Arthur J. Gallagher & Co. (AJG) 30 Apr 202020 Q1 Earnings call transcript

Good afternoon, and welcome to the Arthur J. Gallagher and Company's First Quarter 2020 Earnings Conference Call. [Operator Instructions]. Today's call is being recorded.

If you have any objections, you may disconnect at this time.

laws. made to conference statements questions, meaning the comments given including within the of response in may securities of during call, this answers the Some constitute forward-looking and These uncertainties to forward-looking materially. subject statements to differ that cause actual are could results risks refer its and factors forward-looking the cautionary statements. contained filings for statements and XX-K, XX-Q X-K the more to in Please risk company's details on

please this refer for the In the Relations regarding the call on as of discussed information Investor well reconciliations and addition, these company's release measures measures, to earnings in other other as non-GAAP website. materials of section

It J. Patrick Gallagher, Gallagher is may Chairman, Arthur Mr. to Company. of you Gallagher, CEO now my and begin. pleasure President introduce and

us on Thank earnings Financial quarter heads you our very call Good the Officer everyone, the of much. Howell, divisions. joining our operating call. as for XXXX afternoon, our Also and is for today Doug first as Chief well you thank

me our the those Before global into of we including affected pandemic. lines by acknowledge directly get first on front COVID-XX, results, those the quarter let

the our of priority that associates all recovery. With are that We our wish At a less Gallagher, we very safety you the XX few colleagues. health and speedy whom and than have of courage. fully in their of contracted fortunate all dedication have our are virus, a is nearly We're XX,XXX recovered. still self-quarantined,

X weeks. and in globe, we home proud all the running, days. performed March, I'm the our In how few from of past our have a working incredibly up plans business associates mobilized we're and around continuity over

over streamline systems. and payoff without is remotely operate using to standardize missing work, This working processes the We decade of efforts our relentless past step. the common are a

sending than deliver see meals providing surprised day, service are unselfishly level based fortunate. All more our highest distributing countless all have At And from the I associates in I'm from And the the thank and employees single to productive, quality to order masks one the every at that first the we around every right not centers. of giving of but responders that in they to to colleagues includes support service our tools dedication, X,XXX our clients. are back and citizens, systems our our of home, examples colleagues senior from protective professionalism of to to bottom of world. my equipment, of less you the with proud heart. too.

Management first quarter combined Now for financial Risk and Brokerage our moving to segments. our performance

last adverse revenues fourth like of and even X% We reported quarter around of This of quarter and year. of X.X%, some of are a an completed with more COVID-XX. due we growth another adjusted COVID-XX, X% our Here EBITDAC would highlights. is with adjusted impact been of that revenue X%, acquisitions this we million. quarter X unfavorable had XX.X%. earnings nearly to includes again, which but Total had Included revenue terrific a growth to growth growth of of due organic we reduction quarter. revenue XX.X% margin impressive And in impact margin COVID. posted X% X% estimated $XXX have annualized And net

As the can is past. that tone, tell quarter. our I But you am pleased from with probably my

we're now have on wish to I While some we had time objectives. would celebrate, X full tilt

our on even rate double lines, taking. digits meeting same more were nearly exact underwriting we're up is compensation, risk see we Rates becoming going markets. we're hitting mid-single that even it for and This clients except to workers' the all it already difficult. busting the at time doing virus we're and crisis in with for humps we're already underwriters, partnership our clients, First, our our

combined Now is really the producers, our shine. with time our can capabilities

customer. the few very ideas, solutions, We we bring and have other we have that tools, to data we brokers have have can

win of Our anywhere competing capabilities. a better near like say time, level our smaller not our this does data even of are have I that the broker would XX% chances that with in we environment.

we to safely. workplace ensure safely. have got them home developed employees our the We Second, can plans return to

is to the measured return a workplace and So now process. it conservative about

work We have folks large so proven we into safe. our we offices won't can we back remotely, know it's of numbers hurrying be our until

developed third, of And that are implementing the already business and in our while measures to deteriorating of we've must resiliency adjust encouraged economic with expense far we base balance by conditions. I reality manner. contemplated a information am our the early thus Accordingly, April, already in staged, we

further like to per we million million will quarter, structure. economic this, can lower can deeper see immediately. develop, we adjustments As Doug our into our to $XX dive nearly cost deterioration expense $XX implement looks we but base

want some highlights back do financial to go by I into segment.

Brokerage of to the table on segment Page earnings the First, organic X release.

to First quarter was of which X.X% impact all-in, estimated the organic includes reduction X.X% due COVID-XX.

March. So terrific you or through can growth we see had -- momentum quarter organic month a

new capabilities changes, metrics production, renewal changes, retention, allow and exposure data endorsements and to business premiums, rate monitor premium other us client Our audit daily. premium

lost During in new we throughout adjustments, business the business, quarter, exposure we excluding units, XXXX. changes first saw similar and saw COVID to what

been in when it of XXXX U.S., comps in all increase. loan the quarter quarter. exception together is this around property saw that it lines workers' but a I decreases small 'XX, showed inflection roll globally, up to still pricing, the XXXX flat We've in lines, and rate X% as environment casualty each first was even but for of and seeing up here PC As an pricing compensation XX% in quarter the

that saw quarter. what we So is first in the

here are we Let me April. in address far what thus seeing

It's not in we ends. bit, impact the is a but not as just are yet. Also, retention It's business crisis, new it strong still seeing up are this in is in seeing first was exposure certainly change early the we and as early. a quarter. First, meaningful

not saw perhaps in not from up we first but seeing change the dramatic in Second, we're little pricing a what quarter, a dramatically.

