that's, you know, call it $77 million per quarter. I'm assuming that's including a few other deals in there, but I'm curious if that's assuming any growth for Buck or how quickly that business is currently growing. Go ahead, Bill. This is Bill Zabel with GBS. Buck is been pretty stable across the country last year, across the world last year. They had very strong growth in the UK and in their engagement/communications business. They just finished Q1 with their best sales quarter in the last five years. We're already beginning to have a lot of revenue synergy discussions, very organic, early stages. Built a pretty strong pipeline. We're already going in on deals together. It's a little early to give predictions on what this looks like, but we do expect them to have mid-single digit growth this year. Great. Thanks for taking my questions. Thanks, Weston. Thank you. Our next question is from Elyse Greenspan with Wells Fargo. Please proceed with your question. Hi. Thanks. Good evening. My first question, maybe I'm just confused, Doug. I thought you said brokerage margin, can expand, 60-80 basis points for the year. In response to Weston's question, you were talking about, you know, 10-30 basis points of expansion over the next few quarters. Right. Question one is without the math that results from Buck because they run naturally lower margins. That was the question that we answered for Weston. The 60-80 basis points is how we're looking at Gallagher before Buck. Does that help? Okay. Got it. Yeah, that helps. Thank you. In terms of the organic outlook, you know, still, you know, kind of keeping the 7%-9% range for the year, can you just give us a sense of, you know, kind of what you're embedding in there for the economy as well as pricing when you think about, or are you just expecting, you know, in general, a stable environment over the next few quarters compared to what we saw in the Q1? I think, Elyse, just Pat. I think that we're just sort of predicting that it's a stable environment over the next three quarters. We're not seeing a lot of rate reduction. We are seeing continued. By the way, I'd point out being a little proud about this, we've been the ones saying we're not seeing recessionary pressure in the middle market by our clients around the United States in particular. Those businesses are continuing to grow, and they are robust, even with the headwinds of higher interest rates and higher insurance costs. Those insurance costs are not backing off, and we can tell you this data day to day, line by line, geography by geography, country by country. I think that our commentary and our prepared remarks about it being a pretty firm market, looking like it's going to continue that way for all the reasons we enumerated, we view it that same way over the next three quarters. Thanks. That's helpful. You guys, I know, right, the laws related to your clean energy investments, right, expired at the end of 2021, and you guys have kind of, I think are, you know, kept some of the plants open. Is there still the potential that you guys could generate more tax credits there, or have you kind of not expecting that at this point? We're preserving all the machines that allow us to generate those tax credits. If there's something that might come out of an energy bill, or a tax reconciliation bill yet this year, those plants could be put back into service. Do you think there's a high probability that could happen? Well, Elise, I don't know if there's a high probability of anything getting done in Washington. I mean, I would hope so, but I, you know, I wouldn't put high probability on anything coming out of there. You know, if the plants sit there for another year, they sit there for another year. Thanks for the color. Sure. Thanks, Elise. Thanks, Elise. Thank you. Our next question is from Greg Peters with Raymond James. Please proceed with your question. Well, good afternoon, everyone. Hey, Greg. I think, before I get into the results, I wanted to step back and, just talk about talent recruiting, and employee producer retention, and maybe if you could give us an update on how that's progressing inside, Arthur J. Gallagher. I guess in a, in a parallel question, there was some recent announcements of promotions in the C-suite, and Pat, I don't think you, I think you have plenty of gas left in the tank, so maybe you could provide some context about some of those announcements as well. Well, let me address a couple things first, Greg. First, our recruiting efforts are ongoing. We are always recruiting producers. Excited about the fact that our 500 interns will begin showing up in a few weeks here in the United States. If I look around the globe, it's probably more like 600 interns. As you well know, we recruit heavily from that group, and our consistency of retention there is very strong and continues to be strong. We have a good pipeline and a good, We do a good job of landing new producers. Nothing to announce in the way of any more robust efforts in that regard than our normal. I think I feel really good about that. In terms of retention of producers, very strong retention. You know, I think that we offer a great place