Arthur J. Gallagher & Co. Q4 2024 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Michael Zaremski - BMO Capital Markets - Analyst : First question, surrounding the cadence of organic growth next year, loud and clear, 6% to 8%, no change, I guess, for both segments. I guess I'm more specifically focused on the Brokerage segment. But in terms of the cadence seasonality, anything you'd like to call out two of your peers called out kind of weaker seasonality in 1Q. We do know that reinsurance is overweight in the beginning of

Question: Michael Zaremski - BMO Capital Markets - Analyst : Okay. Got it. So you're saying actually it could be higher, not lower, even the reinsurance pricing is down. Okay.

Question: Michael Zaremski - BMO Capital Markets - Analyst : Okay. Awesome. The last question is on do share investment income, I'm thinking through post the deal close, if you're able to comment. So my understanding that the company purchasing kind of didn't fully leverage its fiduciary income in that it had a lot of kind of -- it's kind of -- it was direct pay relationships between the businesses paying directly to the insurance carriers and you guys might be able to optimize that working capital to gain more fiduciary assets. Is that if that's what I'm describing is correct, could you offer kind of a timeline, and how that works in terms of kind of getting those asset balances onto your balance sheet?

Question: Michael Zaremski - BMO Capital Markets - Analyst : Doug, is just any -- is that kind of a one-year process or is that like a takes many years?

Question: Gregory Peters - Raymond James - Analyst : I guess I'd like to start with California. Given the substantial potential loss to the insured market, there's if you could give us some perspective of how it might touch your operations. I'm interested in the business going in inside RPS, if there's any impact on the wholesale market that you're seeing. If you can just talk about your perspectives of that as we watch this disaster unfold that would be great.

Question: Gregory Peters - Raymond James - Analyst : Okay. And then I guess my follow-up question is switch gears. You mentioned in your comments about the lower contingents. Just curious, given the profitability we're seeing in the industry, I would have imagined that supplementals and it continues to be up. And I think your guidance for '25 suggests that they should go back up again. But maybe you could spend a minute and give us some color on what happened with contingents, and then color on your outlook.

Question: Gregory Peters - Raymond James - Analyst : Just a clarification on that answer, Doug. Is there a specific line of business, is there across, a broader business set?

Question: Andrew Kligerman - TD Cowen - Analyst : First question is around the risk management segment. Thinking back to last year, you had guided to 9% to 11% organic growth for this year. And now for next year -- for '24 that is, and now for '25, you're guiding to 6% to 8%, which I still think is fabulous. But what's kind of changing that your guidance isn't light as robust as it was to start last year?

Question: Andrew Kligerman - TD Cowen - Analyst : So like you never know, you could probably find another elephant this year, right?

Question: Andrew Kligerman - TD Cowen - Analyst : Got it. And then I was just kind of curious about your operations in India with Center for Excellence where I think you have about 12,000 employees right now. And as you look out through this year, do you need to add people given the AssuredPartners transaction? Can you keep it steady? And is technology making it such that you really don't need to hire that much?

Question: Andrew Kligerman - TD Cowen - Analyst : I see. So maybe the bottom-line takeaway is you may add 1,000 or 2 employees, but it's still scalable. You're still getting better margins from that. Is that the right final takeaway

Question: Elyse Greenspan - Wells Fargo Securities, LLC - Analyst : My first question is on the brokerage outlook for '25. So you reaffirmed the 6% to 8%, Doug, I think when we last spoke in October, you said maybe benefits is a 5, reinsurance is 9. I want to confirm that's where you still see it. And then you also had said you would provide, I think, by line in a little bit more detail at the December day, which did not happen. Could you give us a sense even away from benefits in reinsurance, just how you see all your businesses trending organically in the 6% to 8% '25 brokerage guide?

Question: Elyse Greenspan - Wells Fargo Securities, LLC - Analyst : Okay. That's helpful. And then my follow-up question. How do you see -- how is there a pipeline of transactions, right? You guys also did a good number of bolt-on deals to end the quarter and in terms of the AP pipeline, I know when you guys announced the deal, you highlighted the fact that there was very little overlap on pipelines. So would you expect, I guess, once the deal closes, at some point at the end of the Q1, I guess, that kind of just the quarterly level of M&A activity could pick up from bringing on that -- from bringing the two firms together.

Question: Elyse Greenspan - Wells Fargo Securities, LLC - Analyst : And then the 1.3 -- sorry, go ahead. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 30, 2025 / 10:15PM, AJG.N - Q4 2024 Arthur J. Gallagher & Co. Earnings Call

Question: Elyse Greenspan - Wells Fargo Securities, LLC - Analyst : I was just going to say the $1.3 billion from the green shoe, right, that wasn't contemplated, right? Because the financing was there without it. So is that just extra cash that you have for the pipeline, the capital that Doug was talking about in his comments?

Question: Mark Hughes - Truist Securities - Analyst : The guidance you gave for the first core contribution from AssuredPartners. Is there any seasonality there? Or is that just the timing of the deal?

Question: Mark Hughes - Truist Securities - Analyst : And then, Pat, in the wholesale business, you gave a wholesale and reinsurance together, I think, up 9%. Any detail you can provide on wholesale observations on the NS market?

Question: David Motemaden - Evercore ISI - Analyst : I had a question for Doug. Just trying to unpack the brokerage organic this quarter, and I don't want to nitpick too much, but you guys were looking for 8%. And I'm just wondering, so was the entire differential just the contingents and the life sales came back as expected, and it was just totally offset by the contingents. Just hoping you can unpack that a little bit.

Question: David Motemaden - Evercore ISI - Analyst : Okay. Great. And then I want to follow up just on -- I guess I was surprised the RPC stayed at 5%, just given the property price was flat versus up 4% last quarter. So I'm wondering if maybe it's mix, but I'm wondering if there's anything else from sort of like an increased purchasing or buy up dynamic that you guys are observing as the property market as the property rate moderate here?

Question: David Motemaden - Evercore ISI - Analyst : Got it. And then maybe just to sneak one else in -- one other one in. Doug, I think you had said last call that the underlying brokerage business is running at like a 7% to 8% organic growth just on an underlying basis, but then the '25 range is in the 6% to 8% range. So I guess I'm wondering is that 6% just sort of conservatism? Like what sort of scenario would sort of get you guys out of that 7% to 8% range.

Question: Katie Sakys - Autonomous Research - Analyst : I guess my first question is thinking about the last call, I think, Doug, you had mentioned that you expect brokerage organic growth in 2025, split between the components to come from about half new business and then perhaps a quarter each to rate and exposure. Has your perspective on the components of that (inaudible) organic growth guide changed in the context of the AssuredPartners acquisition?

Question: Katie Sakys - Autonomous Research - Analyst : Okay. Sounds good. And then it looks like international retail brokerage growth kind of continues to cool off a little bit. How are you guys thinking about the environment for organic growth abroad this year versus what looks like perhaps a little bit more stable growth in the US.

Question: Meyer Shields - Keefe, Bruyette & Woods North America - Analyst : You mentioned, obviously, accurately that there's a ton of adverse development that we're seeing in general liability. And I was wondering whether there's any direct impact when you've got, I don't know, more frequent claims or more attorney involvement in terms of how Gallagher Bassett grows revenues.

Question: Meyer Shields - Keefe, Bruyette & Woods North America - Analyst : Okay. No, that's very helpful, very thorough. Switching gears, I was just looking for an update on the multiples for M&A because we've seen not only your acquisition of AssuredPartners, but a lot of the other big brokers out that have made big acquisitions and if seeks upwards, decelerates competition for tuck-ins?