today. through we're seeing what is that all remember, Now

units industry anyone's stratified guess. do Property is our long renewals we for do what of April our is see much concentration industry. Accordingly, the going at we But what by will exposure looked and and we decrease. by know from higher that exposure industries So how and business moderate How in casualty impact moderate forward? came certainly XX% in industries. declines. industries, Interestingly, we are lower looked unit COVID. higher, and of in XX% out Then XX% it rate impact versus impact and impact our in lower revenues increases at the

low-impact units in property industries. lines, increases exposure For the to were actually units rate casualty regardless exposure equal And in exposure And lines, net XX%. moderate did in compensation, both or we in down only rate up high, in of X% by X% industries. moderate the a unit high-impact increases see about than low Through lower impact, workers' actually increases were down offset declines X% more impact decrease, for declines declines impact, industries. in and and rate moderate in high

showing yet or et plans in work. unemployed soon could benefits decreases, the furloughs, will under extending know cetera. be Clearly, covered make when our COBRA, we dates, January business, to decrease And by mitigated, many April Finally, part, when a don't there employers' isn't the will estimate year. an But how employees information a look be business in that the how the through big will just benefits covered employee rest has we employers be return large but welfare periods because portion of that lives. throughout effective as must of at we under health and lives to

must that is that All this I said, caution early. again very

are in uncharted territory. We

forward. So susceptible views these going and significant material perhaps are to changes

X/XX. an When as I I look XX% when soft up forward do this we in industry do The environment, off like longer market the to continuing coming we not rate XXXX saw a see that XXXX, happened. increase. term was post to see and rates XX-year environment,

up for call decade, and X%, rate rates hard when causing X%, and this were more I losses a underwriters X%, up in a We a could Even it soft COVID, could call but don't a down soft. X%, been rate been conditions see a rate. more market. in cause like I wouldn't further crisis I even -- recently, it nearly XXXX loss rather, were need also most further haven't firm a and market, market even deteriorating to becoming a difficult deterioration, XXXX more the we've before would X%, now more. rates this market, as bit to in X%, slightly stable were environment

But for term, in that are prepared short by for decrease couple a offset environment. perhaps XXXX increasing flat saw the our reverting during possibility units, to that a in like exposure even we declining see means It's but a So bit bit that I for to rate the we to may predict, go organic organic levels us, negative quarters. hard growth growth an of in due XXXX. very organic a or

the to were the consolidated our Re and largest the our revenue acquisitions about Next, one We nice let brokerage growth and me the previously completing had acquisitions. results. quarter. mergers start a revenues financial its through group, during X Capsicum was in in talk year,

other in professionals. to family a the of our all I we will new X annualized for $XX we very million For estimate warm welcome joining us, acquisitions million they to Gallagher $XX thank quarter, another I'd the and revenue. our add like growing of completed of to partners extend

lull. report bit Looking But it acquisition this through be don't agreed diligence XX upon so call in over confused. and tough merger with being get I'd million prepared. around sheets pipeline bit to internal revenue term of A shows associated forward, or $XXX either a a our due of environment,

We of with be conversations are together. still a can better those that we how having lot see

us. some accounts with close to with deal partners we're that co-brokering signing In even having a fact, were some merger success those

We've partner. put minimum, might succeed. rationalize earnout. tough to Regardless, slow bit a at be down and resources Some are invite multiples. venture globe consideration what line, on need as will more offer to step a brokers smaller to a have full also a ton ownership. which are help of any anywhere joint the a call we an out take to around to open valuation Bottom seen Gallagher a at look nice These broker might merger as continue and a we for could business times, competition

to like to I'd Management segment. Next, move our Risk

even and our a months were activity. quarter organic first the seeing overall we of solid clients' First of results signs higher are business But and reduction was the quarter. growth X.X a mid-March, for in unemployment stronger since dramatically X.X%,

do segment. important as this However, a our bit with we it's Brokerage break differently down to than business

to firstly, service sensitive, business Our then, nature to the is the provide industry. the entity of and Risk type then of to we secondly, Management the

isn't employment headline levels. closed the of number businesses simply So or the it about

color. give more me some Let you

specialized down, some big but highly in many seen overall captive haven't Underlying some and falloff and a services, high-severity industries we For up, are our liability governmental are that, flat. entities, claims consultative risk-sharing volumes. about claim and

cost to in the experienced Then of seeing of the plus our contracts, expect up of down That's hardest, a XX% during chosen to as consistently drive place only they ability types seeing or claims to XX% excess of revenues actually our recovery low-severity high-frequency, Looking our would or margin lowest established these environment. more. hold pay of short-lived off by but have are Then keep for well about economic we either forward, have XX% services. V-shape teams and about revenues. there's are claims XX% about our revenues, our about count those Those XX% are willing we to exceptional hit our claims, staffing claim of a outcomes. XX% and clients that being

labor for ago to expense and our loads and of the adjust portion to base Fortunately, services. while operation lost decrease home can Risk work absorb a of revenues. often our most the contract from years over quarters, the we might our large volume-sensitive low-margin to we Accordingly, workforce revenues of temporary use coming staff much peak shifted and believe Management

claim our stronger than to to we should so very is Our clients. best Financial able the execute even and maintain for playbook the deliver our today during be Crisis, still used what we ability outcomes

virus the in this And finally, World's I well so to has on with can't good our environment. years for it so is perhaps get without in In with on our challenges. organization, end XX as our the today's duty day years, much compass sense our will up beating and bad times in straight and us sense award. for commitment shape and of both Most energy over genuine wrap for XX years and times, really think bedrock I comments of culture and our many guide have every even around better phone There's and a I'm at always for serve continue this Gallagher to ethics emerging stronger, The being culture. And partners thriving of could everyone say didn't come. than complimenting do our served I in employees, Ethical it these more to I will awarded shareholders ninth an to and underwriting before. ever clients, leaders world. about for advocacy but

now stop over Doug? and to I'll Okay. Doug. it turn

afternoon, my thanks Thanks, and for sincere those too, to everyone. line. appreciation the front Pat, first on and also good colleagues. I, my our extend XX,XXX responders And

to had delivering up personal own running advice your clients. pandemic, simply timely our days, by and and You navigate yet few presented a we're challenges service amazing. the in That's just to

So thank you.

a on Commentary I'll few the that and CFO and I'll X impacts capital walk initiatives. thoughts earnings savings Page our and you on liquidity, address through our short on our the Today, margins expense impact of I'll table organic the in release I'll how Document. COVID-XX to and with some comments Pages X provide finish X.