to ply our trade, and we pay people well to do that. We're still one of the places that believes in remunerating people for their growth in books. I feel good about our production recruits, I feel good about our new hires, and I feel very good about the retention level that we have of the people that are here. As it relates to the article, which was not an announcement, I would just simply say that we don't make a lot of comments on news stories, Greg, and I think you know that. I'm the CEO, and I feel great. Thank you very much. I expected that kind of comment from you, so but thank you for validating it. I guess, my follow-on question, will deal with M&A. I know you comment on this almost every quarter, but, you know, the interest rate environment has posed a changing landscape for M&A. You know, we look at your multiples. It's in the, you know, Doug's, CFO commentary tables, and it doesn't look like the multiples are changing much. Can you talk about how you view M&A at the current prices that are being in the marketplace? Do you think, you know, you talk about the 40 term sheets that are outstanding. It seems like you have 40 term sheets every quarter. Can you talk about, you know, how the interest rate environment might change your perspective on what you're willing to pay? Yeah, I will. First of all, let me put some color on that. If I read the Business Insurance article correctly about a week ago, I think M&A in the first quarter is down about 29%. That's after year, after year, after year of more PE entries, more deals being done. I think we're seeing a slowdown. In the number of transactions, which I do think reflects a slowdown in the number of new entrants. There are some people who have been very active in the past that are less active now. At present, we're not seeing a big decrease in those multiples. If you had 20 people bidding on a property 18 months ago, you still have 11 today. I do believe that like anything, supply and demand, if that demand continues to decrease and interest rates are in some way impinging that capital, I think that you will see multiples come down, but they're not doing that right now. Got it. Thanks for the answers. Thanks, Greg. Thank you. Our next question is from Mike Zaremski with BMO Capital Markets. Please proceed with your question. Hey, good afternoon. First question, in the prepared remarks, you talked about property rates accelerating. Any stats or any, you know, any way we can dimension what percentage of the revenues on the brokerage side, you know, touch that element of acceleration? It doesn't seem like from your organic guide that you're baking in that acceleration continuing or maybe I'm incorrect. Well, listen, I can give you some percentages of our book. Our property book, if you include package in there also, is gonna be somewhere around, just doing the mental math here real quick, is around 27%, something like that, of our first quarter total revenues in the P&C units. One of the things that our guys do and our gals do out there is they're pretty good at mitigating some of that rate increase. When you look at it, property rates are going up 17%. You might see commissions going up 10% or 11%, 12%, something like that, because you increase deductibles, you bring down limits, you come up with some more creative programs in that. That is a line of business where the direct correlation between the premium increase and then the commissions that we get, there's a delta there. I think that's a real... I'm piling in here. This is Pat. That's a very, very good point. Every time in a firm market we get that question. Rates are up on XYZ 12%, you're showing 6%. Why is that? Because our job is to not pass on the 12%, and we're good at that. Got it. Okay. That's... That, thanks for the answer, Doug. That excludes reinsurance? Yes, that's right. Most of our reinsurance are one renewal, so you've already seen that. Got it. Okay. Follow-up, investment income, maybe I might have missed this because I jumped on a minute late, but was there any help with if this is the right investment income run rate? I know that there might have been book sales in the number too. It looks like it was better than expected. I know there's some noise on the fiduciary balances too now. Should we be thinking, we need some help there? Right. Book sales would have been tiny. I think the total amount of book sales this quarter was about, I think around $200,000, something like that. That wouldn't have influenced it in our numbers at all. Our investment income on the face of the financial statements also includes our premium funding businesses. The amount of investment income that translates right into that number, just take 90% of what you see as investment income and on the face and 90% of that is real additional incremental investment income. When you look at what it means for the rest of the year, as you know, as you follow the interest rates, there was a big tick up starting about, you know, last month, last year. The second half of the year, the increase in investment income is not as dramatic as it is here in the first quarter. If I were to look at full year impact of investment