okay. So

the to our are numbers, Turning numbers. of fully numbers. where COVID matters captures any non-GAAP table reported release. all all adjust Page earnings of -- table not did They hit GAAP of adjusted show our This and X in we the out we the them our they on

on have a on see have EBITDAC. net there earnings nor impact on moving You'll that much end, the are EPS, noticeable COVID X revenues in estimates but didn't impact and

based adopted estimate are impacts on it with the it how most date. casualty the have address Lines annualized XXX must as occur know, after annualized employee to revenues make plans, that if accounting. drives let's just contracts those policies and can best of that workers' driven are insurance for We even Those revenue And dates a are lot First, group about of you policy that experience-rated examples. flown. contracts. miles ultimate reminder, lines standard requires future you as closing like estimate. policies have We premiums say, effective adjustments And volume-like the events. revenues. dependent there a future to our medical that compensation, adjustable then that year books, us Recall XXXX. prior revenues And effective in have or just on, our accounting in

and drove today's estimates, So businesses historical slowly patterns clients' as there's evolve. and would forth. changes in on the emerge not so In those a volumes lot, our environment. past, so naturally That's

have altered few customers' reality. businesses weeks. short a That's Our been dramatically the in

pre-April it. happen we still contract. in we what the It's So to make easy, need our future for of those not best estimates but will do X must

To coverage, cetera. we it some of consumer data, slice group, industry make do can For those by think P&C compare this, must follow We ton few on quarters. next it that we compare a data, we about to over effective. having of perhaps the contract to sector, develop it. the the informed was versus that that, another when estimate future must way at estimate look make type we internal the We closely change our development adverse and and revenues economic today we et that patterns, first estimates. industry we to spending to From booked

million about we overshot first our $XX About adjustments, undershot, policy, as So don't about impact to lives. impact to becomes to impact, development. relates reverse medical audits, excuse back me, available. that's adverse $X the if in the our about midterm to take XX information we million have insurance table further $XX that -- only contracts. forget, a will covered new quarter there's to et X on Those P&C contingent X.X% totals would also, And million, into but you'll If or relates really, it revenues. revenues sensitive cancellation, related reduced then cetera. possible are ratio volume And million loss $XX and policies. Page on That monthly see group we

you'll much that have see are reserve offsets from business chase we Next, of collect. some of revenue might and down not the also bad compensation policies variable the bad business cancellations for impact debt But debt on rarely collections for wallet. a can't we there which historically. written, also for go also moratoriums We and moratorium, but some given empty might and that during an out

you'll that neither items, see X impacts in our EBITDAC. Next table, noncash

value does adjustment. even X% billion customer lists which our of makes that's the a condition future intangible more. life tweak, lists, $XX given be sense the XX X, on for of asset acquired asset, decline $X.X impact a customer years million can a But in a First, economic just or

hand, decline other much the short-term a amount for on Second, recent has economic in the a conditions impact on of greater earn-outs acquisitions.

million estimate. bigger about under million customer just XX% sheet in lists. On the again, Management excuse segment. $XX much see You'll $XXX percent A and me, a $X current Brokerage but in the is period the than -- intangible segment percentage much recoverability the measurement of shorter that's liability, just of balance that's the million the X% or impact, Risk duration

So navigate Pages can better digest X. once X Page you impact on COVID of the X, tables you through on the

Here impact would all reestimates are has first at we shows by X.X%, shown at COVID. Management to growth points. ends the so hurts a the EBITDAC punchlines down Management saw but basis fourth reestimates X.X%, basis that hurt that of have points points, margin that in is XXX our almost been adjusted EBITDAC XXXX. points. up down. organic at our we Have quarter. about by XX organic basis from but reestimated not by revenues, XXX Brokerage-adjusted the The COVID-related was those Risk Risk what due like lot basis fourth increase COVID-related XX increase XXX points, quarter hurt basis tables margin XXXX. that The for Brokerage COVID quarter organic shown

back the So of go release. earnings to let's Page understanding X the table, with

base. mentioned, Pat we mid-March, delved in our starting As adjusting into expense

over XXXX information, we systems we and Crisis. bigger XXXX from resources. today, are have Even and considerably We consolidated are following Financial the Xx more playbook though

pull. can have actually we quickly more So levers we

other reduce of $XX That by to the entertainment million; our million consulting million advertising benefits, professional welfare per expense implementing of reduced $XX million attrition, and expenses $XX million from: reduced million reduced are of million; to health $XX $XX changes $XX million to $XX lower fees technology, travel labor and utilization and million. and $XX to $XX $XX to to will come base We temporary and quarter. million;

and be strides how coming actions see further based develop the expense over great months. on made revenues will in We've April, we any

Page X stay a on second. Let's for

of available You'll on $X.X XXXX. doesn't million revolving $XXX strong we address liquidity, considering until our few approximately another we access billion position. hand a sentences last have Today, facility. see of of $XXX the to liquidity credit million, on cash have and June expire nearly That

So we're Further, in upcoming the years, million X we very debt maturities, million in $XXX safe that million in over one. $XXX shape XXXX and $XX on of 'XX. only next have

So there's there issues no either.

nat drag equates in decline million gas the but EPS. utilities prices, The of Leaving the our we've with activity our we're Commentary provided driving fairly consistent clean we X, go posted note. It's this of On Three strong straightforward demand, and Brokerage the CFO items before. a Page On favor earnings but to million energy net $XX quarter, foreign Document electricity earnings coal. revenue impact exchange. impact seeing tag U.S. million to lesser also and to economic website. about let's natural lower dollar X, $X.XX then release, what Page on over quarterly posted only leading on due along quick $XX gas a $XX to is to on to but

to our in to net of forecasted year also all now we due So the Page in that line earnings brought back full bit full X, better adjustment. $XX of January, million for a FX corporate a came expect year. almost estimate $XX And million down we on than the have favorable and

So in solid position. are okay, comments. my those We're financial

plans expense achievable in our to adjust quickly base. have place We

to strong weather So economic the the created by challenges and we're operational position in pandemic.

Pat. to back you, So

Doug. Thanks,

I we'll go to think some with questions. that,[indiscernible],

[Operator Instructions].

question is from first from Our Zaremski Mike Crédit Suisse.

impact you're we thinking should to wanted given a to talked I versus be Pat, First of most then to -- believe flat inclusive Brokerage? would of a I And also investors you which maybe to negative just makes Gallagher bit guess -- that the even quarters, couple think CFO and go an that earnings possibility which alluding prepared about we'll having then for I backdrop. is more question. plays bit the that being scenario sense segment, could organic organic a then negative Commentary, clarify that go out? if of given I the then Bassett margins for growth the that, that go

clear of see make a this as Well, long a economic optimist, impact try we states thing to quarters. little yes. deep to included activity, that be hit, that the depending but this up do again, Mike, down understood recession could the point, more put happens we flat really how begin how I adversely be goes. sure we'll could goes. that the and discussions, we be these we'll in which, We It don't what number we are in deep and right it think just I'll be perennial you're as to how on could Gallagher hard just language as material. to we a quarter But and think know open of have remarks bit yes, Bassett to the said, to that numbers, see or those prepared

know, are actually with historical the a hold for can end couple that we in quarters Yes. them. margins of probably saves Mike, and so we margins, EBITDAC flat seeing, a on expense increase just should levels if easily environment even you up at we

Okay.

use that guess my Doug. I as that So -- follow-up, I'll

-- million to So think $XX in very large, of million -- a payback per the I be and million of payback typically the to charges quarter. $XX quarters. X the think of spread ratio seems next kind over $XX typically ratio

temporary? them roll lot to going some -- a because like be into these models are this sounds it our lots to expense on careful of kind of these of not should years over things future we saves, So of be just

That's right.

were you 'XX, margins would to basis And XX that this think up saw the kind you back trough if in us 'XX, will see organic us about growth, year. where through points XXXX probably in maybe we 'XX, revenues. I in for like the you and have to think we I in get of then think more go

probably X% we crook, margins that back by organic you over would to in some XXXX say see they were our to XX points growth Let's XXX basis XXXX. get in up hook or where

XXXX this and would the fill can XXXX it we hopefully, we the you XXXX just in And should And start XXXX. it. you think looking business, then 'XX, then you probably saw So just year. to going 'XX, can hole see with XXXX. and to so how in we hope And we get can like be then That's back pick I at hole. fill trends the normal from

And Peters from Raymond our is coming James. next question Greg of

impact? I business, business, a higher-impact hear aerospace. as example, And of take lot for yet, I the about we Pat, curious the rate you your can -- a XX% of you go middle aerospace I'd your XX% would think comments back impact, the lower out that. to in came with business. up higher how characterize characterize and as where don't I XX% in segmented Just that

offset so And you exposure. color. to imply seem maybe that But to can more you enough getting you're rate some us give

Sure. Yes.

First of is we what we quite did, detailed our all, can business, as book -- segment said, let's chunks. say, now right, all Greg, you into of

then out that the really And So higher are hard what be said, the ones impact. into we those would there we and are going that the are think we down industries to lump sat hit.

the over That's business, $X So million. business hotels. about And an than less example. can We $XXX very it's billion get business entire instance. billion our to our $X.X for is of how revenue hotel granular much

-- So just to all and we businesses took bucket those had them. we that we

our was any hospital would transportation, business, down low the impact. impact dirty. restaurants, thing. that business, went impact, high very like those things and into go then would it So construction, be Moderate and entity some that of Hotels, on public type some

that, segment So what's can we We do can that to accounts it we at we the right, we buckets. geography, And at out. can by by in, looked we look a when that we each and type. we rates. do went We of all account. look it take at then let's can those can the said, And put looked happening also we in do by at,

it's to but again, this happened those said clients early throughout we as And Greg, very that the has bucket. most whole information, we thought in actually were thing, impacted what

cautioning. we're and happened saying quarter this in first again, what's is days the We're early of Now April.

said So what lot happened quarter. to going in at show hotel rates? the the guess to same first going and are clearly, happening quarter But in to time. hotels second nonetheless, we've the them off of third what? not what's pain Well, a down more They're

their are renewing hotels So not rates. And paying that are those They are away. higher accounts their are property going renewing accounts.

saying rates holding. units what are nice that prepared pretty down exposure a bar, But Now on renewal. we're got in our offset. those you've now, remarks this is right And are

distribution the it's on of both and, revenues year's That's our terms XXX in like high-impact counts to kind that sick -- And Greg, it, of on sheet And drinking just we've said, of and got in terms revenue a last eating XX-XX-XX that, one. codes amplify year. that -- for our all in Pat places. there's last of

be product services in the concrete You've got the medium, might manufacturers got stone, clay, glass be and that then legal you've low. and might in

dice across can we exactly you tell a revenues can by code, out you And then our and the we pick that. sick just slice So X. the by coverage

So not lines, too, the industry, only by do but weight looked positions. at we it also our it informed we as the coverage

supplemental well? the contingents by Do it. affected get Got and volumes as

not In is case -- in automatically the volumes the supplemental adjusts quarter. Yes. so much. some with That

that's an So issue. not

their look loss because at the $X that. was trigger could have softness And of estimate in on contingents up -- actually expectation, for in then have as we a reserve pure we a of lift about you ratios a about possible pure I there -- activity. contingent volume contingents, down one a are we that's Our of and But is double there's do we lack might if loss little have expectation. where think that going it put that. And million forward, contracts

I'm sheet. to the it. Got to pivot going balance

on questions two that. Just

and I'm premium you're givebacks, terms receivable First in secondly, wanted quite from at your doing substantially are that I amortization just the year-end. fees carriers I from perspective. of payments. intangible on and what anything to concern of all, of in if there's your looking circle rebates, that there, then level wondering how charge. And delayed up given were a noted back

for XX think in risk last believe customer some XX there. can you weeks, in maybe people -- to that, than I million there's of add potential X got it and of color just filed in lists the more I unemployment but write-offs excess

March and very sheet. first big issue. quarter, a Let's collectibility looked and that's that. is the between be heavy not December difference talk have as our a at should what The It operations balance about influences that reinsurance

are Our still April cash flows strong. during

And so receivables. an collectibility quarter. million, We that are something there's $X That's that, issues million, reserve not on this up having bad put million $X we $X only like debt indication a those that. collectibility not of on

it's not So at we're -- seeing that all.