income on our organic lift, that would be about maybe 60 basis points for a full year, you know, 60 basis points of margin expansion from investment income for the full year. You can see here this quarter was up, you know, fueled about 90 basis points. For the full year, it'd be about 60 to 70 basis points, something like that. Okay, great. Maybe just one last quick one. You know, given, how much improvement, you know, Gallagher's shown in its margins over the last few years, you know, is there a way to dimension what percentage of the deals you guys look at have a better margin profile than Gallagher? Should we expect there to, you know, there to be a maybe similar, like a Buck headwind, sometimes going forward as you guys continue to do deals? I think if you look at our pipeline and you project it, we would think that if I were standing in January of next year looking back, what's going to be the impact of roll-in M&A excluding Buck? It might use about 10 to 20 basis points of margin expansion. It has a significantly smaller impact on the full year because we're so seasonally large in the first quarter. Thank you. Mm-hmm. As a reminder, if you'd like to ask a question, please press star one. Our next question is from David Motemaden with Evercore. Please proceed with your question. Hi, thanks. I just had a question, just on the margin. I, you know, I understand, Doug, we got, you know, the 90 basis point tailwind from fiduciary income here in the first quarter. You know, maybe that ticks down for the full year, like, you know, 60 basis points. Sounds like Buck is about a 50-point headwind to offset that. Then I guess we have, you know, organic that should contribute 60 to 80 basis points. I guess, could you talk about some of the other headwinds that are gonna offset, some of the margin expansion going forward? You know, I'm struggling to get to the, you know, the 20-30 basis points this year. All right. Maybe let me back up and just say, and think about it this way. We built a bridge this quarter from last year first quarter, right? If, if we were standing in January of 2024, looking at a year that we're kind of seeing in that organic in the 7%-9% range, here are some of the components we've talked about already, and I'll toss in a couple more. We already said that maybe investment income would give us 60, 70, 80 basis points of margin expansion for a full year, but not to 90. You know, we got to think about the normalization of the Omicron T&E expenses and then maybe some inflation on other T&E throughout the year. you know, we were back to doing full business in the second half of last year. That may cost us margin expansion, let's say, of 30-40 basis points. I told you about the roll-in impact of regular tuck-in acquisitions, excluding Buck. That would, you know, maybe use 10-20 basis points of margin expansion. That gives you organic maybe in that 70-100 basis points, just pure organic without those things, 70-100 basis points of margin expansion. we are making some additional, you know, we provided some additional raises that we talked about last quarter. We are making some additional IT investments. Call those maybe $5 million-$8 million a quarter. That would use maybe 20-50 basis points of margin expansion. Again, these are ranges. Follow that bridge for the full year, and that gets you back to the 60 to 80 basis points of FX adjusted margin expansion for the year. You layer in Buck, and that would get you down to that margin expansion that you mentioned there. I hope that bridge, and I don't have a crystal ball, it's not January of next year. But if those type of ranges, you get some from investment income, you get a lot from organic, some goes back because of T&E and the roll-in impact has a little impact, and we're making some investments. You know, if we ended up the year and ignore Buck being up 60 to 80 basis points, knowing me in January next year, I'd probably point out that we would have expanded margin 600 basis points in five years. Knowing my personality, I probably would say that I still would feel confident that we would have more and more productivity opportunities as we look forward. A lot can change in nine months, but, you know, wouldn't that be a great year for us to post? Those are kind of my thoughts on that. I hope that helps all the listeners on this to understand that where the pieces are coming from, and hopefully that'll help you build your models. Yeah, that helps a lot. Thanks for that. I appreciate that, Doug. Maybe just to follow up, you know, it's, you know, Doug, I think you said you sounded, you know, or you did say you were bullish on hitting that full year organic in the 7%-9% range after, you know, being a little bit above that, you know, this quarter. You know, it sounds like, you know, renewal premiums are chugging along. The economy is also chugging along. Is it really just the tougher comps that, you know, is holding you back from increasing that outlook? Or is there anything else that we should think about that's on your guys' mind as you were thinking about just the organic growth outlook over the rest of the year? I think the accounting on the deferred