on sheet And read-through that. balance can't the for so you

that's reason the sheet So why the up. is balance

was The second your question part what? of

there's in, write-offs intangible asset, to write-off that before. on goodwill the of just like the than the seems what's customer risk you on the the lists. in economy sitting so ever Around and more of we're have looking balance better the perspective. outside going intangible fact the And just But

near And that. nowhere any goodwill answer we're can I of all, on first impairment this. Yes. type of

surface, the basis. retaining an XX%, on when As But got on of -- for that businesses XX% Greg. got be that their maybe lists, we XX%, the to are annual really customer appears it customers a way, you

but mean immediately a out work could they that months, is during a out that we we And X be. one don't noncash acquisitions there's in look it's If again, next work. of hundreds you a of anyway, just X, of the massive it's do people that, -- there every know, there's thing, charge, business bunch through because back and necessarily quarter very this doesn't and of it Just back hundreds X, quarter. But non don't come see come maybe hundreds and are as falloff. hard we where -- didn't

on deteriorates some the that's million there'll mind. it's when small with across So this, and it's I but If pretty come prolonged of acquisitions, sure, write-offs be it up said, board like you of business a outages, Never kind $XX-some X%. tweak, further have no. we noncash these a all

from Our Greenspan next comes of Elyse Fargo. Wells question

expense the on is question saves. first My

by a sense just And then think we to So as your I the to you Risk the Brokerage [indiscernible] that could relation could about expand by segments? in question. your to geography segment? even probably you proportion it revenue Pat, and that this should focus, of give margins of Was saying, of like both expense guess the Management? right, close. us comment specific tied a Or books between

right. All

this bit, break at And me cracking let little just were a least. So down. you

cost-cutting Bassett segment? Gallagher disproportionate if is So let segment Management or -- the between opportunity the a Brokerage and and there me see Risk I --

itself of Yes, somewhere you're the I think in of Risk around is business that whereas Management looking total to XX% XX% XX% probably savings, segment, those at business. our

ones make slight Brokerage sense more than business So that the would -- there's volume-sensitive type because business which immediate to that skew they're a the does. the have business volume-sensitive

first So that's part skewed more that. It's towards the question. of the slightly

the that segments achieving in if we've is for, that asking margin basis. planned you successful that question see we're to in level actually The the increasing a quarterly on savings margins both would expense you're

the $XX this to be working in because to started this the figure on at expect you million quarterly kind of right, rate March? million you QX, $XX run middle for of And full

But to the not can this we'll We're quarter. it if Yes. May of We quarter. is get of catch third -- get we -- I listen, much this if here then XX% X might tomorrow. get quarter, up it in going

the question then Okay. more And one on revenue adjustments. COVID-related

-- on as so everything understand, today. that's I so just it So it's basically sits

see So I assumption guess if in changed Or we economic any this wouldn't continue XXX-related what today? adjustments? materially from to unless you're further thinking expect you even slowdown,

renewals of customers that none units their X, exposure answers going forward, adjust April X. be there for Two May right. that if should to for is beginning All June X,

they had work covered midterm going a show right? track could insurance, almost what over it think we'll So in afterwards further Yes. we're estimates, buy for thought just was much get how put all type than are down, months subsequent-event further the we We less bed. few adjustment. there last date. we'll to valuation COVID here were could decreases and you it. have Could be in in a this that going to come you, cancellations, if that of following no you we've number of further -- reestimate to the from that see. adjust what we got weeks, was. booked January, we'll more the but that? more we be that revenue it XX But contracts type that adjustment, we'd contract hope Sure. our the deterioration those I those get right? We there basically for all point, there to written COVID-related then And at in lives We would They're be audits of revenues. those all There get did the we For that if if

last one clarification. just And

of organic give contingency Your flat maybe down. slightly like an supplementals all-in, guidance, you That's including outlook your usually to correct?

make Yes. sure right. we And understand That's let's that.

dip that quarter. along back chugging quarter, If assumptions have a next a to quarter into surprised. good Even see think and fourth quarter, of our are have be are And the I'm level. a little would being organic couple we Here at is a in we dip we having what saying this XXXX, if don't quarters. little negative and I that most, might the a by bit I be we the third then, decent I'd organic pushes us for,

Kinar Our next of from comes question Sachs. Yaron Goldman

Could of that maybe we about be sense are us I I talk Are margins three historical years, last you you'd at talking When looking to think expect prepared here? you your give maybe about question, decade? is comments, what guess levels, EBITDAC last historical above. a it first said at slightly your Doug, levels thinking here? in what you we

right. All

to the back go margin let's comment. So

a you going the $XX it just flat I to think of revenue that we're way million you probably to our if to assume get better do to hold just And for $XX revenue. million expansion, a even for third or you're flat asked It in quarter, quarter time expansion help to get get costs right? margin if -- to we get second in so you're XXXX, reverts but XXXX, will you can't year, to fourth the last we're -- you going If slightly going I were you down in and out of the or some by into organic going be we're organic to put year, environment about the into if it back think like then it happens. question to these next if chugging the take the structure. last margin year that earlier, Mike

'XX it be take kind you'll we between 'XX XXXX So did and and of margin there. what your and kind grow 'XX, and of

get Whatever that to it each down an going on $XX going clear quarter if But increase expense expense. the revenue, but... longer to back expense you're want there. term, revert margin the our We So I'm forward, adjusting is understand? of in I going and then may think $XX everybody it's more bit we're to short savings revenue sure get something in on don't know have going term. million to a of million that million $XX we're what it million the $XX I little not to make basis Does saving. misspoke. that, is. I in misspoke to I

right, But Brokerage that's that. Risk like Management. of margins, if I over X% understand in the I base and think revenue look at I XXXX, of

got the we Say static line. on again. Yaron, sorry, some

that. Sorry about

million saves the base think quarterly revenue $XX if of margin. at I that for over I I that's at million X% expense $XX to XXXX, look look and

be. Could

liquidity meet have would this how you precautionary besides in preserving appetite right can't opportunity a increased it that lot greater now Okay. interest as M&A All the you here? more Are of maybe here? in anybody you your creating is environment. maybe fact you for really in then interested? would for here? say you Or space, measure, think with maybe I a M&A., right. Has and capital question you're that thinking the And about capital, around guess have disruption I a my second

Pat, No. is This Yaron.