revenue from six oh six in the fourth quarter, plus maybe the life's cases. maybe we sell some more life cases that come in pretty lumpy. You know, those probably cost us 50 basis points, the combination of the two on full year organic, something like that. one thing I will say is that when we look at our dailies, you know, these are the overnights where we get a scrape of all the renewals that are going on. I got to tell you, April looks a lot more, looks stronger in terms of premium increases than we were seeing before, even on a mix adjusted basis. There is a tone that we're seeing in our data, not from anecdotal polling, that there is some further strengthening in all lines and all geographies, maybe other than one or two smaller ones. You know, who knows? Maybe we'll be closer to the 9%, but we're still comfortable in that 7%-9% range. Okay, great. I appreciate that. Maybe if I could just sneak one more in for Scott, just on, you know, in, on the Gallagher Bassett non-comp liability claims. Just it sounded like core underlying claims were up low single digits during the quarter. That was both in workers' comp and on liability lines. I'm wondering on liability lines, is that up low single digits a significant change to how that core underlying claims level was running in the previous quarters? I mean, there's a couple of things going on. One is we happen to be, if you look at kind of the new business we've been selling, it's been connected to, you know, more liability activity. It's not necessarily that individual accounts are seeing more, but the new business tends to be tilting a little bit in that direction. Got it. Thank you. Thank you. Our next question is from Mark Hughes with Truist. Please proceed with your question. Yeah, thank you. Good afternoon. Hey, Mark. Hey, Mark. Pat, you've been pretty enthusiastic about what you're seeing around exposures. In the construction space, if banks are really tightening up, would you have started to see that? Would there be some early project work that would flow through your system? Do you have any kind of view on what you think will help or what will happen there given the banking crisis? All right. Mark, I'm not sure I'm understanding the question. If I look in my data, is the question around what we're seeing in the construction risks that we insure? Correct. Any early signs of pressure because of the banking situation? In fact, if anything right now, construction continues to be pretty darn robust. First off, you do have a lot of infrastructure stuff that now is flowing through, and our infrastructure contractors are doing very well. When you get down to the more, to the smaller contractors, their backlog is strong. Any observation about carriers' willingness to pay claims, you know, with perhaps inflation in the system? Are they tightening up there? Are you seeing that in your relationships with the carriers? No, I will say this. I'm proud of the industry, Mark. One of the things that I think stays consistent is that our carriers, and I say this on a broad base basis, are paying the legitimate claims that they have filed with them, and I think they're paying them in a timely fashion, and I think they're paying them fairly. You can get to certain jurisdictions, I don't mind mentioning it, Florida with assignment of benefits and litigation on half the claims and there's a battle going on there. By and large, when you put a legitimate claim into the system, the insurance industry is a very efficient model of paying that claim. We are not sitting there with a lot of complaints from our claimants. Very good. Thank you. Thanks, Mark. Thank you. Our next question is from Josh Shanker with Bank of America. Please proceed with your question. Yeah, thanks for fitting me in. I just want to ask one follow-up to Greg's question earlier. You gave a hypothetical, Pat, about an idea that let's say there were 18 bidders on a property, maybe now there's only 11. Right. I know it was only hypothetical, but you know, 11 still seems a lot to me. I'm wondering in the market today, are there still a lot of bidders who are flush with cash? Are they raising debt in this environment to make the acquisitions? Yes. What's their funding that keeps them a-around? A, I don't understand it, and I'm not smart enough to, let's start with that. B, yes, they're raising funds like crazy. One of our competitors that I won't name actually eliminated their integration team and their acquisition team, announced publicly that they were no longer going to be actively pursuing acquisitions. They got additional funding, and they're back in the game. Go figure out who would sell to that. Not me. You go to other players that have been more consistent long term, and yes, they've received significant funding in the last 60 days. They are flush. That capital's gotta work. They didn't get it to put it interest. There's competition out there. In terms of the price they're paying, I mean, I've always felt that there's not really a big pageant going on. People want to come and be partners with Gallagher, it's a choice acquirer compared to some others. Is there evidence that certain sellers are willing