We This what think out think look stories with be really I of want people to to employed There acquisition lot sit be to people if have of to we'll time are to time for we the through think was. with. great at And competitors look take is back think they sort And lots for of do the interested people who the work, very, is people a a do of and landscape their really now well. awful they bank. and there'll in very competitive we can deal now acquisitions. in a money the where and done, were there the and get their after life's want an

capital to it are and acquisitions. trying to business, So we we are for not wide open preserve when comes

deliver it rate you there little I were -- there now. out tighten you bit alone? sit do difficult a not now. it we're on capabilities. our would And where tightening of somebody that's and -- meat get rather want would say, in marketplace, business, the can still Yaron. You coming the to trough right through rather you here Gallagher more expenses, and and sell our revenues. into Or me conditions where do own but go help cutting how know We're to belt have I thinking And be I'd belt I'd of hard we're we agency. us? my that saying, get if I capabilities right our If will be in to the with and selling, about this resources be we I'd pretty be a can there sitting I'd strategic do I own that actually

So billion acquisitions -- recent in $X.X about I Days, worth you of the targeting XXXX. more think one had Investor in of about talked

So still is that something do? achievable you could or

I present Listen, we think that to type have do the ball. of will itself. don't it capacity just

a I But now you V-shape XXXX, could going in this between does us that XXXX? the money to buy, pretty huge to we up spend But be year. there'll there's lot mean having it'd end now, and or of recovery, a year. catch do think diligence, little for for amount people of couldn't that quarter of might be opportunities we a two. a us be right by back on plenty getting is a If due see to the that short out hard and

next our of SunTrust. Hughes question is And Mark from

touched you your this Doug, I'm not year. flow on sure but this, whether expectations for cash

what If free you it measures does these plays as for do sort cash? of undertake all that and out expected,

Okay.

could cuts million much if million on $XXX another starting little probably -- typically have we quarters, how don't right? X to let's generate. for the right? say, there's expense even million right have of, I a have you number a we quarter $XXX fact a the bit But Let's with in for $XX a we dividend. know X.XX, we're M&A, if paying of probably say, after lull is, If I And

got just doesn't organic lot down a So either -- end the if $X by have of year cash way. you've billion or don't if excess a it's I I care a of quarters flat know the you if -- of couple for of bit. could little

of on at the have could You sheet the balance substantial end of year. the cash amount a

distinctions any internationally, the in, at you're or look doing when notably better you worse? markets different Any

a was The quarter really great had in in We organic our strong operations. U.K. the very U.K.

of holding that in don't either. well. business Early lot April, a to be returns very there stress show seems that So on

So we're Canada in results really our operations. U.K. having had also. terrific great a quarter

well Canada. that's I doing really in think

upper while. XX to at few last and are be the the what are in We'll business organic but still day. happening, growth rate in Our honest, environment of operations we're In April. there there U.S. had seems there's in to there And of for lot -- was there terrific lot surprised off they has -- it. some come really years, together be with New our we And hard good in results, see guys, a there. there coming business. the selling Australia they're fires guys then happens I out sheet margin I new business our really every look the of market and pretty nice, too. a selling were running by points April, a here Zealand, new

the that very good really, as you around year. I'd very, where And smaller really world, Latin America, looks look the the places so start Canada, and, global to the rest a Doug, to that, at strong far. if of operations picture Yes. we're take you our said, add too,

last question. on And the then claims count. just I wonder

kind the comp, there? things you jumps that high-frequency about observations curious, workers' and you types of that about How about down, claims not out Other frequency is specifically. have Anything at claims might XX%. I'm talked You expected? of are claims down see any you

and I think then ahead, I'll you go go ahead. Doug, Mark... Doug. Go

of Gallagher like still surprised about the the are claims starting unit the industries And workers' we're the COVID I in comp more It's in. hospital like right are sector strength related claims we some now. in and to especially coming -- to think of also. more -- I think get Bassett

if lot COVID. So or just But don't work comp of type related our day of you customers of claims, have to so" are to going workers' you the claims people just a recurring kind have to the have medical-only in manufacturing type a a those "back arising. working, don't lot

is And So that's But still XX% not of again, I think fix. that, frequency The -- was it's are to be honest, it there. down. the -- severity our business. margin claims all it's that

there. we've or lot do to of contingent labor. on that, a a labor our of So headcount lot contract we've adjust and the got temporary ability used We

ability that pretty flex the it. have on we labor So to pool easily

One as up at quickly quickly unemployment were go is mean March, claims I surprised of People on that to of that, as how work those well. side not in we very though, I getting filing was claims move. requests down side, would I very is Mark. of out it began saw which interesting. came end thing add quickly to claims,

question our Piper is Sandler. Paul And of next Newsome from

difficult a that down a as Or Is interesting that more acquisition what tick in CFO environment? reflection of a disciplined trying perceive it the was just EBITDAC of X. a acquisition of the I was in market? thought to weighted reflection be Commentary is average the you expected that pricing or

Stackhouse have in didn't because really Paul, X about we We that a of a when think numbers, in Poland revenue, at you're look year. in any million was the have deals, big when you doing about up but nice quarter didn't bolt-in already didn't it, We larger $XX a across mergers it, ones at our Canada. look you last talking Jones acquisition. brown caps when you're have for talking I

there. doing nicely nice these bolt-on it's in We're Xs So acquisitions. the still tuck-in in

there. So that's seeing what you're

you're deals revenues then in expectations you doing guess do similar experience? when see drop-offs have you And I that that would you'll also

of has to grow idea things seller the going that think believe x, at they're percentage acquisition it grow growth an puts the to been one they're always of -- certainly I those we going in x. believes of a

purchase then. more this well, would I they're there happier uncertain more this make earnout. grow an we're so I to to And them means me going an time, considerably be in take growing grow. environment. doing part to put going will to their on come of to of earnout. on willing help price all for we sellers because in and they're want That think And and think earnout want to We're well hit out everybody Nothing

Let me weigh that. in on

to right going you're make me who the going the dandy, would had all rates smaller running firm Doug are brokerage difficult. partner with? my As earnout the like going earlier, is When with past said my up everything now, that's to time partner I'd be help making the to a you like to earnout. way be and did it in that I not might if

make now, sudden, difference. a of right All a capabilities

Shields And next question KBW. from comes our Meyer of

Two really quick questions.

that First, it the full bore. is really you wondering producer other comment exposure on units, could if a company recruitment things that. was like, sounds that are I in than going

Yes.

no a capability and on little looking of still going solid I if that's this what be one they the with economies, our is the brokers. buying going different is it for recruitment. the economies, now. few what have producers resonates about I in open exception am a us, we Or been to of matter mean with that don't lot am understand. now. And pay terms the no, agency right we got say, "no, something day market. "Yes, people talked of of resonates looking we've I'm this no, good capabilities where going wide professionals, are talent, to think that I broker what at the get to understands going go me size always on go the a now producer to Gallagher, they standpoint and are I And for they've single can way. who they're you or as I'm Every let to in think we down process, are are interested I competition. one put to -- what go, bad that no help of produce, We today's bill. you and or Jones there's how production the does out places guys of the less acquisition But from around that maybe We're that street time And smaller actually happy work?" to in. a pick really are come Well, the and And really, us to this by street. on run the This we is the production and that with."

to So recruiting; that: number lots think one, time to going great success number us be for two, I have that. of it's we're and with a

Are perfect in XXXX XXXX? Maybe any this to No. is the for expense we in going Yes. impact makes That pullbacks question sense. see a Doug. from

in what we as this put versus XXXX in got savings have could a Is that we they impact? year think you your do So carryover question?

No.

I'm words, those are for at other in The which of loss, weird -- thinking the In terms way. spending these to you were responding of reason, situation, obviously, preclude sort this a other show are doesn't them investments, up of going XXXX? but to

a I result franchise asking, progress a we're expense think these of setback in building have think you're cuts. as to do a of better our going we

to asking. expenses think that's today, of I year. that not what are really how type that's of we're if We next most don't you're these consumable impact believe I us that know traveling going immediately

us. So to travel hurt going comes back, I don't think that's

do have for. I really, been We right been we've belt-tightening exercises we some think can other cost-saving Maybe on by now internally. How down of maybe opportunity that much bit work doing the breaking can it little investments being measures things that technology in nonclient-facing consultants actually this across our cutting be of that external and sharing divisions, that going shown using using of of some investment, to but realize doing we're keep back? that we've technology terms going some silos bring the some in-house a hurt we didn't that those doing that to of areas. us type is we're better -- kind had some in together we

But to from it an But that So year be insurance? website if not. we example that's year, hold still investments. it we us not. back do probably really those this We next going refresh of going is would are Probably more again? -- Maybe want okay. make our to to selling

next a really is year, let you cross-selling. carry excited I to I'm Meyer, think months about. give me some seeing this in I've over to things Number last where bit which the been going one, of are that X

I the you've are lot say heard has my that of that in me of of this, do XXX And benefit harping on. need the one given always minute, a really property casualty side think company customers a side, I'm times that's the a the things from People light help. or sudden that. saying to wait all

need as to we're an grow. Wait coverage know per we're also lines you XX. buying this you, on seeing to refer average, the We of a we we're So other make and X X more well white what I'll for XX up, finding doing, X. We're minute, wipe out help that opportunities client or they're doing on X when probably those of opportunity space. really to

picking ourselves. We're is the And with accounts. up other thing trading those

business explained us London. course, with. do London been and of right more get with XXX and group like it. we've And better you've we a of making a you No this in the acquisitions, than job we business. for "Guys, our excuses. But is say, large, office years. And and sure them today, their they we've got with of trade been you Move people this about the As it." a when by been for they we've They're in done moving broker. trading London some thing in doing client, crisis all that to with of why They've really doing good come should

come in and these times into have 'XX benefits that their bad over pull will, XX. So from fact,

[Operator Instructions].

of Autonomous. Ryan from next Our coming is question Tunis

volume? So talk to What's there even business was I been organic, was to thinking the about get mid-single-digit mousetrap were when bit new clearly, wanted business? the we quite pace was just a of of in written. a What there, being of annual business new the for bit like about new that getting little to kind 'XX,

ahead, Go Ryan.

in on just revenue Yes, No. I No. the number, was terms going of line. say Yes. sorry, to the Doug.

numbers different two There's there. in

opportunities that. bond something Some about one-shot like new business like relating of a or if you talk to it, just type

just to in And about related would you that, to think other, X and getting renewing. the past. You've way we've then X the is got policies The what's lost. been new and and delta this got to from keep annual between a really limp the about or rate -- annual you've keep expect the probably points of the that client

was maybe business it's rate been new rate, has -- really to June X more not the from X% business, end net call it, points exposure. rate and X we almost outgrowing of were was for exposure our of our lost coming last new at year, and the X%. always and toggling that X% really of of point all exposure, So from by And because where to kind of a

from gone What exposure to could the out XXXX, -- exposure looks sure another kind make you the more other there's you on of your hold to period And when rate got secure a flattened happening happen could Well, of rate and to -- I to kind then at also out tends you -- as new there. you this? still believe to there's in it renewal that growth That of And declined out recover rate. little bit and from will we see tend we're It that little had there, and the get business. growth through XXXX We a we're that contraction. or getting business. out -- come units.

So of out what do we XX% you'll that say we widen see of that see loss compete excess business less in spread. point in I a maybe would business by next least at us, in new the time year? X than with somebody maybe because

can terms and the last spread saw what or been years, in in business couple has of numbers the give bifurcated risk you. years what What is large small the Yes, trifurcated in into we the we the have really Ryan. the and last consider stuff. that that Doug finding than you of medium which our And accounts we're success more the of on of management just kind business is would we a had lot bigger norm slightly couple we've the past. heartening

We against we the what in our Doug So years fine, success we accounts not and we found coming those -- and They're [indiscernible] do more time, said, with two against from that the somebody -- have bigger. just they And on a taking find competing competitors. larger and with we been been we compete having fine is us. have But as bigger do are their of last bit smaller. accounts. we're we're XX% are actually taking do

does that last of a to trailing percentage grown nicely the couple add So of of book up business, over which years. has

you say your to you're that maybe still that business more in XXXX. to going slightly of lose to fair flat be generate assuming outlook down, for it's kind for then you're than to able new So