to not consider certain bidders who might be a less of an attractive acquirer? I think so. I mean, I think that's a big part of our sales, that we are always talking about the fact that the differentiator here is twofold. One, we believe we have a great franchise that offers them the opportunity to expand their business. If they love the business and they intend to stay in it, this is the best platform in our mind to trade from. That starts it. Then, of course, you've got the cultural aspect. We're competitive. We're not trying to sell the fact that that should give them a deep discount. There are, you know, there are people that sell for various reasons, and we don't win them all. Thank you for the answers. Appreciate it. Sure, Josh. Thank you. Our next question is from Meyer Shields with KBW. Please proceed with your question. Thanks. Two sort of big picture questions, if I can. First, Pat, you talked about, within wholesale and specialty, open brokerage is growing a lot faster than MGA and binding business. I was hoping you could talk us through why there's that gap in growth rates. Sure. I'll toss that to Joel. Go ahead, Joel. Sure. On the wholesale side, obviously, you work with larger accounts, and larger accounts that end up in the wholesale space typically are, you know, larger accounts with larger exposures and little tougher to place. That would be really the first one. Then really the second thing is the inflow Of tougher accounts today that are coming out of the admitted market and coming into the surplus lines market or E&S, depending on what your terminology is more robust. They're coming in, you know, very quickly because especially the difficulty in the property market. You would see a higher organic in that, in that line versus our MGA buying business, which is more consistent, growing nicely, but it's more consistent in the nature of smaller accounts, so it doesn't move the needle as much. Look at it this way. Another way to put it, Miles. None is troubled business, frankly. When we're doing open market broker, brokers are coming to us because they need our help on tough to place accounts that are going up in price. Our MGAs and programs are consistently writing smaller accounts that are not distressed, that are looking for specialty coverage or specialty expertise. Okay. No, that's very helpful. Thank you. That's exactly what I needed. Second question. I'm just wondering, how should we think about reinsurance growth over the next year or so? Is there sort of a special, maybe temporary boost because it's now under sort of Gallagher's purview, and you can explain the benefits of that to the insurance company that you deal with worldwide, and then once that happens, you're on a stable basis? Is that a more enduring source of upside? No, I think that's an enduring thing. you know, when this team was part of our competitor, Willis, they had a very good block of business underneath them, a very good firm they were part of. I would say, in fact, you know, similar economics. We're not changing that. I think we do offer a different environment. We offer a different way of trading. We're bringing our retailers together with the reinsurance people at a much higher level, or I should say, our level, at a much greater frequency with much greater interaction than they were used to, which I do believe will fuel their growth. I think it will accelerate beyond what they would have achieved, but that's woulda, coulda, shoulda, and we'll never know. Okay, perfect. Thanks so much. Thanks, Byron. Thank you. Our next question is from Rob Cox with Goldman Sachs. Please proceed with your question. Hey, thanks. I just had one question on pricing. I think you all had commented previously that Australia, New Zealand are potentially seeing a re-acceleration in rate, and the UK is also seeming quite strong. I'm just curious if you're seeing or expect to see more of a divergence in the pricing trajectory between, you know, the US and international business? I think they're pretty close to the same. Yes, we're seeing some of those. We're seeing, you know, take D&O out of it right now. Starting to see some uptick in workers' comp now. I mean, I don't see a lot of difference between what's going on in the U.S. and what's going on in Canada, New Zealand, Australia, and the U.K. It's pretty close. Got it. Thank you. Sure. Thank you. Our next question is from Elyse Greenspan with Wells Fargo. Please proceed with your question. Hi, thanks. just a follow-up on the margin side. Thanks for all the color on the moving pieces. Within that 20-30 basis points, are you assuming that the fiduciary investment income, is in line with the Q1 level over the remaining 3 quarters? Yeah, that's pretty close. Yeah, that's right. You know, I know I had asked earlier kind of just a question just in terms of just it seems like you're assuming a stable economy, right? We see some forecasts out there for, you know, decelerating, you know, GDP or perhaps GDP to go negative. What are you guys assuming, you know, for GDP over the balance of the year? Well, here's the thing. Translating it directly into GDP is a different exercise. One thing, you