We're we getting time. This working of meeting our a with. have what what's Listen, now at have help what and in We're broker. in smaller bunch still had terms up that This capabilities, through Act they're from is market. easy. local through, not have doing sturt far. what them communication CARES from they're of calls. where personal my or half right the making in are haven't right. on whether home, is the not calls here's By them we crazy, They're of the them clients thing, difficult capabilities, orders going the help And of picking to we it's terms going this people, is on every day. kids, our now Right it's

who's new amazed remarks, got in have environment, his business beat So pleased I've in actually to it could I'm course, when bit capabilities. as of and They from mentioned Doug last we've that's that is the just had which And time at. our February, month. comparative normal time. the January markets, been us local because good it's broker to -- very with a actually we're the occurred retention mean up I a doesn't over stronger held

we're So new and down up. come a business business smidge seeing lost our our is

now rest and bankruptcies with right exposure So and about to out wind the units new We're what the business suck new happens machine. of a you. now. of I'm But tends unemployment all excited business that and

headcount So nonrecurring I revenues, to tied the your about of also. right comp and I'm just your benefits thinking revenues What is I percent maybe don't guess, in some a if I'm -- what revenues of other one is construction and workers' metric? my being know your project. on, like employee are are percentage about question, sort -- thinking of Like but

So construction project the construction like project need this to a from to write year. last you replace new year,

That's right.

That thing. type of

new book up. what exactly that the budget to we're continue work do infrastructure to And company able to bond come entire course, fact at that going construction does talking is to it every and projects work. the look is year about. Our We be XYZ of who going are

away, Now drop. those and you take projects they'll

withdrawing Now into those presently, not is projects. government the

compensation that a lot are employee is to tied infrastructure by in asked large, And over in right entire the know, predicated, of on payroll. workers' to a billion all But is you've what with our those is continue you doing question, and business, hard So benefits headcounts. you book, which $X work, we're got revenue, as probably going that. on

So we or decrease in are the subject employees of decrease to payrolls.

How big book? bond is the sorry. I'm

bond The book?

Yes.

take I you dig that don't for to to know. I if I'd quickly. see up have I at. can look got a

have Don't that.

you is last of pretty coverages how X discussion clients? My easy a lot type obviously, of lot of just, claims in thing? there's that handholding? interruption. explain. it there lot Is of Or the a lot of get it terms calls, are just of in? kind there coming to like feel They a the around to of Are I'm hectic your in been a business talking carrier was curious And on

of got of number is for tremendous their who a of interruption. feedback. this buy all, to not chosen that with. There's first clients have Well, own why number clients, some a we're getting of course, chosen business have to you've -- reasons start There's

activity what or in take So that of limits bought, We're And in there's bought, cover are they throughout through dictate them are looks And coverage. sit market what forms them and clearly interruption we of or we clients. our marketplace. different And the though yes, it lot the Then there or because pandemic. they clients. not represent forms the those them aside. whether move business they and whether will to carriers the that the not take coverage going with and coverages this a have there's some as regard our

And be pay to to be physical there been look, going have that that say, damage But do, we're they loss. and there the through for can are to to quickly. paid. And we're to the contract, that strong it we simply a if We're we're we it what that pay everything to side, do rightful clients, premises our go claim, company to make others environment. gets we're not from going are our going to saying, have many insurance we we which have sure a there's claims the help a them going is claims. know going has amend to to covered Now leadership appropriate

dig of of revenue. of our bonds you. for follow-up, total which a couple probably we I year, our X% just would Ryan, type include nonrecurring did Last out did everything numbers business, a and about

forever, if to we is went X%. organic areas So be of high-impact comp would what it our X% year have about all last also X%. Workers' been consider away and

away all employees for cost on stayed our XXX% of and and came away an those So back never year point went organic. and us entire another

from Wells Greenspan is Elyse question next our of Fargo. And

Do have operations had And by it COVID guys the weeks. impact the there about the of has India, you outsourcing been have last like years, through I one lagging about in you X have the seems question. to spoken X U.S. that

on was one wondering your should just well. And we impact India. within So be there I other if was as I might any business follow-up about thinking have -- then

that. take I'll Yes.

of trained home. with and could I think move to of planned laptops. those knew working their Those pleased I went and actually if had folks just we home that couldn't any work done be our that We from down, have their capabilities. with locations exercises more

it's the our And in service the service have any our those delimitation centers. in in United in We remember, service And and by centers are for in be Philippines small provided absolutely impactable noticeable we at while at as not also two all months, the seen future. Vegas not India, them the difficult changing home, of all provide States. a to now continued the centers don't service at service many have Las to well last in And change. for even that see

day. paperless trained to Elyse. them from We're Yes. a they come It's they laptops with all remarkable, since their a They there, and day X, environment home are rehearse really been every work the -- home. do

-- you a from have brownouts time time, grid. get with We have electrical some problem where there you little to

them connectivity we've connectivity. to So Internet them is have Internet a at at with order got being experience home home. in required as a for job

really impressed the a hasn't beat. that missed I'm So operation sturdiness that of with

And then last great. question. That's Okay.

sense think in geography, can do save? if just might of is or us the you even you the the expense there be the give Australia, U.K., expense a geographic by obviously, more How terms New base In the of they U.S., pronounced -- Zealand saves, within India? about of

versus paper. in disproportionately right any don't Yes. out a if the I But the location piece I other. can probably see on little dig short to you I'm that X it. it here of for I get

say would but revenues obviously, our out. it dug geography. have So I take question, I another as you it's by proportional But at this a here it I'll to look I'll if at look

Well, last. that maybe was the

disproportionately about. being it talked as don't it different by Bassett matter I here. the by got that Gallagher I we or other see division, than country

don't I a think for afternoon. questions. us joining for here. make we'll it really thanks up. We just appreciate probably here, I Why being Again, quick it wrap this that's comment you

and strategy from and the manage I'm see our people through to can environment platform, right confident the you comments, shareholders. quarter healthy, clearly Stay our all our for all the to environment. and we again. of focus benefit Thanks of for our our our our thanks us, partners our a have difficult, of is for evolving the now delivering current clients, employees, operating on everybody. that being with stakeholders, carrier great As teammates

This call. conference does conclude today's

You disconnect your may time. this at lines