know, you got to separate real versus nominal, first and foremost. Secondly, you got to look at what's the growth in the insured values and insured, you know, what's being insured there. Remember, we're not seeing that in our data right now. I'm looking down through our industry list right now, and I... We talked about construction earlier. Heavy construction, you know, other than building construction contractors up 12.4%. Construction special trade, 8%. Building construction generally up 8%. You look through our industry list here, we're not seeing it. We're not seeing it in our dailies overnight. The cancellations are lower than before. Negative endorsements are lower than before. Audits are audits. They have a lag factor in there. I wouldn't look at those two terribly carefully. We're just not seeing this in our customers' business at this point. Believe me, our customers, if they believe they're seeing a downturn, one of the things they want to do is modify their insurance program because that's cash flow to them. You know, we will know in two years how accurate our dailies are, but right now, they've proved pretty right over the last two years. Even I guess Like if you were thinking about what's going to have the greater impact, do we think about it being the economy and GDP or P&C pricing when we think about the next few quarters? Both. I think the pricing- Okay. Will far offset any modest contraction and exposure in it. I don't know what's going to contract in the next six months, or what volumes are going to contract. We're just not seeing it, Elise. Well, remember, Elise, we are the beneficiary of inflation. There are very few industries out there that really get a benefit from inflation, and we do. As building values go up. Right now, for the first time in a decade, carriers are very, very interested in making sure you're insuring the value. This inflation is hitting building costs very hard. Thanks for all the color. Thanks, Elise. Thanks, Elise. Thank you. Our next question is from David Motemaden with Evercore. Please proceed with your question. Hi. Thanks for taking my follow-up. I've noticed the last few quarters, you know, just in the adjusted compensation ratio, commentary in brokerage, just the impact from savings related to back office head count controls. Could you maybe just touch on that? I'm, you know I'm assuming some of this has to do with leveraging centers of excellence, but I don't think you had mentioned that as, you know, a tailwind when we think about the margin, roll forward. I guess maybe just help me think through that, maybe not only for this year, but, like, broader picture, how big of an opportunity that is leveraging the centers of excellence. Well, maybe we back up and take a look. If you remember some of our discussion about the sensitivity of our business to inflation. We said about 40% of it is neutral to it 'cause it just moves more in tandem with premium or with our commission rates, because we pay people on an incentive compensation basis there. We've got about 40% of our whole cost structure that is moderately impacted by inflation. We have 20% of it that might run a little bit more close to what headline is inflation, knocking off some of the tops of certain things that, you know, like maybe transportation, gas, et cetera on that. When you add all that up, when you look at what could be facing an organ. somebody like us that's pushing $6 billion worth of cost. If you say that let's say it was cost 30% of your 25% of your cost structure is subject to, you know, 75% of the headline inflation number. Just think about that. Let's say there's $4 billion, and I'm just doing this off the top of my head, that might have a 6% or 7% inflation factor in it, right? That's a big number, right? I'm saying that the only thing that's really affecting us is $5 million-$8 million a quarter on it. What that's saying is as we get more productive, not just from our offshore centers of excellence, but because of technology and other process improvements that are both domestic and our offshore centers of excellence, that is absolutely controlling against inflation out there. There is substantial uplift that's happening every day because of our productivity work, our quality work, and our offshore centers of excellence. I just kind of did that off the top of my head, but you get the point. You'd see a heck of a lot more cost or expense dropping into the bottom line if we didn't have our offshore centers of excellence. Got it. No, that makes sense. Thank you for that. Sure. Thanks, Dave. We're pretty proud of the quality that comes out of that operation too. Well, thank you very much, everyone. Appreciate that. Thank you for joining us today. As you can tell, we're extremely pleased with our start to the year. We posted a great quarter. I'd like to thank all our colleagues for their outstanding efforts this quarter. We are a people business. I believe we have the best people at Gallagher. We look forward to speaking with you again at our IR Day in June. Have a nice evening. Thanks for being with us. This concludes today's conference call. You may disconnect your lines at this time.